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Acceleration of Agricultural Growth in India: Suggestive Policy Framework

In his article 'Deceleration in Agricul- tural Growth: Technology Fatigue or Policy Fatigue?' (June 23), Narayanamoorthy has argued that the crisis in Indian agriculture is mainly due to the lack of appropriate policy rather than technology.

Discussion

Acceleration of AgriculturalGrowth in India: SuggestivePolicy Framework

BHAGIRATH BEHERA, PULAK MISHRA

I
n his article ‘Deceleration in Agricul- tural Growth: Technology Fatigue or Policy Fatigue?’ (June 23), Narayanamoorthy has argued that the crisis in Indian agriculture is mainly due to the lack of appropriate policy rather than technology. The author starts building his argument from a statement made by the prime minister Manmohan Singh in his inaugural address at the 53rd meeting of the National Development Council that there is a technology fatigue in Indian agriculture, which needs to be addressed in order to accelerate the rate of growth of the sector.1 Undoubtedly, the author has made an attempt to counter the view of the prime minister by putting his arguments in favour of policy fatigue rather than technology fatigue. In this article, while commending the efforts of the author for his arguments, we attempt to point out that the author’s views are not comprehensive enough, as many important policy and other variables did not find any place in his discussion. Our attempt here is to make the arguments more comprehensive and systematic by giving a holistic view of the problem with some fresh ideas on how to improve the situation.

In existing studies, the present crisis is attributed to technological, ecological, socio-economic and other policy-related factors [Reddy and Galab 2006], lack of an integrated farming approach [Desai 2002], weak agriculture research and extension network, restrictions on agricultural trade and processing [Rao 2003], inadequate public expenditure on rural infrastructure [Sharma and Gulati 2005]. These studies generally speak of the factors that are related to the supply side of the sector in isolation of the demand side. Further, the factors affecting the growth of agriculture are intricately related to each other and the present crisis in the Indian agricultural sector seems to be the result of cumulative effects of a number of factors. It would, therefore, be erroneous to attribute the deceleration of agricultural growth to only one set of factors and that too in a unidirectional framework. So, before making policy prescriptions, it is necessary to understand the multifaceted relationships among the factors that have already been discussed in the existing literature and also the ones that remain untouched in these studies.

Anatomy of Agricultural Crisis

To have a clear understanding of the present crises in Indian agriculture, the related factors can be put into four broad sets, viz, economic, ecological, technological and institutional (Figure 1). While the economic factors include prices of agricultural inputs and outputs, proximity to input and output markets, infrastructure, agriculture-industry linkages, contract farming, access to credit, investment (both public and private) etc, the ecological factors consist of water resources (both ground and surface), quality of soil, biodiversity, etc. High yield variety seeds, modern tools and techniques, seeds, fertilisers, pesticides, etc, belong to the technology set. Finally, the institutional factors refer to all institutions (both formal and informal) related to farming and other allied activities.

Given this classification, if we look at how these factors work in the Indian context, it appears that neither of these factors is exogenous. Instead, they are endogenously determined not only by one another but also by the policies of the government. The institutions determine even the policies endogenously. As we know, prices of the inputs are determined by the trade and subsidy related policies and the role of the institutions in the input markets. In India, the absence of institutional control in the input market has not only increased prices of the inputs but also created uncertainty on their availability in the right quantity, in the right quality, at the right price and at the right time to small and marginal farmers. This coupled with reduction in subsidies on fertilisers, pesticides, seeds, etc and growing fragmentation of farmland has raised the cost of cultivation. On the other hand, lack of easy proximity to the output market, weak agriculture-industry linkages, asymmetric information, and absence of agri-business regulation have restricted farmers from getting the right price for their commodities. All these have resulted in a drastic decline in profitability from agriculture in recent years. This decline in profitability has not only reduced the ability of farmers to invest for further growth, it has also created disincentives for many of them to continue cultivation, putting the agriculture sector in deep crisis.

