Loan waiver: Will the farmers gain?

The finance minister has delivered a Rs 60,000 crore (Rs 600 billion) handout to farmers. How much of that will go to the farmers who are truly debt-stressed is a moot question.

But is this the tonic that our farmers need in order to restore agricultural growth to the 4 per cent plus level that the Eleventh Plan wants? Are we addressing the right problems in our agriculture and food policy?

Over the past decade the agriculture component of GDP has grown at 2.5 per cent, with some signs of acceleration in the last two years to over 4 per cent.

Foodgrain production, however, has not kept pace with population growth and the consumption of cereals has declined from 468 gm per capita per day in 1990-91 to 412 gm per capita per day in 2005-06 and of pulses from 42 gm per capita per day to 33 gm per capita per day during the same period.

Some may attribute this to a shift in consumption patterns with rising incomes except that the data from the National Family Health Survey conducted in 2005-06 suggest high levels of under-nutrition.

According to the survey, almost half of children under five years of age (48 per cent) are stunted and 43 per cent are underweight, including 24 per cent who are severely stunted and 16 per cent who are severely underweight.

Among adults, 36 per cent of women in the age group 15-49 in India have a Body-mass Index below 18.5 indicating chronic nutritional deficiency, including 16 per cent who are moderately to severely thin. Nationally, 34 per cent of men in the age group 15-49 have a BMI below 18.5, and more than half of these men are moderately to severely under-nourished. Our basic problems of nutrition have not been resolved and we need to maintain a focus on the staples of our diet.

Foodgrain production increased by 8 per cent over the ten years before 2006-07, almost entirely because of an increase in yields. Some part of the explanation for this slow growth lies in market conditions. According to this year's Economic Survey, the terms of trade moved against agriculture by about 1.7 per cent per year (for the period 1996-97 to 2003-04).

But the Survey also reports that input growth into agriculture was particularly slow in the decade before 2006-07 -- 1.2 per cent in net fixed capital stock, 0.5 per cent in irrigated area, 2.3 per cent in fertiliser use and, what comes as a real shock, nil in the yield potential of new varieties, a factor which grew at 3 per cent or so in the decade and a half prior to 1996-97. This year promises to be better with foodgrain output projected to rise to 219-220 million tonnes.

Foodgrain stocks fell below the buffer norm by July 2005 and have remained below since then. The wholesale price index for foodgrain shows, quite surprisingly, only a 3 per cent increase in 2007-08 till December. But the data on consumer prices collected by the Price Monitoring Cell in the Department of Consumer Affairs tell a different story.

Their data for retail prices in Delhi for February 8, 2008 (the latest available as of now), show a one-year increase of 13 per cent for rice, 8 per cent for wheat and well over 20 per cent for various edible oils. At the folk-opinion level, the situation is even worse.

If the monsoon is bad, the government may indeed be in for a torrid time with high world prices, low food stocks and a run-down PDS. So even if its horizon is limited by the impending election, the government had better worry about our food economy.

But, say the market fundamentalists, in an open economy you can import what you can't produce. However, the world food situation is quite precarious at present. For the first time since the early seventies, world foodgrain stocks have fallen below the equivalent of 60 days of consumption.

The last time stocks were so low, world prices doubled. The new demands on corn for ethanol and the rising demand for animal feed are reducing the amounts available for direct human consumption.

As a result, world food prices have moved northwards with rice and wheat prices crossing the $450 a tonne mark in February 2008 as against the minimum support prices for 2008 of approximately Rs 10,000 per tonne for wheat and rice. So if the government has to import wheat or rice, it will have to allow prices to rise at a phenomenal rate or find really large amounts of budgetary resources to subsidise imported supplies.

In the short run, there is little that the government can do except some contingency planning to lubricate the rusty PDS and allowing for some fiscal slack to subsidise imports in case the 2008 monsoon fails to protect the UPA's electoral prospects.

The real issue is the medium term. The difficult world supply situation is expected to continue for three to five years. The challenge, therefore, is to revive the interest of farmers in foodgrain production. Agronomic innovations that get us out of the zero growth in yield potential and foodgrain prices that can compete with alternative crops, more public investment in irrigation and other inputs are the obvious answers.

We must consolidate and advance the green revolution in North West India, push for a similar advance in Eastern India and at least make a beginning in rainfed agriculture in the dryer regions. When it comes to priorities, one can only commend the five-point programme advanced by Dr Swaminathan* recently where he asked for:

1. Conservation of prime farmland for agriculture and soil health care;

2. Water harvesting, management and conjunctive use of surface, rain, ground and treated effluent water and safeguarding water quality;

3. Credit and insurance reform;

4. Low-risk and environmental-friendly Green Technologies and the provision of the needed inputs at the right time and place and at affordable cost;

5. Assured and remunerative marketing.

The loan waiver will not help in any of these areas, not even in credit reform. Nor do we need yet another pompously titled Central scheme run by Krishi Bhavan apparatchiks. Decentralisation of responsibility and authority is the need as the locus for action is in the State administrations.

The Centre must focus its attention on energising the research system, removing input bottlenecks and providing the sort of inspired leadership that the three great Tamilians, C Subramniam, B Sivaraman and M S Swaminathan did in the sixties. Alas, such leadership is nowhere in sight.

The Crisis of Indian Agriculture by Dr M S Swaminathan Hindu Online Edition, August 15 2007