Economists and food price policy distortions: The case of India

Economic Development and Cultural Change

Volumn 46, Issue 1, 1998, Pages 79-96

  Sukhatme, Vasant A ^a   Abler, David G ^b  

^a MACALESTER COLLEGE   (United States)

^b PENNSYLVANIA STATE UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

AGRICULTURAL POLICY; DEVELOPING COUNTRY; ECONOMIC POLICY; FOOD POLICY; POLICY DEVELOPMENT;

INDIA;

EID: 0031462906     PISSN: 00130079     EISSN: None     Source Type: Journal    
DOI: 10.1086/452322     Document Type: Article

References (59)

1. Anne O. Krueger, Maurice Schiff, and Alberto Valdes, The Political Economy of Agricultural Pricing Policy, vols. 1-5 (Baltimore: Johns Hopkins University Press, 1992); Terry Sicular, Food Price Policy in Asia: A Comparative Study (Ithaca, N.Y.: Cornell University Press, 1989); George Tolley, Vinod Thomas, and Chung Ming Wong, Agricultural Price Policies and the Developing Countries (Baltimore: Johns Hopkins University Press, 1982).
2. Anne O. Krueger, Maurice Schiff, and Alberto Valdes, The Political Economy of Agricultural Pricing Policy, vols. 1-5 (Baltimore: Johns Hopkins University Press, 1992); Terry Sicular, Food Price Policy in Asia: A Comparative Study (Ithaca, N.Y.: Cornell University Press, 1989); George Tolley, Vinod Thomas, and Chung Ming Wong, Agricultural Price Policies and the Developing Countries (Baltimore: Johns Hopkins University Press, 1982).
3. Anne O. Krueger, Maurice Schiff, and Alberto Valdes, The Political Economy of Agricultural Pricing Policy, vols. 1-5 (Baltimore: Johns Hopkins University Press, 1992); Terry Sicular, Food Price Policy in Asia: A Comparative Study (Ithaca, N.Y.: Cornell University Press, 1989); George Tolley, Vinod Thomas, and Chung Ming Wong, Agricultural Price Policies and the Developing Countries (Baltimore: Johns Hopkins University Press, 1982).
4. It is important to note that in the Indian context at least, if not also in other developing countries, a misleading and false dichotomy took hold early on in the debate on the merits of "price" vs. "nonprice" factors in inducing productivity growth. Several scholars tended to view the issue as one of either prices or of infrastructure and technology. Later on in the article we attempt to place the origin of this dichotomy. The evolution of John Mellor's and Raj Krishna's contributions is particularly important in this context.
5. See, e.g., R. N. Chopra, Food Policy in India (Delhi: Intellectual Book Corner, 1988); and A. S. Kahlon and M. V. George, Agricultural Marketing and Price Policies (Delhi: Allied, 1983).
6. See, e.g., R. N. Chopra, Food Policy in India (Delhi: Intellectual Book Corner, 1988); and A. S. Kahlon and M. V. George, Agricultural Marketing and Price Policies (Delhi: Allied, 1983).
7. Raj Sah and Joseph Stiglitz, Peasants versus City Dwellers: Taxation and the Burden of Economic Development (New York: Oxford University Press, 1992).
8. We are aware, of course, that the government of India intervened on the input side of agriculture as well; however, this is of relatively recent vintage. Prior to the mid-1960s, before the introduction of high-yielding seeds, there was little intervention in the influence of prices paid by farmers for fertilizer, water, and electricity. It is only since 1980 that expenditures on input subsidies have become significant. Economists have properly responded to this growth in expenditures with several studies in the past decade examining the magnitude of input subsidies and the consequences for agriculture of the rapid growth in subsidies.
9. George J. Stigler, The Economist as Preacher, and Other Essays (Chicago: University of Chicago Press, 1982).
10. Ibid., p. 61.
11. Ibid.
12. See James Burke, The Day the Universe Changed (Boston: Little, Brown, 1985).
13. Jagdish Bhagwati, India in Transition (Oxford: Oxford University Press, 1993).
14. Ibid., p. 54.
15. T. W. Schultz, "On Economics and Politics of Agriculture," in Distortions of Agricultural Incentives, ed. T. W. Schultz (Bloomington: Indiana University Press, 1978).
16. Jean Drèze and Amartya Sen, Hunger and Public Action (Oxford: Clarendon, 1989).
