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KAUTILYA
Hot
Air Cold Facts
The parliamentary debate on agriculture only contributed
to global warming
By
Jairam Ramesh
A
few days ago, Parliament was exercised over the plight of farmers. Alas,
the debate was marked more by political rhetoric and less by economic
literacy with many of the arguments flying in the face of facts.
The developed
countries subsidise their agriculture very heavily; so should India.
True, the US, the European Union (EU) and Japan spend billions of dollars
subsidising their farmers. But they can afford to. Moreover, in these
countries the farm population constitutes no more than 5 per cent of the
total unlike in India where the proportion is around two-thirds. The reason
why we have to target subsidies better is because we are bankrupt and
subsidies means money taken away from more essential investment in infrastructure,
a trade-off that does not exist elsewhere.
 The
level of farm subsidy in India is negative and hence we can afford to
increase it. The WTO uses a concept called the aggregate measure of
support (AMS). For India, this AMS has been calculated at minus 31.1 per
cent of the value of agricultural production for the year 1995-96, as
compared to a plus 3.1 per cent for the US, 32.5 per cent for Japan and
22.9 per cent for the EU. The minus sign for India simply shows that our
farmers receive output prices that are below global prices. Many farmers'
organisations would agree to subsidy cuts if Indian farmers get world
prices. One of India's most distinguished economists, Y.K. Alagh, has
recently outlined a roadmap to halve our AMS.
Imports
are killing Indian farmers. The only instance of excess imports is
edible oil. What happened was that the import duty of 15 per cent was
fixed when the international price was ruling at around $600 a tonne.
These prices crashed to around $200 a tonne but the Government took time
to adjust the import duty to 65 per cent. This points to the need for
a trigger mechanism to automatically adjust import duties to fluctuations
in global prices and for a better system of timing for imports.
Low import
duties on farm products are destroying our farmers. Low import duties
are very often fixed so as to protect the interests of consumers as in
the case of edible oil or where domestic production is stagnating as in
the case of pulses. India is committed to a maximum import duty (the "bound"
rate) of 100 per cent for primary products and commodities, 150 per cent
for processed items and 300 per cent for edible oil. These are absurd
rates that weaken our capacity to demand cuts from developed countries.
As opposed to this, the actual import duty rate, as estimated by Ashok
Gulati, India's top agri-economist, now averages 38.5 per cent. For items
like rice, maize and skimmed milk powder, the bound rate was zero because
when these rates were fixed in 1948, India was an importer. These rates
have been re-negotiated recently. India must unilaterally set an actual
import duty rate of 50-60 per cent across the board for agriculture. This
will also give us the moral authority to lead WTO negotiations on agriculture,
from which Indian farmers have a great deal to gain.
Agricultural
production has suffered on account of liberalisation. True, the rate
of growth of foodgrains production has declined from 2.7 per cent in the
1980s to 1.9 per cent in the 1990s. But GDP from agriculture and allied
activities, a measure of value-addition, has averaged an annual growth
rate of 3.5 per cent in the 1990s as compared to 2.9 per cent in the previous
decade because of the growth that is taking place in sectors like horticulture,
dairy, poultry and fishing. But infrastructure to support this diversification
is woefully inadequate.
Investment
in agriculture is falling alarmingly. In constant 1980-81 prices,
public investment in agriculture has fallen. But this measures only expenditure
on irrigation, leaving out spending on other rural infrastructure like
roads, power, markets, research and storage. Falling public investment
in agriculture reveals the growing bankruptcy of state governments. However,
private investment has picked up. In the 1990s, private investment has
accounted for about 80 per cent of total investment in agriculture, up
from its historical average of 65-70 per cent. Private investment has
increased because the terms of trade, that is the ratio of prices received
for farm output to the prices paid for farm inputs, for family consumption
and for capital investment, have moved in favour of agriculture in the
1990s. This is a direct consequence of the 1991 reforms of reducing import
duties in industry, of moving to a market-determined exchange rate and
hefty increases in procurement and minimum support prices.
In the past,
Parliament has adopted special resolutions reflecting an all-party concern
on national issues. These non-binding resolutions help crystallise consensus.
The least our lawmakers should have done was to pass a special resolution
outlining an agenda to revitalise Indian agriculture that faces many challenges
and opportunities.
(The
author is with the Congress party. These are his personal views.)
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Ayodhya
is an issue that is pre-determined. And it matters little in the present
fuss that the foremost casualty is the truth, writes INDIA TODAY Deputy
Editor Swapan Dasgupta in 
