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LATEST NEWS UPDATES | How state can support farmers in a smarter way -Ashok Gulati and Prerna Terway

How state can support farmers in a smarter way -Ashok Gulati and Prerna Terway

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published Published on Oct 2, 2018   modified Modified on Oct 2, 2018
-Financial Express

While recently releasing the book, Supporting Indian Farms the Smart Way by Ashok Gulati, Marco Ferroni and Yuan Zhou, Arun Jaitley remarked that India needs a good blend of investments and subsidies in its agriculture policy. He said that, luckily, there are no severe constraints on resources to invest in rural areas, be it roads, water (irrigation), sanitation, and even housing. If he could include in this list of rural investments, agri-research and development (R&D) and quality education also, it can pay off handsomely in terms of reducing poverty and propelling agri-growth at a much faster pace than has been the case so far. This is a clear cut message of the book.

Most countries around the world support agriculture to ensure food security and/or enhance farmers’ income. India is no exception. The main policy instruments to support farmers in India include subsidised fertiliser, power, agri-credit and crop insurance on the input side, and minimum support prices for major crops on the output front. But a recent study done jointly by OECD and ICRIER estimated that trade and marketing policies of India have inflicted a huge negative price support to Indian farmers. The producer support estimate (PSE) for India works out to be a negative 14% of gross farm receipts for the period 2000-01 to 2016-17, primarily because of restrictive export policies (minimum export prices, export bans or export duties) and domestic marketing policies (due to Essential Commodities Act, APMC, etc).

The book, however, highlights that public capital formation in agriculture declined from 3.9% of agri-GDP in 1980-81 to 2.2% in 2014-15, but had recovered to 2.6% in 2016-17, while input subsidies on fertilisers, water, power, crop insurance and agri-credit have risen from 2.8% to 8% of agricultural GDP during the same period. This is the ‘dumb’ way of supporting agriculture as the marginal returns on subsidies are way below those from investments. The results show that expenditure incurred on agri-R&E (research and education), roads or education are 5 to 10 times more powerful in alleviating poverty or increasing agri-GDP than similar expenditure made on input subsidies. The attached graphic shows that, over time, a rapid increase in input subsidies has squeezed public investments in agriculture.

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Financial Express, 1 October, 2018, https://www.financialexpress.com/opinion/from-plate-to-plough-how-state-can-support-farmers-in-a-smarter-way/1332380/


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