As costs of repayment and interest soar, exchequers can be wiped out. The most important reason why India was relatively insulated from the global meltdown of 2008-09 was because our capital controls restricted the amounts which the government and companies could have borrowed globally; this insulated us from the devastating downgrades and bond market movements that damaged European economies.
Dump Surplus Grain, dump the minister
It is scandalous that inflation in cereals remains above 17 per cent even as food grain stocks with the Centre are close to 80 million tonnes. The Committee on Agricultural Costs and Prices (CACP) paper estimates that the buffer stocking requirement would go up, thanks to the Food Security law, but not higher than 41.5 million as of July 1. The rest is excess.
The government must sell off excess stocks at a price recommended by the CACP, Rs 13,500 a tonne in the case of wheat. The food minister and his secretary must explain to the people why they are hoarding one-third the annual output of grain, a criminal activity that pushes up prices in the market, and locks up huge government funds: Rs 70,000-92,000 crore, or nearly 1 per cent of GDP. The CACP notes this infusion of “excess” money into the economy without corresponding flow of goods has led to the paradox of rising prices of rice and wheat, ‘amidst overflowing stocks in government godowns.’
Blame it on incompetence, not the Food Security law. The paper says that buffer stocks can be limited to 10-15 MT and still ensure food security, with innovative, state-specific local solutions, including direct income transfers.