FOOD POLICY FOR THE PLAN
BASIC CONSIDERATIONS. A well-defined food policy for the period of the Plan is an essential condition for the successful implementation of the Plan. For the large sections of the community which live near the margin of subsistence, a certain minimum supply of foodgrains at reasonable prices constitutes the rock-bottom of the standard of living, a fall in which Would be seriously detrimental to health and efficiency. The consequences of any untoward development in the food situation are too obvious to need stressing. The experience of the last few years has brought out clearly the vulnerability of the economy on account of the inadequate production of foodgrains in the country. Foodgrains occupy a pivotal place in the price structure, and if this latter has to be safeguarded, as it, must be, the prices of foodgrains must be held stable at levels within the reach of the poorer sections of the community. Even a moderate shortfall in the supply of foodgrains is likely, under Indian conditions, to raise their prices more than proportionately, and a rise in food prices leads directly to a rise in the cost of living and in production costs, all round. This does not, of course, mean that the producer of foodgrains should not get a reasonable return. On economic as well as social grounds, it is vital that he does. But, the real return that he gets does not depend only upon the prices he obtains for his produce ; it depends as much upon the prices he in turn as to pay for what he buys. If an increase in food prices raises these latter, he may be no better off in the end, and may even be worse off. In the last analysis what limits the real income of the primary producer is low productivity. To increase this latter, what is needed is a programme of public investment which will give him the water, the power, the seeds and the manures he needs. A policy which might raise prices all round and jeopardise the investment programme itself is, therefore, of no ultimate benefit to the producer. Food policy for the Plan has, therefore, to keep in mind these wider considerations.
2. The food problem has been the subject of discussion and debate for more than a decade, and several expert committees have reported on the various aspects of the problem. The Bengal Famine Commission reviewed in detail the long-term trends in the economy as well as the several short-term factors which culminated in the food crisis of 1943. The report of that Commission enunciated the principle that "food for all" must be accepted as the basis for Government policy in this field. In a planned economy, this objective inevitably acquires added importance and has to be effectively implemented. The system of controls developed since 1943 through a process of experimentation and of adjustment of the needs and claims of the various States, surplus as well as deficit, has had as its objective the
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mobilisation of available food surpluses in the country and their equitable distribution at reasonable prices. The operation of this system has meant a strain on the administration ; it has often involved difficult decisions affecting one sectional interest or another. The degree of public cooperation necessary for ensuring the success of such a system of controls has not always been forthcoming, and doubts have from time to time been expressed whether, on balance, there was advantage in such a system, or whether it might not be better to revert, at least in some degree, to the traditional organisation of the free market and the operation of the impersonal laws of demand and supply. And yet, the lesson of experience is unmistakable the free market is not a dependable mechanism when the economy is or is likely to be under pressure due either to short supplies in the country or unfavourable developments abroad. It is not without significance in this context that most proposals for decontrol and the restoration of the free market visualise certain safeguards like cheap grain shops, licensing of traders, requisitioning of stocks if necessary, etc. But, these forms of control were tried in the early stages, and it was because they proved unsatisfactory that more stringent controls involving procurement, restriction of movements, price control and rationing had to be adopted.
3. The fact that food controls were a product of war-time scarcities is apt at times to obscure the role they have to play in a planned economy. A plan for development involves large outlays on investment, and this, in the early stages, increases money incomes faster than the available supplies of consumer goods. The pressure of these money incomes, especially if they accrue to the less well-to-do classes, is bound to be felt chiefly on foodgrains, with the result that if the prices of foodgrains are allowed to rise, the real income of these classes is likely to rise much less than their money incomes, thus depriving them of the beneficial results of increased employment and incomes. Nor are these adverse effects confined to the new recipients of income ; they affect all fixed income earners who may be subjected through these price increases to `forced saving' out of proportion to their capacity. In a planned economy, food controls have thus certain positive functions, such as safeguarding the minimum consumption standards of the poorer classes, preventing excessive or ostentatious consumption by the well-to-do, and facilitating the country's programme of direct utilisation of unemployed manpower for investment.
