BackInvest more in agriculture by targeting subsidies better: Economic Survey
Economic Survey calls for increased investments in agricultural infrastructure and research, stresses need for common market
Premium(Priyanka Parashar/Mint)
New Delhi: The time is ripe for a broad response to challenges in agriculture to ensure it grows at an annual pace of 4% on a sustained basis, the Economic Survey released on Friday said, calling for increased investments in agricultural infrastructure and research, and stressing the need for a common market.
Rationalisation and better targeting of subsidies can free up resources required for investments in agriculture, the survey observed, adding that the focus of public expenditure should shift from provisioning of subsidies towards investments to boost productivity.
“As terms of trade deteriorate and rural incomes come under pressure, the political pressure for support will increase," the survey noted. “There have been proposal to raise tariffs in a number of sectors like oilseeds and pulses and to provide export subsidies in sugar."
The quick response would be to enhance targeted support for the vulnerable—the small farmer and the agriculture labourer, the survey suggested.
“MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) has the virtue of being reasonably well-targeted. The challenge here is to build on this feature and use the program to build assets such as rural roads, micro-irrigation and water management, while also shoring up rural incomes."
The survey said India’s agricultural markets were not integrated and tended to be distorted. It needs a national common market for farm commodities; towards that end, agriculture produce marketing committees should be made just one among many options available for farmers to sell their output, the survey said and called for a reassessment of the role of the Indian Council of Agricultural Research—the apex farm research body in the country; it asked whether research, education and extension should be separated.
To generate resources required for public investments in agriculture—in research, education, extension, irrigation, water management, soil testing, warehousing and cold storage— rationalisation of subsidies and better targeting through direct transfers can be the way out, the survey said. To achieve this, the survey made a strong pitch for cutting back price subsidies by using technology to plug leakages and said direct cash transfers, if targeted well, were capable of boosting household consumption, asset ownership and reduce food security problems of ultra-poor households.
The survey coined a new term in the food management lexicon, the JAM number trinity—Jan Dhan Yojana, Aadhaar and mobile numbers—that will allow the state to offer cash support to poor households in a targeted and less distortive way.
Jan Dhan Yojana is aimed at ensuring that every household in the country has a bank account; Aadhaar is the unique identity number the centre wants every resident of the country to have.
The fiscal cost of leakages in the existing public distribution system (PDS) is high— ₹ 10,044 crore for subsidized kerosene, ₹ 5,800 crore for PDS rice and ₹ 12,600 crore for PDS wheat— and price subsidies also distort markets in ways that ultimately hurt the poor, the survey said, adding that minimum support prices (MSP) contribute to food price inflation and lead to water-intensive cultivation.
However, cash transfers may prove to be daunting for the centre to implement. The Supreme Court in March last year had said that no citizen can be deprived of an entitled service for want of an Aadhaar number. Also, states such as Madhya Pradesh, Odisha, Tamil Nadu and Chhattisgarh have in the past voiced their opposition to cash transfers of PDS benefits.
“Agriculture is the weakest part of the economic survey. At a time when farmers’ incomes are squeezed due to a crash in commodity prices, the survey only offers lip service to boosting investments," said Himanshu, associate professor at Jawaharlal Nehru University and a Mint columnist. “To say targeting subsidies will save resources is like reinventing the wheel. Certain subsidies are meant to be given in certain form (PDS subsidies in kind). If cash could deliver outcomes (say, better nutritional standards), then economic growth is the largest cash transfer programme. Do cash transfer programmes like Indira Awas Yojana (housing for rural poor) or old age pension schemes have no leakages?"
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