India: New Agriculture Policy

he Central Government in early August 2000 announced the New National Agriculture Policy envisaging more than 4 per cent annual growth rate. The rainbow revolution, it promises, would cover all aspects of the farm sector. Tabled in both Houses of Parliament on 28 July 2000, the Policy Document talks about increased private sector participation through contract farming and land-leasing arrangements. It also emphasizes price protection for farmers to safeguard their interests amid removal of quantitative restrictions on import of agriculture produce. Addressing a Press-conference at New Delhi, Sh. Nitish Kumar, Union Agriculture Minister said Agriculture has become an increasingly unrewarding profession and corrective measures are the need of the hour. This policy will help the farm sector to meet the challenges of economic liberalization and form the basis of an action plan for agricultural growth. The New Agriculture Policy has involved different reactions from various quarters. The consensus, however, is on the point that one vital issue that is glaringly missing in the policy document is time bound, sector-specific approach of the government to tap the potentials in various agri-segments. The analysis, outlook, views, etc. as reported in major national dailies and economic papers have been excerpted by NCDC Bulletin,

August 2000 to provide an insight into the issues involved and the follow up action. Below we quote an excerpt from the Hindu, Chennai, 1 August 2000. The Union Cabinet took the decision on 28 July 2000 for 100 million Indian farmers for a National Agriculture Policy (only coincidentally abbreviated as NAP). Its major objectives would be the attainment of a 4 per cent annual growth in the agricultural sector and enhanced levels of efficiency of input use consistent with environmental sustainability. The question is not so much about the imperative need (a) to raise levels of productivity both in food production and in the non-food sector and (b) to achieve rapid diversification of agriculture covering horticulture and floriculture tapping the unutilized potential, as about the instrumentalities of policy which are required to bring about an agricultural transformation that would be consistent with the fact that around 65 per cent of the people of India are still rooted in agriculture and related sectors. The reality is that there are pronounced disparities among the States in agricultural progress. This makes for a certain degree of incongruity about a National Policy on Agriculture especially when the formulation of such a policy is made with little or no participation by State Governments. Among the

major issues that need to be addressed here is the decline in capital formation in this sector over the years. According to the Central Statistical Organisation (CSO) estimates, gross capital formation in agriculture has virtually remained stagnant (at 1993 94 prices) at around Rs 165 billion during the three year period, 1996-99. The share of public investment in agriculture has actually come down from 28.2 per cent in 1996-97 to 23.6 per cent in 1998-99. A point repeatedly made in the annual Economic Surveys of the Union Government is that the decline in public investment in the agricultural sector had arisen mainly because of the diversion of resources from creation of assets (irrigation capacity, water management, rural infrastructure) into subsidies of various kinds food, fertilizers, water, power and so forth. Is this problem being addressed by the NAP? There is a certain formulation in the policy document which deals with rationalization and transparent pricing of inputs for the purpose of generating resources for agriculture. This is all right by way of intent but political sensitivities involved appear too forbidding for the policy document to spell out clearly how a larger flow of investments could be facilitated either through government budgets or through the private sector.

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The notion that the private corporate sector can make big forays into agriculture can never be part of public policy in India owing to millions of small and marginal farms depending on tiny holdings for bare subsistence. NAP seems to be opening up some new avenues for corporate involvement in agriculture through contract farming, a mode which has made for a positive impact on the farming community in the sugar sector, for example. Consolidation of holdings as has occurred in Punjab and Haryana can be replicated in other States but only on the basis of diversification of the rural economy and the supply of capital to farmers to enable acquisition of marginal holdings. NAP envisages institutional, legal arrangements for leasing of private lands for cultivation and agribusiness, which would presume that holders of uneconomic farms would find it prudent to engage themselves in alternative occupations in the rural sector rather than migrate in large numbers to town and cities. The fashion of the day is a VRS policy for industrial workers and not for the marginal farmer!

Whatever the premises on which a new policy for agricultural progress is built, there is the all too basic question which would cry for attention. And that is the vexatious issue of farm price support which has come to mean public procurement and distribution of not only foodgrains but also of commercial crops such as tobacco, tea, coffee, and the political process of fixing sugarcane, at the State level. Should agricultural policy foster cropping preferences of big farmers that are driven by greed rather than by the agro-economic realities of the region in question? Merely saying that export competitiveness of Indian agriculture will be strengthened while decisions are taken regarding minimum support prices is no substitute for an active policy of identification and support for agricultural commodities which do have a global competitive edge. But it is a dicey game because world commodity markets are all too volatile and it would be a grave error of macro management of the economy for the State to emerge as the underwriter for agricultural exporters.

The Agri-policy envisages Rainbow Revolution Over 4 per cent annual growth rate. Greater private sector participation through contract farming. Price protection for farmers. National Agricultural insurance scheme to be launched. Dismantling of restrictions on movement of agricultural commodities throughout the country.

PAI

Poverty Alleviation Initiatives (PAI) is published quarterly, as an interagency endeavour to provide United Nations initiatives on poverty alleviation in Asia and the Pacific region. The inputs for the newsletter are provided by the members of the Thematic Working Group on Poverty Alleviation, Rural Development and Food Security. The designations employed and the presentation of the material in this newsletter do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status of any country, territory, city or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries. Present membership of RCM, includes ESCAP, UNICEF, UNEP, UNFPA, UNDP, and FAO, ILO, UNESCO, UNIDO, UNIFEM, and WHO. Newsletters are issued without formal editing. For information please contact:

Mr Kiran Pyakuryal
Chief, Rural Development Section Population and Rural and Urban Development Division (PRUDD) ESCAP, United Nations Building Rajdamnern Avenue Bangkok 10200 Thailand

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PAI/October December 2000