On Tuesday, Prime Minister Manmohan Singh signalled that the time had come for hard policy decisions in agriculture. Not without reason. In the last five years, average growth in agriculture worked out to 2% per year, while the economy grew about four times faster, clocking 8%. Worse, growth in annual agriculture output is barely topping the 1.6% growth in the country’s population. Clearly, the PM’s concerns were not misplaced.
Addressing the National Development Council, the apex Centre-state policy forum, Singh said, “Reversing the prolonged slowdown in this sector is essential for our goal of inclusive growth, for ensuring that growth benefits all sections of society and all regions of our vast country. The rates of growth of agriculture in the last decade have been poor and are a major cause of rural distress in some parts of our country.”
Wise words indeed. The PM cannot be faulted for identifying the problem. But disappointing in the context of the follow-up action proposed at the end of the deliberations. After promising a pragmatic response to the crisis at hand, the policy prescription was piecemeal at best. In terms of numbers, the Centre has promised Rs25,000 crore over the next four years. Does it add up to anything significant? Annually, this would work out to an assistance of a little over Rs6,300 crore spread over 29 states. Further, these funds would be doled out subject to the states meeting some preset conditions. In policy prescriptions, it has put the onus on the states to come up with a decentralized strategy that will take into account the different agro-climatic zones. These are palliatives set out by the National Commission on Farmers, set up in 2004 under the chairmanship of M.S. Swaminathan, immediately after the United Progressive Alliance came to power, and have been in the public domain for a while.
So, it was another missed opportunity. The erudite PM should have instead emphasized the crisis facing Indian agriculture. If nothing, it would have provoked the more pragmatic states to engage in rearguard action. Stagnation in farm output has not occurred overnight. It has endured over decades. Several governments have failed to address the problem. Surprising because it provides livelihood to 60% of the country’s population—the bulk of the political constituency.
The PM should have defined it clearly as a crisis, not just a problem. The country’s modern economic history has shown that radical policy reform has always been preceded by an economic crisis. It is only then that political differences are sacrificed to create a coherent policy response.
Not only is output stagnating, but there is little hope of raising production levels by bringing more land under cultivation. The most immediate concern centres on wheat. The three key states of Punjab, Haryana and Uttar Pradesh have reached saturation levels in terms of productivity and, not surprisingly therefore, averaged a growth in output of less than 2% in the last decade. There is no short-term fix to raising productivity in these frontline states. Which obviously means that the shortfall in supply will have to be made up through imports.
Liberalization of agricultural imports is all but inevitable—the actual pace will be determined by the ongoing negotiations at the World Trade Organization. Time is fast running out. And studies have shown that farmers have, in the last decade, cut back production of commodities such as oilseeds and pulses, which have been exposed to liberal imports. So, the threat to farm income from imports is more apparent than real.
The Centre will have to seize the initiative. All the more because hard political decisions lie ahead if the country is to stave off the impending agricultural crisis with potentially devastating political consequences.
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