BY Dr R S Deshpande Former Director and National Fellow Institute for Social and Economic Change, Bengaluru
The Indian economy and agriculture sector picked up from the low of 1965-66 We have now spent almost seven decades in pursuing a fire fighting approach. The desire to achieve a noble destination of self-sufficiency and higher welfare for farmers, is most welcome, but one needs to look at the scaffolding to be made ready for such purposes. Growth in Indian agriculture has been analysed by many and there has been a good amount of discussion about the ambition & feasibility of 4 per cent (+) growth rate over last three plans. Recently the NITI Aayog came out with a new proposal of doubling the farmers’ income, requiring about 9 per cent rate of growth in agriculture and allied sectors. Our experience of long-term growth will surely bother us in this new experiment as historically we have often failed to get to the set goals. Here, it is not really the growth alone that would suffice to double the farmers’ income but on priority imperfections in the markets have to be removed. This was the target of the plan, which was aborted after closure of the Planning Commission recommended by Chibber Commission. Efforts towards achieving such tall objective needs to be seen on the background of the history of our earlier accomplishment. The ground situation however, betrays such an ambition by far margins. The growth rates presented in Fig.1, are usually used in most of the literature are based on the traditional methodology across the phases.
Note: Average Annual Compound Growth Rates (%) during the Phase I: Pre-green revolution period (PGR) – 1960-61 to 1968-69; (ii) Phase II: Early green revolution period (EGR) – 1968-69 to 1975-76; (iii) Phase III: Period of wider technology dissemination (WTD) – 1975-76 to 1988-89; (iv) Phase IV: Period of diversification
(DIV) – 1988-89 to 1995-96; (v) Phase V: Post-reform period (PR) – 1995-96 to 2004-05; (VI) Phase VI: Period of recovery (REC) – 2004-05 to 2016-17.
Source: Based on Deshpande, J Prachitha and Shaha (2018).
The growth rates presented in Fig.1 are based on the GDP figures from National Accounts Statistics at constant prices. The entire five decades after independence, agriculture sector of India could not cross the 3 per cent barrier of growth or what was then called as Hindu rate of growth. It is only after the 2004-05 that the barrier was successfully crossed and thanks to the prices and inflation during those period the growth rate reached slightly about 3 per cent and stayed at 3.19 per cent per annum for a while. The euphoria of this high growth rate and consequent ambition of achieving a double-digit growth in aggregate GDP led the then Government of India, two relatively neglect agriculture sector and subsequently there was a trough in the sectoral growth rate. It is well recognised that the GDP growth is sensitive to agricultural growth despite the fact that the contribution of agricultural sector to total GDP is as low as just 12 to 13 per cent, but often the fact that agricultural sector has a depressing spill over effect on the other sector when the sector confronts trough, is forgotten.
Promise of Second Green Revolution:
The growth trends in the production of food grains and agriculture sector as a whole were quite worrisome during 90s and on the threshold of the millennium the farmer felt threatened due to shrinking income trends and huge indebtedness. The situation assessment survey undertaken by the National Sample Survey Organisation during their 59th round indicated devastating situation. About 40 per cent of the farmers felt that they must leave agriculture for better profession. The growth rates were not very encouraging and so also the trends in production. As a result the number of suicides in certain states started increasing and creating a very distrustful situation. A special meeting of the National development Council was called and steps were taken in order to give full attention to the agriculture sector. At the same time of Farmers Commission was established under the Chairmanship of Dr Swami Nathan and the Commission under its recommendation strongly argued for Second Green Revolution. This promise of Second Green Revolution is easier said than done as there are large across region differences in the country. As we can see from table 1, Indian agricultural experienced a long term growth rate in its production trends in the range of 3 to 3.5 per cent, and that may not be enough for the agriculture sector to promise good returns to the farmers. The stagnation in the net income generated out of agriculture has been noted and this was leading to impoverishment in the agriculture sector. Therefore, the target taken to double the farmer’s income in the coming decade’s most welcome target and that would sort out many of the issues in the farming sector. Even during last two years, the farming sector is undergoing very distrustful situation both due to natural calamities and absence of long-term policies. It is not that India does not have good policy documents, however, many of them have stayed far distance from the implementation desk. For example the Agro Climatic Regional Planning, Rashtriya Krishi Vikas Yojana, National Commission on Farmers, and Agricultural Policy Document of 1999 – 2000 and many such documents. Our major challenge therefore, is to understand the weak and strong spots in the Indian agriculture and accordingly prepared policy which is regionally differentiated across the country, by providing incentives for growth to the promising regions and plug-in the weak points of the lagging regions. Unfortunately, this has not been done and therefore, we see a continuous long-term trend in the lagging regions and concentration of poverty as against a respectable growth in the promising regions. This second Green Revolution therefore has to concentrate on these two groups of regions and especially tapping the potential which has been very neatly explained recently in Making of State Agricultural Policy.
