The Indian Economy Blog

November 4, 2005

Hunger in India

Filed under: Basic Questions,Miscellaneous — Atanu Dey @ 6:16 am

According to UN estimates, India has the largest number of hungry people. Over 200 million, or about one-fifth of India’s population, is chronically hungry. This is an apparent paradox in a country which is food-surplus on the aggregate. The Wall Street Journal of June 25th 2004 reported that according to Indian government sources, by 2001 India had a national stockpile of around 60 million tons of rice and wheat. It goes on to say:

But with inefficiency and local mismanagement plaguing distribution, it couldn’t move the grain fast enough through the system. Some even spoiled in warehouses. A 2002 government survey concluded that 48% of children under five years old are malnourished. That’s an improvement from three decades ago and even today, given rapid population growth, the proportion of chronically hungry Indians continues to fall. But in a sign that there are limits to the Green Revolution, the absolute number of hungry people in India began to rise again in the late 1990s, according to the U.N.

The paradox is easy to resolve if one understands one basic principle: that economic policies matter. The Indian economy has been chronically mismanaged by the Indian government (which has been largely the Congress party) ever since India’s independence. And now the current Congress-headed government could continue on the same failed path of socialism that led us to this sorry state. Vote-bank politics and the command and control license-permit-quota raj is responsible. Paul Samuelson could have been speaking about India when he wrote in April 2002 (HOW TO PROSPER IN THE TWENTY-FIRST CENTURY):

The good life does not come from dramatic speeches or boisterous parades. Where economics is concerned, so far, there is nothing in sight more promising than the limited welfare democracy where public laws harness and monitor the energies and efficiencies of the somewhat free marketplace.

It is a good time to review Amartya Sen’s book of 1982, Poverty and Famines: An Essay on Entitlement and Deprivation. Here is an excerpt from Ken Arrow’s review of the book:

In a free-enterprise economy every good or service has a price, and each economic agent starts out by owning some goods or services. The rice farmer owns some land, used for producing rice, which can then be sold on the market at the going price or reserved for use by the farmer and his family. The receipts from sales can be spent on other goods—different foods, spices, clothing, and so forth. The agricultural laborer has only his or her labor to sell; the proceeds can be spent on rice or other goods. Similarly the cities contain workers who sell labor for money to buy food, shelter, and clothing, and entrepreneurs who buy goods and labor, produce other goods, sell them, and have the proceeds for personal consumption and investment in business expansion.

People will starve, then, when their entitlement is not sufficient to buy the food necessary to keep them alive. The food available to them, in short, is a question of income distribution and, more fundamentally, of their ability to provide services that others in the economy are willing to pay for.

This, of course, does not mean that the supply of food is irrelevant. A decrease in the supply of food will usually increase its price, as people compete for the scarcer quantity. This will in turn decrease their ability to buy food by using their entitlement and, if they start close enough to the margin of hunger, may drive them to the point of starvation. Further, the entitlement approach, simple as it is, enables the analyst to say something about the distribution of the burden of starvation. Farm owners and, to a lesser extent, sharecroppers, should be less affected than others because the reduction in the amount they sell is at least partly offset by the higher prices. If the reduction in supply is caused by some factor, like flood, that reduces the amount to be harvested, farm laborers are thereby more likely to be seriously affected.

I am reminded of Oliver Goldsmith’s words from his poem The Deserted Village:

Ill fares the land, to hastening ills a prey
Where wealth accumulates and men decay

There is something rotten about India that so many people are so unconcerned about the true state of affairs. The communists are solely concerned with protecting a handful of jobs, the larger interests of the nation be damned. Their other concern seems to be blocking the liberalization of the economy and dragging it back to its insular autarkic pre-reform paralysis. The idiotic hype about India Shining and IT super-powerdom has addled the brains of the already marginally stupid. One wonders where this is all going to lead to.

6 Comments »

  1. While the overall gist of the article makes sense and tone of the article is pro-free market the choice of quotes and experts is a little confusing. Paul Samuelson, for example, is no champion of free markets, who avered that “the Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive” in his famous text book edition of 1989 (seriously!!!). Also, though I am not particularly knowledgeable about Mr. Sen, his socialistic leanings are well known.

    The most telling statements in the above article come from the book review: “This, of course, does not mean that the supply of food is irrelevant” – What???? It is supply (through production and importation) that produces wealth (and kills hunger), not redistribution. Socialist redistribution policies punish the producers, removing the incentives to produce and lower the overall standard of living.

    Finally in the same para the following quote: “Farm owners and, to a lesser extent, sharecroppers, should be less affected than others because the reduction in the amount they sell is at least partly offset by the higher prices. ” makes little sense. That is not how people do business. In a free market, higher prices create an incentive to produce more or import automatically offsetting the higher prices.

    Comment by Vivek G — November 4, 2005 @ 10:30 am

  2. Vivek G – Do you think Indias hunger is due to supply problem (and not distribution problem) ?

    Comment by Navin — November 4, 2005 @ 10:50 am

  3. “India has the largest number of hungry people”

    Wow, what a wonderful stat. !!

    Comment by Navin — November 4, 2005 @ 4:37 pm

  4. Hi Navin: I was refering to “income distribution”. The book review quoted in the passage, makes a point that there are people in India who do not have sufficient income to purchase the necessities of life (food included). That is, their standard of living is very low.

    The solution offered in the next sentence is “income” distribution. That is, government should take from producers and give to the non-producers. My point was that such re-distribution will reduce the standard of living further because it punishes the producers and reduces their incentive to produce.

    Atanu Dey has made a good point in this passage that “The Indian economy has been chronically mismanaged by the Indian government .. And now the current Congress-headed government could continue on the same failed path of socialism that led us to this sorry state.”

    My only point was that the references to Paul Samuelson and Mr. Sen, (who are no champions of the free market) does not rhyme with the overall tone of the article.

    Comment by Vivek G — November 5, 2005 @ 8:50 pm

  5. SO Vivek G is a supply side theorist..Well, even taxes may deter producers to produde even more..hell life would be so simple then

    Comment by SAM — November 5, 2005 @ 10:33 pm

  6. Thanks for calling us Indians already marginally stupid. Apparently, marginal is what counts in economics. Hence the hype about IT industry even though it’s contribution to Indian economy is marginal. It is taking the marginal industry’s pratices and applying to old industries practices and watch the economy transform. That’s why marginal matters and so does hype. (Are we still marginally stupid?). And that’s where it is leading to, despite the Commies.

    Comment by Chandra Dulam — November 12, 2005 @ 2:49 am

RSS feed for comments on this post. TrackBack URL

Leave a comment

Powered by WP Hashcash

Powered by WordPress