Oct 29, 2010

Stupid Economics: Blaming the poor and hungry for food inflation

Obsessed with the growth figures, the planners have tried but failed to hide the ugly underbelly of India’s economic growth.

Montek Singh Ahluwalia has been at the helm of India’s planning process for quite some time now. It is during his tenure as the deputy chairman of the Planning Commission that India has been pushed deeper and deeper into the quagmire of poverty. With the largest population of hungry in the world, the Global Hunger Index 2010 has placed India in the pit.

I wasn’t therefore shocked when I read Ahluwalia blame the hungry for the rise in food inflation. From someone who literally lives in the ivory tower of the Yojana Bhawan, anything can be expected. But what, of course, surprised me was the audacity with which he blamed the poor and hungry in the rural countryside for the rising inflation. Although I hate to say but there can be nothing more stupid than blaming the poor in the villages as if they have started eating more and therefore the pressure on food prices.

A few years back, former US President George Bush had made that ignominious remark shifting the blame for the 2007 global food crisis to the hungry Indians. He had said that the food crisis was because the Indians had started eating more. In an interview, I had then replied that if Indians started eating as much as the Americans do, then probably the world would need to grow food crops on the moon.

While one can ignore what George Bush had said, how can one pardon the head of India’s planning process who should know much better. It also reflects on the disconnect India’s Planning Commission has with the existing ground realities. Obsessed with the growth figures that continue to be tossed around with much fanfare, the planners have tried but failed to hide the ugly underbelly of India’s economic growth.

Only a few weeks back, India was ranked 67th among 84 hungry countries of the world. Two years back, in 2008, the Global Hunger Index had placed India at 66th position among 88 countries. In other words, India had slipped still lower down the pit in the past two years. I can’t fathom how the International Food Policy Research Institute (IFPRI) had placed India in such a low esteem if the poor in the villages had started eating more.

Take another international report that was submitted by the Save the Children Fund just a few days prior to the UN Summit on Millennium Development Goals (MDGs) that was held in the last week of September in New York. With over 5,000 children succumbing to malnutrition every day, India had once again topped the global ranking. This shocking disclosure is enough to put every Indian to shame. I wonder how the head of Indian Planning Commission can even walk with his head held high.

Let me also draw your attention to the 2006-07 report of the National Sample Survey Organisation (NSSO) which brings out the stark truth. It tells us that the correlation between hunger and economic growth is robustly positive -- more the economic growth, more people go to bed hungry. This challenges the widely held view that economic growth pulls poor out of poverty and hunger.

What makes the alarming situation still worse is that ever since economic liberalisation was launched in 1991, the NSSO tells us that cereal consumption has been on a steady decline, with no corresponding increase in the intake of more nutritious eggs, vegetables, fruits and milk. It means hunger has been on a rise and is now more widespread and well-entrenched. So far the feeling was that with the changing food habits, people have shifted from cereals to nutritious foods like fruits, vegetables and milk. This assumption too does not hold true anymore.

Cereal consumption

The decline in cereal consumption has more or less followed a steady pattern in the rural and urban areas, and of course, much faster in the rural areas. I don’t think Ahluwalia ever read this report. Accordingly, per capita cereal consumption per month in the rural areas across the country has fallen from 13.4 kg in 1993-94 to 11.7 kg in 2006-07.

The decline has been sharper between the period 2004 and 2007 when just in three years, cereals consumption fell from 12.1 kg to 11.7 kg. In the urban centres the decline was from 10.6 kg in 1993-94 to 9.6 kg in 2006-07. In a largely vegetarian society, cereals constitute the single important source of nutrition and therefore its importance in the Indian context is well established.

This is still not the real picture. The NSSO survey does not cover the period 2007-08 when the world was faced with an unprecedented rise on global food prices. In any case, the average household expenditure on food shows an increasing trend, but does not translate into more food consumption. It only means food prices have been on an upswing, and the poor are finding it difficult to fill their bellies. The recent price rise had made it still more difficult for the poor to be well fed. Cereal consumption therefore is expected to fall still further in 2009-10, and the impact it must have had on the poor and hungry can be well imagined.

Source: Deccan Herald, Oct 28, 2010


Narasinga Rao said...

Devinder..Please keep up the good work. Inflation is increase in quantity of money and credit, one of the effects is rising prices.
We live in a world of govt monopoly over money and via central banking it controls money supply and causes inflation and reduces the purchasing power of its citizens making poor people's life miserable.