17. See George Rosen's Western Economists and Eastern Societies (Baltimore: Johns Hopkins University Press, 1985) for a very readable account of the role of economists, both Indian and non-Indian, in the making of economic policy in India in the 1950s and 1960s. The Ford and Rockefeller Foundations and MIT's Center for International Studies brought a number of U.S. and European economists to India during those first decades of planned economic development.
18. R. N. Poduval and P. Sen, "Prices, Trade, and Marketing of Agricultural Commodities in India," in Studies in Indian Agricultural Economics, ed. J. P. Bhattacharjee (Bombay: Indian Society of Agricultural Economics, 1958), p. 61.
19. Uma Lele's important work on agricultural marketing in India had shown that the inefficiencies of the marketing system arose not from any market power on the part of private traders but from inadequate transportation infrastructure and lack of information. See Uma J. Lele, Food Grain Marketing in India: Private Performance and Public Policy (Ithaca, N.Y.: Cornell University Press, 1971).
20. Government procurement of food grains has generally been confined to rice and wheat; there is no government purchase of inferior grains such as sorghum and millet. The subsidies on consumption through the fair price shops are generally on rice and wheat and, on occasion, sugar and cooking oil. To our knowledge, there are no subsidies on millet or sorghum consumption, commodities purchased by low-income consumers.
21. See, e.g., Ashok Gulati and Pradeep Sharma, "Prices, Procurement and Production: An Analysis of Wheat and Rice," Economic and Political Weekly 25 (1990): A36-A47.
22. David G. Abler and Vasant A. Sukhatme, "The Determinants of Wheat and Rice Policies: A Political Economy Model for India" (University Park: Department of Agricultural Economics and Rural Sociology, Pennsylvania State University, February 1994, mimeographed).
23. D. Gale Johnson, "The Nature of the Supply Function for Agricultural Products," American Economic Review 40 (1950): 539-64.
24. M. L. Dantwala, "Incentives and Disincentives in Indian Agriculture," Indian Journal of Agricultural Economics 22 (1967): 1-25.
25. John W. Mellor, "Functions of Agricultural Prices in Economic Development," Indian Journal of Agricultural Economics 23 (1968): 23-37.
26. Yujiro Hayami, K. Subbarao, and Keijiro Otsuka, "Efficiency and Equity in the Producer Levy of India," American Journal of Agricultural Economics 64 (1982): 655-63.
27. Maurice Schiff, "India's Food Procurement and Distribution Policy," Journal of Development Economics 42 (1993): 387-97.
28. Raj Krishna, "Farm Supply Response in India-Punjab: A Case Study of the Punjab Region," Economic Journal 83 (1963): 477-87.
29. Ibid., p. 487.
30. Dharm Narain, Impact of Price Movements on Areas under Selected Crops in India, 1900-1939 (London: Cambridge University Press, 1965).
31. T. W. Schultz, "Value of U.S. Farm Surpluses to Underdeveloped Countries," Journal of Farm Economics 42 (1960): 1019-30.
32. R. O. Olson, "Discussion: Impact and Implications of Foreign Surplus Disposal on Underdeveloped Economies," Journal of Farm Economics 42 (1960): 1043-44. There are numerous empirical studies of the effects of the PL 480 food aid program in India. See, e.g., J. S. Mann, "The Impact of Public Law 480 Imports on Prices and Domestic Supply of Cereals in India," Journal of Farm Economics 49 (1967): 131-46; N. Rath and V. S. Patwardhan, Impact of Assistance under PL 480 on Indian Economy (Poona: Gokhale Institute of Economics and Politics, 1967); U. K. Srivastava, E. O. Heady, K. D. Rogers, and L. V. Mayer, Food Aid and International Economic Growth (Ames: Iowa State University Press, 1975).
33. R. O. Olson, "Discussion: Impact and Implications of Foreign Surplus Disposal on Underdeveloped Economies," Journal of Farm Economics 42 (1960): 1043-44. There are numerous empirical studies of the effects of the PL 480 food aid program in India. See, e.g., J. S. Mann, "The Impact of Public Law 480 Imports on Prices and Domestic Supply of Cereals in India," Journal of Farm Economics 49 (1967): 131-46; N. Rath and V. S. Patwardhan, Impact of Assistance under PL 480 on Indian Economy (Poona: Gokhale Institute of Economics and Politics, 1967); U. K. Srivastava, E. O. Heady, K. D. Rogers, and L. V. Mayer, Food Aid and International Economic Growth (Ames: Iowa State University Press, 1975).
