THE FOOD SITUATION AND THE COMMON MAN

THE FOOD SITUATION AND THE COMMON MAN

By B. R. Shenoy

Summary

In this Forum of Free Enterprise pamphlet, Professor B. R. Shenoy diagnoses India’s post-Independence food crisis as fundamentally a monetary phenomenon rather than an output problem. He organises the argument under five heads — the nature of the problem, its basic causes, the Government’s responses, the adequacy of those responses, and remedies — and shows that the General Index of prices has risen 27% since May 1955, with rice and wheat rising 33% and 23% respectively. The root cause, he insists, is that the demand for foodgrains, swollen by money incomes climbing 33% over First-Plan and Second-Plan deficit-financed expenditure, has outrun supplies that grew only 4.8%.

Shenoy then evaluates the Government’s five ‘first-aid’ measures — export bans, releases from stocks, fair price shops, imports from Burma and the U.S.A., and credit squeezes against hoarders — and finds each a palliative. Fair price shops, he argues, cannot eliminate the gap between controlled and open-market prices, so leakages and black markets are inevitable; selective credit squeezes fail because hoarding follows expectations of further price rises and the larger stockists can self-finance; comprehensive controls of the wartime British or Maoist type are administratively impossible across millions of producers and distributors in a democracy. Price controls do not generate savings; they merely ration scarcity ‘egalitarianly’ on the home front while doing nothing for the investment-consumption gap.

The pamphlet’s positive prescription has two prongs: first, prune the Plan to the available real resources and abandon inflationary over-investment; second, finance imports of foodgrains sufficient to close the supply gap and sell them through the open market rather than fair price shops, saving subsidies that currently leak to black-marketeers. Shenoy closes with seven numbered conclusions hammering the point that the foodgrain crisis ‘is almost wholly a monetary phenomenon’ rooted in over-investment that began in the last year of the First Plan, and that control over allocation of resources on the communist pattern is incompatible with planning in a democratic economy.

Key points

• Frames the food crisis as a price-level problem driven by money-supply expansion, not a shortfall in foodgrain output — money incomes rose 33% from 1952-53 to 1955-56 while foodgrain output rose only 4.8%.

• Quantifies the inflation: General Index up 27% since May 1955, with rice and wheat up 33% and 23% respectively; foodgrain prices up 27%.

• Traces deficit financing to the Second Plan’s Public Sector outlay of Rs. 1,600 crores in its first two years, of which only a third — roughly Rs. 1,600 crores total — represents inflationary deficit financing taken from Public Sector loans.

• Catalogues five Government ‘first-aid’ measures (export bans, stock releases, fair-price shops, foreign imports, credit squeeze) and judges each a palliative that cannot reach the root cause.

• Argues that fair-price shops cannot abolish the price differential with open markets, so subsidies inevitably leak into black-market hands, and that selective credit squeezes are easily dodged because hoarding tracks expected price rises.

• Rejects comprehensive wartime-style or communist-pattern controls as administratively unworkable across millions of small Indian producers and distributors, and as incompatible with planning in a democratic economy.

• Prescribes a two-part remedy: cessation of over-investment (pruning the Plan to available resources) and sufficient foodgrain imports sold through the open market rather than fair-price shops, to save subsidy expenditure under a deficit budget.

• Closes with seven numbered conclusions arguing the foodgrain crisis is ‘almost wholly a monetary phenomenon’ arising from over-investment that began in the last year of the First Plan.

Generated by the v1.5 extraction pipeline. Awaiting editorial review.