Revisiting India’s Farming and Agricultural Policies: 13 Questions, 99 Articles

The MSP originally was intended to ensure self-sufficiency in foodgrain and resulted in a shift in the pattern of foodgrain cultivation towards wheat and rice. But in recent years, the MSP has focused on increasing farmers’ incomes and pulses were also added to its ambit. The MSP has to be revised taking into account the cost of production incurred by the farmer. Since it acts as a price guarantee, it has often caused distortions in the number of foodgrains produced. Policymakers have to be cognisant of these supply-side distortions in order to design an effective policy that benefits all.

The economic reforms of 1991 brought about sweeping changes to different sectors of the economy. These reforms were expected to bring about growth and development to the masses. In the context of agriculture, which still has a large proportion of the population dependent on it for their livelihood, the reforms had an opportunity to bring about social welfare at an unprecedented scale. Studies under this theme have evaluated the impact of economic reforms in this sector on the standard of living and net social welfare.

The MSP was introduced in the mid-1960s, during the green revolution, to provide incentives to farmers to sow high-yielding varieties of foodgrains, maintain stable food prices and procure foodgrain for the public distribution system. Since then, it has evolved to become indispensable for the livelihood and welfare of the farmer. More recently, the MSP has also been used to make electoral promises to the farming community.

The agriculture sector’s growth rate has been less than a third of the growth rate of other sectors of the Indian economy. In 2016, then Finance Minister Arun Jaitley announced that one of the objectives of the Bharatiya Janata Party government was to double farmers’ incomes by 2022. While the acknowledgement of agrarian and rural stress was appreciated, the announcement raises several questions. What would it take to realistically achieve this objective? What are the various challenges that the government might face in fulfilling its initiative? And generally, what needs to be done to revive the rural economy and make agriculture a more profitable economic activity?

With a general apathy towards agrarian distress, farmer suicides are now a common (and perhaps the most distressing) yardstick to measure the magnitude of the agricultural crisis. Farmer suicides are so prevalent that certain districts and states have been dubbed as “suicide-afflicted” districts and analysed each year. Indian farmers in general, and the small and marginal farmers (those with less than two hectares of land) in particular, are financially vulnerable. The unavailability of sufficient formal sources of credit forces farmers into borrowing credit from moneylenders at high rates of interest and eventually ending up in a debt trap. This high burden of accumulated debt is the primary reason behind the majority of farmer suicides. Farmer indebtedness has been singled out, according to several studies, as the primary cause of farmer suicide, with many articles dismissing the “drought” angle as a political excuse. There is an urgent need for policymakers to address the problem, tackling issues such as the lack of institutional credit, unfavourable land distribution, income inequalities and indebtedness, and decreasing incomes of agricultural labourers.

It has been well documented that India’s agricultural sector has been in distress for a while now. Farmer suicides are a direct result of the agrarian crisis that has seriously engulfed the nation. Despite various governments investing in technology and development, the agrarian crisis continues to squeeze employment opportunities and push agricultural labourers towards low wages and high debt. There is an increasing uncertainty regarding the returns on agricultural operations with input costs being disproportionate to the output prices. While indebtedness leads to economic impoverishment, it must be highlighted that small and marginal farmers and agricultural labourers who do not own any productive assets and farmers from the Scheduled Caste communities are even more economically vulnerable. The following papers stress the need to come up with policies that tackle income for agricultural labourers, revisit land reforms to help the small and marginal farmers and develop agro and allied enterprises that provide employment opportunities for the rural poor.

The Modi government has aimed to increase the coverage of crop insurance through schemes such as the Pradhan Mantri Fasal Bima Yojana and the Weather Based Crop Insurance Scheme. Crop insurance essentially covers farmers’ yield losses due to unforeseen events such as a deficit in rainfall or cyclones that destroy crops before the harvesting season. It ensures the stability of farmers’ incomes and ensures a flow of credit to the agricultural sector, which in turn aids in food security and growth of the sector. Studies explore policy recommendations to improve the performance of these two schemes as well as that of the rural financial institutions. Findings suggest that the disbursement of compensation under both schemes occurs with a delay, indicating issues in the timely execution of these policies.

Credit to the agricultural sector has played an important role in supporting production. But the informal sources of credit have often been found to be charging high rates of interest. Since agricultural production carries a certain amount of inherent risk, a need for institutional credit with reasonable terms arose. Rural institutional credit for the agricultural sector in recent times has increased in absolute terms, but it has been characterised by regional imbalances. It has also been unequal when the size of landholdings and the credit extended is taken into account.

The case for or against taxation of agricultural incomes has been debated in the literature and the lack of political will to implement such policies has been documented. Taxation on agriculture falls under the purview of the states but only a few states have levied such taxes and primarily the agricultural taxes have been levied on plantation crops such as tea. Studies recommend coordination among states to implement a system of agricultural taxation that may present its own set of challenges.

The once-dominant agricultural sector, which used to contribute a lion's share of India’s GDP, has now shrunk to a significantly small share, despite having the majority of the workforce still employed in it. It is argued that the sweeping economic reforms of 1991 did little for agriculture while urban sectors and industries experienced accelerated growth and development. De-accelerated agricultural growth impacts the sector’s ability to provide employment, income and job security to those engaged in farming and the allied sectors. In comparison, the industrial sector grows at a faster pace—a pattern observed even in rural India. As the single largest source of livelihoods in India, the importance of agriculture as an economic sector cannot be overlooked. A series of articles suggest that there must be a policy shift from agricultural production to farmer incomes, with a focus on mitigating the risk of weather unpredictability and price volatility. What does the frequently underperforming sector need to become revitalised and resilient?

Public investment in the agricultural sector and subsidies to farmers is a part and parcel of any government's public policy to aid the growth of the agricultural sector. Further, public investment helps to achieve the twin objectives of balancing regional inequalities as well as increasing incomes of farm households. Studies under this theme evaluate the trends in public investment across different years and question the consequences of a fall in public investment.

Studies under this theme deal with the impact of various government schemes such as the Kerala government’s agricultural workers’ pension scheme, and the sustainability of subsidies to farmers. Since the agricultural sector cannot organise collectively due to the high costs involved, the share of fiscal stimulus granted to cope with the pandemic has been lesser than that of the industrial sector. Studies emphasise the need for collective action, which can translate into bargaining power for the sector. Did the subsidies benefit those they were intended for? Is their implementation sustainable in the long run?

Agriculture, one of the mainstays of the Indian rural economy, by its very nature, is dependent on natural resources such as land and water and other inputs like electricity. The growth of the agricultural sector and, as an extension, the rural economy, depends heavily on the availability of these resources. While agricultural production has increased over the years, the country still faces agrarian and rural distress. One of the reasons for this trend is an increase in the costs borne by the farmers in securing and utilising agricultural resources and inputs. The returns a farmer receives from the sale of produce is disproportionate to the total cost of agricultural production. An overlooked aspect of the rural economic distress is the allocation of water, land and electricity, which need to be managed efficiently and sustainably. The contamination and depletion of groundwater and the excessive use of pesticides and power further stress the need for sustainable management systems. But how natural resources can be used judiciously continues to be a key concern in policymaking. Several articles suggest water management strategies that could help tackle these concerns as well as help mitigate drought, increase resilience to price fluctuations and monsoon failures, reduce the cost of cultivation, and ensure effective use of water and electricity.