34. R. O. Olson, "Discussion: Impact and Implications of Foreign Surplus Disposal on Underdeveloped Economies," Journal of Farm Economics 42 (1960): 1043-44. There are numerous empirical studies of the effects of the PL 480 food aid program in India. See, e.g., J. S. Mann, "The Impact of Public Law 480 Imports on Prices and Domestic Supply of Cereals in India," Journal of Farm Economics 49 (1967): 131-46; N. Rath and V. S. Patwardhan, Impact of Assistance under PL 480 on Indian Economy (Poona: Gokhale Institute of Economics and Politics, 1967); U. K. Srivastava, E. O. Heady, K. D. Rogers, and L. V. Mayer, Food Aid and International Economic Growth (Ames: Iowa State University Press, 1975).
35. R. O. Olson, "Discussion: Impact and Implications of Foreign Surplus Disposal on Underdeveloped Economies," Journal of Farm Economics 42 (1960): 1043-44. There are numerous empirical studies of the effects of the PL 480 food aid program in India. See, e.g., J. S. Mann, "The Impact of Public Law 480 Imports on Prices and Domestic Supply of Cereals in India," Journal of Farm Economics 49 (1967): 131-46; N. Rath and V. S. Patwardhan, Impact of Assistance under PL 480 on Indian Economy (Poona: Gokhale Institute of Economics and Politics, 1967); U. K. Srivastava, E. O. Heady, K. D. Rogers, and L. V. Mayer, Food Aid and International Economic Growth (Ames: Iowa State University Press, 1975).
36. Keith Rogers, U. K. Srivastava, and E. O. Heady, "Modified Price, Production and Income Impacts of Food Aid under Market Differentiated Distribution," American Journal of Agricultural Economics 54 (1972): 201-8.
37. See Dantwala (n. 21 above), p. 1.
38. Ibid., p. 19.
39. See Mellor (n. 22 above), p. 32.
40. Ibid.
41. K. N. Raj, Amartya Sen, and C. H. Hanumantha Rao, Studies on Indian Agriculture: Dharm Narain (Delhi: Oxford University Press, 1988), p. 90.
42. Ibid., p. 91.
43. Ibid.
44. Ibid., p. 168.
45. Raj Krishna, "Price and Technology Policies," in Agricultural Development in the Third World, ed. Carl Eicher and John Staatz (Baltimore: Johns Hopkins University Press, 1984). This article was itself an excerpt from a much larger piece by Raj Krishna, "Some Aspects of Agricultural Growth, Price Policy and Equity," Food Research Institute Studies in Agricultural Economics, Trade, and Development 18, no. 3 (1982).
46. Raj Krishna, "Price and Technology Policies," in Agricultural Development in the Third World, ed. Carl Eicher and John Staatz (Baltimore: Johns Hopkins University Press, 1984). This article was itself an excerpt from a much larger piece by Raj Krishna, "Some Aspects of Agricultural Growth, Price Policy and Equity," Food Research Institute Studies in Agricultural Economics, Trade, and Development 18, no. 3 (1982).
47. Krishna, "Price and Technology Policies," p. 163.
48. Alain de Janvry and K. Subbarao, Agricultural Price Policy and Income Distribution in India (Delhi: Oxford University Press, 1986).
49. Ibid., p. 92.
50. J. Mohan Rao, "Getting Agricultural Prices Right," Food Policy 14 (1989): 28-42.
51. Ibid., p. 41.
52. See Lele (n. 16 above), p. 225.
53. To our surprise, in surveying the literature of the 1960s and 1970s on agricultural supply response, we did not come across any work exploring the possible downward statistical biases in the estimates of aggregate supply response.
54. See Mellor (n. 22 above), p. 24.
55. Raj Krishna and Ajay Chibber, Policy Modeling of a Dual Grain Market: The Case of Wheat in India, International Food Policy Research Institute Report no. 38 (Washington, D.C.: International Food Policy Research Institute, 1983).
56. John W. Mellor and Raisuddin Ahmed, eds., Agricultural Price Policy for Developing Countries (Baltimore: Johns Hopkins University Press, 1988).
57. Anya McGuirk and Yair Mundlak, Incentives and Constraints in the Transformation of Punjab Agriculture, International Food Policy Research Institute Research Report no. 87 (Washington, D.C.: International Food Policy Research Institute, 1991), pp. 91-92.
58. See Abler and Sukhatme (n. 19 above), p. 33.
59. McGuirk and Mundlak, p. 90.