The real question to ask is not whether there is high inflation, but whether relative prices of wheat and rice have changed. Here it seems to me that the data is not clear at all. Measured in ounces of gold or in barrels of oil or in ingots of steel or in bags of cement (as distinct from in dollars or rupees) we may not have any significant increase in the price of rice or wheat. When the analysis is complete (in twelve months from now — late as with all economic analyses) it may turn out that neither is the Indian Middle Class Consumer nor the US Bio-fuels Producer responsible for anything more than a lot of verbiage in the press.

However, going beyond the money illusion caused by the unstoppable printing presses of the Federal Reserve, if in fact there has been a change in the relative price of rice and wheat (which is probably modest at best) it is worth looking into seriously, not with the foolishness and irresponsibility that one has come to associate with the current set of political leaders in India. It was the venerable statesman C. Subramanian who went by his intuition (contrary to the beliefs of World Bank dummies) that the Indian farmer was not stupid. The Indian farmer was an optimiser in a world of great uncertainty and risk. On average he may have received prices that covered his costs and gave him a fair return. But the “average” hid many risks. In years of glut, the Indian farmer had no insurance cover for his returns. This insight was the origin of the minimum support price and the procurement policies that kicked off the Green Revolution. The intelligent Punjabi farmer, once assured of a price, was able to plan better and produce more.

... contd.