The Hindu Business Line : OECD survey silent on agri reforms

It is likely that the OECD does not perceive any major investment opportunity in Indian agriculture given the various challenges the sector has been facing.

G. Chandrashekhar

Mumbai, Oct 9 The unfolding India growth story has surely caught the attention of the world, and in particular, the group of developed economies represented by the Paris-headquartered Organisation of Economic Cooperation and Development (OECD).

For some time now, the OECD has been tracking India’s growth and has included the country as an OECD non-member (along with China, Russia and Brazil) in its monthly composite leading indicators (CLI) – an advance signal of direction of economic growth.

For the first time today, the OECD has published a full-fledged Economic Survey of India. It is known that following India’s growing importance in the global economy, the OECD has been keen to engage the country for purpose of policy research.

Despite a detailed examination of the country’s economic landscape covering a wide range of activities including health, education, infrastructure and financial services, a major sector that has remained little examined is agriculture. Close to 600 million earn their livelihood from farm and related activities; but their financial fortunes have not changed as rapidly as those engaged in manufacturing and services sectors.

major challenge

One of the biggest challenges facing Indian policymakers is to find non-farm employment for millions of people currently on farm, in the form of what is popularly known as disguised unemployment.

There is little doubt that agriculture continues to be a laggard and actually drags down the growth process. It is unclear if OECD’s omission of detailed analysis of the farm sector (contribution to GDP about 20 per cent) and absence of policy recommendations for reforms of the country’s agriculture is a tacit admission that the sector is turning hopeless.

It is also likely that the OECD does not perceive any major investment opportunity in Indian agriculture given the various challenges the sector has been facing.

In a brief reference to the country’s commodity futures market, the report pointed out that after long years of remaining fragmented and illiquid, setting up of three nationwide futures exchanges sometime in 2000 has encouraged commodities futures trading. Although over 90 commodities are traded, gold and silver account for half of the turnover. The report goes on to point out that turnover in agricultural commodities is held back by the system of price support for some agricultural products. However, market participants assert that the inference is too simplistic as there is nothing to suggest that price support has in any manner contributed to restricted turnover in agricultural commodities.

Price support

A minimum support price is announced for a large number of crops - wheat, rice, coarse cereals, pulses, oilseeds, cotton, to name a few. The MSP policy is designed to protect primary producers and has nothing to do with futures trading. Farmers seldom trade futures. The market simply takes cognisance of MSP announced by the Government.

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