It's finally official: with 20 of the country’s 36 meteorological zones recording a 24% to 30% shortfall in rain till the end of July, state governments have declared drought, fearing a serious impact on agricultural growth and their credibility.

The race for emergency relief from the Centre has begun. District administrations are busy with contingency plans. The media has resumed its search for human interest stories. Thinktanks are busy downgrading growth forecasts for the economy.

One fundamental lesson has been missed in the bustle: that India can actually insulate the agricultural sector and the economy from the hazards of meteorological droughts. Free trade and access to latest technologies are the twin weapons by which any society can defeat droughts forever. There is no technology yet that can assure uniform rainfall, but trade and technology can break the linkage between rainfall and agricultural production.

For centuries, droughts inevitably led to famine due to a sharp decline in agricultural production. Historically, the Punjab region witnessed drought and famine every three years because of its proximity to the arid deserts. But today, drought has very little impact in Punjab. To an extent, the green revolution has shown how to insulate people from drought and famine.

Droughts no longer triggers food shortages. But even green revolution technologies haven’t spread as widely as necessary, and India’s agricultural productivity lags way behind the best in the world. Consequently, what droughts still do in large parts of India is to reduce the incomes of farmers and landless labourers, eventually leading to ‘‘starvation deaths’’ of the like in regions like Kalahandi, Bastar and Bolangir in Orissa.

But every crisis is also an opportunity. It is time we seized this one to turn around Indian agriculture. We need policy reforms that lead to an increase in productivity throughout the country, and a sustained movement of people away from being dependent on agriculture so that they are insulated from droughts.

There is an urgent need to remove all obstacles to access to new generation technologies—improved seeds, tools such as biotechnology, techniques to improve water and energy efficiency, improved farm practices, post harvest and transportation systems and unfettered access to domestic and international markets. The 2002 budget made great promises to agriculture. If the 2002 drought pushes us in this direction, the dry spell may yet be remembered for the bounty it brought.

The 1943 Bengal famine, in which about five million Indians perished needlessly, is becoming a distant memory. During 1965-67, severe drought conditions led to about 2,00,000 deaths. By 1987, India had decisively broken the nexus between droughts, famines and starvation deaths. The reason: green revolution and growing productivity insulated production from droughts.

During the 1965 drought, 43% of agricultural area faced deficient rainfall. This pushed down foodgrain production from 89 million tonnes in the previous year to 72 million tonnes—a fall of 20%. With no surplus stocks, India had to rely on global food charity schemes like PL-480.

But this crisis hastened the arrival of green revolution technologies, and matters improved matters by 1972, another drought year when almost 50% of agricultural area faced deficient rainfall. This time, production declined by 8 million tonnes.

During the 1987 drought, 65% of agricultural area faced deficient rainfall. Yet, foodgrain production at 143 million tonnes was just 7 million tonnes and 4% lower than in the previous year. Buffer stocks of 23 million tonnes implied there were no food grains shortages.

For the drought this year, the Crop Weather Watch group estimated an average all-India monsoon deficiency of 24% at the end of July. Despite this, the worst forecasts for 2002-03 indicate a decline of 3% in foodgrain production, about 10 million tonnes. Even that may not happen as a good rabi crop can compensate for the shortfalls in this kharif season.

The increasing irrelevance of droughts and foodgrain availability is also reflected in consumer prices. During the Bengal famine, the price index shot up by over 50%, the highest in the past 100 years, due to shortage, mismanagement and inflation fuelled by the Second World War. During the 1965-66 drought, the consumer price index for agricultural labour shot up by more than 20%. During 1972, despite the Indo-Pak war, the index rose by less than 15%. During the 1987 drought, the index went up by less than 8%.

Since the index is dominated by foodgrains, it is clear that droughts had a declining influence on foodgrain prices. With more than 60 million tons as stocks today, there is hardly any reason to worry about the possibility of the drought triggering a rising price spiral in food grains.

But while food grains prices will remain relatively stable, the drought will still adversely affect poor farmers and landless labourers in BIMARU states and Orissa. With incomes declining, it is these areas that will be hit by drought. In fact, irrespective of droughts, floods or even normal rainfall, people in these states face a fundamental problem year after year: they don’t have the productivity to increase their income to buy foodgrains. The only way out is to generate higher incomes on a sustained basis. And for an increasing proportion of them to move out of agriculture.

Once again, salvation lies in using modern agriculture techniques so that agricultural productivity can be increased. Higher productivity not only leads to increased incomes all around in agriculture, it also releases people for other activities as lower number of people are required for higher levels of output.

Worldwide, developed countries like USA have reduced the share of population dependent on agriculture from more than 60% at the beginning of the 20th century to less than 5% by the end. While the US is still one of the world’s major agricultural producers, the small contribution of agriculture to US GDP, and even smaller population dependent on agriculture has meant that the food supply and people have been completely insulated from effects of droughts.

The common sense behind this linkage should be obvious to policy makers if one compares a ‘‘rich agricultural’’ state like Punjab with a ‘poor agricultural’ state like Orissa. By the end of the 20th century, Punjab had a per capita income at current prices of Rs 23,000 while Orissa managed just about Rs 9,000. In Punjab, rice and wheat productivity in kg per hectare was 3,346 and 4,696 respectively. In Orissa, productivity was less than one third those in Punjab—at 1,127 and 1,333 respectively for rice and wheat.

Contrary to some critics, modern agriculture has not ruined Punjab, but failure to modernise agriculture has ruined Orissa, and perpetuated poverty. Punjab may be India’s granary but it doesn’t mean a majority of its population is involved in farming. In fact, since the midsixties, the number of people ‘‘employed’’ in agriculture in Punjab has fallen at an average annual rate of 1%.

One key policy failure does ensure that droughts cause misery for a large proportion of Indians in villages: while the share of agriculture in GDP has declined to 25%, the percentage of Indians dependent on agriculture for a livelihood is still 60% (It is 5% or less in developed countries). It is not as if villagers love the pristine purity of rural life; just that retrograde industrial and labour policies have stifled opportunities in non-agricultural sectors.

The latest drought offers yet another opportunity to correct historical policy mistakes. First, set agriculture free to use technology to increase productivity. Second, free the agriculture trade. Third, set other sectors of the economy free from stifling labour, investment and trade policies to enable them to absorb surplus labour from agriculture. Farmers don’t need dole, but the freedom to reap benefits of global markets.