Agriculture Reference
In-Depth Information
3
Parastatals and Food Policies: The Indian Case
SHAHIDUR RASHID, ASHOK GULATI,
AND S. MAHENDRA DEV
Indian success stories have frequently been media headliners in recent years.
Consider a few of them. The country successfully implemented the use of elec-
tronic voting machines in its 2004 national election—less than four years after
the “hanging chads” and recount drama of the 2000 U.S. presidential election.
In their pursuit of globalization, Indian companies have been on an acquisition
spree abroad and succeeded in acquiring 115 foreign companies, worth US$7.4
billion, during the first nine months of 2006 (Srivastava 2006). On average, the
country has added more than 6 million cellular phone subscribers a month since
December 2005, with the growth rate exceeding that of China for the first time
(Bremner 2007). Since an age-old ban was lifted in 2003, agricultural com-
modity exchanges led by the private sector have flourished in India—so much
so that three of them quickly assumed positions among the largest 20 exchanges
in the world (UNCTAD 2006).
How are these stories relevant to the country's foodgrain price policies?
They are good indications that the country now has the capacity to overcome
the market failures and other strategic constraints that justified those policies
more than 40 years ago. They underscore the fact that the policy rationales jus-
tifying public intervention are dynamic and should change over time. If so, the
price policies should also adjust to changing conditions. This chapter examines
whether this has been the case in India. It provides a brief history of policy evo-
lution, assesses the commonly cited policy rationales, critically examines the
current policy practices and associated costs, and highlights the challenges of
reforming the current policy paradigm. The chapter concludes with a summary
and policy implications.
Genesis of the Food Corporation of India
The great Bengal Famine of 1943, widely cited as a classic example of market
failure, provided the momentum for public interventions in Indian foodgrain
markets. The famine enquiry committee report, as well as several subsequent
studies, concluded that the cause of famine was a lack of spatial integration of
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