Though government economists are smug about the fact that this year's agricultural growth will be over 3 per cent and will boost overall economic growth, India's agricultural growth picture is abysmal. The five-year average annual rate of growth of grain production is down to 1.6 per cent, below the annual population growth rate. Compare this with what happened through the `80s, and the picture looks a lot more bleak -- at 3.3 per cent, the annual grain production in the `80s was double what it is today. The picture looks a lot worse, if you go by forecasts made by non-government bodies such as the Centre for Monitoring of Indian Economy (CMIE), which puts this year's agricultural growth at roughly half that of the government -- CMIE forecasts a foodgrain production this year of 194 million tonnes, as against the government's 200.As a result, economists are worried that food spending among the poorest will increase in the future. In which case, the government's arguments about India's food security,generally made only in the context of trade in agricultural commodities at various international fora, are far more accurate than it suspects. Economists, in fact, say that the difference between foodgrain demand and supply will be greater than the difference between the rate of growth of population and foodgrain production.
Naturally, though, it does not suit the government to play up food security concerns at home, real as they are. At international fora, on the other hand, food security is considered a handy tool to fend off demands for liberalising India's agricultural trade. Not surprisingly, the drastically reduced rate of growth of grain output in the mid-'90s has gone hand in hand with the near-complete neglect of public investment in irrigation. The total development of irrigation in minor, medium and major irrigation projects during the Eighth Five-Year Plan (1992-97) was supposed to cover 15.8 million hectares. Just about half that is being achieved, at 8.3 million hectares. The achievement incanal irrigation has been less than half of what had been targeted.
Squeezed spending on agriculture has gone on in an era of ``reforms'' in an economy a quarter of whose output is still agricultural and 60 per cent of whose working population still works on farms. The government itself admits to between 25-30 per cent ``leakage'' in irrigation funds. Independent estimates suggest the figure is closer to 40 per cent.
Not just that, India's so-called aggregate measure of support (overall subsidy) to agriculture in 1995-96 was sharply negative, at minus $23,746 million in 1995-96. So by any standards, food security has not been catered for in any systematic or imaginative way.
One healthy development on the horizon, though still tentative and uneven, is that foodgrains seem to be reclaiming some of the area that was being lost to oilseeds cultivation in the heyday of the oilseeds technology missions. Since the total cultivable area is limited, the acceleration in oilseeds production, which went hand inhand with a deceleration in area growth under cereals, was a threat to food security.
That trend, economists such as Anil Sharma of the NCAER (National Council for Applied Economic Research) point out, is now on its way to being reversed. It will be vastly uneven in regional terms, but it still bodes well for food security.
An even sharper impetus to improved food security could in fact be the one thing that the government is running away from trade liberalisation. The caveat is that there has to be a safety net in place for those who could be hardest hit if foodgrain prices rose temporarily as food exports were liberalised. Sumiter Broca, senior economist at the NCAER, says that reliable data do not really exist from which to draw conclusions, but wheat prices probably would rise for two to three years after opening up exports, but that farm wages would begin to rise as remunerative prices raised rich farmers' capacity to pay. He argues that if the poor could be sharply targeted with a safety net forthat period, opening up trade could aid rather than jeopardise food security.
Ashok Gulati of IEG, on the other hand, argues that wheat prices would not rise in the short term. India, he notes, has more or less opened up cash crops for trade sugar, cotton, edible oils. It has liberalised its pulses trade where it is the largest producer and the world market is so small that India thought that if it imported even 500,000 tonnes world prices would flare up. But what happened must have been a surprise to many. As India began to import, supply from Australia increased, a country with plenty of cultivable land to meet world demand. Many such potential suppliers only await a demand signal, he says.
Besides, he points out, India will not really need to go into the world market for foodgrains except on the margins since it has a comparative advantage in wheat and rice. As subsidies are reduced in South East and East Asia, as should happen with trade liberalisation, India will have more not less comparativeadvantage.
India's threats, he asserts, come from its own supply lines and poor investment: levies on farmers' produce, and a public distribution system that still substantially benefits the rich, at least in the north.
In his last Budget, Finance Minister Yashwant Sinha did significantly raise agriculture spending. But unless that is reinforced in the next Budget as well as some creative solution found to the problem of funds leakage, the deceleration in grain output could be here to stay.
It has been suggested that one effective solution could be to link the grant of extra agricultural funds to those states which express readiness to undertake reforms such as those in water and power pricing to farmers. This could, if implemented, put in place a system of incentives for states to follow good policies and would penalise states which resort to populist measures such as free water and power to farmers.
Involving user groups in irrigation projects is also seen as a cost-effective method, wherebyfarmers can be involved in irrigation and in turn get to keep much of the money for maintenance. Andhra Pradesh for one already has a system in place whereby farmers at the tail end are asked to collect dues and get to keep some for maintenance.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.