Agriculture

KEY POINTS

·        Marine products, rice, meat, spices, cotton, fresh fruits and vegetables, sugar, coffee, groundnut, oil meals and cashews comprised more than 80 per cent of the country’s Agri-export basket.

Issues in Agri-exports

·        Fall in global prices – Many of these commodities lost out on competitiveness, due to a fall in global prices.

·        Restrictive export policies - Uncertain trade policies and the inherent “consumer bias” in these policies makes the trading environment unstable.

·         Any rise in domestic prices almost immediately leads to the imposition of market restrictions and harms India’s image as a reliable supplier.

·        This consumer bias in policy must be redressed and a balance should be struck between meeting the needs of food-insecure consumers and income-insecure farmers.

Strategy to boost Agri-exports

·        The draft Agri-Exports Policy rightly identifies two steps:

                                i.            Identify commodities in which India holds a global comparative advantage and

                              ii.            Develop clusters in states to create value chains for these commodities.

Suggestions

·        Change in mindsets – Restricting markets and compensating farmers through higher MSPs will be an inflationary and unsustainable solution.

·        Instead of suppressing market prices for farmers to support consumers, the government should protect them through targeted unconditional income transfers.

·        Efficient global value chains - The government must develop efficient global value chains and liberalise land lease markets across all states.

·        It should encourage contract farming on a medium- to long-term basis.

·        Exporters and processors must be encouraged to buy directly from farmer-producer organisations (FPOs).

·        Private sector participation – Major investments are needed to create infrastructure for global and domestic value chains.

·        The private sector can be an effective player in creating such value chains, but it needs to be enabled by institutional reforms.

·        These investments could have a multiplier effect on the rural economy.

Way Ahead

·        Meanwhile, policymakers should support Agri-exports while ensuring environmental sustainability.

·        Exporting large quantities of water intensive crops are akin to exporting billions of cubic meters of water.

·        The best way to correct this would be to gradually phase-out power and irrigation subsidies, and replace them with a direct income support to farmers, while letting the prices of power and water reflect its true value.