India on its way to agricultural recovery?

Is Indian agriculture showing signs of a revival after nearly a decade of being engulfed by crises? Even the question would have been scoffed at till recently, but now it needs to be addressed.

At the micro level, suicides by farmers may or may not have abated; nor can anyone claim that farmer distress is not an everyday fact of life in many parts of the country. At the same time, there are now several positive indications at the macro level which suggest that there could be change on the ground.

One pointer is the upward revision in the official crop production estimate, indicating that the output of foodgrains and some key commercial crops touched new highs in 2006-07, thus leaving behind the stagnation that had set in during the late 1990s. The increase in the foodgrain harvest in 2006-07 is now reckoned at 3.6 per cent, more than twice as much as projected in April (the figure then was 1.5 per cent).

Equally, if not more, significant is the 20 per cent growth clocked by the two main commercial crops—sugarcane and cotton. Cotton, the crop that has earned a bad reputation because of suicides by its cultivators, has set a new production record for the second year in a row, suggesting something more than a fluke. This aside, agriculture's allied sectors like horticulture, dairy, poultry, fisheries and others have maintained their consistent uptrend.

Though oilseed crops did not do well last year, the overall surge in farm production beyond trend levels, and well in excess of the earlier estimates, may necessitate an upward adjustment of overall agricultural growth in 2006-07, reckoned earlier at 2.7 per cent.

This growth has come on top of a handsome 6 per cent growth in the previous year. Also notable is the fact that overall growth in agriculture and allied sectors in 2004-05, a near-drought year, did not dip below zero, which was the case two years prior to that in 2002-03, when drought had brought down output by as much as 7 per cent (the intervening year, 2003-04, had seen a smart recovery with 10 per cent growth).

The 10th Plan period (2002-07) would therefore have ended with 2.5 per cent annual agricultural growth -- better than the 9th Plan's 2.1 per cent, and significantly faster than the 1.7 per cent rate of population growth.

The logical question is what has triggered the winds of change. There could be several explanations. For one, the flow of farm credit has expanded multi-fold in the past 3-4 years. The availability of good-quality seeds has improved perceptibly, and there is a noticeable improvement in productivity in several crops, in some cases matching global benchmarks.

The use of other farm inputs, including fertiliser, has improved. And thanks to the amendment of the agricultural marketing laws in many states, market access is now better. Commodity prices have remained firm in recent years, putting more money in farmers' hands.

A revival, even if it is there, is still a weak one. Much needs to be done to sustain this nascent trend, and to improve annual agricultural growth to the desired level of 4 per cent. Problems persist when it comes to agricultural credit (the cooperative credit sector remains in disarray), irrigation (60 per cent of the land is still rain-fed), seeds (the replacement ratio is poor), and fertiliser (the industry is heading for sickness due to unpaid subsidy dues). Marketing controls and bans on futures trading also persist. If these are not addressed, the improvement of the past couple of years will not be sustained.