Similarly, technology has played an important role in the development of the Indian agriculture sector since the late 1960s. The introduction of green revolution helped enormously in increasing the productivity of agricultural crops, especially wheat and rice, by enhancing land productivity in irrigated areas through an increased use of fertilisers and pesticides and other inputs. But this increase in crop productivity did not come without adverse environmental effects. In the absence of appropriate policy and efforts on the part of local level institutions and individual initiatives, economic pressure on farmers to use more and more chemical fertilisers and pesticides for maintaining the growth momentum has led to ecological degradation and economic loss for farmers. This has aggravated the crises in the Indian agricultural sector. Many studies have found that the intensive use of fertilisers and pesticides is strongly associated with adverse effects on land productivity, ground water depletion, pollution and health hazards, which threaten the very question of sustainability of agricultural growth [e g, Reddy 1995; Reddy and Galab 2006].

Economic and Political Weekly October 20, 2007

Figure 1: Factors Responsible for Agricultural Deceleration in India

Policy Economic Institution Technology Ecology Deceleration in Agricultural Growth Note: ....Line for policy corrections.

Further, modern technologies require an increased use of water, which has led to overexploitation of groundwater resulting in desertification and drying up of wells in many states such as Punjab, Haryana, Andhra Pradesh, Maharashtra and some parts of Uttar Pradesh. As a result a drastic decline in agricultural growth has been realised in the recent years.

In fact, the prime minister’s statement on technology fatigue is more justified in the context of dry land and rain-fed agriculture on which the majority of Indian farmers live. Despite several efforts over the years, development of new seeds and technology for arid and semi-arid regions is not so encouraging. It is worth mentioning here that the International Crops Research Institute for Semi-Arid Tropics (ICRISAT) was established in India to achieve this breakthrough, which sadly has not happened so far, as farmers in arid and semiarid regions still continued cultivation using traditional seed varieties and technology.2

As regards ecological factors, it can be said that land and water resources are the two main natural resources that are essential for the acceleration of agricultural growth. Judicious use, large-scale conservation and proper management of these resources are key to sustainable development of, agriculture. The present crisis in the Indian agricultural sector, to a large extent, can be attributed to the fact that these two crucial resources have been poorly managed, at least since the adoption of the green revolution. As a result, soil and water depletion have taken a toll, both directly and indirectly, on agricultural growth. A holistic approach could have been taken to manage resources by putting equal emphasis on soil and water conservation while adopting intensive cultivation of green revolution. However, this was not the case. For example, traditional water harvesting systems such as tanks and ponds were neglected by the government and farming communities at large, dislodging the complex ecological balance that existed.

The massive watershed development programme launched across India by the ministry of rural development was primarily aimed at conserving water and soil resources in order to enhance land productivity in dry and rain-fed regions. However, despite spending large sums of money on the programme, the expected outcomes are disappointing. Again, the failure of watershed development programmes can be attributed to social, policy and institutional factors such as lack of people’s participation, less accountability and transparency. It is largely observed that the watershed development programme failed because of poor implementation at the ground level [Reddy 2006]. This can be seen as a policy failure leading to poor ecological outcomes.

An integrated approach that links natural resources and people through vibrant institutions is the need of the hour for sustainable management of resources and hence acceleration of agricultural growth. Often, it is observed that focus has been on a particular component while other vital components are neglected. For example, during the initial phase of implementation of watershed development programme, importance was given to watershed technology (constructing water and soil conservation structures) without paying much attention to watershed committees (institution), which is vital for sustaining the programme in the long run.

Suggestive Policy Framework

The policy framework of the agricultural sector, therefore, needs a fresh look. It is necessary to have a more comprehensive and coherent approach that addresses both the demand and supply side issues, captures the multifaceted relationships among the different sets of factors, and encompasses agricultural policies with other policies for economic growth and development. Further, the policy framework should also address crop-specific pro blems subject to soil structure, climatic conditions, seeds and other necessary inputs and technologies, opportunities in the local market, export potential, etc. This should be done considering the very basic requirements of acceleration of agricultural growth, viz, making agriculture profitable for farmers, maintaining the balance of the natural resource (water and soil) base, sourcing and implementing appropriate technology and know-how.

