Reforms in Agriculture

Agriculture is one of the areas where the reforms are judged to have fallen short, and the assessment of the reform period is quite critical on this count.

The basic problem — decelerating growth:

Reforms have not been able to benefit agriculture, and the growth rate of this sector has in fact been decelerating. Several distinct reasons lie behind this poor performance.

Fall in public investment in rural infrastructure:

Since 1991, public investment in the agriculture sector — especially in infrastructure — has fallen. This infrastructure includes irrigation, power, roads, market linkages, and research and extension services. These very facilities had played a crucial role during the Green Revolution, when strong public support for irrigation, inputs and research helped raise farm output. The withdrawal of such investment therefore weakened the base on which agricultural growth depended.

Removal of the fertiliser subsidy:

The partial removal of the fertiliser subsidy led to an increase in the cost of production. This rise in costs hit small and marginal farmers particularly hard, since they have the least capacity to absorb higher input prices.

Policy changes that exposed farmers to competition:

Agriculture experienced a number of policy changes that increased the pressure on Indian farmers:

• Reduction in import duties on agricultural products
• Low minimum support prices
• Lifting of quantitative restrictions on the imports of agricultural products

Because of these changes, Indian farmers now have to face increased international competition. Cheaper imported agricultural goods and edible oils could enter the market, undercutting local producers who were not always able to sell their own produce at prices that covered their costs.

The shift towards export crops: …