IASbhai Daily Editorial Hunt | 31st Dec
“All our dreams can come true if we have the courage to pursue them.” —Walt Disney
EDITORIAL HUNT #292 :“Indian Agriculture and Subsidies | UPSC”
Indian Agriculture and Subsidies | UPSC
Biswajit Dhar is Professor, Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, New Delhi.
Separating the wheat from the agri-policy chaff
In the farm laws debate, the focus should be on the exchequer-farm subsidies issue and the spending on farm subsidies
SYLLABUS COVERED: GS 3 : Agriculture
How large is India’s spending on farm subsidies as compared to those of other countries having substantial interests in agriculture?Substantiate -(GS 3)
- Comparison from West to East
- Adverse terms of trade
- A look at yields
- Issues related to Farm Subsidies
- A LOGICAL QUERY : Why have successive rulers used the exchequer to provide farm subsidies.
SOURCES : THE HINDU | Indian Agriculture and Subsidies | UPSC
ADVERSE TERMS OF TRADE
- WORKFORCE INVOLVED : It should be obvious to any keen observer of the Indian economy that the country’s agriculture, which also supports the remaining rural workforce, was, forever, living beyond its means.
- AGRICULTURAL SHARE 1950 : In 1950-51, agriculture’s share in the country’s GDP was 45%, the share of the workforce dependent on the sector was close to 70%.
- AGRICULTURAL SHARE 2020 : Seven decades later, agriculture’s share in GDP is below 16%, but almost 50% of the country’s workforce depends on this sector.
- POTENTIAL COMPETITORS : The squeeze on the agricultural sector becomes even more evident from its terms of trade vis-à-vis the non-agricultural sectors.
- THE UPS AND DOWNS : Agriculture has been facing adverse terms of trade over extended periods since the 1980s.
- TERM OF CONTRACTS : Since the middle of the 2000s, farming communities have almost consistently faced adverse terms of trade vis-à-vis non-farmers.
- EROSION OF FARM INCOMES : Less income was triggered by growing inefficiencies, which, in turn, was caused by a lack of meaningful investment in agriculture.
- SHEER NEGLIGENCE : In the subsequent decades, the situation has got far worse with agriculture’s share not even reaching double digits.
A LOOK AT YIELDS
- NET YEILDS : A quick comparison of the yields of the major crops in India with those of other countries confirms the dismal state of agriculture in this country.
- MAJOR CROPS AND WORLDWIDE COMPARISON : If one ranks countries in terms of their yields in wheat and rice — India’s two major crops — the country’s ranks were 45 and 59, respectively, in 2019.
- BATTLE FOR SURVIVAL : The above ranking would go down sharply if the areas recording high yields, such as Punjab and Haryana, are excluded.
- MIDDLE MEN AND APMC : The existing marketing system dominated by the Agricultural Produce Market Committees has long been proved to be against the interests of the small farmers.
NEED FOR A POLICY
- A COMPREHENSIVE DECISION MAKING BODY : Country needs an agricultural policy that addresses the challenges facing this sector in a comprehensive manner.
- POLICY MAKING : The lack of a coherent policy for agriculture must surely be regarded among the most remarkable failures of the governments in post-Independence India.
- FARMERS IN U.S. : U.S. has been enacting farm legislations every four years since the Agricultural Adjustment Act was enacted in 1933, the first piece of legislation of U.S. President Franklin Roosevelt’s New Deal.
- FARMERS IN EUROPE : In a similar vein, members of the European Common Market adopted their Common Agricultural Policy in 1962, only a few years after establishing the institution.
ISSUE OF FARM SUBSIDIES
- SUBSIDY IS A COMPENSATION : The state’s dole out is a price that the country pays for the failure of the policy makers to comprehensively address the problems of the farm sector.
- IDEA OF SUBSIDY : Instead of a comprehensive set of policies, successive governments have chosen to dole out subsidies in order to ensure domestic food security and protecting rural livelihoods.
- DISTORTED PRODUCTION : At the same time, wanton distribution of subsidies without a proper policy framework has distorted the structure of production and, consequently, undesirable outcomes in terms of excessive food stockpiling.
- SURVIVAL KIT : When subsidies have virtually been made the survival kit for Indian farmers, there is possibly a need to understand the magnitude of the government dole out, also by comparing it with those granted by other countries.
ECONOMICALLY WEAK FARMERS
- LATEST SUBSIDY : India’s latest notification, for 2018-19, shows that the subsidies provided were slightly more than $56 billion.
- BENEFICIARIES : In most of the recent years, the largest component of India’s subsidies ($24.2 billion, or 43% of the total) are provided to “low income or resource poor farmers”.
- AGRICULTURAL CENSUS : According to the agricultural census conducted in 2015-16, these are the farmers whose holdings are 10 hectares or less.
- The two major providers of farm subsidies, namely, the U.S. and the members of the European Union (EU) gave much larger magnitudes of support than India did.
- America provided $131 billion in 2017 and the EU, nearly €80 billion (or $93 billion) in 2017-18.
- Thus, for 2017, India’s farm subsidies were 12.4% of agricultural value addition, while for the U.S. and the EU, the figures were 90.8% and 45.3%, respectively.
SOURCES: THE HINDU EDITORIAL HUNT | Indian Agriculture and Subsidies | UPSC