The next farm challenge

| Updated on February 19, 2014 Published on February 19, 2014

Agriculture must learn to grow without the guarantee of periodic price increases and continued subsidies

One sector in which the United Progressive Alliance (UPA) can claim some success during its 10 years in power is agriculture. Between 2003-04 and 2013-14, India’s foodgrain output rose from 213.19 million tonnes (mt) to 263.20 mt. Production of pulses and oilseeds has also gone up from under 15 and 25 mt to nearly 20 and 33 mt respectively, after registering near stagnation in the previous decade. Even more impressive is the performance in crops such as maize, soyabean, cotton, potato and onion, where output increases have ranged from 55 to 220 per cent. The fact that the last 10 years have also seen agricultural exports soar from $7.5 billion to $45 billion, annual tractor sales roughly treble to 5.5 lakh units, and rural poverty rates decline nearly a third faster than in urban areas is further indication of progress on the farm front.

The question that one may still ask is: to what extent can this success be attributed to policy interventions by the UPA government? With the exception of wheat and rice, for which government procurement happens at minimum support prices (MSP), increased realisations for most crops reflect an improvement in the terms for trade for the farmer. The reason for this is not policy, but largely the demand pull resulting from rising incomes in an economy experiencing overall growth acceleration. Also, while there have been technological breakthroughs, especially Bt cotton and single-cross hybrids in maize, their impact cannot be compared with the high-yielding semi-dwarf wheat/paddy varieties and the diffusion of tube-well irrigation that powered the Green Revolution from the late sixties to the eighties. At best, one can say that the last 10 years have reversed the trend of agricultural stagnation of the nineties and the early 2000s. The credit for this goes to market forces rather than prescient policy-making.

But the next few years aren’t going to be easy. A slowing domestic economy, coupled with the end of a global bull cycle in agri-commodities, is bound to put pressure on crop realisations. The next government is unlikely to have the fiscal resources for sustaining either large MSP hikes or fertiliser subsidies. A world where price increases aren’t automatic and subsidies are bound to be phased out is something farmers will need to accept sooner than later. This transition can happen relatively painlessly if the government redirects resources away from subsidies and market-distorting price supports to agricultural research, rural roads, irrigation and other investments, which would help raise crop yields and bring down costs for the farmer. The one mistake of the UPA that the next government shouldn’t repeat is to ignore the potential of agri-biotechnology. Not harnessing it is a luxury the country can no longer afford.

Published on February 19, 2014
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