THE `DEFICIT' 4. A major question that arises in this context is as to the precise measure of the deficit in foodgrains the country must provide for. For this purpose, it is necessary to assess the trends in production and to see how they compare with requirements. We have given careful consideration to this question, but we find that on the basis of available data, it is not possible to reach any definite conclusions on this point. Official figures regarding
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acreage and production prior to 1949-50 are not comparable with those for earlier years on account of changes in coverage, mergers of States, etc. The figures of production since 1949-50 indicate, as will be seen from the table below, no significant trend :-
Foodgrains Production*, 1949-50 to 1951-52
(in million tons)
Rice Wheat Millets All cereals
1949-50 . . 22.8 6.5 16.2 45.5
1950-51 . . 22.1 6.7 15.4 44.2
1951-52 . . 22.8 6.2 15.4 44.4
From an analysis of official figures it appears that there are large variations in the availability of foodgrains between various States and considerable variations from year to year within the same State. To some extent, these variations might be indicative of the imperfection of the data themselves, but it is clear that an estimate of the `deficit' arrived at on the basis of an average norm of requirements for the entire country is apt to prove wide of the mark.
5. Apart from the fact that it is not possible from available data to say how much precisely is the total food production in the country, there is also some doubt whether these data could safely be used for framing a judgment as to whether or at what rate food produc- tion in the country has been increasing. There is a view that foodgrains production is, in fact, significantly larger than is indicated by official figures. Certain data bearing on production and consumption of foodgrains have been compiled in connection with the National Sample Survey, and these may be expected to throw further light on the subject. For the time being,the official data, which represent information collected on a countrywide basis and over a continuous period of years, have to be used, though with due caution, for framing policies and for carrying on administration at different levels in the sphere of food and agriculture.
6. From a practical point of view, it is of no great consequence whether food production is or is not higher than is shown by the official data. For, if more is being produced, more is being consumed also. What matters for practical purposes is that over the last six or seven years, the country has imported on an average about 3 million tons of foodgrains. The following table gives these imports since 1946 :-
Imports of Foodgrains, 1946-1952
(in million tons)
1945 . . . . . . . . 2.25
1947 . . . . . . . . 2.33
1948 . . . . . . . . 2.84
1949 . . . . . . . . 3.71
1950 . . . . . . . . 2.13
1951 . . . . . . . . 4.72
1952 . . . . . . . . 3.90
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Imports of foodgrains were lowest at 2.13 million tons in 1950, but this low level of imports necessitated a reduction of 0.85 million tons in the stocks held by Government. Taking into account imports as well as changes in stocks, the net absorption of foodgrains from abroad for the last few years has been as follows :-
(in million tons)
1947 . . . . . 2.8
1948 . . . . . 2.4
1949 . . . . . 3.2
1950 . . . . . 3.0
1951 . . . . . 4.1
1952* . . . . 3.4t
Average net absorption for these years works out at 3 million tons ; the minimum being 2.4 million tons in 1948, and the maximum being 4.1 million tons in 1951. While it is not possible, as stated above, to estimate the `deficit' directly in terms of food production and requirements, this net absorption of imports is indicative of the measure of deficiency that has to be made good. In the nature of things, the `deficit' is not an invariable factor. if food prices are allowed to rise, the consumption of some sections of the population would come down for want of sufficient purchasing power to buy food at these prices. Through such cuts in consumption, the supplemental imports needed from abroad could be reduced, but this would involve serious hardship, which might even react on productive efficiency.
7. It would be wrong at the same time to take a static view of the `deficit'. Population in India has been increasing at the rate of about if per cent. per year, and the additional annual requirements needed on this account are of the order of 4 1/2 lakh tons. This means that over a period of five years an increase of about 2 1/4 million tons in foodgrains production would be absorbed by the increase in population. The problem thus is of providing for an increasing population, if and to the extent possible, at more satisfactory levels of consumption.
8. The `deficit' in foodgrains works out roughly at about 6 to 7 per cent. of production as judged from official figures. In view of the possibility of these figures being underestimates, the actual deficit might be lower say, about 5 per cent. of total production. While, for the reasons mentioned earlier, a marginal addition to available supplies may prove under present conditions of more than proportionate benefit, the aim of policy must be to increase domestic production, to secure an increase in the marketable surplus, to distribute the same as equitably as possible, and to eliminate by the end of the Plan period the need to import foodgrains. It might be well to stress in this connection that the need to import from abroad is related more directly to the marketable surplus available for meeting the requirements of non-food producers than to total production, and that the problem is not merely one of increasing production but also of mobilising more effectively the surpluses which become available with the producers.
*Approximate.
As a result of the relaxation of procurement in the latter part of the current year, it is possible that some stocks will be available with private trade for carryover to the next year. But data regarding these are not available.
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9. The total cost of imported grains since 1948 works out at over Rs. 750 crores. Although part of the imports received in 1951-52 were financed out of the U. S. wheat loan, it cannot be questioned that the country has been paying heavily for these imports. Any change in food policy likely to reduce procurement and increase the dependence on imports, which, in turn, might mean further expenditure on subsidies, has therefore to be avoided. In fact, the aim should be to reduce imports progressively. The optimum utilisation of the resources available to the country demands that for meeting the requirements of the food administration, the system of internal procurement must not only be maintained but must be steadily improved.
