Farmers should be allowed to benefit from higher international prices and export bans should be used under exceptional circumstances, Chief Economic Advisor (CEA) V. Anantha Nageswaran said in the Economic Survey tabled in both Houses of Parliament on Monday.
Mr. Nageswaran also advised the Centre to allow substitution effects to play out before responding to domestic supply concerns. “For example, if sugar prices rise, consumers can consume less of it or switch to jaggery. It may even be a good thing for their health,” he said, apparently in the background of banning the export of rice, wheat, onions and sugar to soften the domestic prices. He said it was far easier for consumers to substitute or pare back consumption than for farmers to endure big losses because of ad hoc export bans or huge imports.
“Farmers should be allowed to benefit from higher international prices. Bans on food exports also need to be telegraphed in advance lest hunger and famine elsewhere in the world worsen,” he said.
He also prescribed that the future markets do not hurt consumers or farmers at all times and the bar for banning future trade of certain products must be set so high that their recourse must be almost non-existent. “The intelligent regulatory design of such markets can obviate the need for bureaucratic interference in the futures market for agricultural commodities,” he said.
The survey maintained that the performance of the agriculture sector remains critical for the economy’s growth and has been growing at an average growth rate of 4.18% over the last five years.
“The Indian agriculture sector provides livelihood support to about 42.3% of the population and has a share of 18.2% in the country’s GDP at current prices,” the survey discovered. However, the CEA said that as per provisional estimates for 2023-24, the growth rate of the agriculture sector stood at 1.4%. In 2022-23, it was 4.7%.
The CEA said delayed food production due to poor monsoons caused by El Nino was the reason for the drop.
In 2022-23, the survey found, foodgrain production hit an all-time high of 329.7 million tonnes, and oilseeds production reached 41.4 million tonnes. “In 2023-24, food grain production is slightly lower at 328.8 million tonnes, primarily because of poor and delayed monsoons,” the CEA said.
“The share of the crops sector in agriculture Gross Value Added at current prices in 2022-23 was 55.28% as compared with 61.75% in 2014-15,” he added.
The CEA noted growing significance of allied sectors such as animal husbandry, dairying, and fisheries in enhancing farmers’ income. “Smallholder farmers’ incomes cannot be increased by producing rice, wheat, or even millets, pulses and oilseeds. They need to move to high-value agriculture – fruits and vegetables, fisheries, poultry, dairy and buffalo meat. Once the incomes of smallholders increase, they will demand manufactured goods, spurring a manufacturing revolution,” he said, adding that that was what happened in China between 1978 and 1984 when the real incomes of farmers doubled in just six years. “India is well-placed to emulate this,” he added.
