Letter to the editor 20/03/2024

Respected Sir/Madame,

The opinion by T.N. Prakash Kammardi (The Hindu 20/03/2024) is a clear distortion of economics, fueled by ideology. A guaranteed M.S.P. is not an ethical imperative.

Firstly, economics is a discipline that studies the efficient allocation of scarce resources which have alternative uses. Any government guarantee is a diversion of money from it's alternative uses. Eg; 60% Government schools does not have computers, money saved from subsidies could be used here.

Secondly, what msp does is artificially rise prices. It creates unwanted surpluses, shifting demand - supply curve upwards. One should note that, F.C.I. go downs are already overflowing with grains. It might have been a necessity in the past, but it is no longer the case.

Thirdly, any non-remunerative activity in the free markets needs change. Here farmers need to produce things that pay higher prices in the market. This is not a market failure but a clear price signal from the market. A government intervention does not change the underlying reality. It just uses the tax payers and bond holders money to delay the inevitable.

In addition to that, Swaminathan formulae is not according to the basic principles of economics. As profit depend on what consumers are willing to pay. Your cost has nothing to do with it.

Fourthly, middlemen are not the enemy of farmer but his friend. The small scale nature of Indian farming means middlemen incur significant costs that is passed on to the consumer. Even if the farmer sell produce directly to the market, there won't be any significant change in price.

Fifthly, the msp agitation is led by the 6% farmers that got rich through msp. But even for them, time has come to cultivate newer crops. Their plight deserves sympathy. But their solutions are not the right ones.

The weak opposition to it by people is due to a clear lack of understanding of basic economics behind msp. Public clearly think government money is infinite. But in reality, it is only as much as you are willing to pay in taxes and bonds; currently or in future. Failure of government in this will be a failure for the nation. Which loses scarce resources that have alternative uses.

 

From another angle we could clearly see, both farmers and people are a victim of the priorities perused after independence. Neither the farmers nor the people understand the basic economics behind their demands. While their trusted experts and representatives make a fortune by playing according to their whims and fancies.

Opinion by Urmila Chowdhury is notable in this regard (14/03/2024), how Indian students lack higher order thinking abilities. Farmers need exactly that to make farming remunerative. While public need that to realize the hypocrisies of experts and politicians. Unfortunately Indian education fail just at that.