Economic Highlights

New Delhi, 29 April 2011

ADB Warning

REVERSE FARM POLICIES

By Shivaji Sarkar

The Asian Development Bank’s (ADB) assessment on food inflation is a stern warning to India and its neighbouring Asian countries. The Bank has virtually criticised these Governments for their lack of initiative to control inflation.

Importantly, the ADB suggestion calls for stoppage of foreign direct investment in agriculture. The Bank has told these nations that if food prices continue to rise at 10 per cent the GDP growth pattern would be hit. (International rating agency Goldman Sachs too had made similar predictions a few days back for India).

According to ADB it would also push over 6.4 crores more people to extreme poverty --- earning less that $ 1.25 a day, in the region. India would have half of them at 3 crores additional extreme poor over its estimated figure of 45crores. If the food inflation rate is at 20 per cent, as it has been during the last two years, the number of extreme poor would touch 5.9 crore in India alone, says ADB

Rising food prices, the ADB affirms is affecting other sectors as well and the growth story in the region might reverse. As food remains the major expenditure and if that increases, people’s capacity to spend on other necessities diminishes. The Chief ADB economist Changyong Rhee asserts, “Left unchecked, the food crisis will badly undermine recent gains in poverty reduction made in Asia”. Bluntly, the region would not be able to achieve the Millennium Development Goal set by the UN.

The Bank has suggested efforts to stabilise food production with greater investments in agriculture and expand storage facilities. It has called upon India, Pakistan, Bangladesh, Sir Lanka, Malaysia, China, South Korea and Vietnam – to take steps to check shrinkage of agricultural land. The region is becoming more populous and it needs to retain arable land if not add to it.

The problem is to accentuate as the population is rising fast. Even at slower rates population in India has touched 121 crore. It is estimated to surpass China in two decades. The global population is to increase to 900 crore from today’s 600 crore.

The ADB prescription is not difficult. The experts in this country too have been suggesting it. But it calls for having a relook at 12^th Plan draft. The Planning Commission led by Deputy Chairman Montek Singh Ahluwalia has been repeatedly harping on removing people from agriculture to other areas.

Shockingly, the Plan panel refused to look at the reality that jobs in all other sectors are not growing or they grow for a small period followed by sacking of workers for a longer period. In effect, jobs are not being added in a sustainable manner.

Undoubtedly, agriculture is an eyesore for experts who target double digit growth. They have a reason. The latest Economic Survey says agriculture contributes only 4 per cent to GDP. A good reason! But it also says that this small portion of the GDP sustains 58 per cent of the population, almost 72 crores. Some years back the figure was around 62 crores.

Where would these burgeoning numbers be given jobs? It seems the nation is unwilling to learn from the agitations of Singur, Nandigram in West Bengal; Aligarh-Bulandshahar in western UP or Jaitapur in Maharashtra.

Needless to say, making agriculture less remunerative has cost the nation dearly. Punjab, Haryana and Gujarat have not progressed on the mere strength of their industry. But a pragmatic approach to agriculture has made these States stand apart. Bihar is now turning this as a great opportunity.

But, planners state that agriculture needs higher investment, bring in policies that are detrimental to its growth and deprive those engaged in farming. The indigenous farmers who created the bread basket are derided. They are not extended any official support. Whatever little was being given in the name of subsidy has all been withdrawn leading to shooting prices of fertilisers and other farm inputs.

The panacea suggested is foreign direct investment (FDI). Stealthily many farm areas have been opened to FDI --- warehousing and cold chains terming these as “infrastructure”, production of seeds, horticulture, floriculture, cultivation of vegetables and mushrooms. Besides, animal husbandry, pisiculture, aquaculture have also been thrown open to FDI.

It appears to be a nice way to boost investment. It is not. The Government policy would cause more hardship for those dependent on agriculture. It is allowing back-door entry of multi-nationals like Monsanto and Cargill in this sector. These companies and even large Indian companies wherever they have entered this area even in a limited way have thrown more people out of agriculture.

In many cases these companies promote farming non-food items as they have done in the US and Brazil, where farmers are told to produce crops for bio-fuel. The recent global food grain price rises by 30 per cent is attributed to shifting of cultivable area to bio-fuel in the US and Brazil having the largest arable area leading to food grain shortage.

It is a bit surprising that India is following this failed path. Not only higher food prices, as ADB says, but the new FDI policy would also throw many more engaged in farming to extreme poverty as they would have little to do.

Often it is touted that large companies as they enter would create new jobs and make the GDP look healthier and obese. That does not happen. The companies are more interested in recovering their investments. They reduce cost on manpower and turn entrepreneurs into their slaves. Is that the way to treat the skilled farmers?

Our planners need to remember that the farmers remain the mainstay of rural cottage industries, handicraft and many exotic ways of production and lifestyle. The new corporate-oriented policies would virtually lead to their annihilation.

It is time the nation discusses this and forces the Government to reverse the policy. The Government needs to invest in re-training in new research processes by the farming community. They are the most adaptable but our investment percentage in farm research remains at the level of 1970s with very minor variation.

India needs to increase production, save farm land, strengthen and universalise the public distribution system. Investment is needed but not the way the Government has envisaged through the pernicious process of FDI. It calls for a review and reversal of the farm policy. --- INFA

(Copyright, India News and Feature Alliance)