Economic Outlook highlights incomplete agricultural reforms
Business Standard / New Delhi Sep 05, 2012,
The Prime Minister’s Economic Advisory Council (PMEAC) has rightly stressed in its recent Economic Outlook report the need for agricultural reforms and cutting down subsidies on power and water. Because reforms have not been introduced, agricultural growth in India has lagged that of other fast-developing countries. It is noteworthy that China began its journey towards economic transformation with institutional reforms in agriculture, by altering its land tenure system and freeing the prices and marketing of most farm commodities. In contrast, India has focused on industrial, financial and trade sector reforms, leaving agriculture virtually untouched. Even subsequent bids to reform the farm sector have been half-hearted and misguided. Unsurprisingly, the long-term trend rate in the growth of foodgrain production continues to be under three per cent, which compares poorly with that in India’s neighbouring countries. The PMEAC has also done well to indicate that the factors that deterred bold policy initiatives in the farm sector in the past have lost much of their relevance today. The two key ones among them were the perception that the majority of farmers, being small and marginal, lacked the ability to absorb shocks and that carrying out reforms in this sector was difficult since agriculture was a state subject. Various ways and means are now available for the Centre and the states to work on the reforms agenda, and arrange for its speedy implementation.
The areas that require urgent attention include the reduction and rationalisation of input subsidies, ensuring glitch-free marketing of farm produce and liberalising tenancy arrangements. Precious little has been done to rein in subsidies, which are mounting to unsustainable levels. Most states have not revised the water rates for decades; nor have they stopped supplying free or highly subsidised power to the farm sector. The time schedule for rationalising fertiliser subsidy through the nutrient-based subsidy regime has also gone awry with no sign yet of decontrolling the prices of urea, the most consumed fertiliser. Meanwhile, marketing reforms, initiated over a decade ago, still remain inconclusive. Many of the states that have amended their agricultural produce marketing committee (APMC) Acts have not done so strictly on the lines of the model law circulated by the Centre. Much-needed provisions, such as the permission for out-of-mandi transactions and exclusion of perishable items like fruit and vegetables from the ambit of the APMC regulations, are missing in the amended statutes in several states. The end goal, ensuring one nationwide market for agricultural produce, remains elusive.
In addition, the land reforms agenda has not gone beyond the imposition of land ceilings. The issue of land leasing remains totally unaddressed, though the incidence of tenancy remains too high in all parts of the country. Worse, substantial chunks of scarce land remain untilled because of landowners’ reluctance to lease out land for fear of losing its ownership. Legalising land leasing is, therefore, urgently needed. Unless such critical issues are suitably addressed, the country’s farm sector will remain an underperformer.
Business Standard / New Delhi Sep 05, 2012,
The Prime Minister’s Economic Advisory Council (PMEAC) has rightly stressed in its recent Economic Outlook report the need for agricultural reforms and cutting down subsidies on power and water. Because reforms have not been introduced, agricultural growth in India has lagged that of other fast-developing countries. It is noteworthy that China began its journey towards economic transformation with institutional reforms in agriculture, by altering its land tenure system and freeing the prices and marketing of most farm commodities. In contrast, India has focused on industrial, financial and trade sector reforms, leaving agriculture virtually untouched. Even subsequent bids to reform the farm sector have been half-hearted and misguided. Unsurprisingly, the long-term trend rate in the growth of foodgrain production continues to be under three per cent, which compares poorly with that in India’s neighbouring countries. The PMEAC has also done well to indicate that the factors that deterred bold policy initiatives in the farm sector in the past have lost much of their relevance today. The two key ones among them were the perception that the majority of farmers, being small and marginal, lacked the ability to absorb shocks and that carrying out reforms in this sector was difficult since agriculture was a state subject. Various ways and means are now available for the Centre and the states to work on the reforms agenda, and arrange for its speedy implementation.
The areas that require urgent attention include the reduction and rationalisation of input subsidies, ensuring glitch-free marketing of farm produce and liberalising tenancy arrangements. Precious little has been done to rein in subsidies, which are mounting to unsustainable levels. Most states have not revised the water rates for decades; nor have they stopped supplying free or highly subsidised power to the farm sector. The time schedule for rationalising fertiliser subsidy through the nutrient-based subsidy regime has also gone awry with no sign yet of decontrolling the prices of urea, the most consumed fertiliser. Meanwhile, marketing reforms, initiated over a decade ago, still remain inconclusive. Many of the states that have amended their agricultural produce marketing committee (APMC) Acts have not done so strictly on the lines of the model law circulated by the Centre. Much-needed provisions, such as the permission for out-of-mandi transactions and exclusion of perishable items like fruit and vegetables from the ambit of the APMC regulations, are missing in the amended statutes in several states. The end goal, ensuring one nationwide market for agricultural produce, remains elusive.
In addition, the land reforms agenda has not gone beyond the imposition of land ceilings. The issue of land leasing remains totally unaddressed, though the incidence of tenancy remains too high in all parts of the country. Worse, substantial chunks of scarce land remain untilled because of landowners’ reluctance to lease out land for fear of losing its ownership. Legalising land leasing is, therefore, urgently needed. Unless such critical issues are suitably addressed, the country’s farm sector will remain an underperformer.
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