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India and the global food crisis

Posted by: Manjeet Krpalani on April 14, 2008

The food crisis is upon us all. You and I have seen it creep up in the last month, when prices of basic vegetables went from Rs. 25 to Rs. 30 per kilo, to Rs. 50 a kilo, as currently. I’m not talking asparagus, or even aubergine. These are carrots and potatos and okra and beans.

It’s the usual story - New Delhi been slow to heed the warnings, not bothered about the ordinary guy, always thought they could import their way out of a food crisis. But this time they can’t, becasue there is none available to be had. Thailand is short of rice, Malaysia is short of palm oil, Australia is short of wheat. Afghanistan’s poppy farmers are cultivating wheat because, says Subir Gokarn, chief economist, Asia Pacific, Standard & Poor’s, “the risk-adjusted return on wheat is far better than poppy for now.”

Astonishing, the cost-of-food story has still not hit the headlines in India - those are still dominated by the foibles and/or glam parties given by politicians, rapes in the capital, or the upcoming cricket extravaganza.

New Delhi should be warned. India’s economic take-off happened because the ordinary man, for the first time, had smelt prosperity. Interest rates were low, businesses were investing, jobs were being had, cell phones made the service industry happen. Stomachs were fuller, and with the additional money being earned, the plumber, the mechanic, the taxi driver, the vegetablewallah, all invested it in their children’s education. Sometimes that cost Rs. 300, sometimes Rs. 800 a month. That’s $7.50 to $10 a month, but it’s a princely amount.

Now with food prices going up, how will the man on the street make ends meet - especially as those ends include an education for their children? That they can no longer compromise on. They’ve seen a vision of a better life, and schooling brings respectability and feeds aspirations.

I’m hoping for street protests, so the politicians can hear, loudly. While Sonia Gandhi and her crew in New Delhi sit down to a sumptuous lunch of imported iceberg lettuce and pasta, and Dr. Manmohan Singh and finance minister P. Chidambaram with butter chicken at night, they should know that people are cringing from making agonizing choices - nourishment for the family, or school fees?

India’s food problems are of its own making. Reform of the services sector, of the financial sector, has all happened, but not yet reform of the agricultural sector, on which 65% of India depends for a livelihood. S&P chief economist Gokarn says the chickens will come home to roost for this government in New Delhi if India has one bad monsoon - and it’s coming up in June, just a few months before the national elections in 2009. The political environment will take a turn for the worse, as will the economic scenario.

“Perhaps now they will see the costs of not reforming agriculture,” says Gokarn. There are still too many bottlenecks, too many investments not yet made. “I believe in the crisis-begets-reform school for India,” Gokarn explains. “The deeper the crisis, the greater the reform. This is a significant trigger for change.”

In short, everyone should pray for a bad monsoon for India this year, so that the future can be ensured by deep reform at the cost of short-term misery. No one in today’s India should have to sacrifice their child’s education for the higher price of food.

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Bloomberg Businessweek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies.

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