“Inflation and the Indian Agriculture Sector”
By Prof. Nisha Singh
The Prime minister’s Economic Advisory Council Chairman C. Rangarajan has suggested few measures to contain inflation. The GDP can be raised to 8.5% from 8.2% in the current fiscal year. He thinks that maintaining growth and containing inflation should be the twin objectives of monetary policy.
There is inherent contradiction because the current inflation is more due to supply side rather than monetary policy. Non food manufactured inflation is round 7% only therefore rationalising food and fertilizer subsidy in terms of fiscal consolidation is also needed . Furthermore decontrolling diesel price is another step being taken on the part of the govt.
The agriculture productivity is highly needed to be improved. And one of the steps could be opening of the retail sector to foreign investment. This may on the other hand ensure investment in backend infrastructure and fuel investment in agriculture.
The next step in improving agriculture would be to increase yield per acre. It is still very low as compared to other countries.we have to adopt the best practices to this effect.This could improve agriculture yield per acre.
The earlier fore cast of 5 % has now scaled down to 4.5% because Indian agriculture is dependent on the monsoon.And monsoon is yet unpredictable and dicey.
Furthermore, import duty on agricultural products, specially wheat and rice should be brought down to zero. For India these two are the essential commodities. Though food prices have fallen from the high levels since Jauary2010 but again soaring since March 2011.In this regard it is woth mentioning Mr. Montek Singh Ahluwalia observation that it will be difficult to achieve 12.5 % growth rate in 2011.The fluctuating upward prices of diesel and petrol due to increase in the prices of crude oil,Effect of globalisation on business,short agricultural output ,all contibuted to inflation.However year 2011 is generating new hope in satisfactory yields .Though over all inflation remains at a high level,but we can expect abetter and changed scenarion this year. Hence agriculture sector is not only to be blamed for the present inflation in India.
Prof. Nisha Singh
South Carolina,USA