Who are we fooling?

Chetan Bhagat has a piece which is reasonable thoughts and great observation. His anger is valid but what to do with that? Will the politicians mind these words, you know for them it’s merely ‘words’. Will the public listen until next election that won’t be possible, but nothing is impossible in free market economics!

For record I am posting his full article below. But what I feel is that the title of this article would have named as MUDDLED ECONOMCIS!

Mandi economics Chetan Bhagat, August 04, 2009 The Hindustan Times

• The shortfall in the monsoon has created anxiety among farmers across the country with several leaders having expressed their concern. In the name of caring for the affected rural poor, cheap rice is being provided in many places. But before I get into that, I want to share a little story.
• The other day when I went to the airport, I was told that the flight was delayed. I felt disappointed but had no choice. As compensation, the airline gave me one sandwich. After three hours, they told me the flight was cancelled. However, this time they gave me two sandwiches. I argued about my missed flight. How would I reach my destination? They said they were a caring airline and so they could give me three sandwiches. The flight never took off.
• What would you want to do with such an airline? Will you call it a caring people’s carrier? No, I am not talking about any particular airline or ranting about my mishap at the airport. It’s merely an analogy pointing to the attitude of the government towards the farmers of India. On the face of it, there are subsidies, loan waivers and cheap rice. However, none of these creates real progress or changes the face of agriculture in India.
• Before we start blaming the rain gods yet again, I want to know why are we so dependent on rain-fed agriculture in 2009? If India is an agricultural country, shouldn’t we have done some massive infrastructure projects across the country? Over two-thirds of our agricultural land is dependent on rains. China has only one-third of its land unirrigated. Developed countries depend very little on rain. This dependence creates high fluctuations in the output year after year. Apart from the volatility, we are not efficient either. China can produce twice the amount of rice for every acre of land as us. Australia can produce five times the rice per acre than India.
• Who are we fooling? The Indian farmer is not cared for. He is on drip-feed in a hospital being kept alive for votes. The cheap rice one-upmanship seems great in the short-term, but will it help close the massive efficiency gap or the rain dependence? And if this gap is not closed, can India ever really progress?
• There are other negatives created by such subsidies. The government has to borrow, which, in turn, leads to higher capital costs for power and transportation infrastructure projects. It also leads to inflation. Yes, we can continue to live like this: constantly rising prices, the rare infrastructure project that is too little, too late, and poverty with attendant problems like poor healthcare and low literacy.
• Yet, this can change. Many South East Asian countries were in a similar situation 20 years ago. However, these countries have implemented sound economic policies, focused on massive, long-term developmental projects (rather than cheap vote-bank politics) and changed the face of their countryside.
• It is easy to blame politicians. However, we elect them. And the fact is that subsidies do result in votes. The intoxication of cheap rice is heady. It makes the voter believe the government is doing something. A lot of people may even think, ‘Grab whatever you can. The government won’t do anything else anyway.’ But can we sustain this? Is this good for the country in the long-term? Do you want to give your children the same India that you inherited? Or want to leave them a better place?
• Famished, destitute people must be fed. (By the way, why don’t we give them cooked rice in specified centres to avoid misuse and re-trading?) However, a leader’s job is to build for the future. I’d like the local panchayats to accept the rice, but demand more from the leaders.
• Talking about development in agriculture, it is not only about irrigation projects and enhancing crop yields. There are many other areas of improvement. In Hong Kong and Singapore, milk and butter come all the way from Australia. If an Indian software company can provide service abroad, there is no reason why an Indian farmer should be denied such a lucrative market.
• We can say we need to keep the milk for our own country. There are two holes in that argument. One, if a farmer makes money, he will invest in more cattle or efficiency improvements and production levels will rise to meet demand in India as well as abroad. Two, we (rightly) don’t force our corporate sector companies to sell their products exclusively in India. Then how can we force the farmer? To cut off a source of income and then offer cheap rice — is that caring for our rural citizens?
• The government and quasi-government entities keep a tight control on dairy and farm produce for food security reasons. However, the fear is over-blown and government involvement has prevented world- class output. Food that wasn’t grown due to poor efficiency is food destroyed. The government is not saving food; it is destroying it. There are global companies who operate across the world. While they are private enterprises, they have benefited millions around the world.
• Let’s demand the same world-class treatment from our leaders.
• Agriculture can be India’s competitive strength in the world, if we become serious about it. The Indian farmer feeds us. We must nourish the nourisher to ensure he will still be around for us and the generations to come.

Chetan Bhagat’s latest book is The Three Mistakes of My Life