T N Ninan: Success story, not crisis

Agricultural growth has been about 3% - short of the target of 4%, but close to double the current population growth rate

In the next two or three weeks, once the rabi procurement season winds down, India’s grain mountain will have swelled to 70 million tonnes, perhaps more. That will beat the previous record, which was 63 million tonnes exactly 10 years ago. The Vajpayee government solved its grain mountain problem in 2002 by announcing exports — at below procurement prices, as it happens, but with a net benefit nevertheless because the cost of holding on to stocks would have been even greater. Something similar may happen now, though perhaps the loss on exports may not be there. Already, India has become the world’s largest or second-largest exporter of rice. Indeed, India has been a net exporter of grain since the mid-1990s, although this has been a period during which the growth momentum in agriculture has come mostly from the non-cereal sector, from horticulture, poultry and dairying. This perspective of Indian agriculture, as a success story, has been tirelessly argued by Ashok Gulati, who after a lifetime in research is the current chairman of the Commission on Agricultural Costs and Prices. But his has been a voice in the wilderness during a period when the catchphrase in the political lexicon has been that Indian agriculture is in crisis (falling growth rates, farmer suicides, etc). Overall agricultural growth has been about three per cent — short of the target of four per cent, but close to double the current population growth rate. Indeed, half a dozen states have sustained growth rates of more than five per cent; the granary states of Punjab, Haryana and Uttar Pradesh are not in that list.

Many questions follow from this, with regard to public policy. If there is no shortage of grain – and there manifestly is not, since stocks have been built up despite exports taking place – does the country need a “food security” Bill, and the creation of a state-subsidised, parallel distribution system, or does it need an income-support programme so that poor people can afford to buy the grain they need at the local shop? If production is in excess of domestic needs, should export options be kept open, not shut down periodically (as has happened with cotton, onions and sugar), so that Indian farmers have the world market to feed, and therefore a bigger opportunity? Rural demand for consumer goods has been one of the growth stories of recent years, the result of higher incomes in the villages — even those at the bottom of the pyramid have benefited, as can be seen from the sharp surge in agricultural wages. Could a policy thrust that expands the market for farmers put even more money in villagers’ hands, and could that make a bigger dent in poverty than all the government’s hand-outs? Given the facts on the ground, it is hard to understand why these options are not debated with greater conviction.

Consider the possibilities that Gulati spells out. India’s fruit and vegetables occupy six per cent of the cropped area, but contribute 16 per cent to agricultural output (by value). India is a leading producer of fruit and vegetables, next only to China and Brazil. Yet India contributes very little to a global export market that is dominated by other developing countries. The milk story is well known, but how many know that the private trade in milk has become bigger than the once pioneering co-operative sector? Could there be new opportunities for agri-business here? Finally, since the returns on investment in rural roads, irrigation and agricultural R&D are many multiples of the returns from subsidising inputs, why does the largest outgo in the Budget remain the fertiliser subsidy?