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Farmers are paying for India's inflation target, says MIT economist Abhijit Banerjee

Updated : January 16, 2019 03:15 PM IST

Abhijit Banerjee, Professor of Economics at Massachusetts Institute of Technology, spoke to CNBC-TV18 about how the government should come up with a mechanism to compensate farmers for their produce.

“If oil prices go up and as a result, we have to reduce the inflation, we will do it by reducing farm prices by banning exports. Then the farmers are paying for our inflation target. So the right way to think about it is that the farmers deserve compensation for what they are delivering to the rest of the economy, we want stable inflation at 4 percent, farmers are going to sometimes get a big hit, so let us think of a mechanism for compensating them. We have an aspiration for protecting our poor but the farmers are usually poor as well, why should they be the people who pay for it,” Banerjee said on Wednesday.

“In particular, before the election, it is quite easy to make promises based on what clearly will be a long-term negotiation. So it is very easy to say if you bring us back to power, we will use this money in the future because it won’t be now. So I see it as being a very easy option for the government. Once they get to this point, they don’t have to deliver, they just have to say it. Then there will be another promises that have not been delivered, so why not this one,” said Banerjee.

 

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