ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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India's Foodgrain Policy: An Economic Theory Perspective

The simultaneous occurrence of high food inflation and large foodgrain stocks in our granaries has been a matter of concern. The aim of this paper is to understand the fundamentals of our foodgrain market and policy that lead to this situation and to suggest policies for rectifying this. The central argument of the paper is that it is imperative that we look at the entire system of food production, food procurement and the release and distribution of food. Trying to correct one segment of this complicated system is likely to end in failure. The paper argues that there are two different motives for foodgrain procurement by the state - to provide food security to the vulnerable and to even out foodgrain price fluctuations from one year to another. Further, how we procure the food has an impact on how we release the food, and vice versa. Inspired by the sight of foodgrain going waste, it is often made out to be that our central problem is that of poor foodgrain storage. This paper disagrees with this popular view. While we no doubt should improve our storage facilities, it is important to be clear that this in itself will not lower the price of food. To achieve that we need to redesign the mechanics of how we acquire and release food on the market.

This is a revised version of the Sukhamoy Chakravarty Memorial Lecture delivered at the Delhi School of Economics on 10 December 2010. I am grateful to Santosh Panda and Charusita Chakravarty for inviting me to deliver this lecture. In writing this paper I have beneted greatly from discussions with S Bhavani, Aparna Bijapurkar, Anil Bisen, Kali Charan, Supriyo De, R N Dubey, G S Negi, H A C Prasad, K L Prasad and Rajasree Ray. I have also received very useful research assistance from Rangeet Ghosh and Shweta. I owe special thanks to Bhaskar Dutta, Nirvikar Singh and an editor of this journal for reading through the entire paper and giving many valuable suggestions. Finally, I am grateful to the members of the audience at the Chakravarty lecture for their enthusiastic response and numerous comments. The views expressed in this paper are those of the author and do not necessarily reect the views of the Ministry of Finance or the Government of India. L ess than 15% of India’s national income comes from agriculture and close to 60% of India’s labour force lives off agriculture. There is little surprise in the fact that India’s rural population leads impoverished lives.

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