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Time to sow reforms

There must be a sustained effort to shift marginal farmers to the manufacturing sector, even while propelling sustainable farming onto the global platform.

india Updated: Oct 20, 2006 02:02 IST

Since the beginning of economic planning in India, there has been a consensus amounting to an obsession among Indian policy-makers that industry must be the sector that propels growth. The reforms initiated in the Nineties were also marked by this implicit consensus. The result has been that the agricultural sector has been largely bypassed by direct reforms. That this policy has been economically shortsighted and socio-politically dangerous was acknowledged by the Prime Minister in his speech to the second Agriculture Summit on Wednesday, in which he spoke of the need for a “fundamentally new perspective on rural development and agriculture”.

It is not hard to see how important agriculture is to the development of the country. Agriculture continues to provide employment to 60 per cent of our population — which, looked at another way, is the majority of the consumer households of the country. There are sizeable inter-sector linkages — forward linkages between agriculture and agro-based industries, and backward linkages between agriculture and agricultural inputs industry.

The PM’s diagnosis is correct: the rural and agricultural sectors suffer from deficits in public investment and credit, infrastructure, market economy and knowledge. To bridge these, there must be a sustained effort to shift marginal farmers to the manufacturing sector, even while propelling sustainable farming onto the global platform. The task is daunting due to its sheer scale. It is made all the more so because any meaningful agricultural reform must tackle sensitive issues of political economy, especially the issues of prices and subsidies. Offering a fair price to producers is a bitter pill that the middle-class must be convinced to swallow. The politically powerful big farmer lobby must be weaned away from subsidies on fertilisers, power, irrigation, etc — which have grown to more than $ 12 billion annually, far more than both public and private investment in agriculture. Distortions created by the subsidies end up making farming itself unsustainable, such as when free or cheap power leads to overuse and consequent depletion of water resources. India has been blessed with abundant arable land, water and hard-working farmers. The challenge is to shape a policy that can combine these to make our agriculture truly bountiful.