Making agriculture profitable requires not only sourcing inputs and selling commodities at the right price but also strengthening agriculture-industry linkages and creating non-farm employment opportunities. Further, in the context of increasing input prices (primarily due to reduction in subsidies) and changing production patterns, farmers also need appropriate technology that they can afford as well as successfully implement in the field.

Role of Institutions

There should be a comprehensive policy framework, which can address

Economic and Political Weekly October 20, 2007

Figure 2: Suggestive Framework for Acceleration of Agricultural Growth

Policy Institution Economic Ecological Technological Acceleration of Agricultural Growth

economic, ecological and technological issues. But what is more perhaps important is that policies need to be supported by necessary institutions at the micro, meso and macro levels for their successful implementation. The role of institutions in economic develop ment and growth has been widely recognised in development literature [Rodrik 2004]. Effective institutions are essential for encouraging cooperation, reducing transaction costs, sustainable manage ment of natural resources, solving social problems, and controlling for uncertainty that are the preconditions for facilitating economic growth and development.

In a close traditional village community, transaction costs between villagers are expected to be low as people know about each other’s activities and reliability. Moreover, social relations and structures encourage people to keep agreements and also provide mechanisms for enforcing pacts and resolving disputes. These social and economic relationships can be directed towards group farming, which seems to be quite essential for small and marginal farmers in the context of increasing fragmentation of farmland and hence declining size of landholdings lower capital base, weak bargaining power in the input and output markets, and lesser access to institutional credit. Group farming can help farmers not only in using modern technologies and hence enhancing productivity, but also in raising the scale of operations and therefore, reducing the average costs. Further, such an approach will also enable farmers to have greater access to institutional credit through group borrowing,3 restrict unfair practices by the middlemen with greater bargaining power in the input and output markets, and distribute the risks of crop failure.

Forming groups and their efficient functio ning require favourable institutional

Economic and Political Weekly October 20, 2007

environments at the macro level and effective institutional arrangements at the micro level. These are expected to encourage farmers to actively participate in the decision-making process, reducing transaction costs and risks of increasingly complex and distant forms of trade and property rights. The model of selfhelp groups (SHGs) can be one such institutional arrangement at the local level.

Further, greater emphasis should be on strengthening the micro level institutions with decentralisation of power and active participation of the people in designing policies and programmes at the local level according to the needs and priorities of the local people and also to optimally utilise local resources and expertise. The panchayats should be given greater autonomy in this regard. This will not only raise the people’s confidence and hence their participation in the policies and programmes but will also reduce the chances of failure of the same. Such a decentralised framework will also make the panchayati raj institutions accoun table and hence, efficient. The approach should, however, be democratic and in different across political colours, economic status, caste and religion. This requires greater involvement of the SHGs, non-government organisations and other community-based organi sations.

Institutions can also play an active role in widening the information network and making the information dissemination mechanism effective in rural India. This is of immense importance particularly in the context of the sorry state of the information network and dissemination mechanism in rural areas.4 Such poor information infrastructure in rural India has restricted the networking of rural people in agricultural extension services and information related to weather, market connectivity and hence, protection from exploitation of middlemen, smooth flow of inputs to and output from agriculture. This has led to a significant slowdown in the pace ofgrowth of agriculture and eradication of rural poverty.

Since setting effective information is likely to be a difficult proposition for an individual farmer, institutional arrangements at the local level are quite essential to bridge the existing information gap. Institutions can ensure a smooth flow of right information to the right destination and can also take care of language-related barriers. Institutions can also develop appro priate assessment and feedback mechanisms to facilitate a further advance of the information network and dissemination system.

