India’s clear, present challenge: How we can drought-proof economy

  • Gaurav Choudhury, Hindustan Times, New Delhi
  • Updated: Jun 04, 2015 12:14 IST

For the second successive year, monsoon is likely to be below normal with parts of north-west and central India. In the second official forecast on Tuesday, the met office predicted that there was higher chance of scanty rains this summer than earlier thought. Scientists can now fairly determine the monsoon’s course and quality much in advance. Successive Indian governments have largely responded to poor summer rains only in July or even later.

India has no control over the weather whims. Yet, every successive drought year, India’s response to deal with scanty summer rains has been knee-jerk marked by lack of preparedness despite fairly accurate early warnings by the Met department.

Here are 5 things that can be done much in advance:

Increase NREGA budget

The government can announce an increase in rural wages as a temporary measure during a deficient-rain year to keep rural incomes from falling. Also, it can increase the volume of work offered under NRGEA in a drought year to enable even farmers with low landholding to earn wages.
Risk: It could raise government borrowings and push up fiscal deficit.

Cut import duties

Don’t wait until July-August to think about importing food items and enhancing supplies. Lowering import duties on food items such as pulses and oil seeds will help prepare for supplies when crops fail because of poor rains.
Risk: It could lead to hoarding and black marketeering later.

Import food items

In the past India has floated global tenders for import of food items such as pulses and oil seeds only in August and the supplies start coming in only by October. India should begin import through canalizing agencies such as NAFED now given the high probability of deficient rains.
Risk: It could lead to overflowing in govt granaries.

Float a seed subsidy scheme

In earlier rain-deficient years, the government sometimes offers subsidy to farmers to buy seed. On most occasions in the past, however, such schemes have been launched in July and August as authorities would rather wait until the sowing window is over. There is a case for disbursing it earlier.
Risk: Once disbursed the government can’t roll back a seed subsidy scheme later when it rains in July enabling late sowing.

Clamp down on hoarders

The government should walk the talk on price control and announce a clampdown on hoarders and raising the minimum export price of onions now. States should also be immediately crack down on speculative hoarding, in anticipation of shortages in future, in order to ease the supply of food items and to keep some food items outside the purview of APMCs.
Risk: It may be premature as this could scare away wholesalers from hurting farmers.

In addition, here are 5 things we should do over the longer-term:

Invest in irrigation

One main reason for the stagnation in yields and agricultural productivity in recent times has been a consistent under-investment in land development, a trend perhaps best manifested in the declining spending on irrigation over the last two decades. There is an urgent need for a top-down effort from the governments as self-sufficiency and increasing farm land productivity return to focus and shift towards new and more efficient irrigation techniques like micro-irrigation where penetration is particularly low in the region and which can be implemented by individual farmers.

Contract farming

While the average farm size is about 180 hectares in the US and over 27 hectares in Western Europe, the average for India is about 1 hectare and has declined in the past three decades. Land size becomes more important to productivity improvement as the extent of mechanisation increases. This is all the more reason why contract farming with assured income benefits are critical.

Create towns

About 60% of India’s total labour is rural labour. It is not at all surprising that this labour is extremely poor. The strategy should focus on moving labour out of agriculture to more productive asset creation. Moving labour out of farms would involve creating demand for labour in for non-agricultural activities in rural areas by encouraging setting up of industries where the opportunity exists for creating new towns. The development of small towns is an effective way of transfer of rural surplus labor, raise agricultural per capita income and develop vocational skills of rural labour.

Create infrastructure

India needs about $1 trillion ( about Rs 63 lakh crore) over the next five years to shore up its crumbling inadequate infrastructure. Importantly, building roads, ports and highways are critical for raising rural incomes and removing dependence on agriculture. That will not happen unless the government creates a regulatory environment where investors are not scared of locking up capital in long gestation projects. Too many shifting goal posts dog investors. Thrifty households could well be the primary financiers of these projects that India needs to lift millions out of poverty and reduce rural labour’s dependence on rainfed agriculture. Financial sector reforms, therefore, are critical.

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