Farmer’s Income Trends:
The focus of the present policy has been on Doubling of Farmer’s Income and that requires first our understanding of the long-term trends in the farmer’s income. What has been observed in the analysis of CACP data by Narayanamurthy in 2013, is not very encouraging. In fact all years the net income of the farmer has been stagnating, even though there are positive and increasing trend is seen in the Gross Value of Production at an aggregate level. In figure 2 below, it is seen that the net income of the agricultural household is more or less stagnating over years and at the same time the farmers confront an increasing trend in The Consumer Price Index for Agricultural Labourers. The result of this divergence between the two trends leads to impoverishment of the farm households and compels them to go out of agriculture. Therefore, it is not surprising that 40 per cent of the farmers indicated in the NSSO round that they would like to quit farming. This catch 22 situation is leading to severe distress and during 1991 and 2011 more than 5 million cultivators have left agriculture. In order to meet this challenge of doubling of the farmers income therefore, we need to focus on the cost of cultivation and reduction in the cost of cultivation or subsidising on the components of the cost of cultivation may help the farmers to increase their net take-home income.
Figure 2: Agricultural Value Added per Worker and CPIAL: 1986-2012 (1986=100)
Source: Author’s Own calculations Based on CACP data.
Increasing Cost: The Villain:
It was noted that increasing cost is the villain in the entire situation. After the Green Revolution of mid-60s, the cash component in the cost of cultivation of the farmers has been increasing significantly. The dependence on fertilisers, pesticides and purchased inputs has increased significantly and the dependence on these inputs puts the farmer at the receiving end. At the same time the prices of the purchased inputs are also increasing at a rate faster than the rate of growth in the productivity. The natural outcome of these divergences in the growth of fact the prices and product prices results in the shrinking of the net income of the farmer. More than that the farmer is today more worried about the bargaining power that they confront in the markets. Farmer has to confront the factor market and the product market. In the factor market which includes fertilisers, pesticides, new varieties of seeds, irrigation charges and labour charges. Prices of all these are dictated by the suppliers and hence farmer remains as the price taker in the factor market. Similarly, in the product market too, the farmer enters with flimsy bargaining power as the prices are decided by the operating cartels in the market. As a result, the policies have to be directed towards reducing the cost of cultivation or providing the farmers sufficient support in order to wipe off the effect of increasing prices in the input markets and cost of cultivation.
Prices and Market Sector:
It is no secret and rocket science to understand that when the onions are being sold in the open market at Rs 100 per kilogram, the farmer hardly gets Rs 15-20 per kilogram and the rest of the money system market intermediaries. Therefore, the dart thrown at the goal of ‘Doubling the Farmer’s Income’ is totally misdirected towards increment in productivity and production. It is the basic principle of economics that when the supply in the market increases prices collapse and therefore, if the policy focuses on increasing productivity and production, naturally the prices in the market would collapse and the farmer instead of getting incentivised, confront severe distress. From the economics point of view therefore one has to concentrate on the institutions governing market and prices and bring significant reforms in these two sectors.
Whither New Good Policies:
. There have been many policy documents issued by the Planning Commission and programmes undertaken like National Rainfed Area Authority, Watershed Development Programmes of different vintages, Marketing Reforms Programmes, Farmers Self-Help Groups, and many more. None of these however, produced the results as expected and some of them have been buried in the history with huge investment going down the drain. Agro Climatic Regional Planning and National Watershed Development Programmes for the Rainfed Areas are two prominent examples. No one ever asked accountability of drafting these programs and pouring in huge resources. Criticising the past mistakes may not help to reach the new policy goals and therefore, it is essential to work on a succinct policy document in order to reach the desired goal.
