It is time to revisit the approach to rural development

By

Randeep Wadehra

It is surprising that the powers that be have not given agriculture the importance that it deserves. So focused have been our policymakers on such big ticket economic issues as PSU disinvestments, spectrum allocations etc that one fact has been ignored, viz., ever since independence all our economic planning has been based on the premise – justified though it has been – that India’s is an agricultural economy. A vast majority of the country’s population depends upon agriculture for a living – a constant feature despite the industrialization and globalization that have been taking place since 1991. Agriculture may contribute only 21% (15% according to a World Bank report) of India’s GDP, but its importance is due to the fact that about 72% of the people still live in the villages, a large number of whom are poor, and the majority among them depends on rain-fed agriculture, or the increasingly dwindling forests, for their livelihoods.

There have been significant improvements in agricultural productivity over the decades. When the Borlaug seed-fertilizer technology was introduced during the mid-1960s the growth in India’s agricultural output began to gradually catch up with its population growth rate, and eventually outpaced it. Unsurprisingly, the technology became our main strategy for increasing food and agricultural output. From the period 1962-65 to the beginning of 1990s, before the initiation of economic reforms in 1991, the agricultural policy operated within a planned economic framework. The strategy of agricultural development constituted a part and parcel of the overall planning of the Indian economy. The Plan outlays accorded priority to public investment in rural infrastructure in general, and in irrigation in particular. Substantial resources were invested in large, medium and minor irrigation projects in both the central and state plans.

However, the gains of new technology were not spread evenly throughout various states and regions of the country. Moreover, several experts – including environmentalists like Vandana Shiva – have pointed out that the Green Revolution may have significantly increased the outputs of wheat and rice, but at the cost of domestic output of pulses and oilseeds, among other crops. This study, too, admits that the introduction of Borlaug technology increased the yield levels of mainly wheat, and later, rice. Policymakers laid great stress upon agricultural R&D and extension services. A number of agricultural universities were established under the aegis of the Indian Council of Agricultural Research for combining the functions of education, research and extension. Policies were formulated to provide cheap institutional credit and subsidies to encourage farmers to invest in irrigation, including tanks, pump-sets and irrigation structures. Both irrigation and power tariffs were hugely subsidized. However, if you look at the overall rate of agricultural growth – 3% – it is really not impressive by any standards, and lends credence to the arguments presented by Vandana Shiva and other likeminded experts that one set of crops prospered at the cost of another set of crops, which were equally vital to the Indian economy’s health.

A major obsession that has been guiding our agricultural price policy is to somehow keep food prices low in the interest of food security, which is sought to be ensured by augmenting domestic production although imports of such items as sugar, edible oils and even food grains have become quite frequent over a period of time. But, we have seen how the pricing policy has manifestly failed to ensure even a modicum of food security. In fact, it has neither benefited the majority of farmers – who have small to marginal land holdings – nor has managed to keep the food prices down. Our present high inflation rates are largely, if not primarily, due to the rising food prices.

Actually, the current regime of agriculture pricing and subsidies has helped only rich farmers, while the majority of the rest don’t even get the benefits of such pricing policies. There is a need to revisit the entire structure of agricultural pricing and overall management of its growth. You cannot increase output merely by raising prices; it is becoming increasingly clear that multiple cropping, non-synthetic fertilizers as well as non-toxic methods of pest control need to have a serious relook for long term agricultural prospects in the country.

In the recent years there has been a marked slowdown in not just the agricultural growth but in the overall rural economy’s development. The reasons are not far to seek. First and foremost is the inadequate infrastructure and services in rural areas; and whatever is available is of poor quality. For example, the irrigation infrastructure is deteriorating as maintenance is become increasingly difficult due to lack of adequate funds; many projects have been left incomplete. Moreover, public spending is so focused on subsidies that more important activities like agricultural research and extension, health and education and, of course, infrastructure development are being ignored.

Another factor is over-regulation of domestic agricultural trade has left little scope for entrepreneurial activity, thus killing the incentive to improve productivity and competitiveness. When even the costs of land, labour and credit are controlled directly or indirectly by the government private enterprise is left with little scope to function. For various reasons including high transaction costs, even today, a large majority of the rural poor are unable to access credit.

Moreover, there is a need to have a close look at our natural resource management. About 25% of the country’s population depends upon forests for its livelihood. The conservationist approach is actually not very conducive to generating job opportunities for those communities that have traditionally depended upon forests for their livelihood. A more dynamic approach, wherein the traditional stakeholders are empowered to harness, nurture and commercially exploit the forest resources, would have paid rich dividends in terms of rural poverty alleviation.

Perhaps it is time to have a comprehensive relook at the manner in which various policies affecting rural economy have been fashioned and implemented. Equally important is the need for making various government agencies and bureaucracies at the states as the central level accountable. The various instruments and structures of governance like local governments etc too need reforms or, better still, reinvention. But the question is: would the powers that be show enough imagination, skill and more importantly the spine for doing this?

Published in the Daily Post dated July 09, 2012