Agriculture Economics & the Blame Game

The FM yesterday lambasted the “inefficient farm market” for food price spike (source: ET).

This sounds extremely funny esp. when it comes from the mouth of the government, which fails to appreciate the policy instruments in its own hands. The government has no right to blame anyone for India’s ineffective food policy and inefficient agrarian market & let me explain why. Apart from the woefully inadequate infrastructure, reliance on monsoons & small size of land holdings; a major reason for the poor state of Indian agriculture & food market is poor government intervention.

- According to World Bank's "India: Priorities for Agriculture and Rural Development", India's large agricultural subsidies are hampering productivity-enhancing investment. Over regulation of agriculture has increased costs, price risks and uncertainty. Government intervenes in labor, land, and credit markets. India has inadequate infrastructure and services. World Bank also says that the allocation of water is inefficient, unsustainable and inequitable.

- The government cannot set all the policy instruments independently. Thus a higher minimum support price needs to be accompanied with let’s say larger FCI accumulation of food stocks. The ineffective food policy pursued over the last four to five years may thus partly be traced to inadequate appreciation of such policy constraints.

- The food policy has so far been characterized by various kinds of input subsidies. The problem is that, unlike support for extension of irrigation or adoption of new technology, most of these subsidies (e.g., on electricity, water or fertilizer) are not of an once-for-all nature and hence do not cause an enduring increase in productivity. In general, for attaining a targeted increase in output, input subsidies are much less efficient than production subsidies, remembering that the latter leave it to farmers to choose inputs on the basis of their relative costs and productivity.

- The major beneficiaries of procurement at MSP (minimum support prices) are the big, not marginal farmers. There is a systematic and considerable overestimation of consumer subsidy & the net subsidy to the poor Indian consumer through Public Distribution & Ration system is actually negative! (source: Mihir Rakshit)

Guess, it is time to remind the FM that he CANNOT blame anyone but himself, his team & his predecessors!

Just like that!

Life is in the fast lane, no doubt. At times I am delirious and at times I am restless. But here’s a promise that I won’t give up... For this is what I always craved for.

They say - what’s a journey that's not uphill..!!

Some Confusion Here!!

Let me admit, I am confused... Rather I am so perplexed that I am forced to introspect, which is a bit unlike me, b’coz at times I am too lazy to even think (sad but true!)

I don’t understand the so many pointless things that I do these days... & I just want to reflect upon these mundane things over a ho-hum Diwali night.

I am confused b’coz I am actually anxious about the summer placements in my school, when I know for a fact that the process doesn’t ‘places’ most of the people, but ‘misplaces’ them. In fact, the process of placements at a B-school is so similar to that scene in b’day parties where a dozen toffees are thrown abruptly over a group of kids who just grab what they can without caring about which candy they really want.

I am confused b’coz I don’t know why I calculate the intrinsic value & market value of a bond to take that buy or sell decision, when I can do that same thing by just glancing at the interest rates in most cases.

I am confused b’coz I wonder why I have to sit through these Economics classes when I have done all that before. I fail to feel inspired by what I find to be too trivial & bookish.

I am confused. But chuck it!

Look back

Look back at the journey,

just once in a while

Look back at the journey,

a thousand moments, endearing or vile...

Keyed out a new abode,

but lost myself in the journey

Collecting pebbles in holy elixir

- the ultimate anserine irony?

Look back at the journey,

drop a tear & smile

Look back at the journey,

but move on... just that one long far away mile...

Somewhere inside I deeply miss you all the time... But no regrets!

What Went Wrong With Economics

This particular article on the Economist caught my attention. It is about “what went wrong with Economics” and how the discipline should change to avoid the mistakes of the past (yeah! Right).

Well the author rightly points out that like the housing bubble, the economics bubble has also burst and has severely tarnished the reputation of Economics, particularly Macroeconomics. Like the author of this article, I also want to defend Economics, before we collectively rip it apart :-)

Frankly, I think Economics is one subject from which people have a lot of expectations. People expect it to be that magical something that can fix-it-all when it comes to markets. That is so wrong. Despite the use of so called scientific stuff like calculus, Economics is essentially a social science which can only study rational human behaviour.

