Economic Highlights

New Delhi, 18 October 2013

Agriculture Sector

FINALLY CATCHES CEOs FANCY

By Shivaji Sarkar

Agriculture has finally caught the attention of the Indian CEO, as a hopeful bailout. The chief executive officers are predicting growth in the industrial scenario with a good rainfall and higher farm yield and rural income. They are buoyed by the predictions of the Commission for Agricultural Costs & Prices (CACP) estimates. It states the sector will have 5.2-5 .7 per cent growth during the 2013-14 agricultural year (July-June). In the last financial year, farm sector growth was estimated at 1.9 per cent. In recent years, the fastest growth rate was in 2010-11, which propelled overall economic growth to 9.3 pr cent.

“Comparing these likely agri-GDP growth rates in 2013-14 (agricultural year) with the last year (2012-13 ) performance, it turns out that the agri-GDP growth is likely to be about three times higher than last year," the CACP study stated. Some private economists are still betting on the farm sector growing by around 4.5 per cent this fiscal year.

However, the CEOs haven’t yet taken the line of Mahatma Gandhi, who had seen the country growing with its agriculture. The CEOs in their latest meeting see the positive trend to the extent it helps the industry as farmers remain a consumer for them rather than a productive asset. This is where they share a common perception with Planning Commission Deputy Chairman Montek Singh Ahluwalia, Prime Minister Manmohan Singh and Finance Minister P Chidambaram. For all of them agriculture sadly remains a marginal sector.

The CEOs should possibly have a broader vision gradually to give the farm sector its due. As per official statistics, over 54 per cent Indians i.e. 70 crore people, depend on agriculture for their livelihood. Officially, it contributes to only 14 per cent of the GDP and thus the CEOs have reason to look down upon. Therefore, the Government and the CEOs are keen on taking steps to reduce the size of agriculture so that corporate profits soar.

Indeed, this is the fallacy. A reduced agricultural-base would not add to the prosperity of the country. No corporate or their conglomerates can ever provide jobs or livelihood to 70 crore people. They don’t have the capacity to replace the individual farm entrepreneur that the farmer is with their corporate might. They need to accept the strength of the 70 crore people in this sector. Farmers have an immense capability to contribute to the GDP growth if they are recognized as entrepreneurs and given the necessary support.

Importantly, they need inputs at affordable cost. They don’t want to remain dependent on Government electricity supply. Neither the corporate nor the Government has come out with a proposal to make them self-dependent with solar or alternative power supply to be generated by them at a low cost. Additionally, seeds, fertilizer and other inputs have become expensive. Subsidies are being reduced and loans are not easily available. Farm product marketing is a mess. All this forces the hassled farmer the only option to commit suicide.

This cannot be the growth model for the country. It has to change. Farmers don’t even get the remunerative prices for their products. What they get is the minimum support price (MSP) and any increase here raises a hue and cry from trade and industry and is dubbed as inflationary.

Therefore, the Government while announcing the latest Rabi crop MSP had to yield to the concerns of all except the farmers. It raised wheat MSP by Rs 50 and mustard and red gram by Rs 100, against double the amount recommended by the Agriculture Prices Commission. In fact, it is difficult for the Government not to raise the MSP. It is a political compulsion as the elections are knocking at the doors in four States and Lok Sabha polls are not too far.

Clearly, the Government hasn’t been fair to the farmers. While it is keen on setting up the Seventh Pay Commission, which is not yet due, to placate the 50 lakh Government employees before elections, it ignores the CACP to increase wheat MSP by Rs 100.

Undeniably, the MSP has become a mockery in most cases. Except a few, in most other cases, the farmers are forced to sell their products at prices far less than the MSP. In Bihar, parts of eastern Uttar Pradesh and other places most farmers sell the best grade wheat at almost 65 to 75 per cent of the MSP. As the Food Corporation of India has reduced purchases by over 25 per cent, they are forced to sell it to private buyers at around Rs 800 a quintal against the so far prevailing Rs 1350 a quintal.

Worse, the farmer is not compensated for higher input costs as the Government has almost abolished subsidies on fertilizer and other inputs. And, while the farmer loses, the consumer doesn’t gain either. On an average, wheat is sold by the traders at over Rs 22 a kg and by large corporate at over Rs 25 a kg. There is huge profiteering. Nobody acts.

This is leading farmers to divert to other crops such as corn, sunflower, floriculture and sometimes cash crops that get them higher prices. Despite the so far record of over 250 million tonnes of food grain production, the per capita availability is reducing.

Economic Survey 2009-10, per capita net availability per day of cereals and pulses has been lower than that observed in the previous four decades. In foodgrains it was 447 grams in the 1960s and 70s, which successively increased to 459 gm in the 80s and 478 gm in the 90s but came down to 446 gm during 2000-08 and stood still lower at 436 gm in 2008. The situation is far more worrisome for pulses: its per capita net availability per day has gone down from around 60-70 grams during the 1950s to around 30 gm currently.

The Swaminathan Committee had recommended replacing MSP with MRP – minimum remunerative price so that farmers got better prices for labour, seed, fertiliser, water and other input costs. It hasn’t been accepted. The committee had also indicated that higher prices to farmers were not the reason for higher food grain and other commodity prices. It had given the recommendations so that the country’s food production is adequate. If the farmer diverts to crops other than food grain, it might cause severe supply side problems and inflation in coming years.             

The CEOs and the Planning Commission need to change their outlook to ensure overall growth of the country. The US has stood the crisis because of its strong agriculture base and high subsidies. India needs to learn. ----INFA