10. For the immediate future, relative scarcity of foodgrains has to be regarded as a datum. The review of the Grow More Food campaign since 1943 undertaken recently by the Grow More Food Enquiry Committee brings out the fact that there has been in recent years an addition to the "production potential" in the country through schemes of minor irrigation and land improvement. It is also true that the efforts made under the campaign have created a new consciousness among agriculturists as to the need and scope for improved agriculture. The reorientation of the campaign suggested by the Committee and the schemes for agricultural development included in the Five Year Plan will undoubtedly show results. It may be hoped that when these results come, they will come cumulatively. The point, however, is that it will be some time before the new trends are established. So far as the outlook for the immediate future is concerned, a particular year might turn out to be on the whole satisfactory, but food policy must, if serious risks in a vital matter like food are to be avoided, be based on the assumption of a continuance of the condition of relative scarcity and strain in spite of a progressive increase in production. This means that for the period of the Plan, rationing and procurement together with certain minimum imports, must be regarded as the key to the maintenance of a stable system of food controls.
FOOD PRICES 11. The following table brings out the trends in wholesale prices and in cost of living since 1947 and shows also the indices for cereals in relation to these-
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The rise in wholesale prices as a result of decontrol in 1947 was as high as 30 per cent. After the reimposition of controls in 1948, a measure, of stability was attained until the devaluation of the rupee along with several other currencies in September, 1949. The anti- inflationary programme taken in hand soon after devaluation was again a stabilising factor. Prices rose sharply after the outbreak of the Korean War, and although steps were taken to prevent money income from rising as a consequence of the abnormally high prices of exports, the economy was once again subjected to serious inflationary strain The rise in prices in India was less than in the U.K. and the U.S.A. and a considerable part of it was due to speculative factors. The subsequent decline in prices in India was partly a corrective to the earlier speculative trend, and partly a consequence of the real change in world demand-and-supply conditions and of the adoption of disinflationary monetary and fiscal measures by the Government. The inflationary pressures associated with the Korean War have thus been neutralised during the last 12 months or so. But it is evident from the price trends in the last five years that the ground lost in 1947- 48 was never regained. The present high level of cost of living is causing serious hardship to the middle classes and it is necessary to safeguard their legitimate interests. The need for a disinflationary price policy, therefore, remains.
12. The decline in wholesale prices since the break of the Korean War boom in April 1951 has been about 15 per cent. The largest fall has occurred in the case of industrial raw materials, which have gone down by 34 per cent. Food articles have registered a fall of 13 per cent, but the fall in the price of wheat and rice has been of the order of only 1 per cent and 5 per cent respectively. The general index of wholesale prices is now at about the same level as on the eve of the Korean War, and the index of food articles is about 10 per cent lower. But it must be noted that it is the prices of food articles other than wheat and rice that have fallen. The index for wheat now stands at 556 as compared to 518 in April 1950 and is close to the peak level of, 560 reached in April 1951. The continued high level of the prices of basic cereals accounts largely for the failure of the cost of living to come down.
RECENT CHANGES IN FOOD CONTROL 13. The large imports of grain in the latter part of 1951 and the early part of this year improved substantially Government's stock position in foodgrains. In March and April this year the low price of oilseeds and the difficulties in the,disposal of cotton probably compelled farmers to sell more grain in order to meet their cash requirements. To some extent, the bearish psychology created by the sharp fall in almost an prices in the first few months of this year was also responsible for some dehoarding of grains. The satisfactory procurement in the first half of this year, the accumulation of stocks with the Government and the decline in offtake from ration shops led to relaxations of control in several States in June and July. In Madras statutory rationing was withdrawn as from the 15th of, June and cheap grain shops were opened instead. Procurement was temporarily discontinued. The State was divided into six zones and inter-district movements within these zones were
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permitted. Thereafter, statutory rationing has been suspended in Bihar, U.P., Hyderabad, Mysore, Saurashtra and Madhya Bharat and inter-district bans have been lifted or modified. These changes must be viewed as changes in food administration in response to changes in circumstances. The basic policy of keeping down food prices to a reasonable level and of ensuring that the available supplies of foodgrains are mobilised effectively for meeting the needs of the vulnerable sections of the community must remain unchanged. Only when a substantial and enduring improvement in domestic production and marketable surpluses has materialized can change in basic policy be considered.