A commercially viable business enterprise must grow and expand in size and scale. Though the Indian agriculture sector has a vast potential for growth, yet it seems to be suffering from irrational exploitation of natural resources, technology fatigue and policy indifference that is creating several kinds of bottlenecks and anomalies that are hindering its growth and development with equity. As a consequence, the farm sector is showing signs of declining total factor productivity and plateauing of production that is adversely affecting farm incomes and livelihood security of the rural population. The problem is vast as well as serious and needs to be tackled with vision and determination.
Following are a few of the thrust areas in policy that are crucial for faster growth and development of the agricultural economy of the country.
For sustainable development, the economy must have a growth rate higher than what keeps the economy at the extent level of per capita income and standards of living. The growth rate is determined by the natural resources and man-made productive assets and their use efficiency. Resource constraints must, therefore, be relaxed and capabilities built in order to promote growth and development. With the declaration of India as a socialist republic, the country opted for planned development of the economy and paid special attention to the agriculture sector.
In the First Five Year Plan, emphasis was placed on agriculture with an outlay of more than 10.2 per cent of the total plan budget. Actual expenditure in the plan was still higher at 10.8 per cent. This investment helped improve the food situation, yet made the planners and policy makers complacent. The expenditure in the Second Five Year Plan was reduced drastically to 4.7 per cent of the total expenditure. By the mid-1960s, the country was importing huge quantities of foodgrain. In 1964-65, India imported around 13 million tons of foodgrain.
Fortunately, in the mid-1960s dwarf wheat seeds became available from Mexico, which triggered the Green Revolution. No doubt, these seeds were available for all the states, yet the success of wheat-based Green Revolution has been different in different parts of the country. The question is: What is that which makes it a success story in some parts of the country only? The states that transferred the research function completely to their agricultural universities, and effectively linked up the departmental extension set-up with the university research system, advanced faster in the development of the agriculture sector. Where research responsibility was not transferred or remained a dual responsibility of the university and the government department, the progress was muted.
It is of paramount importance, therefore, that the national research system of the country is fully revamped, particularly in the agricultural universities so that location-specific anticipatory research effort is made in strategic areas in order to make demand-driven agricultural production cost-effective and globally competitive. This requires transferring of research function completely to the agricultural universities in all the states and substantial investment in our research plant for developing cutting edge technologies through the use efficient of our scarce resources.
Land holdings in most parts of the country are small and fragmented. It is difficult to introduce improved farm practices on such holdings with no scope for levelling of land, expansion in irrigation, development of independent approach roads and mechanisation of operations etc. Wherever land holdings have been consolidated, such as in Punjab, Haryana, Western UP, it helped the farmers to get canal irrigation, install individual tubewells and pumpsets, mechanise operations, introduce high-yielding varieties and adopt improved practices. Land consolidation serves as a base for modernisation, and states that have not consolidated land holdings have very low productivity and are deficit even in foodgrain. For instance, the Gangetic plain has some 20 million hectares of highly productive land floating over sweet water, which has productivity potential as high as Punjab. But, fragmented small-sized holdings with no independent approach roads and no separate source of irrigation are handicapped in adopting improved production technologies and hence suffer from very low productivity. Thus, consolidation of land holdings is a pre-requisite for agricultural growth and development.
Seeds of change
Seed is the most important input. It is essential to ensure quality seeds of improved genotypes in adequate quantity. India created seed corporations in the states as well as the Seed Corporation of India at the Centre. The job of the agricultural universities and research institutes was to produce enough quantities of foundation seeds of the recommended varieties. The seed corporations got these seeds multiplied in the fields under the supervision of Seed Testing Authorities of the states to maintain the purity of the seeds produced. This ensured the availability of pure, certified seeds of recommended varieties in adequate quantity.
In some progressive states, the foundation seed was distributed in small quantities directly to the farmers at fairs also so that they could multiply their own seed for the next crop. This system, while ensuring adequate supplies, reduced the time gap between research and its adoption by farmers, and enhanced the seed replacement rate. Unfortunately, the system has lapsed into performing routine functions specially at a time when production patterns need to be diversified for higher incomes and efficiency of resource use. Seed policy, therefore, needs to be streamlined so that the varietal development effort of the universities and research institutes bear fruit on the fields. The private sector is entering the seed business at a very fast pace. Yet, in the absence of definitive seed policy, the farmers are being exploited without any accountability on the part of the seed companies. This is a major challenge before policy-makers, who need to regulate the production and supply of seeds for a minimum level of productivity under specified conditions and practices.
Water is the second most important input after seeds. Yet, it is the most scarce social asset; harvested, usable water is becoming scarcer by the day. It was estimated that yield of foodgrains under irrigated conditions were two to six times higher than the yield under rainfed conditions. Similarly, the instability in yields of irrigated crops was less than half of un-irrigated crops. Yet, for optimum results, irrigation has to be under the control of the farmer so that he can supply water to the crops as required in time. Expansion of canal supply undoubtedly helps farmers grow the crops better, but alongside it is the tubewell irrigation that gives the farmer independent control on water for his crops. Assured irrigation is the major factor that allows large-scale adoption of improved varieties and increased intensity of cropping. A one per cent increase in irrigated sown area raised the cropping intensity by an average 0.16 per cent in the country from 1965 to 1980. Thus, it is not the availability of irrigation water per se that determines productivity; more important is assured irrigation under the farmer’s control.