In the context of markets, institutions are necessary to ensure that inputs are available to farmers in the right quality, at the right time and at the right price, whereas, institutions in the output market should facilitate the sale of agricultural commo dities at the right price. Institutions are also required to encourage farmers to use chemical fertilisers in combination with biofertilisers

Concluding Remarks

From the above discussion it can therefore be concluded that the deceleration in the growth of the agricultural sector is not exclusively due to policy fatigue as pointed out by Narayanamoorthy (2007). Instead, it is due to a combination of policy fatigue and institutional fatigue. A comprehensive policy framework for correcting the deceleration phenomenon and facilitating the process of growth acceleration should be accompanied with greater emphasis on developing appropriate micro, meso and macro level institutions (Figure 2). This is required for encouraging cooperation, reducing transaction costs, easy and favourable access to input and output markets, strengthening agricultureindustry linkages, sustainable management of natural resources, dissemination of information and controlling for uncertainty that are the preconditions for facilitating agri cultural growth and development.

EPW

Email: bhagirath@hss.iitkgp.ernet.in pmishra@hss.iitkgp.ernet.in

Notes

[The authors are grateful to V Ratna Reddy for his valuable comments on the earlier version of the paper. The usual disclaimers apply.]

1 The prime minister pointed out “One feature

that stands out is the lack of any breakthrough

in agricultural production technology in

recent years. There is a technology fatigue

which we need to address” [GoI 2007]. 2 For example, Ladakh and Tibet are similar in

terms of topography, climatic condition, etc.

In Tibet, farmers are able to use modern technology such as green houses in order to grow crops during winter whereas in Ladakh, the same technology is not being used. As a result, farmers have to be satisfied with only one crop. It is important that the government should take proactive policy measures with strong institu tional backup to spread this technology in the region where the land resource is scarce and is expected to benefit a large number of people.

3 This is quite important particularly, considering that about 87 per cent of marginal farmers and 70 per cent of small farmers have no access to credit from a formal financial institution. This has often compelled farmers to rely on “extortionate” moneylenders and with failing to repay, thousands of farmers have committed suicides in recent years across India’s sprawling western and southern plateau. Further, non-availability of cheaper credit has also prevented the farmers from adopting the latest technology, or buying quality seeds and fertilisers.

4 For example, as on December 31, 2005 the teledensity in rural India was only 1.81 as compared to the average urban teledensity of 34, creating wide rural-urban disparities in terms of access to information. Similarly, so far only about 10,000 internet kiosks have been set up, which is only 1.6 per cent of the 6,30,000 envisaged to cover all villages of India.

References

Desai, B M (2002): ‘Terms of Trade, Trade and Technical Change: Strategies for Agricultural Growth’, Economic and Political Weekly, Vol 37, No 8.

GoI (2007): Inaugural Address of Manmohan Singh, Prime Minister of India, 53rd Meeting of National Development Council, Government of India, New Delhi, May 29.

Narayanamoorthy, A (2007): ‘Deceleration in Agricultural Growth: Technology Fatigue or Policy Fatigue?’, Economic and Political Weekly, Vol 42, No 25, June 23.

Rao, C H H (2003): ‘Reform Agenda for Agriculture’, Economic and Political Weekly, Vol 38, No 7.

Reddy, V R (1995): ‘Environment and Sustainable Agricultural Development: Conflicts and Contradictions’, Economic and Political Weekly, Vol 30, No 12, March.

– (2006): ‘Getting the Implementation Right’, Economic and Political Weekly, Vol 41, No 40.

Reddy, V R and S Galab (2006): ‘Agrarian Crisis: Looking Beyond the Debt Trap’, Economic and Political Weekly, Vol 41, No 19, May 13.

Rodrik, D (2004): Getting Institutions Right, Harvard University, Harvard.

Sharma, P and A Gulati (2005): ‘Can the Budget Boost Agricultural Performance?’, Economic and Political Weekly, Vol 40, No 21.

Economic and Political Weekly October 20, 2007

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