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Economy Aug 20, 2012

Like Chidu, Beni Prasad Verma claims inflation helps farmers

By Firstbiz Staff

Union Steel Minister Beni Prasad Verma has created fresh controversy for the UPA, by saying that the government is happy about high inflation as it helps farmers. "We are happy with the inflation, it will help farmers... Dal, grain and vegetables are more expensive. The rising prices is a benefit. We are happy", he said.

He said the media was making a hue and cry of increasing prices. "Media kehti hai ki khane ki thali mehngi ho gayi hai...Isse fayada kisano ka hai, aur sarkar kisano ke fayda ki pachdhar hai" (Media says that cost of food plate has increased but it is benefiting farmers...and the government is in favour of farmers profit)," he said.

Lashing out at his rationale, the BJP took the opportunity to accuse the Congress of turning a blind eye to the common man being hit by inflation.

IBN

"The Congress leaders are not affected by inflation at all. They are not seeing the plight of the people as a result of rising prices. It clearly shows their mentality," BJP leader Shahnawaz Hussain said in Delhi.

"Today, the farmers are hit by high cost of fertilisers and power. Then how are they going to benefit by rising prices," he said.

"The Congress talks about aam aadmi but it has drifted a long way away from them," he added.

Attacking Verma, SP leader Mohan Singh said the minister is not fit to continue in the Government, which has got the full support of the Samajwadi Party.

"His remarks on price rise are highly irresponsible. It clearly shows that he is not in touch with ground realities.

The farmers are not getting remunerative prices, be it for vegetables or other products," Singh said.

Shivanand Tiwari of JD(U) said instead of finding ways to effectively tackle inflation, corruption, poverty and unemployment, the senior minister was justifying rising prices.

Bizarre as the comment is however, this is not the first time that a UPA government has tried to rationalise inflation by saying it benefitted farmers. In July, current Finance Minister P Chidambaram also suggested that the middleclasses should not complain about inflation because, in any case, the "poor farmers" were benefiting from higher foodgrain procurement prices.

This argument, as pointed out byFirstpost's Venky Vembuis completely fallacious. He points out that "hiking procurement prices excessively sets off a chain reaction, which works its way through the economy and pushes up all other prices. Food prices go up, which leads to an increase in wages, which in turn pushes up in costs - and output prices. In that sense, inflation is truly "secular": it hurts everyone, but it hurts the poor rather more.

Even the alibi that Chidambaram trots out in defence of price rise - that it benefits the "poor farmer" - is disingenuous.As economist Surjit S Bhalla points out,"politicians... often cite statistics on hunger and poverty in rural India as justification for hiking procurement prices. But it really is kulak favouritism of the worst kind. In 2009, there were approximately 107 million farmers, and an equal amount of poor, landless, rural workers. The former benefit hugely from price rises, and the latter lose equally hugely. And the latter, being poorer, lose more from inflation. But the weight of their votes is less."

With inputs from PTI

by Firstbiz Staff

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