Food-Price Inflation

India, often lauded as the world’s fastest-growing large economy, is grappling with a growing concern—accelerating food-price inflation. The implications of this challenge are far-reaching, as it threatens the ability of a significant portion of the population to access nutritious food.

The Alarming State of Food Affordability

Data collected by international agencies, including the Food and Agriculture Organization (FAO), paints a worrying picture of food affordability in India. In 2021, an estimated 74% of the Indian population, roughly one billion people out of 1.4 billion, could not afford a healthy diet. This statistic underscores the magnitude of the problem.

Local data collected in Mumbai over the period 2018-2023 reveals an alarming trend. While the cost of preparing a thaali (a traditional Indian meal) at home surged by 65%, the average wage of manual workers increased by 38% and that of salaried workers by 28%. This substantial reduction in purchasing power is a clear indication that food consumption has been adversely impacted.

Health consequences are already evident, with the rise in the prevalence of anaemia, primarily due to nutrient deficiency, among adult women. Over 50% of adult women are estimated to be anaemic, highlighting the pressing need for effective solutions.

Policy Failures in Controlling Food Inflation

The macroeconomic policies aimed at controlling inflation, notably by the Reserve Bank of India, have proven ineffective. Inflation rates have consistently exceeded targets for four years. The conventional approach of reducing output to combat inflation does little to address food inflation rooted in supply-side constraints. Central banks alone cannot solve this complex issue.

Significance of the Green Revolution

The Green Revolution, which aimed to make India self-reliant in food production during a time of extreme poverty and a massive population, is a historical example of successful economic intervention. This revolution offers valuable lessons to address the current food inflation crisis.

Lessons from the Green Revolution

• More Focus on the Supply Side: To ensure steady food production at affordable prices, we must concentrate on the supply side. During the Green Revolution, the government provided farmers with high-yielding seeds, affordable credit, and price assurances through procurement. This strategy resulted in a spectacular success story as India achieved food self-sufficiency. A similar supply-side approach is needed today.
• Focus on Past Mistakes: While celebrating the Green Revolution’s achievements, we must also acknowledge past mistakes. The overuse of chemical fertilizers, driven by subsidies, degraded soil quality. Relying on procurement prices rather than productivity gains led to inflation. Additionally, the focus on cereals overshadowed the importance of pulses, a critical source of protein. Correcting these errors is imperative.

Suggestions for Government Action

• Focus on Lowering Production Costs: A new agricultural revolution must prioritize lowering the cost of food production. This mission should involve a comprehensive approach, encompassing procurement prices, cash transfers, the Public Distribution System (PDS), and requirements for priority lending by public sector banks.
• Enhance Yield-Increasing Interventions: India’s agricultural yield lags behind that of East Asia, indicating room for improvement. Attention should be given to expanding irrigation coverage, eliminating land leasing restrictions, accelerating agricultural research, and reinvigorating extension services.
• Revive Public Agricultural Research Institutes: India’s network of public agricultural research institutes, which played a pivotal role in the 1960s, needs revitalization to meet current challenges effectively.
• Promote Cooperative Federalism: Collaboration between the central government and states, based on the principles of cooperative federalism, is crucial. States should play an active role in enhancing agricultural productivity, reducing reliance on central food allocations.
• Embrace a Non-Ideological Approach: Implementing effective solutions will require a pragmatic, non-ideological approach. The focus should be on results, regardless of the political leanings of policymakers.

UPSC Mains Questions

1. How has the failure of macroeconomic policies to control food inflation in India contributed to the current crisis? What alternative strategies could be explored?
2. What specific lessons can India learn from the Green Revolution to address the rising food prices today, and how can these lessons be adapted to current circumstances?
3. How do supply-side interventions differ from demand-side measures in combating food-price inflation? What are the potential advantages and disadvantages of each approach?
4. In the context of cooperative federalism, what role should individual states play in enhancing agricultural productivity, and how can the central government effectively collaborate with them to achieve this goal?