There are three lessons to learn from the 1987-'89 drought policy in addition to the policies already announced. Rajiv Gandhi insisted on a plan, a macro policy to fight drought with all the economic ministries on board, and food, water and employment availability a focus – both immediately and for longer solutions, and management both of the actors and the politicians.

As the published reviews of the policy then show, the concept was to spend with a plan. The release of food would be deflationary and better coordination with the plan programmes on land, water and employment would save rupees. The problem now, as the Governor of the Reserve Bank said last week, is that there is too much liquidity and he is getting worried that when we bounce back – as we will -- can we hold the interest rate as our competitors have done? He was quite clear that this was why food prices started to rise before the rains failed.

That is the problem to solve -- rather than fix the vegetables and oilseeds grower. Incidentally, oilseeds are grown in a big way in rain-failure regions, and to emasculate their incentives is both inefficient and callous. The Economic Survey repeats what we have said all along: that for agriculture, we need variable tariffs within a bound. This should be the framework for supply planning today, tomorrow, and for the next year. We cannot live as if there is no tomorrow.

It is strange for a blog to underline what professional economists in the Government and the Central Bank are saying but these things need speedy reactions. The fact that people like me are saying it is no reason to ignore it.

... contd.