Therefore, I have only one point in defence of my dear subject – that instead of blaming Economics we need to understand that Economics can only study rational behaviour and not whimsical transactions that people indulge in all day long. Unfortunately, people are not as smart as Economics assumes them to be.

I invest in an x-y-z stock not because I know about markets or that stock; but because I believe, on the basis of what I have heard, that this stock will do good. I go on spreading this word to others who do the same. And when this stock crashes I blame economics for my woes. Hello! Economics asks me to be rational, to judge things on the basis of information and not word of mouth.

This is exactly what happened with the current crisis. Despite living in the information era, hardly any investor cares to collect information.

Leave alone the capital market, even if it comes to our basic savings, we care a damn about where we are putting our money. We blindly go and put our money in some bank on the basis of some kaccha-pakka information. How many of us care to go through the balance sheet and portfolio of the bank where we put our money? How many people in the UK cared to know about the investments of the banks of Ireland, before putting their money in it? If it paid more interest than other banks, at least some one should have cared to understand its investments. Even the great Oxford university didn’t bother and lost 30 million pounds because of the foolish investment.

Any theoretical model of Economics flows from the underlining assumption that 'people know', when in reality 'people don’t know and people don’t care'! No science can study irrationality other than astrology, perhaps. So pappus of the world - its not Economics, but lack of common sense, irrationality & laziness that has doomed us.

For you

The moment I close my eyes, I go back in time... For times were what I spent with you... But you were longing for the stars when I was lost amidst fairy tale illusions. & in that bluster I was just a little speck, motionless in the background...

& you gave me a collage of memories and took away time. But I need not the stars; I need your touch, I need your time... Meanwhile in this crimson shade of sunlight I just sit and watch time go by...

A Promise to 'Do' What I love!

I love blogging, and more then writing I love to read blogs. But life here in Lucknow has become a bit too hectic or maybe it is just that I am yet to learn the art of time management & task-prioritization (heavy words huh' for that 'why MBA' answer ;). One of my seniors today remarked that I should not be worried about this as everyone goes thru this phase in IIML and then learns not to prioritize things but to ignore them :P

Anyway, whatever be the case, the point is that I am just not able to take out time to go through all the lovely blogs I used to read in good ‘ol office days (yeah right! I was paid for blogging)

But today – on an unusual Sunday night I am just not feeling sleepy despite the fact that I am prepared for my quiz tomorrow and all my work (that has to be submitted on Monday) is complete. I am somewhat feeling incomplete & I know I am missing the blogosphere.

So I have signed in to my delicious bookmarks (yeah I am also tech-savvy:) to taste all that my amazing blogs have to offer & yes it feels good now as I write this post!

Some of my blogger friends have posted about their experiences that I missed in the last two months. Other blogs like Churmuri, India Retold, Great Bong continue to be classic reads as always. My economics blogs have become marginally more interesting! But sadly some of my favourite blogs are dead now... no new posts :(

Anyway, I have decided that come what may, I will read all my book-marked blogs every week and I will try to write something at least once in two weeks :)

Hope...

Hope is the biggest energizer & I happened to notice the beauty of hope when I met this tiny, little 4-year old girl in my neighborhood. The girl lives away from her mother as her mom is studying medicine in the US. It is really sad and touching to see how badly the little one misses her mother and how her room is filled with pictures of her mother instead of dolls and teddies.

The girl misses her mother so much that she is learning how to write - just to communicate with her mother. She talks to her mother on the phone daily. But she hopes that that the written form of communication will help convince her mother to come back.

The little 1 thinks that it was a written letter (the admission offer letter) that made her mom go to US and so a comeback-request letter written by her will make her mom back soon. Hence she is eagerly learning alphabets and words when most kids avoid all this at this age. It's amazing to see how her faith keeps her going.


On the same lines all that I have is also just a ray of hope... Yes I am well past my teen age but pimples are still one of my life’s biggest problem.. Grrr... But I am still hopeful that I’ll have a flawless skin 1 day... some day :D :D