For the last 17 years, India has been proclaiming itself liberalized. Why then, does the government insist on controlling the prices of agricultural products?
On paper, the current government has repeatedly agreed on the need to make Indian agriculture globally competitive - thereby discontinuing the practice of artificially setting prices.
It has even accepted the recommendations of the Alagh Committee, but has refused to make the policy changes that come with it.
If Indian agriculture is to move from a low-yielding activity to a dynamic and competitive sector, capitalizing on peasantry that has historically proven its enduring and hard-working nature along with the sunshine that the nation has been endowed with, then this is the right time for it. The post WTO-regime means that soon trade barriers will be knocked down and Indian agriculture should be prepared for that eventuality.
While the UPA Government, on the recommendation of several expert groups, has increased tariff rates and outlays in agriculture, much still needs to be done. We may be on a three per cent annual growth path now but the real issues remain and reversals are always possible with anemic policies.
The answer then, is to integrate the Minimum Support Price with trade policy objectives. Further, the government must support the farmer initially - in terms of providing funds for efficient farming, technology adoption, farming education and new inputs. After the initial thrust and support, farmers will become capable of competing on their own.
India has done this in the past with industrial products. A similar policy has also worked in the case of wheat, where good prices and the seed programme of the Food Security Mission yielded good results.
Next, we need policies that will augment the diversification of Indian agriculture. (Examples here of the kind of new crops that would work in India) However, we are simply not putting enough effort into policies that will help make this happen. We need to energise public-private partnerships and local efforts to build markets, processing infrastructure and a vigorous trading culture. Producer associations of farmers get no help. Retail trade reform is by stealth and no strategic reform is done in building linkages as was done in China. The economic climate is erratic. This must change.
Yoginder K Alagh is a former Union minister and the current Chairman of the Institute of Rural Management, Anand.