Why should anyone farm? 3rd July 2009 Financial Express

The Union Budget is normally seen as a policy package or concessions to be given to India Inc while paying formal obeisance to the common man by giving a few concessions. Agriculture and rural development keep getting allocations that have never really been analysed; and with the exception of the NREG, which has been successful, there has been no concerted action taken to boost agriculture. The Economic Survey, which is a precursor to the Budget, shows that even though agriculture plays a vital role in the prospects of industry besides sustaining employment to a large number of households, its share in GDP has declined from 21.7% in FY04 to 17.8% in FY09. Also, its share in capital formation has been declining over the years. As the recent monsoon forecast is not too favourable, we need to address this issue head-on in the Budget. The government’s reactions to droughts, low harvests and suicide deaths have followed a fixed pattern. To begin with, we delay the acceptance of the problem. When the problem arises, we brush it aside as being atypical and not pandemic. Then we panic and look for the causes. While trying to apportion the blame, we decide to import the product. When India decides to import, we push up global prices and end up paying more. The solution is in terms of increasing MSPs quite mindlessly —mindless because while this helps to reward the farmer better for one crop, it leads to crop shifting which solves the problem of one crop but transfers the same to another one. Also, once increased, prices cannot be rolled back. Budgets react to an agrarian crisis by going in for loan waivers and interest rate subventions that transfers the problem to banks. When they cry foul over their NPAs and lower profits, the amount then gets into the fiscal deficit of the government. Intuitively the question that should be posed is whether or not it is possible to eschew this chain of agony by simply budgeting for practical numbers in a phased manner based on a firm policy. In simple terms, this means that we need to have a comprehensive farm policy that tackles the issues of land under cultivation, inputs for farming and improving yields. The Economic Survey has highlighted that food grains production in FY09 was just about at the same level as FY08. Also, the area under cultivation has come down for food grains and oilseeds and increased marginally for sugarcane. Not much progress has been witnessed in area under irrigation except for oilseeds in the last decade, while productivity remains stagnant at best. With output levels remaining uncertain, farming is not an attractive proposition today and there has been a tendency for migration to the urban centres where unskilled labour still finds jobs that provide a sustainable income stream. Hence, we have a situation where demand for farm products has gone up and supply is erratic. The results are seen in constant price spikes for consumers and desperation for farmers who have been driven to extreme action at times when crops fail in the face of indebtedness. Under these conditions, there is the need to usher a new Green Revolution where we have a comprehensive package of quality of seeds, irrigation facilities, pesticides and fertilisers that is spread across the country and the crop spectrum. The funds have to necessarily emanate from the government if they are to come on a large scale as this is analogous to contract farming or corporate farming schemes, which however are restricted to the choice made by the company concerned. Assuming a cost of Rs 15-30,000 for a small pump set, the government could upfront provide the same to a fixed set of farmers every year. Providing 1 million such sets would amount to up to Rs 3,000 crore, which can be provided by the Budget. To make this work, there is of course the need to continue supplying free power to the farmers. The same could be done for seeds, fertilisers and say pesticides so that we are able to have a broad-based strategy for growth in agriculture. The basic point is that we need to provide the inputs gratis to the farmers if we are to encourage them to remain in business. MSPs and credit are only supplements that cannot solve the problem. More importantly, we need not always be reactive to agriculture as we are well aware of the cycles and amplitudes of farm growth. Planned growth in agriculture is doable and will eschew a crisis and hence be more pragmatic.