Given our large arable land and favourable climate, and rising global food prices, a proper policy framework could ensure that India becomes the world's food bowl, says Prashant Goyal FOOD inflation is an area of concern today. The rising prices of agricultural commodities have forced the government to come up with a slew of restrictions. However, the food price rise in India is not an aberration. The prices have risen globally owing to rising demand from emerging economies, increasing integration of food and fuel markets, growing feed demand (increasing meat consumption) and production shortfalls. It is projected that the agri prices are here to stay, at least over the next few years. The global warming could only make the matters worse. Would these restrictions work? A steep lowering of import duty may reduce the prices in the immediate run but with a large buyer like India entering the market, exporters would be tempted to raise prices and corner the gains, thereby neutralising the purported benefit for consumers. This is truer in a scenario of shortages. It would also lower the terms of trade for the country and the government too may end up losing customs revenue. Lower duty would hurt the small farmers and farm labourers because of competition from agri MNCs. Moreover, imports at high prices would benefit the foreign farmers, while the Indian farmer would have to be content with MSP. Customs duties are best maintained at stable rates unless there are exigent situations. Export curbs may be economically selfdefeating. They may push farmers into growing crops that are unlikely to face export ban and thus divert attention from crops needed for food security. The credibility of the country as a reliable supplier may suffer and mar future access to export markets. Stock limits, licensing for dealers/retailers, compulsory stock declaration, etc., would discourage the much-needed private investment in agriculture. The Economist suggests that rather than erect trade barriers, the countries should coordinate their efforts to increase supply. The government need intervene only when there is a failure of market and prices rise out of sync with global fundamentals. The export restrictions and import duty cuts favour the consumer at the expense of farmer! Ban futures chorus is again picking up momentum although it is quite clear that the earlier ban on cereals and pulses futures trading failed to lower their prices. Wellregulated futures markets help in fair and efficient price determination and provide right signal to farmers in taking critical sowing decisions based on projected demand rather than being guided by MSP, which being administered may encourage production out of sync with market demand. Even a relatively high MSP may fail to assure the desired procurement as witnessed in the past two years when government failed to meet its foodgrain procurement target. MSP should best be used to prevent distress sales, while the procurement could be based on more remunerative market prices, with futures trade serving to hedge price risks. With futures banned, price discovery becomes difficult and traders make a kill at the expense of farmers. No wonder the farmers in Punjab protested in favour of futures trading that had offered them vital price clues in 2006 and 2007. Farmers of the developing countries have long suffered from depressed global prices owing to generous agri-subsidies extended by countries like the US and EC. Now is the time for them to earn decent returns. Deflationary steps would only frustrate them. The prices even if paid to traders would get passed on to farmers, in the same proportion, although with a small lag. The crux of National Policy for Farmers, 2007 is to ensure growth in the real income of farmers. Already the NSSO survey has brought out that 40% of Indian farmers want to quit farming because they find it unremunerative. If that were to happen, the food security of the country may be in peril and consumers would be forced to go for higher priced imports. THEinput subsidies such as on fertiliser, pesticide, power, water, etc., only encourage inefficient use of resources and fail to address the basic problems confronting the agri-sector. They may even add to our agri-woes