|1st Five Year Plan||
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|| APPENDIX (CH-9)
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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 v/hat 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 progran-une 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 sevenil 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 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 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 :
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 production 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 :
'Official figures as corrected in the light of the results of I.C.A.R. sample surveys.Imports of foodgrains were lowest at 2'13 million tons in 1950, but this low level of imports necessitated a reduction of o'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 : .
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 c deficit'. Population in India has been increasing at the rate of about l^ 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 21/4 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.fAs 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 dita regarding these are not available.
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.
II. 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
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 l 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 wheatnow 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. I-n 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 all 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 i5th 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 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.
14. Between June and October 1952, stocks of foodgrains with the Central and State Governments came down by about 1 million tons. The year is, however, expected to close with stocks of about 1. 8 million tons, which represents the highest level reached since the imposition of controls. The arrangements in regard to imports, domestic procurement and distribution for 1953 must, in our view, aim at a carry-over of between 1. 5 and 2 million tons at the end of the year. A carry-over more or less of this order might be considered necessary for the entire period of the plan.
15. The period since relaxation of controls has been too short to warrant any definitive judgment as to the effects of such relaxation. Short-period movements in prices are inevitably subject to various influences, seasonal and others, which might not be of significance in the long run. These trends have, however, to be carefully watched, and the machinery of basic controls has to continue to operate so as to check any undesirable developments.
16. In regard to millets, certain changes have recently been made in the system of controls with a view to stimulating freer movements within States and larger flows from the surplus States to deficit States. Inter-State movements as well as prices at which the deficit States buy from the surplus States will continue to be controlled by the Central Government. The index of jowar prices in September this year was 204 as compared to 382 towards the end of 1951. It is also significant that throughout the period of controls the prices of millets have risen much less than those of wheat. A measure of relaxation in respect of the internal movement of millets, subject to inter-State bans bein maintained and buying by deficit States being kept under Central regulation, may thus be expected to ensure a better distribution of these grains as between States, without producing direct repercussions on major cereals. With buying by deficit States under regulation, prices can be prevented from rising too much, and the retention of inter-State bans ensures that any undesirable developments can be checked in time through appropriate administrative arrangements. The administration of controls is a complex matter, and a measure of experimentation in regard to the detailed arrangements to be made, subject, however, to certain essential safeguards, is desirable if excessive rigidity is to be avoided.
Food Controls In Relation To The Plan
17. If " food for all " is to be the effective basis of policy and if the investment targets in the Plan are to be adhered to, the basic structure of food controls has to be kept intact during the period of the Plan. It is our considered view that until the domestic production of fbodgrains has been stepped up to the extent of 7-5 million tons as envisaged in the Plan, the country cannot be considered to have an adequate and assured food supply. Controls might be relaxed or their form altered after the target of additional production has been achieved and adequate transport facilities have been created to ensure the expeditious movement of food grains from one part of the country to another. The extent to which such relaxation or changes could be made will depend upon the investment targets that the country might then have, and the alternative demands for additional production of raw materials like cotton, jute and oilseeds.
18. It is sometimes argued that controls act as a disincentive to production and that if free market conditions are restored, production will be stimulated, and even though prices rise in the process, the consumers will, in the long run, stand to benefit. To what extent controls are a disincentive depends on two factors, (a) the prices paid to producers for controlled commodities, and (6) the efficiency and fairness with which the controls are administered. This latter aspect of the problem has, of course, to be constantly kept in view. As regards prices, the problem is to define a level which may be considered reasonable under given circumstances, and to ensure through direct controls or through fiscal and other devices that the producer of foodgrains is not placed at an undue disadvantage. The difficulty about the incentive which might be given by the unregulated operation of the free market to production in a particular line is that expansion in this line takes place at the expense of output in some other line. A general increase in output cannot, obviously, be secured by merely increasing the money reward for each unit of work. The great advantage of a system of controls is that under it the measure of incentive to be given can be regulated.
19. A policy of price stabilisation must have in view certain maxima as well as certain minima. At a time when the economy is subject to inflationary pressures, the emphasis is inevitably on the maintenance of the maxima. But if the trend of prices is persistently downward, a system of controls with defined procurement prices can be used and indeed should be usedto safeguard the interests of producers by preventing prices from falling unduly. Judicious purchases by Government at defined prices are thus an excellent device for stabilising prices and for evening out to some extent inter-State disparities. Elsewhere in this Report, we'have stressed the desirability of initiating State trading in a few essential commodities to begin with. With the bulk of the trade in grains already in the hands of Government, further extension of such trading can play a vital part in stabilising or reducing the cost of living and in diverting to the public sector the surpluses which might accrue in those lines.
20. Food policy has a direct bearing on the investment programme which can be undertaken in an underdeveloped economy. The larger the available supplies of food, the more effectively they are mobilised, the greater is the investment effort the community can put forth, for food constitutes the wherewithal for sustaining the labour force employed in construction and in the production of capital goods and equipment. The rapid development of an underdeveloped economy is a function mainly of the rate of capital formation, and the latter can be stepped up as more food can be made available to the newly employed. The Five Year Plan, as it now stands, envisages a stepping up of total investment in the economy from about Rs. 450 crores in 1950-51 to about Rs. 675 crores by 1955-56, which amounts to an increase of 50 per cent. in the course of five year. The yearly rates of investment are thus high enough to call for special effort. The resources available to the public sector for financing its plan of Rs. 2069 crores are estimated, as has been shown in Part I, to necessitate a considerable measure of deficit financing. If economic activity in the country is stimulated, as is proposed under the Plan, incomes in the country-side must increase. This is bound to ensure a high level of demand for food. In fact, it may even be stated that a development plan which does not raise the demand for food in the country significantly must be considered inadequate. Persistently low or falling food prices under present conditions of domestic production and availability can only indicate insufficient investment effort and low purchasing power in the community.
