Sudip Bandyopadhyay’s Blog

The economic progress of the past decade has had differential impact across society, as a consequence of which inequality has increased.  Over 40% of the population depends on agriculture for their livelihood, making it a formidable sector.  Yet, food security eludes the grasp of many.  About 380 million Indians suffer from hunger and malnourishment today and, with rising food prices, up to 150 million more are expected to face the same fate by 2020.Food price inflation can always be blamed on the weather, on globalization, on evil speculators, and now also on faster growth in poorer countries.  Some of these factors do matter, but they divert attention from past policy failures and from what needs to be done going forward.  India’s inefficient and wasteful system of procuring food grains, storing them and distributing them to those in need is much more to blame for food price inflation than speculation or trade.

Transforming agricultural systems is essential for inclusive growth, and should draw upon the experiences of nations like Indonesia and China which have successfully accomplished this. Over the last 25 years, India has not invested enough in raising agricultural productivity.  As the largest investor in agriculture, the government sells seeds, fertilizer, water and extension services to farmers and also buys their products.  But the government’s investments have focused on subsidizing rather than developing agriculture, and this has been the biggest obstacle to food security in India.  For instance, the government has provided heavy discounts through the Food Corporation of India (IFCI) to make rice more affordable rather than investing in breakthrough rice hybrids, which raise productivity and lower prices.  In 2008-09, the government invested $2.27 billion in infrastructure for agriculture (markets, roads, and so on) but spent 15 times that amount ($37.5 billion) on fertilizer and food subsidies.

Fertilizer, water and electricity (used for pumping water) are subsidized in ways that lead to significant waster, as well as to poor choices of crops.  There is insufficient investment in irrigation infrastructure and irrigation techniques, development of new crop varieties, innovation in farming methods and in diffusing what knowledge already exists.  On the financial side, credit is not provided efficiently, nor coupled with insurance against crop failures.  Mechanisms for selling crops are costly and subject to the control of powerful intermediaries.  Storage, transportation and distributions of many agricultural products are still primitive, because of lack of government investment, and failures to enable private investment in areas where it could be financially viable.

A holistic response, like the one for Punjab in the 1960s, bringing together water, seeds, extension services and the market through the FCI doubled the per hectare productivity of wheat in five years.  Similar success was reached with rice in Thanjavur.  But since then India’s green revolution has taken a long pause.  Agriculture-intensive states such as Uttar Pradesh, Bihar, West Bengal and Orissa, which have the potential to double their farm yields simply by applying known and existing technology effectively, are yet to benefit from such a concerted effort.  Going beyond increasing output, linking the farm to markets more efficiently to reduce waste and matching output to market needs can play a pivotal role in increasing the incomes of farmers.

Our aim of achieving inclusive growth and double digit GDP growth hinges critically on refocusing on Agriculture in the right manner. The ambitious target for growth in Agriculture for fiscal 2011-12 can act as the right catalyst for initiating this process.