The Hindu Business Line : OECD notes India's progress in farm sector

OVER the next ten years, the outlook for world agricultural markets is for a gradual strengthening in market conditions for all commodities. Stronger global economic growth is expected to lead to increased consumption and trade and firmer agricultural product prices in nominal terms.

But these outcomes are highly conditional on the geopolitical and global economic situation, as well as continuation of domestic policies and policy settings, the OECD Agricultural Outlook 2004-2013 report has pointed out.

Global production of wheat, rice, coarse grains, beef, cheese and vegetable oils is likely to expand faster than consumption. Most of the gains in production are through expected productivity improvements especially in crops where area expansion is at a much lower rate. These tend to be concentrated in areas outside the OECD.

Prices of almost all commodities — cereals, oilseeds, meat, dairy products and sugar — are expected to strengthen over the next 10 year period in nominal terms, but to continue to trend downward in real terms, the report forecast.

Some important structural market developments include the likely recovery of European Union's wheat market share, China becoming a large cereal importer, Brazil emerging as the largest oilseed exporter and South America's expanding beef consumption.

The report recognises that non-OECD countries would play a larger role in shaping world agricultural markets. China is important in cereal markets while Argentina and Brazil are major players in oilseeds and oilmeals markets. Brazil also has a large role in sugar and beef markets.

Focus on India: "India is another large non-member economy that could become increasingly important in world agricultural markets as domestic markets become more open to the world," the report observed.

Examining the agricultural market and policy situation and outlook in India for the first time in a special focus section, the OECD Agricultural Outlook report said despite being a major producer and consumer, inward-looking trade policies have meant that India has played a relatively minor role in world agricultural trade for many products.

But this is changing as India is increasingly becoming more integrated into world markets. Some experts in India expect agricultural exports to increase at about 9 per cent per annum while imports are expected to grow at double this rate, averaging 18 per cent per annum to 2007.

Some estimates also indicate that in the absence of significant technological changes in the agricultural sector, growing income and population would lead to an import demand of 115 million to 142 million tonnes of food grains.

Commenting on the uncertainty about India's future role, the report pointed out that India entered the path of policy reform in the 1990s and has also taken a more active role in the international arena through active participation in the G-20. As its agricultural sector becomes more outward looking, structural issues such as limits on farm size, infrastructure inadequacies, access to inputs and the inadequacy of investment in less-favoured areas may emerge.

Another policy issue that might need to be considered is a well-targeted safety net to ensure that the rural poor are not left worse off in the transition from high support and protection to a more open and market-oriented agricultural environment.