Abundant Foodgrain Stocks, Ample Foreign Exchange Reserves and Poverty: Addressing the Challenges of India’s Development Story

India progressed with 9% growth and 5% inflation with the Economic Reforms of 1991 which trumped the old slow growth model to a new continuous monitoring model of economy building.
We reached our millennium goals, due thanks to globalization and liberalization with major hiccups which refuted core development methods and presented us with the adage, ‘Growth comes with its share of difficulties’.
And in the age globalization of not only economies, but also hopes kept us in fear to daringly see new possibilities in lieu of breakdown.
As we enter the last half of 2011, India possess economic abundance and ample food grain reserves so much as our granaries can’t store it and leave it to nature to decompose. No, these are not golden spoon moments; in fact, we have lot of abject poverty to look into on why so high uneven divide got created, as if it’s a clarion call that we missed to look into our developments as vivid as our diversity.

One look tells us that agriculture constitute the major part of our economy, and as a result we out folded our agriculture spending in the last couple of years which fruited us with 4% growth in agriculture, which we once only dreamed about.
Sadly, it also fostered generation of a new economic divide, ’rural poor’.
Frightening are the recent NSSO figures which numerate 91% of income gap among rural and urban dwellers. Still this did not stop us from delivering the growth rate, but warns us to check our fuel before striding forward to a halt!

A look into the fund distribution clears the flaws that we missed while formulating them. One among many is, the subsidies still are divided into big farmers leaving the needy peasant with a namesake amount. This was drawn to utilize the contribution but it failed to bring in a collaborative way of mixed economy. Ahead, we must look into distributing them unequally and on need basis. Another issue left to solve is 70% of our agriculture still depend on monsoon. We again failed to bring sophisticated irrigation methods to this cause. As a result, agriculture excluding fisheries, poultry is in a state of collapse! We spend millions of amount on surface and groundwater irrigation, but still have no clue why there is a lack in output per field. Subsidies still reach only 1/3rd part of the ratio.

Now, let’s look at the NSSO figures for rural spending. Rural consumption is now 2/3rd part of national average. From last 5 years, overall expenditure has increased from `772 to `1054 in 2009-10. And, food expenses also has increased slowly from `404 to `600 in 2009-10. Speaking math rural spending on FMCG is presently 64% from 53% on food in last 20yrs, and on other misc. from 9.5% to 24% an increase in 14%. Thankfully but unintentionally, India’s 60% of rural folk ride a motorcycle, today!
The above data shows increase in non-essential expenditure which includes transport, school, hospital, fuel, tobacco to essential ones. We gave them services and rightfully spending has also increased drastically.
But, did we liberalize to a larger extent? We presented an Indian farmer with better facilities like education for his kids, roads and increase in public transport to towns for accessibility, networks for communication but left better irrigation methods to manage for on their own. Giving rise to subsidies on diesel created formerly rich-in-land farmers driving luxury cars! As mentioned we created rural poor and gave them better accessibility, certainly giving them many juggling balls to hold through among real estate, urbanization and employment of his land and no food for thought advice.
We need policies and better amendments to fix many leakages in the present safety net programs like NREGA to quote and many others. Our legislative acts also have lots of shortcomings for fostering tribal communities. A strong inclusion must be made for all their problems and to check population control.

These changes implicitly affect nation’s food security. Similar to Right to Education Bill, the Food Security Bill (likely into Winter Session of Parliament) is appreciated. Under this, we intend to give legal entitlement to highly subsidized food grains to around 70% of the population. Accordingly, 75% rural households will get subsidized grain according to newspaper reports.
But, a step further must be taken. We currently have the Public Distribution System (PDS) which is perhaps the largest distribution network of its type in the world. But, is not efficient in working at street level for which they were created for. Around 40% of the stock goes into black market. Commodity reserves are plenty but cannot release them. Under the new bill, `20 per day food security for rural areas is being reserved. Add on issue to be looked upon is food relief measures during floods and natural calamities.
Opening of exports for wheat, cotton, rice is a welcome move to our surplus stocks. But, there’s no point in exporting fodder food implying to sell not only the harvest but four months of land as well. Concrete policies should be made while initializing them leaving no missed opportunities.
India’s development story is not complete without talking on the urban view, its resources and challenges. No doubt, migration from rural areas to urban zones have increased in the past 5 years and posed further strain on the limited resources of the city. We have been giving away our lands to Greenfield projects for promising growth and development of world cities until recently flaws have been detected in the Noida project of illegal land acquisitions and improper planning. We must plan flawlessly and nimbly in these issues. A further step would be to plan with a local community involved in the monitoring process of work done.

India’s FDI investments are contributing 10% to economy and its love affair with India is cooling down which keeps us in a favorable position to revive the backbone of our domestic economy. It should definitely start with agriculture and smooth a transition towards the services sector. The major scams in 2008 has put a bad picture of ourselves to foreign investors and it’s ripe time to win back their faith by implementing tax policies on a fixed tenure. Also, the investments have been centered to manufacturing and services sector which also needs to flow down to other sunrise sectors such as defense, financial and banking.

As mentioned growth comes with its share of problems and difficulties but we have never bogged down on our capabilities. We have immense potential to work our way out as we did in the financial meltdown and large youth, to bring novel combination of solutions for complex problems.
And pointing it on democracy is not the way to go.

What we are missing is agility in decision making and quick feedback amendments. The state should bring in discretion powers to the penultimate level of administration or perhaps the gram panchayats at direct level of its head. An impromptu effect would be to include at least 5% of local members of any decision committee, which would be highly conducive. Today, as in 1990s the Govt. must be bold enough to usher a new wave of policies addressing the concerns without excluding strong monitoring laws.
To conclude I would say, we should revive our inspiration from our ancestors who started civilization in the Indus Valley to the political crisis, which gave us the brilliant economist Kautilya amidst the Greek invasion of Alexander the Great to being a global power. Certainly we are still having many budding Chanakyas to set the growth wheel going and help create flawless execution processes throughout challenges and bring the goal of being a developed nation into light not for chauvinistic conversations, instead surfed by every Indian mind.


The above essay participated in the ‘GOLDEN JUBILEE CELEBRATION OF INDIAN ECONOMIC SERVICE’ organised by IES- DoEF, Ministry  of Finance in August 2011. Any info. for the same is welcomed!