Harish Damodaran

Anatomy of India's farm ‘turnaround'

HARISH DAMODARAN | Updated on March 09, 2018 Published on August 30, 2011

Innovative mechanisation solutions can help contain high wage cost as well as labour shortage.

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The recent period, contrary to popular perception, has not been all that bad for the farm sector. Sustaining this apparent recovery, however, may not be easy.

Agriculture is in decline. Crop yields are stagnating. Farming has ceased to be remunerative and no longer attracts people, more so the youth. Fertile fields are being steadily devoured by urbanisation.

There is an element of truth to these statements that add up to a ‘crisis' narrative engulfing discussions on Indian agriculture. But the reality, as often, is more complex. The recent period, if anything, has seen the farm sector stage a rebound of sorts — never mind how sustainable a ‘revival' this might be.

The table gives output trends for major crops over three phases: 1993-94 to 1998-99, 1999-2000 to 2004-05 and 2005-06 to 2010-11. For each of these six years, the average annual production has been taken, so as to even out the effect of extreme year-to-year fluctuations induced by the vagaries of weather.

Decline reversed

The data are quite revealing. During the last six years, the country has harvested an average 225 million tonnes (mt) of foodgrains, which is about 24 mt more than the corresponding figure for the preceding six years. The latter period, in contrast, registered a rise of just nine mt over the average level from 1993-94 to 1998-99.

The same trend, of a higher production increase in the recent period, is noticeable in oilseeds, cotton, sugarcane and milk or even staple vegetables such as onion and potato. In some cases — cotton, maize and soybean — the acceleration is significant, while in pulses and oilseeds, there has actually been a reversal of the output decline witnessed during the previous period. In 2010-11, pulses production touched a record 18.09 mt, prompting official claims of self-sufficiency being attainable in the next three-four years, thereby obviating the need for imports.

The evidence of a recovery is further borne out from the ‘input' side. Consumption of fertilisers has gone up much more over the last six years than they did in the six years ended 2004-05. Likewise, tractor sales averaged two lakh units through the nineties and the early part of the following decade. But between 2005-06 and 2010-11, annual sales jumped from 2.6 lakh to 4.8 lakh units, while averaging 3.45 lakh for the period.

Turnaround explained

How does one account for this overall improved farm sector performance? In some crops, increased yields, courtesy new production technologies, have certainly played a part: Bt transgenics in cotton and single-cross hybrids in maize being the most obvious examples. In most others — rice, wheat, oilseeds, pulses or sugarcane — the productivity gains have been incremental at best, involving no major technological interventions.

The real impetus to the apparent turnaround has come from higher prices and terms of trade turning more favourable for farmers, inducing them to ramp up output. Since 2004-05, the minimum support prices of wheat and paddy have been hiked by Rs 480 and Rs 440 a quintal respectively, whereas these went up by just Rs 90 and Rs 120 a quintal over the previous six years from 1999-2000.

The improved terms of trade for agriculture can also be seen from the last two rows of the table, comparing the average annual inflation in food articles to that in all commodities.

In the last six years, food price increases have far outpaced the general rate of inflation. It was pretty much the opposite in the earlier period, where falling farm prices in relative terms and the absence of yield breakthroughs made it doubly unprofitable to expand cultivation. The question that arises is: Can the present ‘revival' — more in the nature of a positive supply response to relative price corrections — be sustained? One can cite at least two impediments here, with potential implications even in the short run.

Constraints and Opportunities

The first is labour, the availability of which was never an intractable problem, despite there being pockets or occasional periods of scarcity. The scenario has completely changed now — particularly in the last two-three years — with high food prices pushing up agricultural wages through a feedback loop and the resultant wage-price spiral turning into a zero-sum game for farmers. That, in turn, has been made possible by economic growth, in general, besides NREGA and other welfare schemes. These have altered old labour equations, enabling even farm workers to pass on their costs.

The second source of renewed erosion of farmers' margins could be fertilisers. For a long time, from 2002-03 to 2009-10, fertiliser prices were kept unchanged. From April 2010, prices of non-urea fertilisers were decontrolled, following which they have become costlier by 30-40 per cent. With the Government planning to decontrol urea prices as well, there would be further cost pressures on this front — from which farmers were largely insulated till recently.

The above challenges, however, also present opportunities for corporates, agricultural departments and research institutes to work closely with farmers: To come out with innovative mechanisation solutions, introduce customised fertiliser products delivering nitrogen or phosphorous more efficiently to plants, and promote water- and energy-saving agronomic practices.

If the latest agricultural ‘recovery' phase was a result of price corrections, the next one should be based on raising crop yields and reducing production costs.

Here, there is need for policymakers to be more proactive, especially when it concerns issues of technology. If you and I can have the latest smartphone or iPad, there is no reason to deny farmers the choice to plant herbicide-resistant maize or cotton that helps save on manual weeding costs. Let the farmer, and not those who do not farm and yet claim to speak for him, decide.

Published on August 30, 2011
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