Excerpts from the speech

“In 22 weeks it was 7%, and in 12 of those weeks it was 8%, it is possible that today’s bad news wipes away yesterday’s bad news, time plays metrics on one’s memory, the fact remains that in 2000-2001, inflation was over 8% in 12 successive weeks, then inflation moderated, in 2004-05, the government came into office, inflation was on the rise, in fact the day we took off, inflation had already cut 7%, it remained over 7%, for about 16 weeks, and then moderated, it moderated in 2005-06 and 06-07, and it came to 3.11% in November 2007, and since then, it has been steadily rising, it was still well under 4%, until January. Beginning January, it has risen rather sharply and the sharpest rise being the last 6 weeks. This is the story of inflation.

As I said, the financial turbulence in the world, has also cast its shadow in other markets, commodity markets, food crisis, energy crisis, financial turbulence crisis, all seem to be coming together and this has really triggered the very difficult situation that we faced in the last 6 weeks, I concede, all this is a little comfort to the common man, this is simply an explanation so that the honorable members would know, join me trying to understand the forces that are at play, what we are confronting with so that we can sit in together and decide the course of action, I am open to suggestions. We must understand the forces that are triggering the inflation, so that we can attack the causes of inflation rather than symptoms, the WPI is a symptom, we must go to the underlined causes of inflation,

On food inflation

Therefore the question is what is it that we can do now and what are the steps that are possible? What is the step government has taken? What is the step government is contemplating? Some decisions have to be taken.

We can intervene through fiscal policy, through monetary policy and through supply-side measures. A number of supply-side measures have been taken. The investment in agriculture has increased from 10.2% to 12.5% in the last four-years. It is our goal to raise it to 16% GDP but this will take some time to materialize. We have announced the National Food Security Mission at a cost of Rs 25,000 crore, the Rashtriya Krishi Vikas Yojana at a cost of Rs 4,882 crore.

The goal is to raise rice production by 10 million tonnes, wheat production by 8 million tonnes, pluses production by 2 million tonnes. There is a National Horticulture Mission. There is a rain fed area development mission but all this will take some time to yield results. We have vastly increased allocation for Accelerated Irrigation Benefit Programme (AIBP) in the last four-years and we have setup irrigation and water resources corporation in order to find more funds for irrigation. In the last five-year we were able to bring about 8 million hectors of land under irrigation but the actual potential that has being used is only about 65% of that. So there are a number of steps are being taken in order to augment production, so that we will not be dependent on importing essential food items. While we import food items we are actually importing inflation. While we import commodities, we are actually importing inflation.

Production, as I have said on some other occasions has virtually stagnated over a period of 10-years. This is why the entire plan is now skewed in favour of agriculture, so that agriculture production increases dramatically and agriculture sector grows by at least 4% a year. For example, during the NDA period the lowest year in which we had rice production was 2002-03 at 71 million tonnes, the highest was 93 million tonnes. 2006-07 is again 93 million tonnes and 2007-08 is expected to be 94 million tonnes. The point I am making is despite all the efforts taken, it is more or less - we are not able to cross the peak of about 93-94 million tonnes. In wheat in the NDA period there was a year when we had 65 million tonnes of wheat. The highest was 76 million tonnes. 2006-07 it was 75.81 million tonnes and this year we expect another 75 million tonnes. Again it is plateauing at about 75 million tonnes.    

This is over the years; we have not been able to increase productivity per hectare or either wheat or rice or pluses. Therefore a number of steps are being taken and when the Minister of Agriculture replies, he will explain in much greater detail - what steps we are taking in order to become self-sufficient in at least the essential food items, which is one of the major contributor to the current inflation.   

Unless we become self-sufficient in essential food items, I am afraid we will be under pressure of international increase in food prices. 

Apart from Fiscal measures and monetary measures, if the behavior of some areas and some sectors does not change, the government will not hesitate to take tough administrative measures.

On the essential commodities side, I want to point out that all the powers are resting in the state government.

It is the NDA Government which passed the order withdrawing the power of the state governments and said that any control order is to be passed only with the prior approval of the Central government; we reversed that and said, we give powers to the state government, you pass control orders, you take whatever measures you want, for de holding, speculators. I have got a list here, of what actions the state governments have taken after full powers are available to the state government according to the essential commodities act, some state governments, I wont say the name, but if necessary I will, have imposed licensing requirements, nothing more, just take out a licenses, some have imposed stock limits, but when it comes to taking action, there have been 348 cases of conviction through out the year 2007, 251 have been in one state, 76 in another, 1-2 in 2-3 states, and in most of the states,  not one person has been convicted. When it comes to raids and searches, a bulk of them, are exactly 5 states, there are states which go through the pretensive causing a few raids, hardly any body is arrested, or prosecuted, and no body is convicted, if state governments are serious about essential commodities. I appeal to them on the floor of the results, the Prime Minister written a letter yesterday, please invoke the powers under the essential commodities.

First of all you must take action before you prosecute, they don’t even take action, the first thing we should do is, impose severe stock limits, and raid people who hold stocks above the stock limit."