Here a word of caution is necessary. With such independent, free access to the underground water through private tubewells, there is every possibility that farmers would overdraw subsoil water thereby, upsetting the balance between withdrawal and recharge of water. This is what happened in Punjab, Haryana, Gujarat and several other parts of India. In a democratic set-up, electoral compulsions play a major role. The groundwater table in several states, especially in Punjab and Haryana, is receding at an alarming rate. It is a suicidal approach to supply electricity (for farm operations) and irrigation water free of cost or at excessively low rates. Flat-rate charges are as harmful as free supply, because after paying these charges, the farmer entertains no urge to save on power or water.
The system plays havoc on underground water resources, so much so that farmers and urban centres are now installing submersible pumps to lift water for irrigation and drinking purposes. There is, therefore, no scope for laxity in this respect. Sustainability of production and environmental conservation demand that, regardless of electoral compulsions the balance between withdrawal and recharge of water should never be upset; and water should be treated as a social asset and not allowed to be irrationally exploited by individuals. This demands the inclusion of social costs in production estimates of commodities, both in terms of the resources used and environmental externalities. Therefore, a definitive policy — incorporating the harvesting of water, its utilisation, right pricing, ecological considerations and sustainability of water as a social resource — must be put in place to avoid the disastrous consequences of unchecked over-exploitation.
The dwarf varieties of crops such as wheat and rice cannot be grown profitably without irrigation, fertilizers and pesticides. High yielders, whether plants or animals, require higher inputs as well as pest control. Subsidised supply of fertilisers to farmers, though at a huge cost to the exchequer, enabled even the small farmer to use fertilisers. In some parts of the country, such as the states of Punjab and Haryana and western UP where assured irrigation was available, along with high-yielding seeds, improved production technology and effective extension service, fertiliser use increased tremendously, and production as well as productivity touched new heights. Yet, all this did not happen without negative results either. Today, the groundwater in these areas is highly polluted with fertiliser and pesticide residues rendering it unfit for drinking. The situation demands a policy stance that encourages the farmer to use these chemicals selectively and at optimum levels which leave minimum residues in the soil and water. India needs to design policy options that encourage the contractual participation of chemical-producing and distribution companies in integrated pest management, which would lower the cost and health risks for the farmers; and, at the same time eliminate excessive and wrong use of pesticides and minimise environmental degradation.
Next to infrastructure, education has strong complementarities with the factors that determine economic growth and development. The level of literacy has a positive significant correlation with economic development. Rural development strategies that did not take due cognizance of human resources as a factor of production have not achieved optimal results. A survey based on 37 countries estimated that four years of primary schooling of farmers an average would enhance farm output by 8.7 per cent (Lockheed et al, 1980).
In India, wheat output was estimated to have grown at the rate of 1.49 per cent with each year of increase in the education level of farmers. (Jamison & Lau, 1982) The level of development in different states underscores this relationship. Further, closer the relationship amongst farmers, researchers and extension agents through education, techniques and training, lesser is the lag between research results and their adoption on the field. The gap in the technical efficiency, defined in terms of best and current practices, is inversely related to human capital, expressed in terms of formal schooling and non-formal education. Thus, farmers’ education plays a crucial role in putting the agriculture sector on a sustained and faster growth path. Farmers’ education, both formal and non-formal, must therefore, be given top priority in order to hasten the adoption of ever-improving production technology. This will strengthen the absorptive capacity of the farm sector for new techniques and methods provided by our research institutes.
Agriculture production, being a biological process, has a long periodicity in harvests. The farmers, especially the resource-poor small farmers, do not have the financial capacity to invest on costly inputs and wait for returns. Credit support at affordable cost (interest) is, therefore, essential. It improves farmers’ access to purchase inputs. Credit, if properly used for the sanctioned purpose, brings future opportunities to the present; If diverted to unproductive purposes, it can lead to bankruptcy. The amount of credit, its timeliness, interest rate, prior evaluation of proposals and continuous monitoring are essential inputs to make credit a positive determinant. Unfortunately, we have remained overly concerned with the supply side of the credit. The situation is that financial institutions with the mandate to advance a minimum of 18 per cent of their credit to the agriculture sector have a high level of liquidity, but are not finding viable avenues of investment. There is, therefore, a need for enhancing the capacity of the recipients in the farm sector through creating complementarities of technology dissemination, market clearance and appropriate priced credit support.
Market and price
Production is not complete till it reaches the consumer in the form, at the time and place he demands. Therefore, market plays a crucial role in the production process. Farmers, especially small farmers, do not have much staying power and holding capacity for their produce. Their marketable surplus becomes spot arrivals in the market as soon as the crop is harvested. They have to invariably operate in a buyers’ market. They need to be protected from the vagaries of market and buyers’ monopolies and cartels. In an economy of shortages, it is particularly important to protect farmers, because post-harvest glut often leads to a price slump when the farmer disposes off his produce; and lean period shortages lead to high prices when the produce is in the hands of the trade. This puts a damper on the production effort of farmers and, at the same time, consumers do not benefit in any manner.
The minimum support price and procurement system served very well in eliminating market uncertainty for farmers, but the rigidities of the system put the prices of foodgrain out of alignment with international prices. Flexibility and rationality are key elements in pricing and procurement policies. Now, it is time that the private sector should be enabled to play a competitive role in the agricultural markets through amendment of the Agricultural Produce Markets Act in the states, though it should not replace the existing markets. This will reduce the pressures on the public sector market operations and, simultaneously, control unhealthy market practices of private players.
Thus, for higher and sustainable growth, the agriculture policy thrust must involve multiple tracks such as infrastructure development, efficient irrigation, regular and right-priced power supply, education to access improved production technology and market information, adequate and fair credit, effective R & D input, close interaction between researchers, extension workers, farmers and policy-makers, and, lastly, effective market clearance of demand-driven production.
— The writer, a noted agro-economist, is Deputy Chairman, State Planning Board, Punjab.