Harvesting the follies of the past

The biggest failure in the decade of economic reforms has been in agriculture, in spite of a string of normal monsoons. C.RAMMANOHAR REDDY on the farm sector's problems and prospects.

THE BIGGEST failure in the decade of economic reforms has been the abysmal performance of agriculture in spite of a string of normal monsoons. The growth rate of crop production has almost halved since the 1980s, farm productivity growth has declined, the expansion of agricultural employment has slowed... the list of failures is endless (as indicated in the accompanying graphs).

In response to criticism that successive Governments in the 1990s have done little for the farm sector, the new budget has announced a number of measures. A new scheme to establish ``agriclinics'' that will provide extension services, subsidised credit for construction of rural godowns, expansion of the Rural Infrastructure Development Fund and a removal of the restrictions on the inter-State movement of grain are some of them. Innovative as a couple of them may be, taken together they promise more than they will deliver. Most important, the budget proposals no more than skim the surface of a crisis that runs deep into the fields.

The challenges in agriculture have different faces in each region and in each crop. There is a common thread though. It is that the growth in crop productivity - the amount harvested from each hectare of land - has slowed across the country. Sluggish farm yields as the root cause of all the problems may seem like a paradox when the godowns are overflowing with cereals and farmers of many non-food crops are running into collapsing markets. But there is no paradox. It is the slowdown in the growth of wheat and rice yields that is forcing the State Governments of Punjab and Haryana to keep demanding a higher price for every quintal offered to the Food Corporation of India. They see a higher minimum support price as the only way to maintain farm incomes, but the result is the huge stocks built-up with very high prices that the FCI has to contend with. It is also a productivity slowdown in oilseeds, which has created a widening gap between domestic production and the demand for vegetable oil. This shortage has been bridged by large-scale imports but because the Government has not been very adept at fine-tuning import duties, a flood of imported oil has caused problems for diverse groups such as the coconut growers of Kerala and the cultivators of soyabean in Madhya Pradesh.

There are two important reasons for the failure on the yield front. One is the decline in both private and public investment in agriculture during the 1990s. Public capital outlays - in irrigation, agricultural research and land development - have fallen because the Central and State Governments cannot find the funds. Investment by the farmers themselves has increased in recent years but only in absolute and not relative terms. Farmers have not been able invest more because credit investment - not to mention working capital - has dried up. The banks report a growing volume of advances but all reports from the fields say that the agricultural credit system is yet to recover from the effects of the loan waiver of 1990. The official statistics of ever-increasing credit only reflect a roll-over of loans and a payment of interest.

The other reason for yields not increasing is that the quality of agricultural research and extension services which underlay the Green Revolution have deteriorated. Prof. Abhijit Sen, formerly Chairman of the Commission on Agricultural Costs and Prices, says inadequate Government funding is one reason for the deterioration. ``The funds that are now provided are sufficient only for payment of salaries, there is little left for equipment or testing.'' Prof. Sen also suggests that the failure of yields to increase rapidly in crops other than rice and wheat reflects the continuation of the 1960s and 1970s bias in Indian research - in favour of the two main cereals and against other crops such as oilseeds and pulses.

The budget does not really deal with either investment or research. The RIDF, which the Union Finance Minister, Mr. Yashwant Sinha, has claimed has been a success and therefore expanded, has sanctioned as much as Rs. 16,000 crores in the past five years but has disbursed only Rs. 7,000 crores. The agriclinics scheme will assist the establishment of private testing and extension services, but the bigger challenge of revitalising research remains unaddressed.

The debate on reforms and the farm sector is always lopsided. The ``other'' and silent crisis of agricultural and rural labourers is completely ignored. In recent years, the daily wage rates in agriculture have risen very, very slowly and farm employment in the 1990s grew at the slowest pace in decades even as work opportunities in rural India outside agriculture also increased at a lower rate. An emphasis on raising crop yields faster will yield many benefits for rural labour. Productivity-growth of a certain kind will increase the demand for farm labour and raise their wage incomes. That would increase the demand for cereals which in turn should prevent a build-up in stocks of the kind the country now possesses. There is no other way of dealing with the peculiar phenomenon of the food mountain that keeps growing although production of cereals in the 1990s increased no faster than population. Mounting stocks and falling prices will continue to haunt the farm sector as long as domestic purchasing power does not expand faster.

As the farm crisis has spread, imports have become the focus of public and Government attention. But, as Prof. Sen has written elsewhere, the protection that agriculture now enjoys in the form of customs duties is perhaps the highest ever in recent years and more than what industry is now getting. This is likely to go up further with the hike in duties announced in the budget. But while the fear of imports - now and with the impending removal of quantitative restrictions - may be exaggerated, Prof. Sen points out that what imports have done is to increase ``uncertainty'' amongst farmers even as they contend with problems on many fronts.

It is naive to think that the many challenges in agriculture can be resolved with the reforms now on the table such as freeing inter-State movement from controls and removing restrictions on trade stocks along with abolition of excise duties on processed foods and construction of more godowns. Freedom of movement, more storage facilities and processing of agricultural products will only tinker with the fringes because the crisis is really rooted in low and slow-growing crop productivity.

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