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G. Chandrashekhar

OVER the last decade, India has emerged as one of world's fastest growing significant economies, resulting largely from the adoption of the process of liberalisation, begun in July 1991. The contribution of agriculture and allied activities to India's economic growth in recent years has been no less significant than that of industry and services. India is today the world's third largest producer of food. The importance of agriculture to the country is best summed up by this statement: "If agriculture survives, India survives".

Thanks to the Green Revolution, India has come a long way since the dismal ship-to-mouth existence of the 1960s. The country has now emerged as a notable exporter not only of foodgrains, but also of several agricultural commodities. Today, India is the world's largest producer of milk, second largest producer of rice, wheat, sugar, fruits and vegetables, and the third largest producer of cotton, to mention a few.

The Green, Blue, White and Yellow revolutions are in every sense of the word. They have brought distinct improvements to household consumption, leading to qualitative and quantitative improvement in the diet. Despite occasional droughts, the country has left behind the era of famines and agriculture has become resilient, although the economy is not exactly drought-proof as yet.

On many counts, Indian agriculture is a success story; as much as it is also the story of missed opportunities and messy policy initiatives. The economic potential of this labour intensive activity, which can ensure growth with equity for nearly two-thirds of the population, has remained largely untapped.

After a span of relative stagnation during the previous two decades, agriculture witnessed an improved growth of 3.2 per cent in the 1980s; but the growth performance was somewhat subdued in the 1990s, and especially in the last 10 years, with the real GDP originating from agriculture growing at a modest 2.9 per cent. This was the result of near-stagnation in crop yields, falling public investment in agriculture, adverse terms of trade and impact of low world prices following gradual integration with global markets.

Obsession with food security-led policies meant a highly restrictive trading environment, and provision of high levels of input subsidies (irrigation, fertilizers) and high output prices, especially for rice and wheat. The system of distortionary pricing (high minimum support price) and open-ended procurement of rice and wheat resulted in inadequate crop diversification, especially from surplus fine cereals to deficit oilseeds and pulses. Close to 50 per cent of our vegetable oil consumption and a fifth of pulses consumption is imported. The ballooning food subsidy burden has choked the government's financial capacity to invest in much-needed rural infrastructure.

Rise in incomes and demographic pressures are driving demand for food products up; but growth in output continues to trail consumption demand growth. As a result, despite harvesting a record 212 million tons foodgrains in 2001-02, the per capita foodgrain availability has remained below the historic peak attained in 1991. Agriculture witnessed a very modest 2.1 per cent average annual growth during the Ninth Five Year Plan, while total GDP grew at an average of 5.4per cent per annum. For the Tenth Plan, the GDP growth target is an ambitious 8 per cent. Even if the country manages to realise an average annual growth of 6 per cent, it would unleash tremendous purchasing power in the hands of people, and food is expected to attract a significant share of the consumer-spend.

Indian agriculture continues to face internal and external challenges. While monsoon dependence, fragmented land-holding, low level of input usage, antiquated agronomic practices, lack of technology application and poor rural infrastructure are some of the key internal constraints that stymie a healthy growth, massive agricultural subsidies and adoption of cutting edge production technologies (such as agricultural biotechnology) are seen driving global production of a number of crops up.

Subsidies and barriers distort international agricultural trade, rendering agri-exports from developing nations such as India uncompetitive. In recent years, the government dismantled most of the trade related restrictions. Controls on storage, movement and credit access are applicable no more. Forward trading is allowed, so also futures trading in most commodities. For primary producers and processors, the marketing environment is free as never before. Yet, supply chain inefficiencies persist. Fragmented markets, lack of primary processing, lack of standardisation of quality, fragmented nature of processing industry and continued restrictions such as small-scale industry reservation, operation of the Essential Commodities Act, compulsory marketing through designated agricultural produce markets and such others characterise agri-marketing.

The thrust of government policy in terms of free domestic trade, free access to overseas market and protection to domestic producers by way of tariffs, crop insurance scheme, etc., are all expected to boost commodity trade and deliver economic benefit to participants.

For the future, there are certain imperatives for the country's agricultural sector. Raising yields and improving quality of produce through appropriate input management, provision of rural infrastructure (warehouses, market yards, access roads), creating facilities for primary grading/sorting, using information technology to deliver price and market information to farmers, and contract farming and supply chain management are key areas that need attention and policy support. In these activities, the State governments have a key role to play, as under the Constitution, `agriculture and agri-marketing' are subjects within the jurisdiction of States.

The objective of every policy initiative should be to make Indian agriculture globally competitive — by investing it with the ability to produce globally acceptable quality at globally comparable cost. The National Agricultural Policy announced as far back as July 2000 unfortunately remains an excellent document of lofty intent. The country needs an action plan to effectively implement the policy provisions.

The contribution of agriculture and allied activities to India's economic growth in recent years has been no less significant than that of industry and services.

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