ECONOMIC SURVEY HIGHLIGHTS FIVE POLICY RECOMMENDATIONS FOR AGRICULUTAL SECTOR

THE NEED OF THE HOUR IS TO MOVE FROM BASIC FOOD SECURITY TO NUTRITIONAL SECURITY

TIME HAS COME TO PROMOTE CROP-NEUTRAL INCENTIVE STRUCTURES: ECONOMIC SURVEY 2023-24

AGRICULTURE SECTOR IS AT THE CONFLUENCE OF 3 GREAT CHALLENGES: FOOD AND NUTRITIONAL SECURITY, CLIMATE CHANGE AND SUSTAINABLE USE OF CRITICAL RESOURCES

The Indian agriculture sector is a success story. The country has come a long way from being a food deficit and importing country in the 1960’s to being a net exporter of agricultural products, highlights The Economic Survey 2023-24, tabled  by the Union Finance and Corporate Minister Smt Nirmala Sitharaman in Parliament today.

The need of the hour is to move from basic food security to nutritional security , points out the Survey. The Survey further notes that, we need more pulses, millet, fruits and vegetables, milk, meat and their demand is growing faster than that of basic staples. So, farm sector policies should align more with a ‘demand-driven food system’ that is more nutritious and aligned with Nature’s resource endowments, suggests the Survey.

The Economic Survey elaborates five policy recommendations that governments can take to ensure that the markets function in the interest of the farmer. The first step talks about not banning futures or options at the first sign of price spikes. The intelligent regulatory design of such markets can obviate the need for bureaucratic interference in the futures market for agricultural commodities, adds the Survey.

 The second recommendation by the Survey talks about invoking export bans only under exceptional circumstances and allowing domestic consumers to substitute, especially if the agricultural commodities in question are not essential consumption items such as foodgrains. “Farmers should be allowed to benefit from higher international prices”, states the Survey.

As the third step, the Survey talks about re-examining the inflation-targeting framework. It says that India’s inflation targeting framework should consider targeting inflation, excluding food. “Higher food prices are, more often, not demand-induced but supply-induced. It is worth exploring whether India’s inflation targeting framework should target the inflation rate excluding food”, notes the Survey. The Survey further notes that hardships caused by higher food prices for poor and low-income consumers can be handled through direct benefit transfers or coupons for specified purchases valid for appropriate durations

The fourth recommendation talks about the need for increasing the Total Net Irrigated Area. Several states are well below the national average and India’s irrigation efficiency is only 30-40 percent for surface water and 50-60 per cent for groundwater, points out the Survey. The Survey highlights the need for better water utilisation farming practices and technologies like drip and fertigation.

The fifth and final suggestion by the Survey is about making farming consistent with climate considerations. Grains such as rice and sugarcane are water-guzzling crops and cultivation of paddy gives rise to methane emissions. The time has come to promote crop-neutral incentive structures, says the Survey.

Agriculture is at the confluence of three of the greatest challenges of the 21st century – sustaining food and nutrition security, adaptation and mitigation of climate change, and sustainable use of critical resources such as water, energy, and land, highlights the Survey. The Survey notes that although agriculture and allied sectors hold significant potential for gainful employment, India is yet to fully exploit the potential of agriculture to contribute to economic growth and employment generation.

The agricultural sector requires a serious structural transformation due to challenges posed by water scarcity and climate change adds the Survey.  The surge in agricultural employment in COVID years due to reverse migration, the decline in the growth rate of value addition in agriculture in FY24, and an extremely hot summer in the Northwestern and central regions of the country in the summer of 2024 with rising water stress and energy consumption make a serious and honest stock-taking of India’s farm sector policies imperative, concludes the Survey.

Crop neutral incentive structures to align agricultural production with nutrition and sustainability while avoiding ad hoc market bans. The Economic Survey 2023-24 urges a policy shift from basic food security to nutritional security, endorses crop neutral incentive structures to discourage water intensive and high emission crops, calls for smarter regulatory design of futures and options rather than bans, restricts export bans to exceptional circumstances so farmers can access higher world prices, proposes considering inflation targeting excluding food with targeted transfers for the poor, and prioritises expanding irrigated area and adopting water efficient farming and climate smart practices.