From Plate to Plough: Modi sarkar’s toughest test

It is agricultural reform. Without focus on agri GDP and a sectoral overhaul, ‘sabka saath, sabka vikas’ will remain a slogan

Written by Ashok Gulati , Shweta Saini | Published:June 8, 2015 12:11 am
GDP growth, agriculture, agri-GDP, agriculture workforce, MeT, Modi sarkar, Jan Dhan Yojana, Ashok Gulati, Shweta Saini, india news, nation news, news The current system of crop insurance is also patchy, time consuming and corrupt.

When the provisional estimates of GDP growth for FY15 were released last week, showing an overall GDP growth of 7.3 per cent but agri-GDP at 0.2 per cent, one wondered whether one should celebrate or cry, or do both simultaneously. The reason is simple: agriculture still absorbs about 49 per cent of the workforce, and an average household still spends about 45 per cent of its expenditure on food. And it is not just in FY15, but during the first three years of the abandoned 12th Plan, the average agri-GDP growth works out to a paltry 1.7 per cent, less than half of its target of 4 per cent. So, if agriculture is limping and farmers are facing deep stress, how could one realise the grand vision of “sabka saath, sabka vikas”?

Now, the official Met (IMD) has revised its forecast for the current monsoon to 88 per cent of the long period average (LPA), down from 93 per cent in the first forecast. Twelve per cent below the LPA could mean an impending drought, almost the same as experienced during the monsoon of 2014, although the government did not officially declare it a drought for reasons best known to itself. This back-to-back drought, technically a deficit of more than 10 per cent rainfall compared to the LPA, has happened only thrice since 1900 — in 1904, 1905; 1965, 1966; and 1986, 1987. This surely does not auger well for the Modi government, and could be its mega challenge.

What is it that the Modi sarkar can do in the short run, and also for the medium to long run, to put agriculture back on track and bring smiles on the faces of our farmers? The standard drill in the government is to prepare a contingency plan, asking state governments to ensure ample supply of seeds, fertilisers and fodder, and give some subsidy on seeds, diesel, fodder, etc, if need be. How much of it reaches the millions of farmers varies from state to state, but the overall situation remains grim, although the Central government says it is fully geared to face any problem resulting from drought.

GDP growth, agriculture, agri-GDP, agriculture workforce, MeT, Modi sarkar, Jan Dhan Yojana, Ashok Gulati, Shweta Saini, india news, nation news, news (Illustration by Pradeep Yadav)

The current system of crop insurance is also patchy, time consuming and corrupt. It needs a major overhaul, from raising the sum insured to at least 80 per cent of expected income to using latest technologies, from digitisation of land records to satellites, drones and all-weather stations to assess damages, and Aadhaar-based bank accounts, where compensation can be wired within days of the damage, and not six to 12 months, which is the current practice. The prime minister will have to lead this transformation of crop insurance with high priority, as he did for the Jan Dhan Yojana and social security schemes. Else, this will remain in limbo for years and farmers will keep suffering.

But the real answer to droughts is developing our water resources and learning to manage them well. In reality, however, the water sector is already in deep crisis, and this crisis is going to deepen unless bold and urgent steps are taken to reform it. The culture of free (or highly subsidised) water and power is depleting our groundwater fast, and surface irrigation schemes are embroiled in long delays, with a thin spreading of resources due to the paucity of funds. And whatever funds are allocated, a substantial part of that simply disappears like water disappears in sand, without any tangible increase in irrigated area. No wonder, even after spending lakhs of crores of rupees on irrigation, more than half of India’s cropped area is still rain-fed. With climate change and erratic rainfall, this rain-fed area is exposed to high risk, and this risk is going to become increasingly more intense.

But despite being water-stressed, India is a net exporter of water. One kilogram of rice uses 3,000 to 5,000 litres of water for irrigation, depending upon where it is being grown. In the Punjab-Haryana belt, it inches towards the upper limit of about 5,000 litres of water for every kilogram of rice. In FY15, India exported more than 10 million tonnes of rice, which means anywhere from 30 to 50 billion cubic metres of water. It is almost a similar story for sugar, where one kilogram of sugar uses about 2,000 litres of water. If we have to learn to use water more rationally, there has to be economic pricing of water and power. But none of the state governments will be willing to touch it, with it being a politically sensitive issue, especially in a drought year. The alternative for the Centre is to put, say, a 5 per cent tax on exports of common rice and sugar to recover a part of the subsidy that flows to these crops, and discourage exports of water-guzzler crops, in a way restricting exports of “virtual water”. But our policies are perverse, subsidising exports of sugar (read water).

