Thursday, July 8, 2010

Why we need the Food Security Bill? Part 2

Another argument, seemingly less compelling but legitimate nevertheless, in favor of food security:

While much needed and absolutely commendable, it is commonly understood that hike in diesel prices will feed into food inflation; slightly dated but diesel costs were 7% of agricultural input costs in FY09.

Incorporating the current 7% hike in diesel prices, a preservation of farm incomes (agricultural GDP, Estimate 3 in table below) would require 2.3% rise in value of output i.e. farm prices: - value of output in case there were a 7% hike in diesel price and costs were passed on in full, is 2.3% higher than actual value in FY09, implying food inflation would have been higher by 2.3 pct points.


Figures in Rs crores

In Why we need the Food Security Bill? Part 1: How food inflation eats away real income.

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