• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• BL Club
• Smartbuy
• Books
• Gallery

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

The Centre last week completed the ritual of announcing the minimum support price (MSP) for certain rabi crops (wheat, major oilseeds and pulses) for 2009-10. The tinkering job bears little connection to market prices. There has been no increase in the prices of some crops (rapeseed/mustard, masur), while in others a token hike (wheat, chana, safflower) has been granted.

The economic rationale is hard to decipher. In recent years by consistently hiking the MSP for various crops, the government has improved the terms of trade in favour of the much-neglected agriculture sector. Yet if it believes that is all it needs to do, that would be misplaced. It would be naïve to think that just raising the MSP has made a significant difference to farmers’ disposable incomes and to the rural economy as such. To be sure, no one grudges higher support prices as growers certainly deserve some assurance of a minimum price. But this is only a small part of what ought to be a comprehensive agricultural policy package. Under the challenging conditions that farmers face, prices play only a secondary role in influencing planting decisions or improving the marketability of crops. Given the limited degrees of freedom faced by over 100 million small farmers, their ability to respond to higher prices with higher output is limited. The sluggish farm growth of recent years is proof enough. On the other hand, the risk is that a rising MSP can cocoon growers in an artificial world of price security. New Delhi’s job does not end with routinely announcing the MSP; it must go beyond guaranteeing minimum prices.

Indian agriculture needs non-price and non-trade initiatives. Krishi Bhawan must strengthen the input delivery system (seeds, fertilisers, agro-chemicals, credit), expand irrigation facilities, improve agronomic practices, build rural infrastructure and deliver price and market information to growers through effective use of information and communication technologies. These are some of the critical ways to make agriculture competitive and turn the terms of trade decisively in its favour. We need policies that help build capacity among small and marginal farmers to face the pressures of free markets and we need to step up public investment in the farm sector. The sooner the government recognises these challenges and begins to act, the better.

More Stories on : Editorial | Agricultural Policy | Foodgrains

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Copyright © 2009, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line