1) Plough to plate, hand held by the Indian state
The distinct characteristics of India’s agriculture require that a reformed state must ensure farmer, consumer welfare
GS 3: Indian Agriculture, Agricultural Reforms
- There are very specific characteristics of agriculture, as also crucial elements of the socio-historical context, which imply that the Indian state must continue to intervene in multiple markets and make critical investments, to ensure the welfare of both farmers and consumers.
Specificities of agriculture
- Due to a variety of limiting factors,
- from uncertainties of the weather to soil fertility and water availability,
- increasing returns to scale are very difficult to achieve in farming.
- This underscores the need for the right kind of public investment in agriculture.
- But in agriculture, members of the family can be drafted to work on the family’s farm, as also in other farms and non-farm work.
- This phenomenon is quite widespread in India today: of the nine crore rural families who draw their main income from unskilled manual labor, four crores are small and marginal farmers.
- Through overwork and self-exploitation, peasant farmers are able to cling to their land.
- All farmers harvest their crop at the very same time due to the climatic annual cycle; 86% of India’s farmers are ‘small and marginal’, too poor to afford warehousing facilities, and are, therefore, compelled to bring their harvest to the market at around the same time.
- Since demand for food crops is typically priced inelastic, during a bumper crop, while prices fall, the resulting rise in demand is not enough to salvage farmer incomes.
Balance of power
- These traders double up as moneylenders and the operation of a deeply exploitative grid of interlocked markets afflicts most farmers.
- In the credit market, usurious interest rates (often as high as 60%-120% per annum) create a debt trap from which it is virtually impossible to escape.
- The repayments due are ‘adjusted’ through exploitative practices in the input, output, labor, and land-lease markets.
- The moneylender combines the roles of input supplier, crop buyer, labour employer, and land lessor.
- This interlocked grid works in tandem with the oppressive caste system, with the poorer, ‘lower’ caste farmers, facing a cumulative and cascading spiral of expropriation.
Diversify public procurement
- The Food Corporation of India and the Agricultural Prices Commission (Commission for Agricultural Costs and Prices, or CACP since 1985) were set up in 1965.
- The idea was that as farm output rises with the Green Revolution, farmers are assured that their surplus would be bought by the government at a price high enough to leave them a margin.
- The crops procured were then made available to consumers at subsidized rates through the Public Distribution System (PDS).
- Thus, government intervention protected farmers during bumper crops and dipped them into the buffer stock to protect consumers during droughts.
- However, the Green Revolution also sowed the seeds of its own destruction.
- More than 300,000 farmers have committed suicide in the last 30 years, a phenomenon completely unprecedented in Indian history.
- There is growing evidence of a steady decline in water tables and water quality.
- The yield response to application of increasingly expensive chemical inputs is falling, which has meant higher costs of cultivation, without a corresponding rise in output.
- Around 90% of India’s water is consumed in farming, and of this, 80% is used up by rice, wheat and sugarcane.
- Farmers continue to grow these water-intensive crops even in water-short regions primarily because of an assured market — for rice and wheat in the form of public procurement, which still covers only a very low proportion of India’s crops, regions and farmers.
- Thus, we need to greatly expand the basket of public procurement to include more crops, more regions and more farmers.
- If done right, this single reform would secure multiple win-wins: higher and more sustainable farmer incomes, greater water security and better consumer health.
Ensuring a steady market
- To incentivize farmers to make this change, governments must include them in procurement operations.
- A useful benchmark could be 25% of the actual production of the commodity for that particular season (to be expanded up to 40%, if the commodity is part of the PDS), as proposed under the 2018 Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM-AASHA) scheme.
- The locally procured crops should then be incorporated into anganwadi supplementary nutrition and school mid-day meal programmes.
- This would mean a large and steady market for farmers, while also making a huge contribution to tackling India’s twin syndemic of malnutrition and diabetes, since these crops have a much lower glycemic index, while providing higher content of dietary fiber, vitamins, minerals, protein and antioxidants.
- India has a network of 2,477 mandis and 4,843 sub-mandis to safeguard farmers from exploitation by large retailers.
- This network needs to be greatly expanded as today, only 17% of farm produce passes through mandis.
- To provide farmers access within a radius of five kms, India needs 42,000 mandis, which are also in need of urgent reform.
- Rather than moving in the direction of weakening or dismantling mandis, we need to make their functioning more transparent and farmer-friendly.
Rural India will be focal point
- Ever since the Second Five Year Plan initiated in 1956, the central plank of Indian economic policy has been to get people off the land and move them into industry and urban areas.
- However, even after all these efforts, the United Nations estimates that in the year 2050, around 800 million people will continue to live in rural India.
- Agriculture can only be reformed by radically enhanced state capacities and qualitatively better regulatory oversight, rather than by opening up spaces for more predatory action by those already entrenched in positions of overwhelming power in the economy.
2) Explaining Pakistan’s flip-flop on trade with India
The shadow of politics still looms over trade, which runs contrary to Islamabad’s statements on the need for better ties
GS 2: International Relations
- Pakistan’s double U-turn on resuming trade with India highlights the internal differences within Ministries, between business and political communities, and the emphasis on politics over economy and trade.
