Cereals in basket case

Importing wheat for India’s food consumption makes complete sense from the point of view of the Indian economy. In terms of its comparative advantage, it makes sense for the country to import capital and resource intensive crops like cereals. If India imports wheat from countries like the US, Canada, Latin America and Australia by exporting high-value, labour-intensive commodities like vegetables, fruit, flowers and herbs, we will benefit due to gains from trade. The world has changed from the cold war days when India needed to be self-reliant in the production of foodgrains and had to invest heavily in cereal production. Then, that strategy yielded beneficial results, but today this strategy has become a liability. It has become too expensive and inefficient for us to continue on the path of trying to promote cultivation of cereals through a plethora of subsidies on fertilisers, power, water and seeds, and then buying vast quantities of cereals at above-market prices to fill government granaries.

Over the next 30 years, as India grows, the need for land for industrial and urban uses will increase. There will therefore be increasing pressure on land. Also, as the road network, industrial parks and SEZs expand, marginal agricultural land will no longer be available for cultivation. China, for instance, is already making the transition. It is turning into a food importer and saving its land for other uses and paying for food imports by exporting manufactured goods.

Today “food security” can be achieved without growing all the wheat and rice we need. On agricultural land, we need to turn to higher value crops by developing marketing, research, support and infrastructure for them. Import of agricultural products needs to be decanalised, allowing private traders to engage in trade and import of foodgrains. Both domestic and foreign trade must be liberalised by removing barriers to free movement of agricultural commodities. The most difficult challenge will be for the government to remove the considerable subsidies being handed to farmers to produce cereals. Unless we do away with incentives for farmers to produce cereals, no serious move can be made to diversify cropping patterns. Today a new notion of food security and a new vision are required.