How to Exit Farming Risk Trap

Source: Indian Express

Relevance: The article highlights issues in Indian agriculture

Synopsis: Reforms in agriculture are needed to extract ourselves out of the risk-laden currents of agriculture.

State’s interference in agriculture:

Indian agriculture was saved from nationalization due to opposition of Swatantra Party in Parliament against Jawaharlal Nehru’s farm collectivization efforts in the 1950s. However, even today, government agencies have a say on all aspects of the farmer’s livelihood. It includes 13 central and countless state ministries and agencies that oversee rural property rights, commodity prices, input subsidies and taxes, agribusiness and research, etc.

The result has been a suffocating mix of arbitrary and conflicting policy interventions by both the central and state government agencies. For example, poor and varying levels of provision of basic public goods, including irrigation.

Implications of state’s interference:

• First, relatively low productivity levels with high levels of variation in crop yields across the country. It has resulted in lower levels of individual welfare and higher levels of overall risk. The large gap in rice and wheat yields between Punjab and Haryana and the farm districts in the rest of the country remains far from being closed.
• Second, there is severe unevenness in the provision of common goods. The absence of well-functioning markets for agricultural land, crops, inputs, poor quality of education, and slow progress achieved on labor reform have reduced overall resource mobility. They have limited the mobility of ideas and technology.
• Third, the real promise of a decentralised system has failed to materialize due to highly fragmented efforts with different “agricultural models” for different farming districts.
• Four, the various input subsidies and minimum price guarantee procurement schemes have worsened the overall levels of productivity. It has resulted in the degradation of our water resources, soil, health, and climate. Thus, it is no surprise then that the farm households of Punjab and Haryana fear both, the loss of state support for rice and wheat and the higher risks implied by a switch to other crops.

Suggestions

Farm reforms must be oriented towards minimizing risk and increasing returns for farmers. Farmers must be free to determine the best mix of resources, land, inputs, technology, and organizational forms for their farms. Farmers must be allowed to enter and exit agriculture on their own terms and contract with whomever they wish.