The humble agriculture is again making the headlines as India seeks to ignite the next agrarian revolution. On the occasion of the foundation stone laying ceremony of the Indian Agricultural Research Institute (IARI) Jharkhand on June 28, Prime Minister Narendra Modi called for a second Green Revolution in the country without any delay.
But the call has come at the time when the sector is in the midst of an unprecedented crisis after showing signs of improvement since the mid-2000s. The provisional estimates of GDP growth released by the Central Statistics Office for FY15 show agriculture GDP growth at 0.2% against overall economy growth of 7.3%. The sector, which employs over 50% of the workforce, has barely grown at the rate of 1.7% per annum during the first three years of the 12th Five Year Plan against the target of 4%.
Though the share of agriculture in overall GDP has shown a marked decline from 51.9% in 1950-51 to 13.7% in 2012-13, the same has not reflected in the concentration of the workforce in this sector—leading to asymmetry in income and employment. It has generated a skewed distribution of income between agricultural and non-agricultural sectors and also between rural and urban areas. In the post-reform period—1993-94 to 2004-05—the growth in income of farmers and agricultural labourers could not keep pace with the growth in income earned by non-agricultural workers, as shown in the Farm Income in India published in EPW. This, accompanied by a steep rise in the cost of living in rural areas, accentuated the disparities between agricultural and non-agricultural incomes and often resulted in pauperisation of the peasantry.
Rising input costs, dwindling produce price realisations and the inability of farmers to abandon cultivation without alternative livelihood sources are seen as factors contributing to the agrarian crisis in the post-reform era. The period witnessed dilution of supportive mechanisms which were built up in stages over time and has exposed the farmers to market uncertainties. As part of the reform strategy, the government not only slashed subsidies on major inputs to discourage environmentally-unsustainable practices, but also absolved itself of the responsibility to produce or procure and distribute these inputs at farm gates. This was instrumental in escalating operational costs. Also, with the decline in public investments in irrigation, research, extension and other related infrastructure, things such as technology development, dissemination and adoption received a major setback. Subsequently, yield levels went down, resulting in rising costs of cultivation. Taken together, these changes perceptibly slowed down the performance of the sector in the post-reform period.
It was a great challenge and a formidable task to arrest the decline and reverse the slowing growth of the sector. The government renewed its policy thrust in the mid-2000s to revive agricultural growth through development programmes such as interest subvention on crop loan, national agricultural development programme, National Food Security Mission and a special emphasis on certified seed production. These efforts paid dividends—the last eight years (2004-05 to 2011-12) witnessed impressive revival of the agricultural growth rate. The increase in productivity growth during the period has drastically decreased the real cost of cultivation. The result was an impressive growth of 7.2% in per-farmer income between 2004-05 and 2011-12, against a mere 1.96% between 1993-94 and 2004-05.
This period also witnessed a small decline in the wide disparity between the incomes of agricultural labourers and non-agricultural workers.
However, the revival could not be sustained after 2011-12. The average growth in agriculture GDP during the three years after 2011-12 dropped to 1.8%, which is less than half the growth rate achieved from 2004-05 to 2011-12. This has again brought the issue of farmer distress to the centre-stage. The reasons for the decline are obvious. One, much of the achievement in growth was driven by an increase in real prices of farm produce—about one-third of the growth in farm output resulted from an increase in real agricultural prices. Under the situation, if agricultural prices rise at the same rate as all other prices, it will result in a sharp decline in agriculture growth rate—as it was the case after 2011-12. Two, the use of productivity-enhancing inputs has dropped sharply in the last three years. For instance, between 2011-12 and 2013-14, consumption of NPK fertilisers declined from 27.7 million tonnes to 24.48 million tonnes and production of breeder seeds and foundation seeds declined from 1,45,000 tonnes to 99,700 tonnes.
Three, prices of farm inputs grew faster over the period with steep increases in wages, diesel and other such items, compared to the growth in output prices. The net result was that low growth in farm income—as per one estimate, growth rate in the post-2011-12 years was just one-fifth of that in farm income from 2004-05 to 2011-12—resulted in a lot of distress among farmers.
As the country plans a second Green Revolution to accelerate agricultural growth and achieve self-sufficiency in food, it must try and absorb some of the lessons from the past experience. As growth depends a lot on the manner in which the resources in the sector are put to productive use and the degree to which farmers are incentivised, there must be a balance between both price and non-price interventions. Non-price interventions through investments in irrigation, research and other important infrastructure are crucial not only for improvement in agricultural productivity, but also for the farming sector to gain higher returns and reduce the income gap between farmers and non-farmers. The second Green Revolution should build on the good work initiated by the first one, while filling some of its gaps like paying adequate attention to long-term concerns such as sustainable use of natural resources, soil health and adaptation to climate change along with short-term priorities such as accelerating growth.
India should devise a strategy for broad-based, inclusive and sustainable second Green Revolution.
The author is faculty, National Institute of Bank Management, Pune.
Views are personal