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Business News/ Opinion / Online-views/  Views | The roots of the rural crisis
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Views | The roots of the rural crisis

Views | The roots of the rural crisis


A looming water crisis in India and a spike in food prices globally seem to have added to the risks of rising food inflation in the country.

Adequate food grain stocks were not enough to prevent a jump in food prices during the drought of 2009, and there are fears that the price rise may be equally sharp this year if the rains continue to play truant. Agri-commodities such as pulses are likely to see a sustained bull run, a 19 July report on the monsoons by Religare Broking said.

The key problem in Indian farms and, by extension, in rural India, is low productivity. Low yields lead to high real costs of farming, prompting increases in minimum support prices, which feed into food inflation. Steep increases in minimum support prices in 2009 played a key role in pushing up food inflation. Only a sharp increase in productivity can attack rural poverty fast without stoking inflation, by raising farm profits and wages even while freeing up farmlands for industrial development.

As the accompanying table illustrates, barring the eighties, annual growth rates in food grain productivity have steadily fallen since the first decade after independence.

India’s estimated food grain production this year may be at a record high of 257.44 million tones, and India may be among the largest cereal producers in the world but yield levels are way below global averages in all major crops other than wheat.

For instance, India’s average yield in rice at 2.3 tonnes per hectare is half that of the world average and a third of China’s average, according to the latest FAO estimates.

A strategy to revive agri-productivity in India needs to have four essential components:

First, any strategy today must rest on innovations and technologies that prevent further damage to the degraded state of the nation’s soil and water resources. The ‘green revolution’ strategy of the earlier era was simply too resource-intensive. There is a need for a comprehensive overhaul of policies governing water usage and distribution. Inept governance, both in planning and execution, has made irrigation projects extremely costly. Planned irrigation projects need a relook. Also, policymakers must start thinking of ways to make rain-fed agriculture drought resistant, in a country where the majority of farmlands are rain-fed.

Second, to tackle the growing fragmentation of farmlands, India’s arcane land laws need to be loosened up to allow more land to be leased. Small farms are among the biggest hindrance to capital investments.

Third, the long chain between the farm and retail markets must be shortened by encouraging retail firms and aggregators to tie up directly with farmers. A stable and profitable relation between the two sets of participants will encourage investments across the supply chain.

Finally, it seems one of the biggest reasons for the slow productivity growth in agriculture over the past two decades is the reduced role of extension workers, who help farmers adopt innovations. In an age where farming has become riskier and more complicated than ever before, public investments in rejuvenating a cadre of extension workers will help manage volatility better and provide a boost to farm growth.

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Updated: 23 Jul 2012, 09:46 AM IST
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