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Farming growth

Between Bt decision and subsidies, agriculture is badly hit

Business Standard  |  New Delhi 

While the jury is still out on whether Environment Minister Jairam Ramesh did the right thing by putting a moratorium on the use of Bt brinjal, or whether he simply played to the gallery by only taking into account the concerns of the environmentalists, policy-makers need to ponder over some other implications. The introduction of Bt cotton, for instance, led to production more than doubling between 2002-03 and 2007-08, from 13.6 million bales to 31.5 million bales — as a result of this rapid growth, India became the world’s second-largest cotton producer in 2006-07 and the second-largest exporter of cotton the year after. Such was the benefit seen by the farmer that, by 2008, almost 65 per cent of the area under cotton was using the Bt variety. So, while the decision on Bt brinjal can be justified on the grounds that the research is inconclusive and it’s better to be safe than sorry, the cotton experience suggests this may be replicated all over again. But even if you leave aside the issue of Bt brinjal, there is a lot the government needs to fix in the agriculture sector, and the forthcoming Budget can make a start.

For one, despite years of rising agriculture spend, it’s worth keeping in mind that less than a fourth of the total investment in the sector comes from the public sector. Indeed, as pointed out by Ashok Gulati, Asia Director of the International Food Policy Research Institute, subsidies crowd out investment in the sector 3:1 — indeed, it was way back in 1986-87 when subsidies first equalled government investment in the sector, and the difference has been widening with each passing year. This when, Gulati points out, the returns on subsidies are a fraction of the spending on agriculture R&D (think of the money being spent by companies like Monsanto on seed research) or that on irrigation. Such has been the ineffectiveness of government spending in the sector that India’s annual agriculture growth has been constant at around 3 per cent for several decades — according to economist Surjit Bhalla, the fluctuations in growth can by and large be explained by the change in the rainfall pattern! In other words, over six decades of spending on irrigation hasn’t really yielded much. It is unlikely that six decades of policies can be rolled back in an instant, but if the Budget starts making a move on cutting fertiliser subsidies — think of the possibility of delivering them directly to farmers through a Unique-ID-enabled system as a pilot to begin with — that would be a good beginning. But even as the government dithers over whether it wants to do its bit for contributing to growth, the private sector continues to forge ahead. Gulati points out that, by the end of the year, private sector firms will overtake the cooperative dairy sector; with the increase in organised retail, the share of processing in agriculture will rise significantly — just 2-3 per cent of India’s fruit and vegetables are processed as compared to 60-70 per cent in the West. As the Wal-Mart India’s president said in an OpEd piece in a financial daily a few days ago, the next green revolution will happen outside the farm — the decision on how to deal with the host of Bt products that are in the offing will determine what happens on the farm.

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First Published: Wed, February 17 2010. 00:56 IST