To the market, softly

But there is little emphasis on markets, skill development, expertise creation, extension systems, agri-related laws and regulations, etc. It is strengthening this aspect that will take Indian agriculture from the 17th to the 21th century. To put it in another way, if left unaddressed, growth will remain low, inequalities will increase, Naxalites and caste-based senas will increase, and food-grain imports will once again become a standard feature, if we do not quickly get our act together.

Much more important than hard infrastructure in the agriculture sector, is the soft infrastructure: namely, mechanisms that encourage trade, improvement of skills, technology adoption and availability, knowledge and information availability, and good quality advice to the individual farmer. Many have written about this, but the government incorrectly believes that the solution is to build hard infrastructure and provide easier and more credit. The government’s own data indicates in many different ways that hard infrastructure and credit by themselves cannot result in a dynamic agriculture sector.

Of the masses of data on the agriculture section in the economic survey, there is one particular table that reveals the gist of the problem. This table (Table 7.6) is drawn from the Planning Commission, and the country must thank the person who put it together.

The table identifies 13 major items of interest and follows how they have grown since the 1980s. Technology (as measured by newer varieties of paddy, wheat, mustard, groundnut and maize); capital stock — public, private, and total; irrigated area — gross and net; cropped area; cropping intensity; electricity consumed in the agriculture sector; area under fruits and vegetables, NPK fertiliser use; and credit to the agriculture sector.

Consider the patterns. One: apart from credit, each and every one of these items have shown a fall in the growth rate in recent times; that is, 1996-97 till present vis-a-vis the period 1991 to 1996-97. Hence growth has fallen for land area, irrigated land area, use of fertiliser, use of better seed varieties, electricity, capital stock — both in the public and private domain, and cropping intensity.

Two: this deceleration is not a new phenomenon and has been occurring since the early nineties. Growth in public sector capital stock, electricity consumption, fertiliser consumption, improved seeds (technology), and cropping intensity was lower in the early nineties vis-a-vis the eighties.

Three: throughout this period credit growth has been accelerating — from 3.7 per cent annually in the eighties to 7.5 per cent in the mid-nineties to 14.4 per cent in the late nineties and early 2000s.

Here lies the crux of the matter. If use of new seeds, fertiliser use, irrigated land, cropping intensity, and private capital stock growth are not rising fast enough, then where is this credit going? To put it another way, what is the Indian farmer doing with the extra credit if he is not using it in seeds, fertiliser, water, capital or land?

One could take this argument into the leakages and corruption domain, but let’s take the best-case scenario that the farmer is actually getting all this money. In this case, the farmers are in all likelihood using the credit to smoothen their liquidity position and as a consequence are better able to spread out their consumption. This, no doubt, would be an important contribution in making the farmers’ lives easier.

But the point is, greater credit by itself does not lead to improved production or productivity. It can and does improve accessibility to better inputs, but it cannot ensure their use. Take seeds as an example. The economic survey says 80 per cent of the farmers continue to rely on farm-saved seeds. But improved seeds would require changing farming practices, timely access to irrigation, adequate and appropriate use of fertilisers and pesticides, etc. Using those seeds would require a well-functioning extension system in the public domain, or advisory services in the private domain. Merely building canals would not be enough, the farmer would need to be convinced that water flows through them when it is required. Fertilisers are now more or less available across the country, using them inappropriately causes harm. On top of that, marketing and trade hurdles further limit him. Credit may enable a farmer to purchase new technology inputs, but he needs the knowledge, skills, and selling mechanisms to utilise them.

It is here where we are falling short. Government documents do list out the various initiatives on these fronts ranging from reforming the APMC Act to setting up “gyan choupals”. But there is a large gap between the claims and the scale of action required.

For all its flaws, there is little doubt that this government does aim at injecting a new dynamism in the agriculture sector. This requires a greater emphasis on putting the soft infrastructure in place where the agri-sector is concerned. And unlike in the IT sector, dynamism in the agri-sector will have direct ramifications on the election results.

The writer heads the economic research firm, Indicus Analytics laveesh@indicus.net