I am in a state of shock — double shock to be precise. The first is because I have been quoted by Nitin Gadkari, the president of the Bharatiya Janata Party. The other is because he quoted me with approval. The quotation is: “For no fault of theirs, poor get much trouble from the government. Need is to identify the really poor and inclusive growth.” This is the man who called the Congress the mother-in-law of Afzal Guru, and Lalu Yadav and Mulayam Singh dogs who lick the feet of the Congress; in politics at any rate, his abuse has turned contemptible people and institutions into objects of sympathy. If his approval became a mark of belonging to his brand of Hindutwitism, I would have to run away and take sanyas. Admittedly, I did not write what he says I did. But the news that someone in the BJP bothered to misread me and miseducate Gadkari is disturbing enough. The act of commission was part of a powerpoint presentation Gadkari made somewhere; I suspect it was at one of the meetings the BJP has lately been holding with reference to inflation.

It quotes the Economic Survey as follows: “The-large magnitudes of both poverty and inequality which coexist with growth. From National Sample Survey (NSS) on the distribution of consumer expending, And employing the consumer price index of agricultural labour. The consumption of the poor people (lower 20% of the Indian population) has come down (i.e. poverty and inequalities has increased).” The citation is in quotation marks. But I cannot find it in the Economic Survey, and the English is so imperfect that even the authors of the Economic Survey could not be so sloppy. It requires some work to find the right quotation; but such an egregious misquotation is a mark of genius.

Then the presentation sets out 14 charges. Some of them relate to the breach of various laws: the Preamble (social, economic and political justice), Articles 21 (fundamental right to life) and 27 (right to food) and Directive Principles (adequate means of livelihood) of the Constitution, Food and Safety Standards Act 2006, and Section 409 read with Section 120B (criminal breach of trust) of the Indian Penal Code. Gadkari can try out a case on their basis in the Supreme Court. I guess the government would argue in defence that if it has breached these laws, every government of independent India has been violating them: that people who live in glass houses should not throw stones at others’. This is the kind of sophistry that passes for law in our country. It wastes a lot of money and time, but is otherwise irrelevant to the state of the country, so I will leave it aside.

Coming to more substantive points of Gadkari, there are six. First, the government has hoarded enormous quantities of foodgrains — 45.3 million tons on March 1, 2010 — but not sold them to reduce prices. Second, it had wasted foodgrains; 8 lakh tons were being stored in the open. Third, the government allowed speculation; of the 10 lakh tons traded on commodity exchanges in 2007-08, only 3,591 tons were delivered. Fourth, the government was misleading the people by alleging a global food crisis; prices of some essential commodities were higher in India than abroad, and inflation also was higher in India. Fifth, the number of poor had gone up from 31 crore in 2005 (Planning Commission’s estimate) to 42 crore in December 2009 (Tendulkar Committee’s estimate). Finally, the government was profiteering by charging consumers far more for foodgrains than it paid farmers. Let me address these points.

The first two points are valid. As I have myself been saying, the government is very good at buying and hoarding grains, but not at all good at using them to stabilize prices. This is due to insecurity (the government hoards for a really big crisis which never arrives), indecision (government machinery is much better at deciding not to do anything than to do something, and takes so long to do anything), and lack of clarity about objectives (the government does not know whether it buys grains to reward farmers, to sell them to the poor at subsidized rates, or to stabilize prices, or to be prepared for a crisis). Wastage is not deliberate, but is a by-product of buying like mad. It is not a matter of policy or priority; the government could continue to be as confused and incompetent, and yet eliminate wastage if it decided that it would buy only enough to fill its silos. It could even build or rent storage space. The government’s basic weakness is that it is the government — it pursues multiple objectives without deciding priorities.

The third point is wrong. “Speculation”, as Gadkari and many others call it, is trading without delivery. In this sense, all trading on the stock exchanges is speculation. Scrips are not actually delivered; instead, transfer entries are made in demat accounts. What speculation does is bring all the information and intelligence the traders may have on the formation of prices. It does not necessarily raise prices. If some traders anticipate an increase in supply in future, they will sell the commodity long. That will bring down the current price. Speculation will raise prices if there is a lot of money available to speculators; but equally, a shortage of money will bring down prices. When people associate speculation with inflation, it is because they — or people they listen to — have been unduly impressed by the coincidence of speculation and loose money supply.

I have not heard the government citing a global crisis for inflation — at least not recently. The government allows imports and exports of foodgrains only exceptionally, and it taxes imports of some agricultural products heavily. Domestic prices would be lower if import duties were abolished. But a government which interferes so blatantly in domestic markets is hardly likely to be in favour of free international trade.

The various poverty estimates of the government are not necessarily comparable because the definition of the poor keeps changing. As the country gets richer, the number of poor declines. This threatens the government’s poverty racket, so it raises the poverty line, and increases the number of the poor.

Finally, the difference between producers’ and consumers’ prices must cover the costs of transport, storage and distribution; foodgrains are bulky, and these costs are high for them. They are high in this country because of government monopoly: they are not kept down by competition, and the government is not interested in bringing its own costs down. But the government could continue to be idiosyncratic and yet bring down costs if it introduced competition in storage — called tenders for long-term storage, for example. To summarize, Gadkari’s understanding of economics is limited, and he is far too obsessed with attacking the government. If he is not to compete with the government as a mess-maker, he needs to learn some economics, and do some dispassionate thinking about the problems of our country. He does not have to, for he will not face much competition from the competent in his profession; but it would be good if he did.