X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster
Investing in India? Get Equitymaster Research  
The biggest failure of Indian economy 
(Wed, 13 Oct Pre-Open) 
 
The success of the Indian economy is evident in the interest that foreign investors are showing towards Indian stocks. The future prospects too seem no less enticing with a sustainable GDP growth of 6.5% and high domestic savings. But dig a little deeper and the vast disparity in the per capita income levels could take away every scope of India's prosperity. One of the most striking evidence of this is the country's latest ranking on Global Hunger Index for 2010. India has ranked 67th among 84 developing countries. Just to drive home the gravity of the poor ranking, even Sudan, North Korea and Pakistan rank higher than India. In fact the report states that India is home to 42% of the underweight children under the age of five in the world.

The policy makers in India have convinced themselves to have done enough to address the problem of food security. Billions of rupees of subsidized loans are given out to farmers to aid agricultural productivity. The Food Security Bill is one of the most debated legislations. But having said that, the poor nourishment levels tell a completely different picture. And this could be the biggest challenge for a nation that considers its young population its biggest strength. The underlying pattern of food productivity spills the beans. In the period 1990-2007, grain yields in India grew at an average rate of 1.2% per annum. This was less than the corresponding population growth rate of 1.9% per annum. Resultantly, the amount of daily food grain available per capita at the end of FY08 was lower than in 1950s (source - Ministry of Agriculture).

The cause of such poor productivity is also an offshoot of the Green Revolution of 1970s. Thanks to fertilizers being available at subsidized rates, excessive usage rendered large portions of land uncultivable.

Furthermore, in the absence of micro-credit, the richer farmers proved more adept at exploiting opportunities. The subsidy model therefore disadvantaged 75% of farms which cover less than two hectares. The majority continued to remain vulnerable to the vagaries of monsoons. Most importantly, the acquisition of fertile agri land for construction seems to be the biggest bane of contention. With the rise in realty prices and need for industrialization, agricultural lands have been acquired from the farmers. While this has led to plenty of social unrest in several parts of the country, the impact can be felt directly on low cultivation. As per estimates, one third of cultivable land in the state of Uttar Pradesh is already deemed to be at risk.

And lastly, one cannot ignore the government's poor management of food distribution amongst the needy. While the government does hold strategic national reserves of food grains, the same is left rotting. The government has increased their volume of food stored in the form of reserves in the last two years. However, its storage and public distribution leaves a lot to be desired. This gives enough leeway to middlemen to hoard food grains during times of shortage.

Thankfully, the authorities are now waking up to this fact. They are planning to construct warehouses across the country on a war footing. But the question that remains is how long will we continue to lock the stable doors after the horse has actually bolted out? Certainly, not fitting of a nation that prides itself on becoming the next superpower.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

View all commentaries | Archives  RSS
Read the latest Market Commentary
 
BSE-30
 

 
Go
 

Equitymaster requests your view! Post a comment on "The biggest failure of Indian economy". Click here!

  
 

S&P BSE SENSEX


Jul 20, 2017 (Close)

MARKET STATS