February 17th, 2011
Econintersect: A New Delhi investment banker says that food inflation is not a bad thing for all of India. Sunil Chandra, writing an Op Ed at GEI Opinion, says that the 65% of the country that depends on agriculture for their livelihood. Chandra points out that food inflation has little effect on the living expenses of the agricultural community but has a significant impact on increasing their incomes.
Chandra asks: "How can something which is good for nearly 65% of a country’s population be bad for the country as a whole?" Follow up:
Follow up:Food inflation is also not a serious problem for the approximately 15% of the country in the "middle class." So Chandra concludes that food inflation is a big negative for only 20% of India, and that 20% is aided by a number of state run programs.
The question is raised about whether the government efforts to control food prices over the past few years is really wise. Chandra says:
Coming back to food prices, they appear to have acted as the villains but have actually helped spur agricultural growth. Higher prices are attracting larger number of people and corporations towards farming activities like dairy, poultry, fisheries, horticulture, etc. Thus it will only be a matter of time before the prices stabilize around the presently high levels. And remember, current food prices in India are still lower than most developed countries. Finally, let the Government, the RBI and economists carry out an extensive study of the extent to which food prices are resulting in a transmission effect on other prices in the economy before they take further bludgeoning measures.
Source: GEI Opinion