Separating the wheat from the agri-policy chaff

Context: In the farm laws debate, the focus should be on the exchequer-farm subsidies issue and the spending on farm subsidies.

 Issues in Indian agriculture sector:

• Declining contribution: Contribution of agriculture has declined from 45% of Gross Domestic Product (GDP) and 70 % of employment (1951-52) to below 15% of GDP and almost 50% of employment.
• Adverse terms of trade: over extended periods since the 1980s.
• Poor and Small Farmers: India has noti?ed that 99.43% of its farmers have low income. According to the Agricultural Census 2015-­16, these are the farmers whose holdings are 10 hectares or less.
• Lack of meaningful investment: as the cause and effect of inefficiencies in the sector.
  • In the 1950s, it garnered 18% of total investment which fell to 11% in 1980s. In 2018-19, the average share of agriculture (in terms of investments) was 7.6%.
• Poor yield of crops: India ranks 45 and 59, in terms of yields in wheat and rice, respectively. (in 2019).
• Inefficient Agricultural Produce Market Committees (APMCs): Prohibits farmers from realising remunerative prices for their produce.
  • Recent reforms aim to introduce even larger middlemen that would do no more than complete the circle of misery for the farming communities.
• Lack of a comprehensive and coherent Agriculture policy: like resulting into doling out of subsidies.
  • The United States (< 2% of its workforce in agriculture), has been enacting farm legislations every four years since the Agricultural Adjustment Act was enacted in 1933.
  • Members of the European Common Market adopted its Common Agricultural Policy in 1962.
• Issue of Farm subsidies:
  • Due to wanton distribution, it has distorted the structure of production and has undesirable outcomes in terms of excessive food stockpiling.
  • Need for subsidy: $24.2 billion (43% of the total) are provided to resource-poor farmers.
  • International Pressures: Under the Agreement on Agriculture (AoA) by the World Trade Organisation, the subsidy notification shows that Indian subsidy is far less than others.
    • USA- $131 billion in 2017 (90.8% of agriculture value addition), European Union- nearly $93 billion in 2017-18 (45.3% of agriculture value addition).
    • For 2017, India’s farm subsidies were 12.4% of agricultural value addition. In 2018, the subsidies provided were slightly more than $56 billion.

 Conclusion: Government should engage with the farming communities for putting in place a comprehensive set of policies which also provides for the setting up of farmer-friendly institutions in order to improve the economic viability of the sector.