Agriculture notes - Mahendra Dev PDF

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Agricultural DevelopmentBy Mahendra DevAlthough contribution to GDP is less than 1/4th, but agriculture provides employment to nearly 0 % of the Indian workforce.Performance of Agriculture: One of the paradoxes of the Indian Economy is that the decline in the share of agricultural workers on total ...

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Agricultural Development By Mahendra Dev

Although contribution to GDP is less than 1/4th, but agriculture provides employment to nearly 0 % of the Indian workforce.

Performance of Agriculture:    

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One of the paradoxes of the Indian Economy is that the decline in the share of agricultural workers on total workers has been slower than the decline in the share of agriculture in GDP. The growth I agriculture is much higher in the post-Independence era (2.7% per annum) as compared to the pre-Independence era (4% p.a.) Highest growth rate of GDP from agriculture and allied activities of more than 3 % per annum was recorded in 1980s. In the pot-reform period this however declined to 2.76% p.a. Agriculture moved to an intensive form post-green revolution with increases in percentage of net irrigate area, rise in fertilizer consumption, increased electricity consumption and increased percentage of area under high-yielding varieties, all leading to significant increase in agriculture output. Sources of growth have changed from area expansion in the pre-green revolution period to yield growth in the later periods. The aggregate output growth at a national level hides a great deal of variation in performance of different crops and regions (a) Wheat has shown accelerated growth unlike the coarse grains (b) In the 90s, there was a deceleration in the growth rate for both food grains and non-food grains. (c) States like Punjab, Haryana, parts of Andhra Pradesh, Western UP, and Tamil Nadu benefitted more during the initial phase of Green Revolution. (d) In the 1980s and early 1990s, one observes a more equitable spread of agricultural growth with significant growth recorded in Assam, Bihar, Orissa, MP and West Bengal, states that had performed poorly during the early phases of green revolution. During the post reform period there has been a shift in the allocation of resources from cereals to dairy farming, poultry, edible oil, meat, fish, vegetables, fruits etc. as a response to the growing domestic and export demand for non-cereal items of food. The post reform period has witnessed a decline in institutional credit for small and marginal farmers with increasing risk due to globalization and WTO rules.

Policies since Independence Under the constitution of India, agriculture is a state subject but the central government plays a crucial role in shaping agricultural policies

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The four sets of policy packages in agricultural development, a. Institutional reforms b. Public Investments Policies c. Incentive policies d. Reforms and globalizations policies. During the first 3 five year plans institutional reforms and publics investments packages dominated with these laws relating to mainly 3 aspects, abolitions of Zamindari system, land ceiling and redistribution of land and tenancy reforms. There was significant public investment in agriculture during the 1950-65 particularly in constructing irrigation reservoirs, distribution system and expansion of institutional credits Incentive policies focus both on input and output, subsidies for inputs like irrigation, credit, fertilizers and power increased significantly in the 1970s and 1980s. On the output side there has been a comprehensive long term procurement distribution policy in the post green revolution periods. Trade policies in India, however, in the past five decades have been highly interventionist and discriminating against agriculture.

Policy changes needed for higher growth The growth of agriculture during 1997-9 to 2004-5 was only around 1.6% per annum. Yield growth declined in the 1990s. Thus there is a need for policy changes in the areas stated below:  

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The performance of the PDS has not been satisfactory and there is a need for reforms in the procurements price, buffers stocks and distributions policies There is a need for public investments in agriculture particularly in irrigation, research and extension. Currently, India spends only 0.5% of GDP on agricultural research as opposed to 1 % of GDP in other developing countries. Trade-off between input subsidies and public investment in agriculture can be observed. The credit system must reach out to the small and marginal farmers. Management of water is of importance and effective watershed development can be sustained in the long run only through social mobilization and capacity building. Need for taking timely actions within tariff bindings to restrict import that affects producer livelihoods. For facing international competitions there is a need to reach standards that are increasingly becoming an important factor in global trade. For improving employment opportunities and also with shifting consumption patterns there is need for crop diversification and improvements in allied activities like livestock and fisheries.

Agricultural Price Policy, Farm Profitability and Food Security By S. Mahendra Dev, N. Chandrasekhara Rao

The primary objective of the Indian government’s price policy is to protect both producers and consumers. The country’s food security system is based on three main instruments: procurement prices/ Minimum Support Prices (MSPs), Buffer Stocks and Public Distribution Systems. In the post reform period, favourable Terms of Trade in agriculture has had some impact on agriculture. Periods of improving ToT like early 1990s and 2004 onwards saw high agricultural growth. Several factors like shortage of domestic supplies due to poor monsoon, rise in International prices, shortage of global supplies due to transfer of food grains to biofuels, increase in demand due to higher growth and populist government schemes, inefficiencies in marketing system, speculation has been identified as reasons behind increase in agricultural prices over the last few years. Prices and supply side non price factors can enhance yields and provide higher incomes for farmers apart from providing food security to the poor. Many people have criticized agricultural policy for recommending higher support prices than warranted by the Cost of Production (COP) and supposed distortion of the market leading to food deprivation. Increased Role of Price Policy Agricultural Prices Commission tries to maintain a balance between the interests of consumers and producers. The Price Policy of the government has aimed at encouraging higher production and lower prices. Post reforms there was shift to a policy of “high input and high output” as opposed to an earlier policy of “ low input and low output” prices. Technological development and adoption of new technology received a setback due to drop in public investment. The policy shift was a factor behind the fall in yield that led to a rise in cost of production and a subsequent rise in the support prices. Inability to substantially increase the MSP could lead to rural distress. Another factor driving higher support prices is the operation of market forces in the liberal and open trade regime. Due to liberalized imports and exports, changes in the international market affect the domestic markets. A supply shock in the in international markets could lead to rise in domestic prices, the government if it wishes to fulfill its objective of food security would need to increase its support prices to be able to procure the required grains. Increase in support prices leads to increase in aggregate prices. 

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A higher emphasis need to be given to non-price interventions through public investments to supplement price policy measures, this can help in increasing the yields, reduce reliance on prices for farm profitability and hasten poverty reduction, which increases when prices are low. Decentralizing procurement operations by building necessary infrastructure in states like UP, Bihar, Orissa and MP could help. Price support operations should be extended to other crops like pulses and oilseeds. There is an urgent need for increasing the storage capacity for the buffer stock....