Agriculture's plight

By C. Rammanohar Reddy

A DECADE after reforms, the issues confronting agriculture have finally been thrust onto the Government's attention. Much of policy-making during the 1990s tended to take place as if this sector did not exist. Even where the Centre had a role in what is a State subject it did nothing. The States, on their part, were more interested in wooing foreign investment in industry and information technology. The string of reasonably good monsoons during the 1990s gave the illusion that all was well at least on the production side. But now the very different sets of problems faced by farmers of various types of crops, by farmers in different parts of the country and by farmers of different classes have finally burst into the open.

Much of the blame for the plight of Indian agriculture is placed on the World Trade Organisation (WTO). The impending removal of quantitative restrictions on import of all farm products does indeed pose a particular set of threats to Indian agriculture. But while the long-term threat is real, for now more is perhaps made out of the current state of WTO intervention in Indian agriculture than is really the case. Farmers of some crops have indeed been affected by recent WTO-induced changes in domestic rules. However, the bigger problem is one born of years of Government neglect, stagnant public investment and an excessive emphasis on the price mechanism to secure the interests of particular groups of farmers even as the larger majority has tended to languish.

The statistics are unambiguous about what has been happening to agricultural growth during the 1990s. First, the index of all crop production increased more slowly in the 1990s than in the 1980s. Second, the 1990s were marked by much greater fluctuations in farm production than in the 1980s. And third, growth in the agriculture sector during the past decade lagged behind industry. For instance, between 1994-95 and 1999-2000, value-added in agriculture exceeded that in industry in only two years (1996-97 and 1998-99) and in both this was because of a rebound from a contraction the year before.

In many ways, the problems that began to surface in the 1980s came to be set in stone during the 1990s. The region-specific Green Revolution had exhausted itself by the 1980s, while rain- fed agriculture continued to struggle as before. The response curiously was for a stagnation and even decline of public investment in agriculture during the 1990s. This was compensated, in the aggregate, by a rise in investment by the farmers themselves. But the two are very different. Private investment is concentrated in certain areas and can naturally be carried out by only certain strata of farmers. Public investment on the other hand is more evenly spread out across regions and is of a kind (surface irrigation, soil conservation, agricultural research) that tends to benefit more rather than fewer farmers.

If adequate investment does not take place in agriculture then the effect as in any other form of activity shows in the form of a slower growth in production. But when the rice farmers of Andhra Pradesh or the coconut growers of Kerala protest, as they are now doing, it is not about a decline in production but about a fall in prices occasioned either by changing market conditions or a lack of purchasing power in the domestic market. But the underlying cause of both a slower growth of production and a collapse of crop prices is Central and State Government indifference to what is happening on the ground.

In the present groundswell of protest against a decline in the prices of farm products there is a clear difference between the situation confronting cultivators - especially in the north-west - of rice and wheat and that facing growers of oilseeds and plantation crops. In the case of wheat, from the early 1990s, the Central Government hit upon price ``bonuses'' as a way to reward farmers over and above what the official procurement prices provided. A natural consequence of this use of crop prices as the main if not sole instrument to augment farm incomes was first the pressure to lower standards to enable procurement of poor quality wheat and paddy and then the lobbying to reclassify standards (of paddy) so that yet another way was found to provide surplus- growing farmers with higher procurement prices. The ``bonus'' system was begun during the Congress Government of 1991-96, the lowering of standards during the United Front Government of Mr. Deve Gowda and Mr. I. K. Gujral and this year half-a-dozen State Governments have used the standards instrument to play havoc with procurement.

Alongside the procurement of huge quantities of rice and wheat, the Centre has embarked on its foolish policy of raising issue PDS prices. The strategy has been counter-productive even from the narrow perspective of fiscal deficit reduction: Government stocks have climbed to over 30 million tonnes, off-take from the PDS has plummeted and the subsidy bill is expected to close 50 per cent higher than what was budgeted for and what would have been the case if PDS prices had not been tampered with in 2000. Experts expect the FCI's stocks to climb to 50 million tonnes by the middle of next year, which would be an unmitigated disaster. The use and abuse of the price mechanism would not have taken place if the Government had placed more importance on raising farm productivity as a means to increasing incomes. And if it had consistently used food-for-work programmes as a means to combat rural poverty and build rural assets, stocks would not have burgeoned and the cultivators of cereals would yet have a market for their produce.

The issues in oilseeds so dramatically illustrated by the problems of coconut in Kerala and soya in Madhya Pradesh are different, but again have to do with low productivity. While the oilseeds mission of the 1980s did do something to increase production, this was not enough to control the prices of edible oil. Sensitive to the concerns of (urban) consumers, the Government encouraged imports of palm oil but did nothing to raise import duties even when global prices declined. While imports this year have fallen and the Government recently increased import tariffs, the damage was already done to domestic cultivators of a variety of oilseeds. Again, higher oilseeds productivity would have raised farm incomes, supplied the local edible oil industry with raw material at reasonable prices, helped maintain oil prices too at affordable prices - and obviated the need for imports.

The import duties that India now maintains on agricultural products and the tariff ceilings that it can go up to are adequate to prevent a flooding of the domestic market - even after the last of the import controls are removed next April. Of course, if world prices do crash to levels far below domestic prices then even these high duties may not be enough to control imports. In the unlikely event of that happening, the Government will have to use other mechanisms (import safeguards?) to prevent a flooding of the local market. But there could be a problem in the long term if a growing body of influential domestic opinion has its way in making Indian agriculture more oriented towards exports. In the WTO era, the twin of making India an ``aggressive'' agricultural exporter of some agro-products is opening its markets more to imports.

However, the solution to the problems of Indian agriculture lies less in giving it a greater export orientation and more in increasing crop productivity (through better agricultural research, restoring agricultural extension services and raising public investment), improving economic management and, last but not least, restructuring the social relations in much of rural India. (Discussions of Indian agriculture that look at the ``farming community'' as a whole and refuse to acknowledge the chains imposed on it by regressive social relations conveniently or otherwise miss an important element in the larger picture.) Global markets are inherently volatile and do not mesh easily with the livelihood character of Indian agriculture and the domestic food security concerns. Turning Indian agriculture outwards is likely to create new and more problems rather than solve the existing ones.

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