Farm in our logic

Every scare about farm output 8212; there is now an immediate weather-related challenge, as reported in this newspaper 8212; can potentially start breast-beating about food security. Truth is the agricultural problem has several dimensions. Classic agriculture 8212; food-grain output 8212; cannot grow at 4 per cent. That kind of growth requires commercialisation and diversification. Policy should be designed to move people out of agriculture and farming away from food grains; no administered price distortions in favour of rice and wheat. Of course, the transition has to be managed.

Risk instruments diversification increases exposure to risk available now are inadequate, 90 per cent of holdings are sub-optimal less than two hectares, only 40 per cent of land is irrigated and some products like edible oils, cotton and dairy are price uncompetitive globally. The farm sector faces a profitability squeeze, with costs rising faster than prices. That8217;s why suicides are concentrated among small landholders rather than farm labourers. Farm reform therefore will have to include, among other things, creation of credit and insurance options as well as of land markets tenurial and ownership, building rural infrastructure with decentralised management and not just creation of assets, changing the composition of public expenditure away from input subsidies and revamping research in dryland crops. The problem is that most of these are state, rather than Central, subjects.

From the consumers8217; perspective, price fluctuations in farm products would have been less 8212; the seasonal effect apart 8212; had forward markets had more reach, had trade policy still not insisted on canalisation for farm products, had contract farming been common and had retail trade been largely organised big stores offer lower basic goods prices by sourcing better. Right now, intermediaries who exist because the field-to-consumer chain is unreformed are thriving on speculation based on expectations of future price increases. And the government periodically panics; pulses today, may be onions again tomorrow. Most solutions are knee-jerk. The fact that they don8217;t work is compensated, as far as the sarkar is concerned, by the fact that they are easier to implement than reforms.