Budget 2012: Incentives, investments and institutions for sustainable food security

No promises on 'inclusiveness' and longterm food security will be sustainable unless growth in agriculture is propelled to more than 4% per annum. And this growth needs to be widely spread out to eastern region and rainfed areas of western and southern regions. The north-west belt is coming to its saturation level, especially in rice-wheat, given its fast depleting water table.

The experience of the last decade and a half is not something to be proud of. Agriculture growth crawled at 2.5%, 2.4%, and 3.2%, respectively in the last three Plans, way below the 4% target. Fifteen years of continuous failure should be sufficient to teach any nation a lesson that business as usual will not deliver. But it seems we refuse to learn!

What is needed for a higher growth trajectory? Three things are critical: (1) getting the incentives right; (2) getting sufficient investments in public goods; and finally (3) getting institutional framework right, which facilitates private investments and fair distribution of gains in agri-value chains. Let us elaborate on each one of this trinity of three "I", Incentives, Investments, and Institutions.

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GETTING THE INCENTIVES RIGHT
It relates to getting the prices right and the markets right. Government intervenes in both output and input markets to supposedly help farmers realize better returns, and also to keep a balance with consumer interests. Paddy and wheat are two prime examples (in a pack of 24 commodities) where government announces a minimum support price and has an elaborate procurement program.

But in much of eastern UP, Bihar, Jharkhand, West Bengal, Assam, and Orissa, paddy is being sold way below the MSP of Rs 1080/quintal. This is when farmers have given a record crop. Farmers feel frustrated and complain of slow or no procurement, and collusion between procurement agencies and rice millers/traders. This is the region from where we dream of getting our second green revolution and long term food security!

At the Centre, we often put the onus on states, and when we discuss the matter at the state level, they turn it back to the Centre. Unfortunately, in this blame game, farmers are being grinded. Those blaming states need to be reminded that the first green revolution was not brought about by a state. It was the vision of the Centre and it took a few states along to realize that vision.

We will have to do the same for a second green revolution. The technology is very much there. What is missing is critical infrastructure to reach farmers, and marketing network that can ensure at least MSP. States alone cannot do it. It needs political commitment at the Centre, ample resources, fast and coordinated action, not rhetoric. A marketing revolution needs to precede the second Green Revolution.

PUTTING INVESTMENTS & INSTITUTIONS IN PLACE
Right incentives can unleash farmer spirits and invite private investments in agriculture. But there are critical areas where public sector has to take a lead: rural roads, public irrigation (including power supply for irrigation), agri-R&D, and marketing infrastructure.

States and the Centre will have to work in tandem to ensure it is done. Gujarat has done much of this, attaining an unprecedented growth of almost 9% per annum.

More than 80% of farms being small, it needs major institutional changes to create a scale that is efficient in adopting modern technology and also in marketing produce to processors and organised retailers. This calls for freeing of land lease market and formation of producers' organizations on high priority.

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Free movement of agri-commodities across India, uniform and low taxation on primary commodities, reforms in APMC are some of the institutional reforms needed to get Indian agriculture past the 4% growth barrier. The potential of Indian agriculture is surely much more, if only we knew how to tap it right!