As usual all the elites and planners blame others. We all need to understand money, inflation and governments role in distorting these.

Ramesh Dubey said...

आदरणीय देवेंद्र जी आपने भुखमरी-गरीबी को बढ़ावा देने वाली विकास रणनीति का सटीक विश्‍लेषण किया है । इसमें कोई दो राय नहीं कि गांव वालों की आय में बढ़ोत्‍तरी हुई है लेकिन बढ़ती आय के बावजूद भी वे भुखमरी के शिकार बन रहे हैं तो इसका कारण यही है कि अब उनकी बाजार पर निर्भरता बढ़ गई है । पहले नमक, चीनी जैसे कुछेक खाद्य पदार्थों के लिए ही वे बाजार पर निर्भर थे लेकिन अब तो दाल, सब्‍जी, अनाज, दूध आदि के लिए भी वे बाजार पर आश्रित हो चुके हैं । उगाकर खाने वाले आत्‍मनिर्भर ग्रामीण समाज अब पूरी तरह खरीदकर खाने वाले समुदाय में तब्‍दील हो चुका है । इससे विकास दर तो बढ़ी लेकिन देशवासियों की सेहत बिगड़ी । प्रतिव्‍यक्‍ति अनाज उपभोग घटने का मूल कारण है बढ़ती आबादी के अनुरूप अनाज उत्‍पादन में बढ़ोत्‍तरी न होना है । पिछले एक दशक से देश का खाद्यान्‍न उत्‍पादन 22-23 करोड़ टन के आसपास बना हुआ है जबकि जनसंख्‍या में प्रतिवर्ष डेढ़ करोड़ की बढ़ोत्‍तरी हो रही है । ऐसे में प्रति व्‍यक्‍ति अनाज उपभोग घटना स्‍वाभाविक ही है ।

रमेश दुबे, दिल्‍ली

Rajan Alexander said...

Interest rates: The Poisonous Fangs of MFIs

MFIs were touted to provide the poor access to affordable credit, reduce poor people’s need to use moneylenders and indebtedness. In short, provide a much kinder, cheaper alternative to the village loan shark. Instead, they evolved as the new class of institutionalized loan sharks which neo-liberals gave respectability to. MFIs did improve access to micro loans but failed in their touted mission to provide affordable and gentler credit and above all, one that lifted people from the clutches of poverty. Objects of institutional financial sustainability exhort them to charge interest rates and fees high enough to cover the costs of their lending and other services.

MFIs argue that they need a spread apart from all costs to provide for contingencies and growth. Fine but the moot question is how much should be this spread.

MFIs argue that economies of scale and competition will drive interest rates down. This remains only a theoretical argument. “Mexican micro-finance institutions charge such high rates simply because they can get away with it”, said Emmanuelle Javoy, the managing director of Planet Rating, an independent Paris-based firm that evaluates micro lenders!!

If at all, the average Indian MFI interests rates appear more benign than in Latin America or Nigeria, then it simply because other than factors internal to the MFI industry, the sector faces strong competition from governmental and NGO SHG micro-saving programmes in the absence of which, these MFIs would have formed a cartel. Past angry public and government reactions that resulted in a backlash against them, which included the arrests of MFI top leaders, like Uday Kumar of Share Microfinance Ltd as in 2007, keeps their profiteering impulses under check.

The sooner MFIs are seen as profit enterprises, the better. The longer they pretend they are pro-poor, the longer they discredit the NGO sector that gave birth to a Frankenstein. By 2014, they target to reach 110 million borrowers. Remarkably, despite two decades of operations, if statistics are to be believed, these MFIs only reach just 20 million people in the country, a good proportionate of them, multiple counted. Yet, they succeed in gaining an attention, so disproportionate to this minuscule reach. Act now to prevent they becoming an epidemic in the country. Act now, when they are most vulnerable.

And how do know they are vulnerable? Because Vijay Mahajan, the father of MFIs in India tells us so:

“We are facing collapse. Unless something changes on the ground, the industry as we know it is basically gone. ”

Mahajan, we have news for you. The day when the likes of you are gone, that will be the turning point for the fight against poverty!

What’s wrong with Micro-finance Institutions? Practically everything as the case of SKS illustrates.

Read More: http://devconsultgroup.blogspot.com/2010/10/whats-wrong-with-micro-finance.html