A Viable Agriculture Policy for Sustained Growth

Summary

S. S. Tarapore — economist and former Deputy Governor of the Reserve Bank of India — uses this Forum of Free Enterprise booklet (a reprint of his April–June 2012 Inclusion article, framed by an introduction from editor Sunil S. Bhandare) to argue that Indian agriculture has been hollowed out by a development model that lets the share of agriculture in GDP fall to 14.4 per cent while seventy per cent of the population still lives in rural areas. Writing against the looming 2012-13 drought, he warns that if this ‘sectoral distribution of income’ is not corrected, the resulting rural-to-urban migration will not be absorbed by Indian cities and will produce a ‘severe social explosion’.

Tarapore lays out a five-point reform agenda for a ‘viable’ agricultural policy: India must become a major and predictable commodity producer and exporter; overhaul its procurement-pricing system; expand the production of pulses and oilseeds; selectively corporatise farming on uncultivated government land; and promote allied activities such as livestock, fisheries, horticulture and floriculture. Central to all of this is the demand that the ‘export control raj’ — periodic bans on rice, sugar, onions and cotton — ‘must be totally abandoned’ so that domestic producers receive world prices and farm incomes rise.

The second half of the essay is a critique of the foodgrain procurement-and-storage regime. Drawing on a seminal Economic Times piece by CACP Chairman Ashok Gulati, Tarapore notes that public-sector foodgrain stocks would exceed 75 million tonnes against storage capacity of only 50 million tonnes, generating a ‘colossal damage’ the authorities cannot publicly acknowledge. He recommends exporting stocks even at 20–25 per cent below MSP, ending state bonus-leapfrogging above the MSP, and using free PDS distribution to clear excess inventories rather than feed rats. Recalling Indira Gandhi’s 1980s admission about scuttled oil-palm corporatisation — ‘We did some funny things, didn’t we?’ — he urges leasing uncultivated government land to corporates for pulses and oilseed production. The booklet ends with a Prime Minister’s Economic Advisory Council data table on farm crop output for 2004-05 to 2011-12, a tribute to Shailesh Kapadia (whose memorial trust sponsored the booklet), and a one-page note on the Forum of Free Enterprise.

Key points

• Frames the 2012-13 drought as a precipitating crisis that exposes deeper, structural fault-lines in Indian agriculture rather than a one-off shock.

• Identifies the central macroeconomic problem as the gap between agriculture’s 14.4 per cent share of GDP and its 70 per cent share of population, which guarantees forced rural-to-urban migration unless reversed.

• Calls for India to become a major commodity producer and exporter by abolishing the ‘export control raj’ of periodic bans on rice, sugar, onions and cotton.

• Proposes overhauling the procurement-pricing regime, restricting state bonuses above the MSP, and exporting surplus foodgrain stocks even at 20–25 per cent below MSP rather than letting them rot in open storage.

• Cites Ashok Gulati on the ‘foodgrain mountain’ — stocks projected to exceed 75 million tonnes against only 50 million tonnes of covered storage — as evidence of a political-economic-social imbroglio.

• Recommends selective corporatisation of agriculture by leasing uncultivated government land to corporates for pulses and oilseed production, invoking Indira Gandhi’s regret over a scuttled 1970s oil-palm proposal.

• Argues that without an aggressive policy to lift agriculture’s growth rate to four per cent per annum, ‘abject poverty will never be alleviated’ even if overall GDP grows at ten per cent.

• Frames the booklet within the Forum of Free Enterprise’s broader project, opening with A. D. Shroff’s ‘Free Enterprise was born with man’ epigraph and closing with Eugene Black’s defence of private enterprise as ‘an affirmative good’.