Growing agricultural stress

Jayshree Sengupta

Agriculture is under stress as pointed out by the recent Economic Survey. The untimely rain in north India before and after Holi has also caused much damage to the crops. Agricultural growth seems to have regressed to 1.1 per cent, according to the First Advance Estimate of Kharif Crop (July-September 2014), following a bumper year in 2013-14. With only 88 per cent of rainfall, the growth rate is thankfully positive.

A lot of thinking should be done about how to reinvigorate agriculture because rural demand is important for reviving manufacturing sector. Agriculture is important also because 52 per cent of the population is still occupied in agriculture and it has a share of 17 per cent in the GDP. There will have to be higher agricultural growth in the future to take care of the food needs of a growing urban population. Those who think that we can import food to feed our population of 1.2 billion are underestimating the importance of self-sufficiency. We cannot depend on imported food as it can lead to manipulations by food exporters. We cannot afford it especially when there is so much malnutrition among children. India is already importing edible oil and pulses. Good nourishment is what we need in the future to reduce the malnutrition among women and children.

After the Green Revolution, India reached self-sufficiency in food production but the impact was limited as it focused on regions that were well irrigated and grew two crops, rice and wheat.The benefits were reaped by farmers, who could mobilise the necessary investment in the adoption of the new technology.

For some years, the terms of trade have been in favour of agriculture and the agricultural sector has been better off in terms of its purchasing power of industrial goods, but this trend seems to have peaked according to the Economic Survey. There will, therefore, be a pressure on agricultural incomes and farmers will call for an increase in price support. Agriculture has to grow at 4 per cent to be able to bring sufficient income growth to farmers. From 1981 to 1997, there was an increase in agricultural growth and it averaged at 3.5 per cent but during 1997-2005, there was a decline in agricultural yield to 2 per cent. When crops failed, it led to an increase in farmers’ suicides.

Around 14 million farmers have committed suicide in the last 17 years. Although there has also been a decline in per capita land availability, there is a slower reduction in the share of employment in agriculture. It means that productivity of labour has declined.

The net sown area is around 140 million hectares and the area under forests and non-agricultural uses has increased. In the process, the quality of total stock of agricultural land has deteriorated as good quality agricultural land in the urban fringe has gone out of cultivation and comparatively inferior quality land in the form of waste land has come under cultivation. An important problem in agriculture is that a combination of low quality land and low labour productivity is leading to a widening of gap between agriculture and non-agricultural occupations. The share of marginal land holdings to total land holdings has increased from 70 to 85 per cent in the last decade. Lack of diversification of crops, slowdown in public investment in agriculture, slowdown in private investment, slow growth in use of technology,  low fertiliser use and soil erosion  have resulted in the stagnation of agriculture. Price incentives like increase in output support prices have had less impact in increasing productivity than if quality of inputs, technology, institutions and infrastructure had been improved.

Since the size of the holdings is small and because majority of farmers are cash strapped, it is difficult for them to undertake innovations for productivity improvement. It has led to an increase in the number of subsistence farmers who have very little surplus to sell.

Many agricultural scientists are advocating GM food trials. As Chief Minister of Gujarat, Narendra Modi had introduced BT cotton, which changed the face of cotton production in India. It remains controversial, however, and people are not fully convinced about the long-term advantages of GM food.

Irrigation is also of utmost importance. There is still 41 per cent of land under cultivation that is not irrigated. Small irrigation works will help a lot. In the Budget, minor irrigation works have received attention and an amount of Rs 1,800 crore has been allocated. Another Rs 3,500 crore has been allocated for other irrigation projects. Similarly, the MNREGA programme has also received extra money of Rs 5,000 crore that may benefit the small farmer and the agricultural labour.

Water conservation is very important in agriculture. Various water conservation programmes have received money in the Budget. Basically the problems about water in India are the same as in China. It is going to be the number one problem in the future in both the countries. ‘Drop per crop’ is a slogan adopted in both China and India.

Reforms in agricultural marketing have been spelt out in the Economic Survey and dismantling of the APMC will probably bring more options for farmers to realise better prices. Storage space is important also. What the government wants to do in agriculture has not clearly been spelt out in the Budget except for the infrastructural fund of Rs 25,000 crore. Agriculture is a state subject and states are responsible for the ‘extension work’ and supply of better inputs to farmers. Some states have succeeded in increasing agricultural productivity but others have not.

Rural credit, which is very important, has got a hefty increase in funds but the problem is that small farmers still find it difficult to access formal sources of credit and turn to moneylenders.

Higher support prices are clearly in the offing. It can mean an increase in domestic prices, which will contribute to inflation and widening of the fiscal deficit. In all, the Budget ought to have given more help to farmers to raise productivity but the Central government is pinning its hopes on the states. This leaves much room for speculation about the outcome.