There are few important aspects on which the new policy should work in a focused manner. First among these is to provide institutional instruments to increase bargaining power of the farmers in the factor as well as product markets. Second, it is necessary to work on the prices sector and the marketing infrastructure. Alternatively, direct payment system or an income support scheme can be considered. This is largely prevalent in the European Union. The direct payment system involves compensating the income loss to the farmers due to price or yield collapse at the pre-decided price or market price during that year. The implementation process and modalities of this scheme are quite complex in Indian context. The second alternative is the income/price linked insurance scheme. These types of support schemes are under operation in many countries especially Canada, US and France. Under the Income Support Linked Insurance Scheme, it is envisaged that the farmers participating in the scheme (especially the Paddy and Wheat growers) will be guaranteed an income calculated by multiplying the product of average yield of the preceding three years and the market prices. Third option relates to operations of forward/future markets through establishing commodity boards for various commodities. This can be one of the important alternatives. The forward markets can undertake large purchases and sale the commodities that will allow smooth flow of the commodities in the market thereby reducing the loss due to fluctuations. This will also keep in control the prices and totally avoid violent price fluctuations. Future markets have been operating in the country and we have a Forward Market Board. The commodity boards on the lines of Wheat Board of Canada and Tea and Coffee Boards of India that work independently and autonomously, could be quite useful in keeping the prices under control and managing domestic trade.
Functioning of the agricultural markets and their interface with the market intervening institutions is another problematic area. A model APMC act was circulated among states and discussion was there to revise the act. A decade has passed over that, the Act is adopted by many states but not implemented in the full decade. The probable areas that need reform are I) Infrastructure creation as well as proper use of infrastructure, II) Process of grading and removing the inefficiencies in that, III). Process of auction and the probable nexus between the traders, IV) Reducing the dependence of the farmers on the traders and breaking the interlocking of the credit and product market. In addition to these the monitoring of the prices and a proper information system is required in all the APMCs. Thus reforms at APMC level should take priority over other factors.
A Case Study of a Successful Farmer
Mr. Kailash Murthy started working in agriculture in his farm near Kollegal, in the year 1984, after a successful span of working in Banking sector and a good career as a National level player. Initially, he followed all the recommendations given in the package of Practices given by Agriculture University with in a span of 4 years realized that, there are many changes taking place that included: i). depilation of soil fertility demanding more fertilizers; ii) Ground water depletion; iii) New pest attacks and pests started developing resistance to pesticides; iv) His cost of cultivation was increasing every season in geometric proportion. In the year 1988 he read “One Straw Revolution” by Masanobo Fukoka and since 1988, and since then he started experimenting in agriculture by cutting down on Cash Outflow on Cost of cultivation. His experiments included cultivation of different crops like Banana, Mango, Papaya, Coconut Arecanut, Sapota and among food grains Paddy. His farm has now realized: Increased Production of all crops; Soil and water conservation; Retained and incremental soil fertility; Biological control of pests and diseases, along with good Bio-diversity. In the year 2009, he requested agriculture scientist from different research centres to study merits and demerits of his method of cultivation practices. He feels that for Banana to develop pest resistant variety that will have natural biological control of control pests and yield better. Natural farming can double the production and conserve ecology at the same time address climate adaptability. His farm today has a production of 16-30 tons of Banana per Acre and 30-40 tons of Papaya. Besides fruit crops he has developed a new method of Paddy Cultivation with broadcasting and using sunlight and light irrigation. Paddy production on his farm is comparable to any of the demonstration farms.
The advantages of natural farming are quite a few and we overlook many times these long-term advantages to the environment and the farmer’s life. These include initially water saving and groundwater recharge. It requires less labour power and no fertilisers or pesticides. Therefore, the cost of cultivation goes down and consequently the farmers’ net income increases. Natural farming also helps in preserving soil fertility and in fact enhancing the fertility over years due to large organic content lower back in the soil. It helps to retain biodiversity in the field and reduction in release of Methane and Nitrous Oxide in the environment thereby helping to control Greenhouse Effect. Farmers can grow three crops in the year and conserve water in addition to saving on village sites, pesticides, and fertilisers. Ford will be non-contaminated and free of chemicals. This intervention therefore, will go a long way in retaining good health of the farm sector and income flow to the farm sector.
