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Food for thought! - Views on News from Equitymaster
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  • Aug 20, 2003

    Food for thought!

    The day today is being celebrated as Janmashtmi round the country, and most devout of Hindus will be on a fast till the time the divine hour comes at midnight. Well, this seems to be the right day to think about food! And this article proceeds in that direction - towards some food, but for thought!

    The graph below shows the inverse relationship between GDP per capita and percentage of disposable income spent on food. Is this based on Engel's Law, which states that as incomes rise, food quantity consumed cannot increase much? No! Simply not! Take a closer look and the underlying picture becomes clearer. This graph does not mention rise in income (or disposable income) levels of one country. Rather, it is indicative of different levels of disposable income spent on food in different countries.

    The graph above shows that while an average US citizen spends around 11% of his disposable income on food, the same figure for an Indian stands substantially higher at 51%! Does this mean that we Indians eat too much! Or, does that mean the US citizens are sacrificing food for nukes? A resounding 'No' for the former, but we have doubts about the latter! Anyway, while the cause of this divergence lies in the fact that there is a huge difference between per capita disposable incomes in these two nations (assuming from the difference in GDP per capita), the effect is graver still (for India).

    A high percentage of disposable income spent on food leaves little for spending on clothes, automobiles, houses, etc. The non-ownership of these assets by majority of Indians (not even clothes) presents a 'poor' picture of people of our country, and of our relatively lower standards of living.

    The solution, thus, lies not in reducing our food intake (after all, Indians are not probably the strongest of all), but in improving the standards of living of people in this country. This would require a big initiative from the public sector, the private sector and the government. Doing that will involve, first of all, creation of more jobs and providing higher average disposable income in the hands of people. This can be primarily achieved by encouraging higher levels of investments in to the economy. Post 1991, while the economy has opened up, there is still a long way to go. Even now the level of FDI investments entering the country remain abysmally low. The requirement of the hour is formulation of more progressive economic policies, with a view on the long term and not on election objectives.

    Importantly, this initiative needs to be directed towards people living not only in the metros, but more importantly in small towns and villages. After all, more than 70% of our population is inhabiting these lesser-known places. Any improvement in lives of our rural folks would be dependent on improvements on the agricultural front. Apart from benefiting the Indian farmer, this would have an effect on the development of the entire economy, helping us improve our standard of living as then, we would have more in our pockets to spend on houses, cars, and clothes.



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