Can agricultural policies of countries continue to maintain a stoic status quo when greater global food demand, higher prices, more volatile markets and increasing resource pressure have become the defining features of the global farm market?
The Agricultural Policy Monitoring and Evaluation 2011 report of OECD countries and emerging economies released recently has made a strong pitch for moving beyond ‘status quo' policies by suggesting that countries should focus on improving farm productivity, sustainability and long-term competitiveness, rather than policies that distort markets.
Farm policies should also offer greater support to research, innovation and education, the report has argued. India needs to take these recommendations seriously simply because the country is one of the drivers, albeit in a limited way, of the global agricultural markets. Rising disposable incomes and demographic pressure drive food demand higher. But overall supply growth trails demand growth, leading to tightening availability and rising prices. Because of supply chain issues, the benefit of rising open market prices seldom flows to the primary producer.
In other words, high market prices do not automatically result in a supply response. Another factor to reckon with is the rising cost of production resulting from higher input costs. Increased use of inputs (seeds, fertilisers, agrochemicals) has not translated into a commensurate higher yield. We need to design policies and programmes that help reduce costs – production as well as post-production.
Indeed, with available natural endowments – 270 days of sunshine, 900 mm of annual rainfall, varied agro-climatic conditions, rivers crisscrossing the country, 7,000-km-long coastline, extraordinary biodiversity and abundant labour force – India ought to have become a global farm powerhouse long ago.
Yet, we face the daunting challenge of feeding our population of 120 crore. Food in India is both unaffordable and inaccessible for a large number of the poor. Unabated food inflation is seen further diluting the already inadequate nutritional content of poor man's frugal food.
With volatility expected to remain high and growing concerns about climate change, farmers will need comprehensive risk management systems that best address their specific needs, the report has pointed out adding governments should support the development of market-based tools while steering clear of actions that interfere with farmers' management of normal business risk.
While high farm prices create opportunities for farmers, high and volatile food prices have particularly severe impact on the poorest people around the world who spend a large proportion of their available income on food.
For this group of consumers, improved safety nets can help with immediate needs. However, as the report notes, policies that improve agricultural productivity and long-term resilience will provide the long-term solution.
Meanwhile, total OECD farm support has registered a small decline in 2010 to $366 billion from the previous year's $378 billion. Of this, support to producers stood at $227 billion. Admittedly, most government support is still given in ways that distort production and trade while doing relatively little to improve productivity and competitiveness, ensure sustainable resource use or help farmers cope with risk.
Insofar as the OECD region is concerned, time is ripe for reforming farm support, the report has observed. With tighter government budgets and farmers getting top prices for their crops, governments should begin to shift from payments that further support farm incomes and move to policies that have long-term benefits for the global food economy.
Farm support in emerging countries is generally well below OECD levels, but also varies overtime and across countries. However, there is something that an emerging economy such India can learn from OECD support policies and that relates what is described as ‘General Services support'.
Countries spend huge amounts for delivering general services to agriculture. These are not crop-specific, but cover a gamut of services that benefit all crops. The general services cover research and development, agricultural schools, inspection services, infrastructure, marketing and promotion, public stockholding and miscellaneous services.
The expenditure on general services in OECD area has been rising year after year. In 2010, it stood at an estimated $99 billion, up from $91 billion in 2009, $84 billion in 2008 and $73 billion in 2007. Indian policymakers can take a cue from the OECD experience. Our rural infrastructure, for instance, is totally inadequate, while inspection services are anything but confidence inspiring.
Farm support policy
While Indian ministers and officials may make politically expedient noises in international forums against OECD farm support, it would be immensely beneficial to adopt some elements of the farm support policy of industrial countries. ‘General Services Support' is a case in point. India needs to put its own house in order.
A lot of work is left undone as far as agriculture is concerned. We need a committed government that demonstrates ‘political will' to implement progressive and growth-oriented policies. Accountability for outcomes is necessary. Clearly, there is no one-step solution to addressing the issues of Indian agriculture. India has to move in several different directions simultaneously but with singularity of purpose and one common objective.
Multitasking is the way forward.