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The continuing increase in food prices is a mater of great concern and the problem is real one. During the past nine months, food prices have risen by 50 per cent, threatening global stability. Various international organizations, such as The World Bank, International Monetary Funds, United Nations Food and Agriculture Organization has warned that rising food prices threatened to wipe out a decade of efforts to combat global security.
Social unrest could spread to sub-Saharan African countries where 50 to 60 per cent of household income is spent on food. The causes are plenty such as droughts, push to use bio fuels made from corn to reduce dependence on fossil fuels, increased demand for meat and dairy products from richer Asian countries and so on. These explanations highlight external causes but totally ignore the causes rooted in the policy that have led to stagnation of agricultural sectors.
Hunger is caused not by high international food prices, but by local conditions, especially rural poverty linked to agricultural productivity. Indeed the story of Indian agriculture has been a story of ill conceived and quite often inappropriate policies. Besides the weather induced fluctuations, what ails the growth of agriculture sector has been reduced capital investment and plateau of productivity of major crops. Growth of Food grain production has fallen from 3.2 per cent during 80's to 1.1 per cent during 90's.
More importantly, the growth of food grain production remained less than the population growth. Furthermore, the deceleration was much more after 1996-97 and growth rate remained less than one percent. Hence country started facing severe supply side problem since mid 90'swhich become acute by the turn of century. This happened because the environment around agriculture has dramatically changed but many of the policies have not kept pace with these changes.
Sustained agricultural growth is a sine qua non for accelerating the pace of Indian economic growth. But sustained agricultural growth, among other things, requires a constant expansion in its productive capacity, which inter alia implies continuous increase in capital formation in agriculture. Capital formation in agriculture comprises asset creation, directly and indirectly, for augmenting production.
Land reclamation, preventing soil erosion, irrigation and flood control directly add to the existing stock of capital. Inputs such as equipments, animals, fertilizer, storage, transport and communication all these are important components of capital formation. Investment on science and technology and training are equally important segments of capital formation which improve the quality and productivity and shift the production frontier.
Today, increased investment in agriculture has added relevance in India particularly due to a near exhaustion of the possibility of bringing more land under cultivation, implying thereby that the increase in agricultural production has hereafter to be secured through a sustained acceleration of yield per unit of land. Again what is equally important is the existing productive capacity as well as every addition to it has to be utilized in the most optimum and efficient manner. Moreover care has to be taken to see that the overall structure of investment in agriculture and periodic changes in it are, among other things, both growths promoting and employment generating.
A mere 5.8 per cent share of agriculture in gross capital formation for a country whose 70 per cent population depends upon agriculture and nearly 20 per cent of the GDP comes from agriculture, is nothing less than a crime.
No doubt, technology will bring about an improvement in agricultural productivity and competitiveness, but more important is how the technology is driven by market demands? India invests a substantial amount of money in the agricultural sector but a large share goes to subsidies for fertilizer, electricity, water and Minimum Support Price and so on. The spending on subsidies is about 4 times grater than the spending on investments. Hence agricultural scenario is dominated by features having short term impact rather than lasting and long term. This needs to be reversed.
A highly regulated market discourages private investment in rural areas. Since agricultural sector is becoming more responsive to market demands, public-private partnership have an opportunity to play a larger role. This is likely to improve agriculture productivity, competitiveness and supply response and will be critical in responding to the new challenges of the agriculture sector.
Commodity exchanges may be answers but once again we need to have competition among multiplayer. There is no shortage of money, but proper policy framework should have been in place. The retail investors are a big chunk in these days so allow them to be participants also. Instead of focusing on Cricket and Bollywood, government should divert their attention to undernourished and health needs of people. Every Government of India as well as states Governments, past or present, has to share the blame for the current impasse. Indeed, we are paying the price for neglecting this sector long. Will our policy makers ever confronts to reality or would continue their lackadaisical way.
Dr Gursharan Singh Kainth is the Director, GAD Institute of Development Studies, 14 Preet Avenue, Majitha Road, PO Naushera, Amritsar 143 008
Email Id: idsasr@indiatimes.com
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