2011- Anticipated Global Food Crisis

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2011: Anticipated Global Food Crisis

GRK Murty



Agriculture is the lynchpin of India’s food and livelihood security. For, it

still provides employment to around 52% of the workforce, though its

share in India’s GDP (at constant prices of 2004-05) slid from 18.9% in

2004-05 to 15.7% by 2008-09, while growth rate itself fell from 4.7% in

2007-08 to 1.6% by 2008-09.

Against this backdrop, and particularly the known quantitative and

qualitative status of undernutrition and malnutrition prevailing in our

country being what it is, the recent warning of the Food and Agriculture

Organization (FAO) of the United Nations that “with the pressure on

world prices of most commodities not abating, the international

community must remain vigilant against further supply shocks in 2011,”

is sending shockwaves.

For, when prices of food commodities spike in global markets, they

tend to transmit to domestic markets, particularly when markets are

integrated—a stage towards which India is currently heading; and it is

the consumers in the developing countries that are worst-hit, as they

spend a high share of their incomes on acquisition of food, that too,

having no or little options in their food choices.

Now the question is: What should India do in 2011 to obviate the

forecasted crisis? Of course, as the Steering Committee on food and



nutrition set up to advise the UN Committee on food security observed,

India must draft and execute “a comprehensive coordinated approach,

not piecemeal approaches, to tackling chronic, hidden and transitory

hunger.”

Fortunately, we have suitable policies already in place, but what is

needed is: political will to implement them in letter and spirit. The first

policy that comes to mind for immediate execution is the

recommendations of the National Commission on Farmers, which

emphasized the importance of “imparting an income orientation to

agriculture” by affording water and nutrients, timely credit and assured

and remunerative marketing system that ultimately result in higher

productivity per unit of land.

The mission-criticality of this simple requirement can best be

appreciated only when one is aware of the basics of Indian agriculture.

More than four-fifths of India’s total operational holding of 1,077.1

lakhs fall under the category of small and marginal farmers consisting of

less than 2 ha. Essentially, every farmer is a risk-taking entrepreneur—

even today, the entrepreneurship of an Indian farmer is a gamble on

the monsoon system. Besides, they also face the risk of spurious inputs

such as seeds and pesticides, pest and disease attacks, and



inadequate/untimely credit supply, coupled with procedural hassles

from the banking system and price uncertainties.

And the small and marginal farmers are the worst victims of all these

risks, for they do not have the wherewithal to micromanage these

innumerable risks; nor do they have the asset-backing to stay put with

the consequences of any of these risks—particularly, the consequences

associated with the risk of extremities of weather, like the one the state

of Andhra Pradesh suffered in the current kharif season.

So, what immediately needs to be done is to build risk-mitigation

mechanisms in an integrated way into the system. It, of course, calls for

a multi-pronged strategy to address both covariate and idiosyncratic

risks: one, macro level agricultural insurance system to be

strengthened, besides making it meaningful; two, encouraging local

collective group insurance initiatives; three, so streamlining the credit

delivery system that it adopts a flexible and cyclical credit system in

sync with weather behavior; four, institutionalizing the price support

mechanisms and procurement for greater transparency; and five,

creating a reliable and well-regulated market infrastructure. So far as

the policy initiatives for providing ex post risk-related relief are

concerned, a distinction needs to be made between normal risks and

risks that are rare but having high consequences for individuals over



larger areas, and importantly, institutionalizing these measures to limit

the scope for corruption.

Are we then ready to plunge into action—of course, right action?

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2011- Anticipated Global Food Crisis