- It also signifies Pakistan cabinet’s grandstanding, linking normalization of ties with India to Jammu and Kashmir.
- On March 31, Pakistan’s new Finance Minister Hammad Azhar, announced Pakistan’s Economic Coordination Committee (ECC)’s decision to import cotton, yarn, and 500,000 metric tons of sugar from India.
- The media dubbed it as a political breakthrough but the ECC’s decision was not on bilateral trade; it was about importing only three items — cotton, yarn and sugar.
- A day later, Pakistan’s cabinet overruled the decision; the meeting was chaired by Prime Minister Imran Khan and which included Shah Mohammad Qureshi (Foreign Affairs Minister), Fawad Chaudhry (Science and Technology Minister) and Shireen M. Mazari (Human Rights Minister).
- However, Pakistan’s textile industry has not taken the cabinet’s decision kindly; for them, importing cotton yarn from India is an immediate need; else, it would impact their export potential.
- Three takeaways can be identified from the above.
- The first relates to the ECC’s decision to import only three items from India, namely cotton, yarn and sugar.
- It was based on Pakistan’s immediate economic needs
- It was not designed as a political confidence-building measure to normalize relations with India.
Practical and economic
- For the textile and sugar industries in Pakistan, importing from India is imperative, practical and is the most economic.
- According to the latest Pakistan Economic Survey, 2019-20, though the agriculture sector witnessed a growth of 2.67%
- Cotton and sugarcane production declined by 6.9% and 0.4%, respectively.
- Sugar exports came down substantially last year, by over 50% in 2019-20, when compared to 2018-19.
- Yarn, cotton cloth, knitwear, bed-wear and readymade garments form the core of Pakistan’s textile basket in the export sector.
- By February 2020, there was a steep decline in the textile sector due to disruptions in supply and domestic production.
- When compared to the last fiscal year (2019-20), there has been a 30% decline (2020-21) in cotton production.
- According to the State Bank of Pakistan’s latest quarterly report,
- The decline in cotton production is also due to fewer areas (the lowest since 1982) of cotton cultivation.
- By the end of 2020, there was a sharp decline (around 40%) in cotton production.
- The ginning industry estimates that in 2021, it would receive less than half of what was projected.
- Pakistan’s cotton export would reduce, creating a domino effect on what goes into Pakistan’s garment industry.
- Pakistan is the fifth-largest exporter of cotton globally, and the cotton-related products (raw and value-added) earn close to half of the country’s foreign exchange.
Another industry in crisis
- The sugar industry in Pakistan is also in crisis. When compared to cotton, the sugar industry’s problem stems from different issues
- the availability for local consumption and the steep price increase.
- The sugar industry has prioritized exports over local distribution.
- Increased government subsidy and a few related administrative decisions resulted in the sugar industry attempting to make a considerable profit by exporting it.
- By early 2019, the sugar prices started increasing, and in 2020, there was a crisis due to shortage and cost.
- In February 2020, Mr. Imran Khan announced an investigation and constituted a commission of inquiry into Pakistan’s sugar crisis, 2019-20.
- According to the report, sugarcane was purchased off-the-books by the sugar mills, and sugar sold off-the-books.
- The report also noticed market manipulation and hoarding resulting in increased sugar prices within Pakistan.
- In short, the subsidies, cheap bank loans, a few administrative decisions, manipulation, and greed, especially by the sugar mill owners, mean high costs paid by the consumers.
- As a result, importing sugar from India would be cheaper for the consumer market in Pakistan.
- Clearly, the crises in the cotton and sugar industries played a role in the ECC’s decision to import cotton, yarn, and sugar from India.
- It would not only be cheaper but also help Pakistan’s exports. This is also imperative for Pakistan to earn foreign exchange.
- The second takeaway from the two U-turns — is the supremacy of politics over trade and economy, even if the latter is beneficial to the importing country.
- For the cabinet, the interests of its own business community and its export potential have become secondary.
- However, Pakistan need not be singled out; this is a curse in South Asia, where politics play a supreme over trade and economy.
- The meager percentage of intra-South Asian Association for Regional Cooperation (SAARC) trade and the success (or the failure) of SAARC engaging in bilateral or regional trade would underline the above.
- Trade is unlikely to triumph over politics in South Asia; especially in India-Pakistan relations.
The Kashmir link
- The third takeaway is the emphasis on Jammu and Kashmir by Pakistan to make any meaningful start in bilateral relations.
- This goes against what it has been telling the rest of the world that India should begin a dialogue with Pakistan.
- Recently, both Pakistan’s Prime Minister and the Chief of Army Staff, Qamar Javed Bajwa, were on record stating the need to build peace in the region.
- There were also reports that Pakistan agreeing to re-establish the ceasefire along the Line of Control (LoC) was a part of this new strategy.
- Pakistan has been saying that the onus is on India to normalize the process.
- Perhaps, it is New Delhi’s turn to tell Islamabad that it is willing, but without any preconditions, and start with trade.
- It may even allow New Delhi to inform Pakistan’s stakeholders about who is willing to trade and who is reluctant.