How to reform India’s Agriculture?

This could have gone to assorted links section. But as I have been writing on State of Indian Agriculture seperately, I thought it bettter to bring this one seperately.

In ET today, Ashok Gulati has written an excellent article on how can we bring growth in India’s agriculture.

If you recall, Prime Minister in the recent National Development Council had said govt. would invest Rs 25,000 cr on the ailing agriculture sector. I had written about it here. (By the way the speeches etc related to the meet are out now and you can find them here, in particular the strategy paper on agriculture looks quite good)

Now on the article. The question Gulati asks is where should govt spend the Rs 25k? Should it go towards irrigation systems, or better fertilizers or power? That is a question which would interest policymakers the most. Where to spend?

He says the research done at IFIPR by him and his colleagues show:

  • If the objective is raising growth rates in agriculture, marginal returns are highest when resources are spent on agriculture R&D, followed by rural roads.
  • If the objective is reducing rural poverty, one can get biggest bang by investing in rural roads

So rural roads are very important either way you look at it. He continues to surprise with this:

Returns through public expenditure on irrigation, especially through major and medium irrigation schemes, are very low. Irrigation is important but just pouring money in canal irrigation without any commensurate reforms on the demand side management of water in terms of pricing and institutions for better water delivery such as participatory irrigation management, may not give high returns.

This takes the cake:

Increased supplies of irrigation water, in the absence of such reforms are often absorbed by those at the head ends of the canal system. They grow water guzzler crops like sugarcane and rice while those at the tail end of the canal system remain deprived of sufficient water supplies even to grow sorghum. That is one of the reasons that during the last five-ten years while lots of money has been poured in canal irrigation, but without much increase in irrigated area. As a result, widespread prosperity that should have resulted from enhanced irrigation remains concentrated in few hands.

So, it is critical to note that enhanced money allocation in isolation will not deliver. It must be accompanied by price and institutional reforms, especially in water.

So, institutions matter. What also matters is things ignored- R&D and rural roads. It is a tough decision to make for any policymaker at such tough times. How does he divert funds at R&D and rural roads when the growth is not happening at all? That is why hard reforms are to be taken when times are good.

But, on a hindsight agriculture’s share in GDP would further shrink as India develops further(just as we see in developed countries). So why should one spend on agriculture? Well, agriculture may be shrinking but people employed in agriculture are not. So India needs people to move from agriculture to industry and services. For that there is a need to focus on education, education and education.

2 Responses to “How to reform India’s Agriculture?”

  1. Roads to rural India at Blogbharti Says:

    […] Amol Agarwal refers to some recent research to point out where the government should invest in rural India: […]

  2. A nice summary of Indian Agriculture’s woes « Mostly Economics Says:

    […] A nice summary of Indian Agriculture’s woes This is a short paper (18 pages) that summarises nicely the problems with India’s agriculture sector. (I had mentioned about this paper here) […]

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