21. Throughout this Report, we have emphasised the need for utilising unemployed manpower more effectively. It is only through such untilisation of idle manpower and the spare hours of those partially employed that a comprehensive programme of development can be implemented. The low levels of employment which have become endemic in the economy are not merely so much economic waste ; they constitute a big social problem involving the very stability of the economic and social system. The rate at which the unemployed can be absorbed in productive work depends, obviously, on Government's capacity to supply them food at reasonable prices. It is true that even the unemployed do in any case consume food, but this only means that the increase in food requirements need not be proportionate to the increase in employment. On the other hand, it has to be borne in mind that when the unemployed are put to work, firstly, their food requirements are likely to go up and, secondly, the necessary supplies will have to be found not directly from the families which were hitherto supporting the unemployed but from the marketable surplus available in the system.
22. There are parts of the country which are subject to periodical droughts and scarcity. Some areas are so underdeveloped and yet so thickly populated that special efforts are necessary to create new avenues of employment for the people in these areas in order to provide them with the minimum purchasing power necessary for sustenance. It is in this context as much as in the larger context of development that deficit financing on a big scale is often advocated. What limits the measure of deficit financing that can be undertaken under such conditions is not finance as such but the danger of larger money incomes generating inflationary pressures which might affect adversely the economy as a whole. Only to the extent that these latter are controlled and the supply and distribution of food-grains and other essential commodities at reasonable prices arranged can deficit financing for fuller employment be safely proceeded with.
Rationing And Procuement
23. The system of food controls to be maintained has to be related to the needs of the. urban and other highly deficit areas. This means that cities and towns above a certain sizewhich might vary according to local conditions in each Statemust be statutorily rationed and the needs of highly .deficit areas like Travancore-Cochin must be similarly looked after. A system of controlled distribution through non-statutory rationing should normally be adequate for other areas.
24. The system of procurement to be adopted must aim at channelling into the hands of the official agency the surpluses available in each State after the needs of the local population are provided for. Whether monopoly procurement or some form of levy would best answer the purpose has to be determined in the light of the conditions prevailing in each State. The aggregate requirements of the Central and State Governments for meeting their commitments have, since the restoration of controls towards the end of 1948, been between 7 and 8 million tons. These have been met through domestic procurement amounting to between 3-8 and 4-6 million tons and imports varying between 4-7 and 2-1 million tons. Of the total procured domestically, Madras and Bombay which are net importing States have been responsible for about 40 per cent. It will be noticed that the net exports from surplus States have been small relatively to total procurement, the maximum attained being 785,000 tons in 1950. In 1951, net exports from these States fell to 170,000 tons, and for 1952, they amounted 350,000 tons up to the end of October. If food controls are to function with increased efficiency, it is necessary to evolve a system which will increase the flow of grains from surplus States. For deficit States, the problem is to secure from local production what they need for meeting their commitments without, on the one hand, reducing unduly the availability of grain in the rural areas, and, on the other, increasing the demands from the central pool.
Administration Of Food Controls
25. The maintenance of a satisfactory system of food controls depends upon (a) clarity and continuity in policy, (A) efficiency in administration and (c) the degree of public cooperation that can be secured. The last is, to a great extent, dependent on the first two. As regards policy, the question has to be approached not so much from the point of view of the needs of particular States as from the overall national point of view. In,'country of the size and diversities of India, there is room for differences in the details of administrative arrangements. It is necessary in these matters to adopt a pragmatic rather than a doctrinaire view and to leave room for local adaptations in the light of -prevailing circumstances. Nevertheless, the broad objectives must be kept clearly in mind. The aim of policy must be to secure from each surplus State the maximum it can make available to the common pool and to organise the procurement arid distribution of grains in each deficit State so as to restrict its drawings from the central pool to the minimum necessary. It is evident that the responsibility for fixing procurement and issue prices and for coordinating the control policies of States must rest with the Centre.
26. The maintenance of a system of controls presupposes efficient administrative arrangements. Given the essential framework of policy and the determination to pursue certain objectives steadily, the necessary efficiency in administration can be secured. Planning implies the readiness to undertake new and onerous responsibilities, and to argue for decontrol on the ground of administrative difficulties is to question the feasibility of planning. A solution to such shortcomings and difficulties has to be found through progressive improvement of the administrative machinery. To a great extent, this is a question of selecting the appropriate personnel.
Change In Food Habits
27. Finally, we should like briefly to touch upon an important aspect of the food problem which relates to consumption habits. Of all the foodgrains which form the staple diet of the country, rice presents special difficulties. Not only India but the world as a whole is short of rice, and the world price of rice is high and is rising further. Even a moderate import of 500,000 tons of rice is estimated to involve an expenditure of about Rs. 40 crores. The outlook for wheat is, on the other hand, better. Considering these circumstances, the substitution of wheat for rice to a moderate extent in the customary diet is highly desirable. The shortfall in the country's rice production is not more than 2 or 3 per cent of total needs, and it should by no means be difficult to make good this deficiency by substituting wheat for rice. There is also scope for encouraging the use of supplementary foods. No doubt, food habits are not easy to change, but if the public is made aware of the cost involved as also of the undoubted benefits of a more varied diet, the necessary response could be secured.
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