Subsidized fertilizer means subsidized food grains. The
question arises “why the government supported the food grain prices till now
and why, now, it wants to discontinue this practice?” There can be two possible
answers, one, the government wanted to reign in inflation and inflationary
expectations, and, the second one is, that, it wanted to support the farmers,
anyway. If the government wanted to lower inflation then why, now, it wants to
leave the economy in doldrums when inflation is already high and is not coming
down. This is not the right time to discontinue subsidies. And, if it wanted to
support the farmers, then, why, now, it feels it appropriate to leave them to
the market, the argument given in favor of FDI in multi brand retail, when it
has not arrived yet. Subsidies distort the price structure the market offers. Till
now the government provided subsidies and bought the most of food grains itself.
It never intended the market to support the farmers which could offer them
higher prices and also the capacity to pay for fertilizer, themselves. It has
literally exploited the farmers so far and now it will push the whole economy
back to high inflation. The proposition that government now wants to
discontinue subsidies due to high fiscal deficit is acceptable. But is the food grain market
in INDIA, now, sufficient to factor in the cost of fertilizer and pay for it
without increasing the prices of food grain and overall inflation? It is not
possible. Let us wait for the FDI in retail, if it happens, amid all the discussion.
I hope it will come…
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