Another key issue in a drought year is what happens to food inflation, and how consumers can be protected from spikes in food prices. The fundamental principle for that is to create an all-India market for all food products, keep the taxes and levies on food items to less than 5 per cent, compress the value chains by allowing direct buying from farmers, and have a liberal import policy to augment domestic supplies wherever there are shortfalls. Currently, there are ample stocks of wheat, rice and sugar. The problem is likely to emerge in the case of pulses, oilseeds and fruits and vegetables. In the short run, liberal imports can help, but in the medium to long run, we need to invest in raising the productivity of these on a per unit of land and water basis.

This is a huge agenda for reforms in agriculture. It requires massive resources, from resurrecting crop insurance to stepping up irrigation to investing in markets and value chains. And time is running out. How will the Modi government garner enough resources to accomplish these?

Humongous food and fertiliser subsidies (more than Rs 2,00,000 crore a year) hold the key to this puzzle. The management of food and fertilisers hides massive inefficiencies and leakages in the system. Streamlining these through direct cash transfers can unlock at least Rs 40,000 to 50,000 crore a year, without giving up on the objective of helping consumers and farmers. It is these savings that can be used to overcome various bottlenecks in agriculture.

Will the Modi sarkar have the time to focus and undertake these bold reforms? Only time will tell.

Gulati is Infosys chair for agriculture and Saini is consultant, Icrier

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    Abhilash kumar
    Jun 8, 2015 at 7:45 pm
    Excellent piece of writing ,sir. We need more of you
    Reply
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      A. Waraich
      Jun 8, 2015 at 1:52 pm
      That's what ! As long as you keep glorifying poverty and keep the farmers with meagre 1 hectare per capita land, nothing is going to change. These parties are just politicising the issue. I really want the BJP to go ahead and promote the land bill as harbinger of growth, but with proper urance of rehabilitation and compensation. But the opposition just wants politics at the stake of development! I being a farmer's daughter don't mind giving up our land if it will add to the growth of the country, provided we get fair compensation and the environment is not degraded and most importantly the land does not go to vested interests!
      Reply
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        A. Waraich
        Jun 8, 2015 at 10:53 am
        on the one hand you suggest to solve problems of farmers. And then you say curb the exports of rice and sugar. In my view that would be really detrimental to farmers at ground reality. Belonging to a rural family, I have witnessed how the Modi govt's last year export quota on potatoes to curb inflation ruined the income which otherwise in past years was easily earned. The right thing is to make exports compeive, make irrigation sustainable and diversify the labour involved in agriculture to other sectors like manufacturing by enhancing skill development programs.
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          Deepak sharma
          Jun 8, 2015 at 10:11 am
          The share of agriculture in GDP falls as a natural outcome of modern science and technology. This happens because with increase in individual’s income. share of agriculture produce in consumption pattern of individual falls while share of consumer goods. electronics, car, petrol, electricity, traveling, entertainment, apparels i.e non agricultural items increases.The share of agriculture in GDP has fallen to 17% while 51% people are still dependent on agriculture. This has resulted into decrease in per capita land holding and income of farmer. 65% of farmers have less than 1 acre of land which is not sufficient to make a living. Childrens of small farmers can not live by remaining farmers. They must get jobs in manufacturing and service sector. The share of agriculture of agriculture in GDP will fall further. The percentage of potion depended on agriculture should be equal to share of agriculture in GDP. We are already late and far behind. But politician are not telling this truth to farmers. They are getting their votes by misguiding them and giving them subsidies which are leading farmers to dead end. Hence farmers should be made aware of this and efforts should be made to shift people from agriculture to manufacturing and service sector.
          Reply
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            Dr. Sonali
            Jun 8, 2015 at 8:58 am
            Perhaps another way would be to introduce agro-based industries in the villages. So value can be added at village leavel.
            Reply
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              hemkant
              Jun 8, 2015 at 12:21 pm
              In the name name of development and irrigation facility, the previous congress govt. almost monopolized water resources building large dams and canals.(Good scope for money siphoning out for everyone involved). This left the rivers dry, which were sources for large underground storage of water. When water from dam is not available, farmers opted for tapping water with the help of bore-well tech. which worsened the situation more now. The co-op movement , again led by congress people, went for extensive sugarcane farming, to make the factories rich and farmers more poor. All farmers started to grow cash-crop not thinking for water availability. Now today Indian farmers are facing worst days. The problem created in 70 years , can not be solved by any single measure, but an all-thought policy is required, and no govt., be of any party, can force the farmers to do what is best for other people and nation.
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                hemkant
                Jun 8, 2015 at 12:27 pm
                Not easy to run their. Needs good roads, water and electricity. This lacks everywhere in villages.
                Reply
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                  hemkant
                  Jun 8, 2015 at 12:24 pm
                  The right thing is to make exports compeive, make irrigation sustainable and diversify the labour involved in agriculture to other sectors like manufacturing by enhancing skill development . HOW ? All parties are opposing YOUR suggestion of diversifying agri. labour to manufacturing , by opposing the land bill!!!!!!!!!!!!!!!!!!
                  Reply
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