A AMARENDER REDDY, is Principal Scientist (Agricultural Economics), ICAR-Central Research Institute for Dryland Agriculture, Hyderabad. He worked as Director (Monitoring and Evaluation) and is Director Centre for Knowledge Management, ICT and Mass Media in Agricultural Extension at National Institute of Agricultural Extension Management (MANAGE), Hyderabad. Before this, he worked as Associate Professor (public policy) at Administrative Staff College of India (ASCI), Hyderabad, as Special Project Scientist (Economics) at ICRISAT, Hyderabad, as Senior Research Officer at Bankers Institute of Rural Development (BIRD), Lucknow and also as Principal Scientist (Agricultural Economics) at ICAR-IARI, New Delhi. Dr. Reddy also worked for a short period at Indian Institute of Public Administration (IIPA), New Delhi in agricultural and rural economics research. In an interview with MOHD NAUSHAD KHAN, he said MSP as insurance against price risk is important for farmers, but it needs to be designed in such a way that it costs less and logistically manageable to government to administer.
How has agriculture shaped our economy in the last decade?
Indian agricultural growth is very good especially during the COVID years 2019 and 2020. While all other sectors’ growth rates declined, agricultural sector growth rate was positive. Indian agricultural sector exports increased significantly in the recent past. The buffer stocks of food grains peaked to above 100 million tonnes, which facilitated free distribution of food grains under Public Distribution System to vulnerable population, migrant workers and other weaker sections during the COVID period.
In what way agriculture has impacted our GDP and economic growth in recent times?
Agriculture contributes to about 17% of the country’s GDP, although population dependent on agriculture is 50%. It indicates that the incomes of the farmers are about one-third to half of that of people dependent on non-agricultural sector. During the COVID period, agricultural sector supported all the reverse migrant population.
How MSP is important for the livelihood of farmers?
On average, farmers’ incomes in India are very low with a monthly income of Rs.10,000 per household, of which about Rs.3,500 is coming from agriculture. Assuring price is important given that agricultural prices fluctuate widely from season to season and year to year. MSP as insurance against price risk is important for farmers, but it needs to be designed in such a way that it costs less and logistically manageable for the government to administer.
What would be the real burden of MSP on the government?
Now the government announces MSP for 23 crops, but actual implementation is restricted to only a few crops like paddy, wheat, cotton and sugarcane that too in a handful of states. The government is procuring just 44% of production of paddy, 36% of wheat, 29% of cotton and 68% of sugarcane. The remaining was sold in the open market; generally open market prices are about 10 to 25% less than MSP. According to one estimation, MSP value of production was about 11 lakh crore rupees, the 10% of it is Rs.1.1 lakh crore and 25% is Rs.2.7 lakh crore. It means, if the government directly transfers the gap between MSP and open market price, the amount needs to be allocated to ensure MSP through Price Deficiency Payment (PDP) ranging between Rs.1.1 to 2.7 lakh crore rupees.
There are many exaggerated figures of burden due to MSP. How would you like to respond?
Some authors are including all the Public Distribution System (PDS) subsidies while calculating burden of MSP. For example, if wheat MSP is Rs.2015 per quintal and issue price of wheat is Rs.200 per quintal, the entire gap (2015-200=1815) is considered burden of MSP per quintal. It means about 90% of the MSP price. But this calculation is erroneously wrong. This burden is actually going to consumers as food subsidy. The actual burden of MSP as price support to farmers is to be calculated as the gap between MSP and open market price (or international price). It is generally ranging between 10 to 25% of MSP during the last decade as calculated from the FAO data.
Agriculture economy has never been a concern for all of us as compared to corporate economy. What do you think are the reasons behind it?
Unlike in developed countries, in India still about 50% of the population depends on agriculture directly and about 20% depends on indirectly. All the rural populations are either directly or indirectly depending on agricultural incomes. Over the years, farmers’ relative incomes are shrinking and risks and input costs are increasing. The household expenditure especially on education and health is increasing exponentially, but farmers’ incomes are stagnant. This is leading to widespread agrarian distress in India even in rich states like Punjab and Haryana and even in Telangana as seen from the farmers’ agitations for assured MSP.
How would you like to see the policy of subsidy to farmers in India as compared to that in other developing and developed countries?
Across the world, countries are subsidising their agricultural sector hugely. As the agricultural commodity prices are decreasing over the last 100 years across all the countries, which decreases relative incomes of the farmers. But mode of subsidy is shifting from the guaranteed prices to income support in terms of direct money transfers. Administering guaranteed price through direct procurement is costly, there is a huge burden on governments to arrange for procurement logistics as well as offloading the grains in open domestic market or international markets. Whereas direct money transfer income support schemes like PM-KISAN, Rythu Bandhu of Telangana, YSR Rythu Bharosa of Andhra Pradesh or KALIA scheme of Odisha can take advantage of already created Aadhar linked bank accounts created under Jan Dhan Yojana and disburse money with zero leakages directly into the farmers’ accounts.
Apart from repeal of three farm laws and MSP, what do you think are the other challenges before our agriculture and labour market?
There is a need for attracting huge investments in post-harvest market infrastructure in India both by public and private investments. There is also a need for making APMC markets fully functional with world class grading and standardisation facilities to adhere to importing countries. Now India is becoming surplus in many commodities, to increase farmers’ incomes at least 30-40% of production of major crops needs to be exported to increase farmers’ incomes. The whole market infrastructure needs to be built with a focus on meeting this export target.