Economic Survey 2017 slams excessive regulation in India’s agriculture sector

On demonetisation’s impact on the agriculture sector, the Economic Survey said higher winter plantings may not necessarily lead to higher production


The regulated markets deprive farmers of better returns and higher incomes, and make light of claims that there is one economic India, said the Economic Survey. Photo: Mint
The regulated markets deprive farmers of better returns and higher incomes, and make light of claims that there is one economic India, said the Economic Survey. Photo: Mint

New Delhi: India’s farm sector is entwined in regulation and is a living legacy of the socialist era, the Economic Survey released on Tuesday said, criticizing curbs on marketing of agriculture produce and imposition of stock limits on traders.

“While progress has been made in the last two years, producers (farmers) in many states are still required by the Agricultural Produce Marketing Act to sell only to specified middlemen in authorized markets (mandis),” the Survey said. Regulated markets deprive farmers of better returns , it added.

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The Survey added: “When this system nonetheless generates price increases deemed to be excessive, the Essential Commodities Act is invoked to impose stock limits and controls on trade that are typically pro cyclical, thereby exacerbating the problem.”

The Survey’s critique comes at a time when the National Democratic Alliance government at the centre is trying to create a national market for agriculture produce and has launched an electronic platform which states have been slow to adopt.

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Moreover, stock limits on traders and poor procurement have led to wholesale prices of pulses dipping below government-announced support prices, hurting farmers, following record production in 2016-17.

On the impact of demonetisation on the agriculture sector, the Survey said that contrary to fears, sowing of winter crops like wheat and chana (gram) is higher compared to the year before, but warned, “whether this will lead to a commensurate increase in production will depend on the extent to which farmers’ access to inputs—seeds, fertilizer, credit and labour—was impeded by demonetisation.”

The Survey said that the effects of demonetisation could linger into next year (2017-18) for the farm sector.

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It added that “vigilance is essential to prevent other agricultural products becoming in 2017-18 what pulses were in 2015-16 in terms of supply deficiencies and consequential higher inflation.”

“If Economic Survey is the preface to the budget, farmers have little to expect from this government; the Survey lacks any focused discussion on the farm sector or the stress it is going through,” said Devinder Sharma, a Chandigarh-based agriculture policy analyst.

“There is no discussion on how to improve farm incomes. Blaming mandi regulations for farmers’ woes is a flawed argument: in Punjab where trade is regulated, farmers still get the benefit of support price, not in Bihar where there are no marketing regulations,” he added.

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