New Delhi: The centre is looking to invest more in rural infrastructure, such as roads and irrigation systems, along with price support mechanisms, to help farmers, given that subsidies may not be sustainable in the long run, said finance minister Arun Jaitley on Tuesday.
“Resource crunch is no longer a constraint to support agriculture...and every year we are taking additional steps to increase and blend subsidies with investment support," Jaitley said, adding that “there is always a great temptation" to take populist decisions, but those may not be long lasting.
The finance minister was speaking at a book release event. Edited by agriculture economist Ashok Gulati and former Syngenta Foundation chief executive Marco Ferroni, the book, Supporting Indian Farms The Smart Way, argued that it was time to move from price support to direct income support for Indian farmers by reviving public investments in agriculture.
While investments in the sector declined from 3.9% of agricultural GDP in 1980-81 to 2.2% in 2014-15, input subsidies on fertilizers, water, power, insurance and credit rose from 2.8% to 8% of agricultural GDP, it said.
Jaitley’s observations come on the back of the centre’s pledge to ensure higher minimum support prices to farmers, ahead of the crucial state elections this year and the 2019 general elections.
The Indian farmer took the country from an era of shortages to an era of surplus, the finance minister said, adding that the surpluses, however, led to a fall in crop prices, which added to the farming community’s woes.
Among the major recommendations of the book are switching to direct cash transfers of fertilizer subsidies based on the per-unit of land, discouraging production of water-intensive crops in water-scarce areas, and making loan waivers and interest subsidies a part of a comprehensive package of income support policy.
Principal economic advisor Sanjeev Sanyal said that the last time India “re-looked" at the agriculture sector was in the 1960s with an aim to produce more calories, which still remains the central theme of our agriculture policy. Now we need a radical rethink as producing more and more calories cannot be a focus since population growth is slowing down, he added.
According to the book, despite subsidies on key farm inputs and price support for various crops, an adverse farm trade policy, which restricted exports and other controls, led to a negative producer support, which was estimated at -14.4% of the value of gross farm receipts between 2000-01 and 2016-17.
The book argued that marginal returns of public investments, in terms of the number of people who can be brought out of poverty or higher agri-GDP growth, are 5 to 10 times more if public money is spent on investments in R&D, roads or irrigation, compared to when money is spent on power or fertiliser subsidies.