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Budgeting for a well-fed, self-reliant India

Just as in the defence sector, India needs to reorient its approach to agricultural self-reliance with a great focus on R&D

If India wants to be fully self-reliant in food, it is generally agreed that it must invest at least 1 per cent of its agri-GDP in agri-R&D. (C R Sasikumar)

In the backdrop of the ongoing war between Russia and Ukraine, Prime Minister Narendra Modi has emphasised the need for India to be atmanirbhar (self-reliant) in defence equipment. Finance Minister Nirmala Sitharaman also pointed out that hardly any defence equipment was bought during the 10 years of UPA rule preceding the Modi government. We may add a footnote here that for the Amrit Kaal (next 25 years) that the Modi government has announced, we need to be self-reliant not just in missiles (defence equipment) but also in meals (food). As the old proverb goes, no army can march on an empty stomach. “Jai jawan, jai kisan” (salutation to the soldier and salutation to the farmer) was the slogan given by Late Lal Bahadur Shastri, and Atal Bihari Vajpayee added “jai vigyan” (salutation to the scientist) to that. Focusing on science and scientists is critical for attaining self-reliance today.

But self-reliance in food does not mean that we have to produce everything ourselves at home, irrespective of the cost. Its true meaning lies in specialising in commodities in which we have a comparative advantage, export them, and import those in which we don’t have a significant comparative advantage. This is not an either/or situation — it is about the degree of self-reliance a country wants to have following the principles of comparative advantage. If some protection is needed for new areas to develop (infant industry argument), that may be okay. But one should not aspire to be self-sufficient behind high tariff walls. That would only breed inefficient and high-cost structures that cannot compete globally.

What is it that gives a country an edge over others in attaining comparative advantage? In the area of agriculture and food, our research reveals that it is the efforts and resources that a country puts in agri-research and development (agri-R&D), its extension from lab to land, investing in irrigation to boost yields, efficiency in marketing and processing the produce, and taking it from farmers’ fields to consumers’ table or export destinations.

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Let us focus for the time being on agri-R&D. There is ample literature to show that agri-R&D raises total factor productivity and makes agriculture more competitive globally. Sometimes, the basic R&D to develop “miracle seeds” is done outside the country, but those seeds can be imported and adapted to local conditions with in-country R&D and scaled up for adoption at farmers’ fields. The Green Revolution was such a case.

If India wants to be fully self-reliant in food, it is generally agreed that it must invest at least 1 per cent of its agri-GDP in agri-R&D. But the budgets of both the Union government and the states put together reveal that this expenditure on agri-R&D and education hovers around 0.6 per cent of agri-GDP, with a roughly equal share of the Centre and all states put together. This is way below the minimum cut off point of 1 per cent and government policy must urgently work towards raising this substantially.

So far, India has achieved self-reliance in agriculture by producing a reasonably large amount of food, and also being a net exporter of agri-produce. The high dependence on imports for edible oils — hovering around 55 to 60 per cent of consumption — however, remains a concern. India’s potential to emerge as a significant exporter of agri-produce remains untapped.

The Economic Survey (2021-22) explicitly highlighted the correlation between spending on agri-R&D and agricultural growth. Our research also shows that every rupee spent on agri-R&D yields much better returns (11.2), compared to returns on every rupee spent on say fertiliser subsidy (0.88), power subsidy (0.79), etc. Yet, the competitive populism in Indian democracy leads to sub-optimal choices in the allocation of scarce resources. More on safety nets like food subsidy and MGNREGA or on income support and subsidies for farmers, but very little for agri-R&D (see figure).

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With this type of resource allocation in the Union budget of FY23, which is heavily tilted towards safety nets and subsidies, India cannot develop cutting-edge technologies to attain competitiveness at a global level.

Can the private sector come forward and help India attain supremacy in agri-R&D and innovation systems that make the country not just atmanirbhar but a hub for exports and agri-technology?

There are some global and local companies like Bayer, Syngenta, MAHYCO, Jain Irrigation, and Mahindra and Mahindra that spend a considerable amount of their turnover on R&D programmes and developing high-tech inputs. The USP of these companies is that they develop technology that increases productivity while addressing the current challenges of limited net sown area, depleting water resources, vulnerability to climate change, and the need to produce nutrient-rich food.

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The need of the hour is to focus on increasing expenditure on ARE and other development projects, which can aid in the sustainable growth of the agriculture sector. India’s budget allocations in the agri-food space should thrive on creating “more from less”. The financing should focus on altering the current atmosphere of a high incidence of hunger and malnutrition, keep a check on the mismanagement of natural resources and mitigate climate change issues. There is a need to work on building long-term sustainable solutions that have an aggressive approach to implementing relevant policies and developing new ones. India’s current budgetary allocation strategy and trends need to be reoriented to ensure that there is more room for R&D expenditure by the government. In addition to this, the government should come out with policies that incentivise private companies to expand their R&D programmes and invest more financial resources on development projects, which have the potential to overcome the challenges of the current agrarian setup of India.

This column first appeared in the print edition on March 28, 2022 under the title ‘From missiles to meals’. Gulati is Infosys Chair professor for Agriculture and Khurana is researcher at ICRIER.

First published on: 28-03-2022 at 03:30:59 am
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