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 I actually think that¶s pretty fair. The question of what they do from this point on is right. But
governments are paid to be anticipatory. One of the great strengths of India over the last 50-60 years,
atleast since the time of the Bengal famine has been supply management. I think this is a failure more
on the supply side than the demand side.

I see in the papers that now they are trying to push the blame on to the states. Yes the states have a
role to play, but I do think that in aggregate there has been a failure of competence really in many
ways in government on these issues. I don¶t think that this is something that was beyond the wit of
man to manage. How we might manage it is something that we can get to a little later. But I think your
characterization is not unfair.

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 Absolutely, I think it has seen a sort of an abysmal failure of supply management. But there
are a couple of comments that I would like to make in this context.

One of them is the fact that this time the real drivers of inflation, of food inflation, have been non-
grains, if you like. So it has really been traction in things like milk, vegetables and so on that has
driven food inflation up. These tend to be out of the ambit of the procurement and distribution network
that the government runs. So it has made things a little bit difficult for the government to handle.

The other bit which I think the RBI is trying to emphasize now a fact that over the last 2 or 3 years, or
perhaps even longer period, there has been a significant increase in rural income, perhaps because
of the combination or rising, support crisis, NREGA and so on. So, rural demand, particularly for non-
grain products like vegetables and so on, have actually ramped up very sharply over the last two
years. And that also had a demand side impact.

The limited point I am trying to make is that yes, there has been an abysmal failure of supply
management, but, there are other factors, that have sort of compounded the problem and made the
problem far more difficult for the government to handle. But that certainly doesn¶t condone the
government¶s lack of effort to bring prices under control.

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 Let me start with a rider. I don¶t think there are too many measures or too many options left for
the government in the short term to sort of handle the situation. Of course addressing hoarding and
preventing the extreme lack of competition that¶s showing up in some of the categories.

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 Yes. But I think these are sort of limited options that will have an impact at the margin. I think
what Mr Bery was pointing out is the fact that when there has been serious sort of neglect or
indifference of some of these very critical structural issues, particularly in the non-cereals category of
agriculture and these cannot be addressed overnight. So we will have to seriously get down to
addressing issues of productivity, of supply chain management etc.
But the pay off from this, will come only in the medium to long term. I don¶t think in a situation where
the chickens have come home to roost after sort of years of indifference, you can reverse the situation
very quickly.

What sort of queers the pitch further is the fact that the export option in a number of cases is
somewhat limited because globally there is also a huge excess demand problem and we have seen
the response of Pakistan, I don¶t know whether it was just churlishness or whether there is a genuine
supply problem there. But they have decided to stop exporting onions. And I expect that would
happen in other categories too.

So we are going through a very difficult situation where we¶ve sort of neglected our internals for too
long. The external situation is adverse. So I don¶t think there are any quick fixes.