January 17, 2005

Against the Grain

The Telegraph, 17.01.2005

Ashok V. Desai has delivered a message that is so needed in India today ó that most so-called sympathizers of the poor are misguided, and despite all their good intentions, end up entrenching poverty further. Desai correctly argues that framing economic policy with the underlying assumption that India is, and will remain, a predominantly agricultural economy is starting out on a wrong foot. The reason why Indian agriculture suffers from low productivity is because there are too many people employed in this sector.

It is all very well to ensure that the farmer gets a certain price for his crops, but why should the Indian consumer suffer as a result? If as the populists say, 70 per cent of Indians are farmers and thus need protection, then it follows that 70 per cent of all Indian consumers are also farmers. Agricultural exports tend to be price elastic, and a cheaper product will boost demands for the farmersí produce. When the G20 finally manages to get the US and EU to cut farm subsidies, and eventually it will happen, we will no longer be able to support our farmers. Isnít it better to slowly prepare them for the brave new world?

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