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Agrarian revival needs long-term stimulus

Agrarian revival needs long-term stimulus
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First Published: Tue, Feb 02 2010. 10 28 PM IST

Updated: Tue, Feb 02 2010. 10 28 PM IST
Inflation numbers are back on the upward spiral after a marginal dip the previous week. While the blame game between the Centre and states is on, nobody really seems to have a clue on when inflation will start declining. However, under intense public pressure, the government has taken a few short-term measures that may have some impact on prices in the short run.
First is the government’s decision to offload rice and wheat through open market sale. Better late than never, the government has finally acknowledged that it is the hoarding of buffer stocks beyond normal requirements that is helping build the inflationary spiral. However, given that rice and wheat are to be offloaded at prices higher than the public distribution system (PDS) rates, the impact will depend on the actual offtake of these.
Similarly, efforts on the monetary policy front to squeeze liquidity may not have the desired impact on food prices in the short run. This is primarily because the present inflation is more a problem of government mismanagement of the food economy and structural imbalances that have nothing to do with monetary policy, as I have argued in my earlier columns.
While most of these measures are short-term and knee-jerk, although belated, there does not appear to be any urgency to look at the larger issue of maintaining food security and reviving agricultural production. Finally, Prime Minister Manmohan Singh, in his meeting with the chief secretaries of various departments, has acknowledged the need for agrarian restructuring and the revival of agricultural growth.
The United Progressive Alliance (UPA) government, which did not leave an inch in reminding the public of its contribution in increasing agricultural production in its previous avatar, seems to have woken up to the false sense of food security that lies at the root of the problem.
It is now more than obvious that the growth of food production in the first four years of the previous UPA government was more a gift by the rain gods than a result of any significant contribution by the government. Although the farm loan waiver and the increase in minimum support prices were beneficial to farmers, these were more a populist dole at the time of elections than anything else.
Nevertheless, farmers did benefit and so did the rural populace, which is partly responsible for the fact that though food prices were rising in the last two years of the previous UPA government, the effect of it was felt less severely. The situation has changed after the elections and the government, already bleeding with fiscal stimulus to industry after the recession, has very little to offer to farmers.
But behind all this lies the real problem of a gross neglect of agriculture, whether it is in terms of expansion of public investment, extension services and technological improvements, or in terms of managing the food economy or the price policy.
This crisis has not only opened up a debate on long-term sustainability of agricultural production in an economy growing at more than 8% on average, but also presents an opportunity to use this enhanced potential of the government to do something meaningful.
Some key issues that need urgent attention if long-term growth has to be sustainable are:
Expansion of agricultural investment
This requires expanding the irrigation potential of dry-land areas that account for a bulk of our production of pulses and oilseeds, not only because these commodities have been at the back of the current food price inflation, but also because we have always been deficient in the production of these crops. There has been no significant increase in acreage of these crops except for some such as soya bean. Further, any investment in agricultural extension and research has to benefit areas that are lagging behind, such as the eastern states. And finally, the agrarian strategy has to move away from a one-size-fits-all universal plan to crop-specific and region-specific policies, taking into account the local constraints and opportunities.
Management of food economy
This has to become a priority. It includes not only restructuring the procurement system and Food Corporation of India, but also giving adequate attention to the revamp of PDS. Hopefully, there will be some urgency on the long-promised Food Security Act.
Revamp of the price policy
This is the most important, particularly the revamp of Commission of Agricultural Costs and Prices (CACP), which has become more or less a toothless tiger because of the political interference in its functioning. The recent crisis on sugar cane pricing is a good example of this. There has not been any effective action on the Y.K. Alagh committee that was constituted to relook the functioning of CACP.
Agricultural sustainability as livelihood
There has to be a political will to look at agricultural sustainability, not from the narrow perspective of growth, but a larger perspective of livelihood. Despite its share in national income shrinking to less than one-fifth, half of India’s population still derives its livelihood from agriculture. No strategy of inclusive growth can be effective without including agriculture in the growth framework.
Himanshu is assistant professor at Jawaharlal Nehru University and visiting fellow at Centre de Sciences Humaines, New Delhi. Farm Truths looks at issues in agriculture and runs on alternate Wednesdays. Respond to this column at farmtruths@livemint.com
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First Published: Tue, Feb 02 2010. 10 28 PM IST
More Topics: Farm Truths | Himanshu | Agriculture | Wheat | Prices |