Econo,ic Reforms On Agriculture

8/14/2019 Econo,ic Reforms On Agriculture

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r e s e n t a t i o n o n r e s e n t a t i o n o n c o n o m i c R e f o r m s i n c o n o m i c R e f o r m s i n n d i a n A g r i c u l t u r en d i a n A g r i c u l t u r e


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Importance of Agriculture sector Imp

ortance of Agriculture sectorTo IndiaTo India

1.Largest and one of the prominent sector inthe Indian Economy.

2.Agriculture and Forestry accounted for

16.6% of GDP to the economy.


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3.Employs 60% of Indian Population.

4.Accounts for 9% of Indian Exports.

5.About 43% of Geographical area is used forAgriculture Activity.


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Reforms Ref

orms

Advocacy of Liberalization1. Liberalization of Agriculture trade wasput forward to impart efficiency toAgriculture sector.

2. Restriction on private Stocks andInternal trade was be eliminated


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3.Policy agriculture Credit Under WentSignificant changes towards deregulation

4.The existing laws on agriculturalmarketing discriminated farmers by notallowing them to interact directly with thebig buyers were relaxed.


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rade radeLiberal izat ioniberal izat ion

1. Trade liberalization in Indian agriculture rupeedevaluation of 1991.

2.3. the subsidies on the exports of a set of commercial

crops, such as tea and coffee, were withdrawn.

4.5. Consequently Indias signing of the WTO agreement

in 1995 ,export controls on almost all the cropswere gradually phased out


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Continti 4. Quantitative restrictions on the importsof commodities like wheat and wheatproducts, rice, pulses and oilseeds wereremoved from 2000 onwards

5. The trade policy began to use tariffs asthe primary instrument of regulation


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RR eduction in Subsidies eduction in Subsidies

In India, subsidies are provided for the following :fertilizer, power, irrigation and credit also the foodsubsidies are also provided by the state

1.Official policy that aimed at restricting subsidyprovision finances of the government

2.Subsidies crowd out public investment by divertingresources;

3.the prices of inputs do not reflect their scarcityvalue and hence these inputs are prone to overuseresulting in environmental degradation


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ubl ic Investment In Research ubl ic Investment In Research nd Extensionnd Extension

There were major shifts in the official policy onagricultural research and extension.

1.The new policy focused on encouraging privatesector investment in research and extension.

2.100 per cent foreign equity was allowed in the seed

industry and seed imports were allowed for researchpurposes under the Open General License (OGL).


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F nancial l iberalizationnancial l iberal izat ion1. Financial liberalization important component set of economic reforms in India after 1991.

2. Formal institutions of credit provision, mainlycommercial banks, emerged as important sources of finance to agriculture displacing usuriousmoneylenders and landlords.

3. The policy of social and development banking wasa supply-led policy; it aimed at augmenting the supplyof credit to rural areas, and that too at an affordable

interest rate.


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eversal of land reforms eversal of land reforms

lawsaws

1. New policies of the 1990s have aimed at

removing the ceiling limits by amending thelaws, so as to allow private firms to cultivateunlimited areas of land

2. An organization of production demandedpossession of large tracts of land with privatefirms, which was constrained by the ceilings onland possession in the land reform laws of States


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eregulat ion of marketing and eregulat ion of marketing and egal isat ion of contract farming egal isat ion of contract farming

1. The strategy of promoting high-valueexport-oriented crops is envisaged to be

encouraged also through a deregulation of the marketing system.

2. Reforms in agricultural marketing havebeen undertaken through amendments tothe APMC Act and the EssentialCommodities Act in different States.


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hese reforms have had three major hese reforms have had three major:eatures :eatures

(a) The legalization of private corporate farming;

(b) Legalization of direct purchase of agriculturalproduce from farmers by global retail chainsbypassing regulated markets; and

(c) Permission for private players to open andcontrol new agricultural markets.


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Effect of the Reforms Ef fect of the Reforms


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griculture trade griculture tradeliberalizationiberal izat ion

1. Due to surge in agricultural imports, the differencebetween rupee value of farm exports and importssignificantly narrowed , when the WTO agreement wassigned .

2. The ratio of dollar value of agricultural exports andimports fell from about 5 in 1996-97 to 2.2 in 2003-04.

3.The share of agricultural exports in totalmerchandise exports declined from 21 per cent in1996-97 to 12 per cent in 2003-04.

4.The ratio of agricultural exports to the GDP fromagriculture also fell from 7.6 per cent in 1995-96 to


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Contionti 5. Impact that trade liberalization had on Indianagriculture was the sharp fall in domestic prices of many commodities

5. The increased alignment of domestic and worldprices after trade liberalization imported the volatilityof international prices formed in highly imperfectand monopolized market environments into Indianagriculture

6. The fall in prices of crops, combined with pricevolatility, significantly eroded the competitiveness of

Indian farm exports in the post-WTO period.


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eduction of Subsidies eduction of Subsidies

Viability of agriculture depends critically on the ratiobetween the output price and the input price.

That prices of inputs would rise with the withdrawalof subsidies is obvious.Large share of farmers in India does not generate amarketable surplus; most of the production of marginal and small farmers goes into householdconsumption and these groups would be adverselyaffected by the higher price of inputs.


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E fect of deregulazit ion of fect of deregulazit ion ofmarketingarketing

There were major impacts for these policy measures1. The first is that the purchaser is quite likely to be

interested in short-term gains/profitmaximization and may, therefore, suggestpractices, which in the long run are not good forthe land/other assets of the producer. Thepurchaser has the option of moving on after afew years of exploitation of an area

2.

3. The second issue relates to possible shifts in favourof export-oriented crops at the cost of cropsproviding basic food.


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3. The third is the preference for the larger producersin choice of partners by the purchaser, ignoring thesmall landowners.

4.It suggests that contract farming systems areassociated with increase in labour displacement infarms, intensified casualisation of labour, increaseduse of low-paid women workers and child labour and a

propagation of monoculture in search of quick profits.


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S r inking credit to rinking credit toagriculturegriculture

The flow of credit to the rural areas declined sharplyin the 1990s

The number of rural branches of commercial banksfell substantially between 1991 and 2000.

The rate of growth of credit supply to rural areas fellfrom 12.6 per cent between 1980 and 1990 to 3.2percent between 1990 and 2000


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P blic investmentblic investment1. In the 1990s and 2000s, there was a decline in therate of growth of public spending on agriculturalresearch and extension compared to the earlierdecades.

2. The growth rate of public spending on agriculturalresearch fell from 6.3 per cent in the 1980s to 4.8 percent in the 1990s

3. The corresponding figures for agricultural extensionwere 7 per cent in the 1980s and 2 per cent in the1990s and 2000s


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4. Concurrent to the weakening of the public sector,there has been an increasing control of private firms

over agricultural research and extension

5. According to a Planning Commission review, the

sluggish growth in Indian agriculture in the 1990s wasdue to weakened support systems, unresponsiveagricultural research, nearly broken down extensioninadequate seed production, distribution andregulation .


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ConclusiononclusionEconomic reform after 1991 was based on anexplicit rejection of the need to transform theinstitutional framework of Indian agriculture.

It was argued that with increased openness, thebarriers to raising agricultural surplus could beovercome by using external trade as an instrument. A

firm resolve emerged to repeal land reform laws inmany States, in order to encourage private corporateinvestment.


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Econo,ic Reforms On Agriculture