Surinder Sud: Anatomy of poor farm growth

FARM VIEW

The post-WTO slump is better explained by falling global prices rather than by large scale crop imports.

The reforms decade of 1990s is generally looked upon as the worst phase for Indian agriculture after the Green Revolution of the 1960s. This impression, indeed, is true, but only partly.

The deceleration in growth during the 1990s neither affected all the areas that constitute the vast agriculture sector, nor was it spread evenly over the decade.

What is notable is that much of the deceleration was confined to the post-Word Trade Organisation (WTO) period (the second half of the 1990s). Significantly, that phase also happened to coincide with the global recession in agro-commodity prices.

The deceleration in growth was more pronounced in the livestock and fisheries sectors than in crops. These were the sectors that had pushed up the farm sector's growth to new heights in the 1980s.

The horticultural crops, on the other hand, had clocked an accelerated growth that was almost double that of the 1980s. However, non-horticultural crops registered only a modest growth.

These aspects have been brought out by several studies on the impact of economic reforms and the WTO on agriculture. But the most precise and lucid analysis has now been presented by the National Centre for Agricultural Economic and Policy Research (NCAP) in a four-page Policy Brief (paper no. 20). It has been prepared by Ramesh Chand, principal scientist at NCAP.

A look at the accompanying table (from the data carried in this paper) would indicate that the real slow-down in agriculture came in the post-WTO phase, beginning 1996-97. The growth rate was 3.16 per cent between 1990-91 and 1995-96 but fell sharply to 1.75 per cent between 1996-97 and 2001-02. In the entire 1990s, the sector had grown at a rate of 3.28 per cent, marginally higher than 3.13 per cent in the 1980s.

Indeed, the growth rate of fruits and vegetables in the first half of the 1990s was almost double "" 4.93 per cent "" of the 1980s figure of 2.36 per cent. The crop sector as a whole, too, clocked a growth rate of 2.65 per cent in pre-WTO part of the 1990s, slightly higher than 2.47 per cent in the 1980s.

What really marred the image of agriculture in the 1990s was the farmers' unrest emanating from their aprehensions about the impact of the WTO and the drop in the agro-commodity prices globally.

At the domestic level, too, deceleration was witnessed in almost all groups of commodities, including cereals, pulses, oilseeds, cotton, sugarcane, fisheries, milk and eggs. The only exceptions were rice and onion. The foodgrain output growth declined to a mere 1.17 per cent, a rate lower than even that of population.

Why did such a dismal scenario emerged during this phase? The NCAP policy paper has identified a few factors that might have been responsible. The first is the deterioration in the terms of trade for agriculture towards the late 1990s and beyond, mainly due to the impact of depressed international prices for most agricultural commodities on domestic prices.

Second, output price intervention through support prices and procurement remained confined to already developed regions where crop yields had almost plateaued. Consequently, agriculturally underdeveloped regions, which had the potential for raising productivity and production, remained deprived of a favourable output price environment.

Third, despite a good deal of concern expressed by economists, as also the government in successive annual Economic Surveys, public investment in agriculture did not increase to keep pace with the needs of output growth. Fourth, the adoption of new and improved technology remained slow during this period.

These apart, there is a widely held view that large-scale imports of some of the commodities in the post-WTO period had an adverse impact on their domestic output, giving rise to livelihood concerns.

However, as pointed out in this paper, there is a need for quantitative study to establish the exact role of these and other factors in influencing the farm sector growth in the post-reforms and post-WTO period.

Regardless of the causes of deceleration in farm growth, what is absolutely clear is that such a situation cannot be allowed to continue for long.

Otherwise, it will start impinging on the country's overall economic growth as well. A school of economists may argue that the link between the growth and agriculture and non-agriculture sectors is becoming weaker with time, but even if it is so, agriculture development cannot be overlooked.

Considering the proportion of population depending directly or indirectly on agriculture, the consequences of any laxity on the agricultural front will not be only be economic; they will be social as well which may be more trouble some than the former.