Monday, February 22, 2010

Wheat & Rice Economy

Quoted from an
worth read article in Business Standard

what is it that makes wheat and rice special, such that even though they contribute barely 3.3 per cent to the country’s total GDP, they absorb something approaching 2 per cent of GDP as subsidies? It could be that they form the bulk of the consumption basket for the poor, but then the poor are separately being promised food security (which, if there is total coverage, will probably cost another 1 per cent of GDP).

Nor can it just be that you need to protect/subsidise millions of poor farmers (70 per cent of the 100-plus million land holdings in India are under a hectare), because only about 40 per cent of the country’s cropped area is under wheat and rice. The rest is under coarse cereals, oilseeds, pulses, cotton, fodder, sugarcane and the like. How is it that farmers can grow all those other crops without the scale of government support that wheat and rice growers get?

Most of these Wheat & Rice growers have strong lobbies or share enough mind space to sway policy decisions. And i think this same subsidy game is what keeps some of the states like Bihar poor. I do not have direct correlation but if you look through the grain storage capacity of two states Bihar & Punjab and two further data like their Grain production & GSDP (gross State Domestic Product) Data for each of these two states you can notice the disparity. I believe because of this substantially high proportion of subsidy for these two corps some of the central money again goes to states which produce more of wheat & rice.

Grain Storage Capacity based on FCI data : Punjab = 57.66 Lac Ton, Bihar = 5.1 Lac Ton (almost 1/10 of Punjab)

Production Foodgrains During 2000-01(Could not find later years data there although this link has 2006-07 data) : based on Central Govt data: Punjab = 24.89 Mil Ton, Bihar = 11.85 Mil Ton (almost half of Punjab)

GSDP (gross State Domestic Product) Data due to agriculture : Punjab = 26 Bihar = 16

Just goes on to show how this subsidy has created a kind of disparity which forces Biharies to Migrate & Search for Agricultural work in Punjab.

Further on .. i have not read anyone paying any attention to forest dwellers (many of them categorized as adiwasis) and i believe most of these forest dwellers are in our most backward areas like Jhharkhand, Chhatisgarh or Orisa (incidentally they all are mineral rich as well). One reason of Govt not paying enough attention to Forest dwellers is that they are still not organized or they do not have formed associations to look after their welfare. So the govt is while keen to dole out subsidy to Wheat and Rise growers its does not care much for others.

Quoted from the same article

In any case, it is not just farmers who are poor; there are 50 million forest dwellers (to take another category of poor) who make do as best they can without state support. If anything, the forest department is hostile to them. Besides which, it is the success of dairying that has helped boost rural incomes far more than growing wheat and rice; milk is now the single-biggest commodity to come out of Indian agriculture, and most milch animals are owned by small and marginal farmers, landless workers and shepherds — all poor people.

Yet on one side we have growing food prices and the govt's cost on storage of wheat & rice has gone up as

The central exchequer is forking out an estimated Rs 132 crore every month on wheat and rice storage, thanks to the burgeoning stocks of these commodities. This is a jump of 76 per cent over what is estimated to have been incurred last year this time.

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