People's   Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 21

June 08 , 2008


Discussion On Food Crisis And Inflation


'Political Will Required To  Provide Relief To People'


Roshan Kishore

IN the backdrop of the steep price rise and inflation being experienced in the country, Anveshan, a Delhi-based citizen's forum organised a panel discussion on “Global Food Crisis and Inflation: Implications for India” on May 30 at the Constitution Club. The speakers in the discussion were CPI(M) Polit Bureau member and MP, Sitaram Yechury, Planning Commission member Professor Abhijit Sen and NCEUS chairperson Professor Arjun Sengupta. Prabir Purkasthya from the Delhi Science Forum chaired the programme.

Arjun Sengupta argued that one of the reasons behind the global upsurge in food prices was the diversion of land from foodgrain cultivation to biofuel production, which has been facilitated by high subsidies in countries like the US. Stagnation in agricultural productivity and output growth because of declining R&D expenditure has also been a contributory factor. He said that the inflationary situation is likely to remain for some time and therefore it is important to focus on strategies for its mitigation in our country. According to him, the nature of the growth process in India has not been inclusive and large sections of the population remain poor and vulnerable and inflation causes greater deterioration in their condition. The main task is to ensure access to food for the majority of the people, provide gainful employment and increase their incomes. Stressing on the fact that over 93 per cent of the workforce is in the unorganised sector, he said that there is an urgent need to have social security cover for this section and greater opportunities for income generation. He also emphasised the need to augment the incomes and productivity of the small and marginal farmers. Strengthening of the PDS with increased expenditure from the government was the need of the hour, he said, since only an effective PDS can protect the people from the rise in food prices.

Abhijit Sen agreed with Arjun Sengupta that the inflationary situation is likely to persist, contrary to the claims being made from some official quarters, and also expressed fears that the situation may worsen. This is because the price of oil, which has reached $125 per barrel in the international market, will eventually increase in India too. International fertilizer prices have also increased steeply which too will lead to increase in domestic prices of fertilizers. Once these price increases are brought about, the inflationary situation may get worse. He debunked the claims being made by the advanced countries like the US and Europe that the rise in food and oil prices is because of increased consumption in India and China. Rather he laid emphasis on the dynamics of the current crisis affecting the advanced countries. The sub-prime lending crisis in the US and other economies has resulted in massive outflow of finance from the stock and property markets and inflow of funds into the commodity markets. Speculative activities in the commodity markets have contributed more to the rise in oil and food prices, rather than shortages in production and actual supply. As far as India is concerned, Abhijit Sen was of the view that price rise is inevitable in the short run, especially for oil and fertilizer, in which we are dependent on imports. A long run strategy of dealing with high international prices would require increased efficiency of energy consumption by promoting public transportation etc., in order to save on oil. Similar is the case for fertilizer. In order to protect the poorer sections of the population in the short run, he suggested measures like the universalisation of the PDS and indexing wages in schemes like the NREGA to the price level. He also ruled out any need to import foodgrains and pointed towards the increased food output and procurement in the current year.

Sitaram Yechury argued that rather than taking global inflation as a fait accompli, as the government seems to be doing, there is a need to analyse the causes behind it before arriving at policy prescriptions. His contention was that the surge in global inflation is an outcome of neo-liberal policies and the finance capital driven global capitalism. The neoliberal policies pursued in the interests of finance capital have caused massive income deflation for vast sections of the people. A direct result of this has been the rise in income inequalities both within and between the nations. Such deflationary policies while increasing capitalist profits had till recently succeeded in keeping inflationary pressures under check. However, the sustained income deflation in the agrarian sector has resulted in a crisis of peasant agriculture in all the developing countries which has led to falling agricultural production. The agrarian crisis coupled with diversion of land from food cultivation to non-food crops for bio-fuel has created supply constraints. Moreover, massive speculation in the commodity exchanges has aggravated the situation. The total trade in commodity markets globally amounts to $513 trillion, which is 10 times the size of global GDP and five times larger than total trade in the stock markets. Even the US Senate has accepted the fact that the current rise in oil prices is because of speculative trading, he said.

Talking about policy measures, Sitaram Yechury argued that the speculative trading in all food items needs to be prohibited. He also demanded the restoration of the universal PDS. Opposing any move to increase the prices of petroleum products, he said that such a step would worsen the already grim price situation.  In order to curb the losses being incurred by the Oil PSUs, he said that the Left parties have already suggested a range of measures including doing away with the advalorem customs duty on crude oil, reducing excise duties on petro-products and taxing the windfall profits of the private refineries. He also added that any meaningful strategy to mitigate the current inflation would require a shift away from the neo-liberal policy framework which seeks to place private profits over people's welfare and a stepping up of public intervention in addressing the agrarian crisis. Inflation is increasing the hiatus between “shining” and suffering India and providing relief to the masses in this situation requires political will to mobilise resources from the richer sections, especially the dollar billionaires spawned by the liberalisation process.

The discussion was followed by a lively question answer session, which witnessed some debate over possible policy measures. While summing up the discussion, Chairperson Prabir Purkayastha observed that while there were differences over the need to increase oil prices, there was a clear consensus on the need to strengthen, expand and possibly universalise the Public Distribution System.