Agri Reform

8/14/2019 Agri Reform

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E c ono m ic R e fo rm s i nA gri cu l t ur e - Th e N e xtPhas e

V.S. Vyas

Professor EmeritusInstitute of Development Studies, Jaipur


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Nature & Pace of Economic Reforms

in India

Growth of Indian Economy during last decade at

6.5 percent per annum exceeded all

expectations.

The growth was achieved in the face of

serious domestic problems

adverse international situations


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in India

The growth was accompanied with

manageable rate of inflation

burgeoning foreign exchange reserves

adequate foodgrains stocks

some reduction in poverty


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in India

Basic tenets of economic reforms, i.e., liberalization

and globalisation were accepted in India as well.

However, nature of economic reforms in India was

characterised by

sequential approach to reforms

slow and cautious manner in which reforms were

implemented

It spared the country from initial shocks faced by

number of developing countries.


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Stagnation in Agricultural Growth Deceleration in the growth rate of agricultural

production

Stagnation in yields of important crops; with

larger intake of modern inputs

Disappointing performance of commercial

crops

Large fluctuations in the output prices


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Economic Reforms in Indian

Agriculture - The First Phase

Slow and cautious approach to reforms

Main benefits due to reforms in non-agricultural

sectors

Only major reform being abolition of zones and

emergence of the country a single market for

agricultural commodities

Privatization also got a fillip.


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Factors Contributing to Agricultural

growth in Previous Decades

Performance of Agriculture in the last decade was

in sharp contrast to performance in two previousdecades.

The factors contributing to earlier growth included

larger investment in agriculture

size neutral technology

reforms in supporting systems


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Integrated system of Minimum Support Prices,

Procurement and Public Distribution of foodgrains

These policies made salutary impact on

producers incomes

Kept real prices of foodgrains low

Contributed to growth of agriculture in so-called

backward regions.


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The earlier policies were implemented when

the major goal was food self-sufficiency.

Economy was an inward looking economy.


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There were and continue to exist certain weak

spots in Indian agriculture. These are

degradation of land and water resources

low value production

declining productivity of modern input, and

inefficient support systems.


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Agricultural Reforms - The Next

PhaseThe Cha ng ed Circu ms ta nc esThe next phase of reforms has to take into accountfollowing circumstances

Indian Agriculture is progressively acquiring a small

farm character

The country is wedded to domestic market reforms

It is committed to an open global economy

It is a democratic multi-party competitive polity.


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Measures which need immediate attention are

review of the policy on input subsidies

review of the policy on agricultural prices

reforms in the support systems completing the unfinished agenda on domestic

market reforms.

Agricultural Reforms - The Next

Phase


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Input Subsidies

The rationale for input subsidies can be provided if

input is a new and risky input warranting sharing of

risks by the state

it contributes to increase in productivity which isshared both by the producers and consumers

subsidizing income is the only way to transfer

income to the poor producers

in case of heavily traded products, the trading

partners are resorting to overt or covert

subsidization and there is no other way for redress


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Input Subsidies

In case of India, none of these conditions

obtain now


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Input Subsidies

There is a need to retreat without disarray

put a cap on subsidies

earmark the savings obtained for investment inrural infrastructure

improve efficiency of input production and

supplies

involve users in the distribution of inputs

bring states on the common platform of

reforms.


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Agriculture Price Policy

Present policy is disfunctional and has created

serious distortions.

The major weakness arises due to the fact that

we are using administrated prices as vehicle

for income transfer.


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Reforms in Agriculture Price Policy will include

Long-term strategy to strengthen crop

insurance and forward trade. In the interim, the scope and coverage of MSP

be limited.

A price band may be announced to trigger

open market operations.


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Procurement operation should be organised

strictly as business operation

Responsibility for PDS should be passed on to

states, and subsequently to lower units of

Panchayati Raj. Better coordination between price policy and

trade policy should be ensured.


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Economic Reforms

Emphasise reforms in the support institutions i.e.,

institutions to provide research, extension, credit

and marketing services.


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Reforms in Support Systems

Case of Rural Fina nc ia l Inst it ut io nsTo strengthen Rural Financial Institutions address

some of the critical problems improve absorptive capacity of the borrowers

with

emphasis on investment in infrastructure strengthen channels of investment credit.

use various options available to reduce

transaction cost.


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Reforms in Support System (RFI)

Mitigate risk at borrowers level with crop

insurance and forward trade .

Mitigate risk for RFI through an Agricultural

Risk Fund contributed by the Centre, states

and banking institutions.


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Economic Reforms - The Next Phase

Have proper sequencing and practical

approach to reforms -

HASTEN SLOWLY.


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Economic Reforms in Agriculture

The Next Phase

Thank You

June 4, 2005

Agri Reform

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