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Updated: March 16, 2010 14:01 IST

Needed: farm sector reforms

S. MAHENDRA DEV
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There have been concerns about the growth, equity, and sustainability of Indian agriculture in the last few decades, particularly in the post-reform period. The annual growth of agriculture in the long term has been around 2.5 per cent. The business-as-usual approach will not help. Significant reforms in the agricultural sector are needed to accelerate growth and achieve equity. In this context, this book, a collection of essays by A. Vaidyanathan, is timely. A leading agricultural economist of the country, he has written extensively on various aspects of Indian farming.

As Vaidyanathan says, there have been serious gaps in an analytical understanding of agricultural growth and its determinants. In an attempt to correct this lacuna, this book examines the trends of agricultural growth in India and provides an in-depth analysis of the role of technology, incentives, and institutions in facilitating this growth. The discussion on technology also covers irrigation and fertilizers, while the one on incentives includes price policy and input subsidies. The chapter on institutions deals with agrarian structure, land and water management, research, infrastructure, marketing, and credit.

Apart from highlighting the deficiencies in all these areas, the author discusses what lies in prospect for Indian agriculture.

Hardly affected

Vaidyanathan, who is critical of government policies, says: “There was hardly any change in the strategy for agriculture. It was hardly affected by the reforms. Policies continued as before to focus on large investments in irrigation and other infrastructure, and special programmes to increase rural employment.”

In the concluding chapter, easily the best of the lot, Vaidyanathan discusses the prospects of reversing the recent decline in agricultural growth and sounds a note of caution against assessing the growth prospects in the light of the slowing down in domestic demand and the risks of trade liberalisation. He argues that the “current perceptions about inadequacy of investments as the main reason for low growth and its apparent slowdown are quite misplaced.” But many agricultural economists in India may not agree with this line of argument. For example, the Steering Group for the 11th Plan contends that public investment is one of the major sources of agricultural growth.

As the author says, non-price factors are more important for boosting agricultural growth. However, going by the interaction the Commission for Agricultural Costs and Prices had with representatives of the State governments and agriculturists — as part of mid-term evaluation of 11th Plan — it would appear that farmers have responded to higher minimum support prices with higher yields in rice and wheat. In fact, the high growth rate during the period 2003-04 to 2007-08 was associated with improvements in terms of trade for agriculture. That could be a coincidence, but it warrants a deeper study and analysis.

Role of public sector

Vaidyanathan rightly lays stress on the important role public sector plays in agricultural research. It is known that private sector confines its research to developing varieties that will fetch profits. Therefore, it is necessary to revamp public sector research. He is critical of the 11th Plan targets for expansion of irrigation. On this, he says that “in the case of irrigation, the focus has been, and remains, almost exclusively on investment for expansion of area with little attention given to ensuring efficient, prudent, and sustainable water.”

One cannot but agree with Vaidyanathan's argument for improvement in the over-all efficiency of investments. He attributes the poor quality of public investments and services to several factors. They are: too much centralisation, although agriculture is a State subject, leaving little scope for adapting to local conditions; laxity in the preparation, scrutiny, and approval of projects, in monitoring the use of funds, and in adhering to the estimated cost and time-schedule by States; indiscriminate subsidies to inputs, much to the detriment of their efficient production, distribution and sustainable use; pervasive interference in the constitution and functioning of public sector organisations by those in power leading to manipulation and outright corruption; and the absence of effective and transparent performance audit mechanism to ensure public accountability.

According to the author, unless there is a significant shift in strategies and priorities, and major reforms are undertaken to correct the above-mentioned institutional deficiencies, agriculture cannot be propelled to a higher growth trajectory that also ensures widely diffused growth of incomes and employment. The courage of his conviction comes across when he puts forth his case for these reformist measures. At one place, he says that “social scientists recognise the adverse effects of subsidies but do not raise a strong voice for a radical change on the ground that a change is politically unfeasible.”

This comprehensive, lucid, and masterly analysis is a must read for all those interested in Indian agriculture and inclusive growth. In the preface, there is a suggestion by Vaidyanathan that he was putting together his work on agriculture in this volume “before calling it a day.” I hope he would not call it a day and thereby deprive the benefit of his writings to all the stakeholders in agriculture.

AGRICULTURAL GROWTH IN INDIA - Role of Technology, Incentives and Institutions: A. Vaidyanathan; Oxford University Press, YMCA Library Building, Jai Singh Road, New Delhi-110001. Rs. 675.

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