“Towards a painful climax” by V. Anantha Nageswaran, Mint, 29 January, seems true on most points. I agree that safety lies in precious metals and cash under the mattress. Yet that does not help: Every invester wants good returns and is also risk-averse. But one cannot stick to the metal investment or holding cash alone. Other alternatives have to be explored. Looking at the diversified needs of a diverse set of investors, one has to look at investment options in other markets also. Global capital markets are risky, and looking at the present condition of global markets, one cannot but conclude that the situation is becoming riskier. So, what should be the policy for investment in such a scenario?
Re: “Good news for farmers” by Niranjan Rajadhyaksha, Mint, 23 January.
Back in 2000, freshly returned to India after completing my PhD, I would have half-accepted your article that seemingly spreads the news of impending happiness among the farmers of this country.
Today, however, like many an optimist-turned-pessimist, I seriously doubt that higher cotton prices are likely to do much for the farmer’s welfare.
First, higher production is not necessary for higher welfare among the farming community. For one, higher aggregate production, unless accompanied by demand growth, suppresses prices. Second, there are presumably many grades of cotton, and it is an open question whether the incremental production is of the same quality, i.e., whether the increase in output is an increase in productivity from traditional cotton fields, or whether the incremental production came from acreage either switched from other crops or brought in to farming for the first time.
Even presuming that higher prices accompany higher production, the benefits are generally siphoned away by the financial wizardry of our commodity and hedge fund managers and day traders before the cotton middlemen take their share. The farmer, especially the small farmer, even sells his crop before harvest at previous year’s prices to pay off loans and feed his family. (What bargaining power will a farmer with three daughters and four bad loans have with his middleman?) As to what the advent of higher productivity textile machines and prices of synthetic yarns have on cotton prices, it is an open question.
As our agricultural and energy markets integrate with the rest of the world, our farmers are likely to increasingly feel the impact of the integration of agricultural and energy policy. In the US, where the bogey of oil imports was used as a thin disguise for providing hand outs to corn producers, farmers are today moving away from corn on account of the plummeting prices of ethanol.
In India, sugar policy and ethanol mandates are likely to rule the legislative roost for some time to come. This, along with droughts and power cuts, will affect the fortunes of our farmers.
In any case, farmers are so deeply subsidized and to their neck in debt that the government (and the foreign institutional investors behind them) verily controls their level of welfare. I do not think it will permit farmers to marry their daughters any time soon!
–Ganga Prasad G. Rao
“Postponing the necessary” by Shanmuganathan N., Mint, 25 January, was an eye opener and indicates that an interest rate cut by 75 basis points is not a step in the right direction to get over the problems faced by the US economy.
However, I fail to understand what the necessary steps will be to get over po-ssible recessionary trends.
(We thank our readers for some very interesting letters in response to our stories and columns. Do continue to write to us at email@example.com)