The Hindu Business Line : Supporting agriculture

Lower growth rate, reduced investment and poorer yields can combine to threaten farm output growth, with consequent effect on availability and prices.

New Delhi would be well advised to heed the warning issued by a group of experts that the current financial and food crises are sure to adversely affect investments in agriculture, especially in developing economies, pushing millions into the malnutrition trap. The current twin-crises of falling economic growth and investment are likely to have strong and long-lasting effect on emerging economies and on the people most in need, according to International Food Policy Research Institute (IFPRI). Financial crunch is already seen affecting investments in a wide area of economic activity and many governments are tempted to bail out the industrial and services sectors. If agriculture becomes an unwitting casualty in this race for policy attention, there is bound to be long-term negative impact on a large number of people with extremely limited capacity to adapt to deteriorating conditions.

Even before the crises, the poor — out of the world’s over 800 million living on less than a dollar a day, over 200 million are in India — have been struggling to make ends meet, having to spend as much as 55-60 per cent of their income on food alone. Falling food prices in recent months have brought relief to a large number but they have also lowered the real wages of unskilled farm workers. The world is already in recession; and 2009 is forecast to be worse for global economic growth. There is justified apprehension that scarcity of capital may affect agriculture at a time when the sector is crying for more investments.

One cannot escape the nagging reality that the composition of India’s growth over the last five years has skewed towards industry and services, while agriculture has remained a laggard, logging a paltry 2.3 per cent annual average growth. Public investment in agriculture has been on a declining trend, even though food subsidy bill has been ballooning. Schemes like the farmers’ loan waiver are but a palliative as they fail to build capacity among farmers to face the vagaries of the market. Structural issues of the farm sector — strengthening input delivery system, expanding area under irrigated cultivation, building rural infrastructure — have been glossed over. No wonder, the country’s farm yields are among the lowest in the world. Experts assert that lower growth rate, reduced investment and poorer yields can combine to threaten farm output growth, with consequent effect on availability and prices in the coming years. On the other hand, despite economic slowdown, if agricultural investments are stepped up — or in the least, not reduced — and yields are maintained, food will become more affordable. IFPRI’s three-point formula, namely promotion of pro-poor agricultural growth, reduction of market volatility and expansion of social safety nets, deserves to be high on the policymakers’ priority list.

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