CONFLICTING INTERESTS OF PRODUCERS AND CONSUMERS

      The Government of India has extended the ban on exports of cotton, as the consumer industry,  namely textile industry has complained about increase in the prices of its raw materials which would make its exports uncompetitive. Often, the government bans the exports of onions to bring down the prices domestically to benefit the consumers.  It also allows imports of  products/commodities when their prices in India go up. This means that:

    The Government wants cotton growers to subsidise exports; it wants onion growers to suffer losses or forgo profits for the benefit of the consumers. When the prices of cotton goes down, does the textile industry comes forward to pay higher prices? When the price of onion goes down, do the consumers volunteer to pay higher prices? Of course, the government sometimes procures certain products at  particular prices. The prices should be allowed to be determined by the market forces. In the process,  for examples, if the textile exports suffer , the government should extend cash or other assitance to the exporters, considering the need for foreign exchange. In the case of domestic sales, the industry should pass on the increase in prices to the consumers.

    However, a question arises as to the incentives that the government extends to, for example cotton growers by way of restricting/ banning imports to ensure  remunerative prices for the growers. Restricting the imports is not just to help the growers, but also to conserve the foreign exchange for use by the industry.  However, the ultimate solution should be to allow freely, both imports and exports of raw materials and finished products except where the non-renewable raw materials  like ores, need to be conserved for future use.

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