The Hindu Business Line : Farm ills: Globalisation not to blame

THE Union Science and Technology Minister, Mr Kapil Sibal, is rather upset that Indian farmers are unable to obtain remunerative prices for their exports. He is convinced that globalisation, as practised under the WTO, is the reason for depressed global prices that prevent growers from getting a higher income.

At the recently concluded Indian Science Congress, the Minister came down heavily on extant development models that failed to deliver benefits to a large number but favoured only a few.

He believes that big economic powers are trying to eliminate national barriers to impose themselves (on developing countries) and expand freely.

From media reports of the event and quotes from the Minister, it is clear that the speech must have evoked frenzied response from the audience because in our country theatrics often carry the day. One cannot escape the inference that the speech was long on emotion and short on knowledge of market dynamics.

One is not sure if the Minister is a staunch socialist who does not believe in an inter-dependent world, but believes that a country can isolate itself and remain secluded from the influences of other nations.

Mr Sibal wants Indian farmers to export agri-produce to the world outside and obtain remunerative prices. The very activity of export pre-supposes that India would and must have trade links with other countries. For survival and growth, every country has to integrate with the world outside in some measure or other.

The level of integration of the domestic market and economy with the world market and economy would depend on what each country wants from its engagement with the outside world. Also, the extent of integration will be decided by each country's policies and responses to global negotiations.

The WTO is a rule-based global forum that broadly sets out rules for international trade and commerce. It may not be the best or the ideal one for over 140 nations that are at different levels of economic development. It is here because a better alternative has not yet evolved.

Should India walk out of the WTO because our membership has not ensured higher prices for Indian farm produce? There is absolutely no guarantee that outside of the WTO system, Indian farmers will get any better price than they do now. Without the WTO, India may well find itself in a worse situation, having to bilaterally negotiate with countries. India would indeed come under intense pressure, succumb to strong-arm tactics of other nations, and generally be worse off than it is now.

It is necessary to remove the internal contradictions in what the Minister said and put matters in proper perspective. The principal point to understand is that India is not an export-oriented or export-dependent economy; and in agricultural produce, India is a marginal player in the world market, with no genuine export surplus in any of the major commodities. In reality, India is a consuming economy or, more appropriately, a producing and consuming economy.

Therefore, in a broad sense, no one needs to shed tears for the Indian farmers' inability to obtain attractive export prices, because one, we are not export-dependent, and two, the market is here and within the country.

The attempt of policy-makers should be to ensure that the domestic market is first well serviced before talking about exports. Also, we need to first create genuine export surpluses.

Given the robust expansion in consumption demand driven by population and income growth, on the one hand, and tardy growth in agricultural output (compounded by high production cost and non-standard quality), on the other, India is most unlikely to be a notable exporter of any major agricultural commodity anytime soon.

Indeed, we should be rather pleased if we are able to produce all of what we need, rather than look for export opportunities at remunerative prices. The country is yet to fully exploit its own burgeoning internal market. It is strange that when the whole world, especially developed economies, are looking at the massive size of the growing Indian market, we have a Minister who is deeply concerned about farmers not getting attractive prices in overseas markets.

This is not to suggest that all is hunky-dory at the WTO. Yes, there are issues; there are distortions in the market; there are perversities. The causes for distortions have to be identified and fought against. But to blame globalisation for the ills of Indian agriculture would be barking up the wrong tree.

Mr Sibal referred to transformation of the country from near self-sufficiency in oilseeds production to dependence on imports of cheaper vegetable oils. While it is true that the country's self-reliance in oilseeds has stood eroded in last 10 years by almost 50 per cent, one must also examine the causes for such a development.

Edible oil imports were liberalised sometime in 1994 following domestic shortages and rising prices. High levels of Customs duties were progressively slashed in order to encourage imports, bridge indigenous supply gap, and contain inflation. Edible oils have a high weightage in consumer price index.

Rising incomes (strong GDP growth) and population resulted in strong rise in consumption demand. Demand expansion was rapid because the then existing per capita consumption level was rather low (around seven kg per person per year). Strong consumption increases, especially of food products, are quite natural in any developing economy on the growth path.

On the other hand, successive Governments since the beginning of the process of economic liberalisation in 1991 have merely paid lip service to agricultural growth. Scant attention was paid to the real economy — agriculture.

Even the annual budgetary outlay for the Oilseeds Production Programme was slashed.

The Technology Mission on Oilseeds, under the Ministry of Agriculture, lost focus and steam. More often than not, annual production targets were missed despite normal rainfall.

There was little accountability and even less aggression in pushing production growth. Instead of guiding and driving oilseeds production growth, the Mission produced explanations and reports on why targets were not achieved.

Meanwhile, demand continued to grow relentlessly. Yet, policymakers were happy tinkering with the Customs duty rates from time to time without an evidence of concern for unsteady oilseeds production year after year. The current situation is the result of several omissions and commissions of successive Governments since the early 1990s. It has nothing to do with globalisation but has everything to do with official indifference and apathy.

Worse, as far back as 1988, the Chadha Committee had identified about eight lakh hectares as land suitable for oil palm cultivation. No concrete action was taken on that report. Even today, the oil palm industry in the country is languishing because of faulty policies.

In 1994, the Government committed to binding soyabean oil import duty at 45 per cent maximum, despite the fact that India is producer of soyabean.

That low rate is continuing even today, while on rapeseed oil the WTO-bound rate is 75 per cent and on palm group of oils 300 per cent. There are ways to beat this WTO-bound rate of 45 per cent on imported soyabean oil; but the Government is not bothered. The point simply is that we have ourselves compounded our internal problems and have to blame ourselves and our faulty policies. Our current plight has nothing to do with globalisation but has everything to do with our inefficiency and lethargy.

Mr Sibal would, therefore, do well to educate himself on how Indian agriculture, in general, and our oilseeds economy, in particular, have reached the current station. It is not too late to change course even now. It is possible to rework our priorities and strengthen agriculture, especially the oilseeds sector.

Globalisation cannot prevent our progress and development, if there is a will.