Rebooting India’s agricultural policy

The efforts of the government in revamping the crop insurance and land titling schemes are long-term solutions which will take time to bear results

The agricultural sector is facing its worst moment in the last three decades. The last time India saw such distress caused by back-to-back deficient rains was during the drought of 1986-87 and 1987-88. The severity of the situation is evident from the stories of migration and severe water crisis in Maharashtra and elsewhere. After the collapse in international prices for major agricultural commodities since late 2014, the drought has only aggravated the crisis in agriculture.

While the government cannot be blamed for any of these, its response to both these shocks has been inadequate in most cases. In some cases, the delay in response has certainly aggravated the crisis. This is true of the response to the collapse of commodity prices, but even the response to the drought this year has left much to be desired. Not only was the government aware of the impending drought but it also knew that this is the second consecutive drought, which would require relief efforts on a scale larger than a normal drought.

While the government recognized the severity of the situation after protests by states, most states have not been given their share of the drought relief fund that was promised by the central government.

Some of this was also evident in the Union budget, with the government claiming to increase spending on agriculture. Unfortunately, the ambitious claim of doubling farm income by 2022 was not matched by the corresponding amount of money. Excluding the reclassification of Rs.15,000 crore of interest subvention on short-term credit, which was reflected in the budget until this year, the actual increase in the budget for the agricultural sector was a modest 27% against a claim of 127% by the finance minister in the 2016 budget.

The efforts of the government in revamping the crop insurance and land titling schemes are long-term solutions which will take time to bear results.

However, the real problem with the policy of this government on agriculture is not just the financial allocation, which remains inadequate given the enormity of the situation, but also the lack of a coherent policy for achieving the objective of doubling farm income. While there has not been a clear road map to revive agriculture, some idea of the government’s vision is available from a recent NITI Aayog paper . Although the paper reiterates some old policy directions, it lacks a clear understanding of the problems facing Indian agriculture.

The reason some of the old prescriptions are less relevant in the current context lies in the changing nature of agricultural production, which has seen a rising share of horticulture, floriculture and livestock. Although grown in an area smaller than food grains, horticulture production is now higher than the total output of the food-grain sector. It now accounts for almost one-third of total agricultural gross domestic product (GDP). So is the case of livestock and dairy, which have seen rapid growth in recent years.

Not only are these more vulnerable to weather shocks but they also require a different kind of support, including marketing and processing support, from what traditional agriculture need. These are also more vulnerable to price fluctuations, as has been witnessed recently, than traditional crops such as food grains.

Precisely because of the changing nature of agricultural production, traditional methods of raising productivity such as increasing input-use efficiency are less relevant today. What is required is to insulate these farmers not only from the risk and vulnerability which arise from production-related factors such as weather but also from risks in the price and output market.

Incidentally, most of the farmers (more than 80%) engaged in production of these crops are small and marginal farmers with little support from traditional agricultural policies such as insurance, marketing infrastructure, support prices and subsidies. Most of our agricultural policies are geared towards supporting and protecting farmers in traditional agriculture, including drought relief programmes.

Secondly, years of neglect of natural resource management have put enormous stress on the land and water resources of the agricultural sector. In this context, traditional approaches of input intensification are now yielding limited returns—in some cases, negative returns. The focus of the agricultural strategy has to move towards developing new technologies, agricultural practices and crop varieties which are not only less resource-intensive but also environment-friendly.

Finally, a sustainable agricultural policy requires efforts to not only support and protect farmers from the vagaries of the monsoon and market forces but also to create an enabling institutional framework. The neglect of agricultural universities, extension services and cooperative institutions has led to a collapse of the enabling institutional structure critical to development of sustainable agriculture which supports small and marginal farmers.

While most of these require a holistic approach to reviving agriculture in the long run, the crisis in the short run also requires efforts to augment the income of farmers suffering from the drought. This not only requires supporting and strengthening livelihood programmes and safety nets such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) but also implementing the much-delayed National Food Security Act.

While wholesale inflation continues to be low, the pressures of food inflation, particularly on prices of vegetables, pulses and oilseeds are already beyond the comfortable zone.

The current crisis in agriculture has forced the government to respond to the challenges facing the agricultural sector. The government should not only respond to the immediate challenges facing the farmer and the agricultural sector but also reboot the agricultural policy to create an ecosystem for the future of Indian agriculture. The ambition of doubling the farmer’s income in the next six years may be difficult to achieve but is not impossible.