While the BSE benchmark sensex plunged over 618 points before recovering a little to close at 17,632.41 on Thursday, The PM has come out in Parliament and stated that the solution to food inflation is the National Food Security bill .
What do u think , will this be the magic key that vanquishes the demon of Inflation? That after the govt assurances that they will control inflation for the last 7yrs are nothing more than plain untruths or lies ? Most likely this bill will end up upping fiscal deficit and inflation, because u can give guarantees but guarantees dont insure cheaper food. A good harvest, better technology and investment in agriculture, cold chains better distribution and cutting influence of multiple layers of middlemen does.
Even Mid day had a piece about how much the price of onion increases from farm to market. read here and here
The Rajiv Gandhi famously said that for every Rupee that the government spends, only 15 paise reaches its intended recipient. Subsequent studies have shown the figure to be still lower, may be around 6%. Yet the congress upa govt finds it rather convenient to repeat Indira Gandhi’s populist mistakes like agri loan waiver , and populist schemes like nrega without tweaking the transmission to drastically cut this porous transmission mechanism.
Subsidy be it Kerosene or pds food never reaches the intended people. it is most likely siphoned off to be sold in the markets . The quality of pds food is terrible , and most of the times it is never available just like kerosene at pds shops . Kerosene has a market value of 40 and a controlled price of 4 ? How much of kerosene goes to the intended recipient ? ask your servant who tries to get kerosene through pds. Worse good honest govt officers have died at the hands of the kerosene mafia which is shielded by some in the Political class.
Food inflation affects everyone and most of all the lower middle class and the poor who will in most likely case not be covered by the National Food Security bill, which is for most poor. bpl households.
Secondly govts policy and transmission mechanism is pathetic , and pds is most often used as a political tool and is riddled with corruption and lack of quality control, mainly to give farmer lobbys and mandi operators record procurement prices, which are most likely not competitive in the markets if we take into account quality of grain, storage and transport cost. Result , govt hoarding increases market prices of commodities , no state picks up centralgovt stock , little wonder govt exports surplus sugar to Pakistan at a loss and later cries shortage to import at record price and stores of wheat or rice are either pilfered or poorly stored thus it is good for manure or as rat food.
The mute question is why persue this ruinous policy that will ultimately harm the nation?
S S A Aiyar says Politics is the most profitable business
It knows that to stay profitable in a democracy, a ruling party must provide visible hand-outs for the masses, even while raking in black money itself . This principle has been the lodestar of seven years of Sonia-Manmohan Singh rule. Second generation economic reforms have taken a back seat.
On coming to power in 2004, the first priority of the Congress-led UPA coalition was to rectify the supposed anti-rural bias of the preceding Vajpayee government. So it shifted governmental focus to Education For All, rural employment guarantees through NREGA, and Bharat Nirman—a multifaceted rural infrastructure programme covering irrigation, roads, telecom, electrification, health and much else.
This was a win-win strategy, wooing voters while ensuring that leakages from social programmes leaked (to the extent possible) into the desired political pockets.
Between 2004-05 and 2009-10 ,central plus state social spending more than doubled from Rs 1.73 lakh crore to Rs 4.46 lakh crore (and from 5.33% of GDP to 7.23%). So, social spending has actually risen faster than GDP.
Tech and Trek 