There is a need for reform in the wheat-rice economy
T N Ninan / New Delhi Feb 20, 2010, 01:23 IST
Mention agriculture and most people immediately think of wheat and rice. That is to be expected, since these two crops dominate the airwaves and policy pronouncements, account for the bulk of the subsidies going into agriculture as well as the bulk of what is pushed through the public distribution system, and of course define food security (the promise of 25 kg per head of wheat/rice to every poor family at Rs 3 per kg). So, the statistics make for interesting reading. Between them, wheat and rice account for just 20.8 per cent of the sub-set of the economy that is called “agriculture and allied activities”. In comparison, milk accounts for 17.6 per cent of agriculture, as does horticulture (fruit, vegetables and flowers). But we don’t hear of the need for subsidies to these large sub-sectors. In comparison with the subsidies going mostly to wheat and rice, the milk sector is profitable, as is poultry, and as are cash crops like sugarcane and cotton. Bear in mind also that coarse grains and pulses, which are grown mostly on non-irrigated land, receive little by way of government support; yet these account for 6.6 per cent of agriculture (wheat is 8.1 per cent).
So, what is it that makes wheat and rice special, such that even though they contribute barely 3.3 per cent to the country’s total GDP, they absorb something approaching 2 per cent of GDP as subsidies? It could be that they form the bulk of the consumption basket for the poor, but then the poor are separately being promised food security (which, if there is total coverage, will probably cost another 1 per cent of GDP).
Nor can it just be that you need to protect/subsidise millions of poor farmers (70 per cent of the 100-plus million land holdings in India are under a hectare), because only about 40 per cent of the country’s cropped area is under wheat and rice. The rest is under coarse cereals, oilseeds, pulses, cotton, fodder, sugarcane and the like. How is it that farmers can grow all those other crops without the scale of government support that wheat and rice growers get?
In any case, it is not just farmers who are poor; there are 50 million forest dwellers (to take another category of poor) who make do as best they can without state support. If anything, the forest department is hostile to them. Besides which, it is the success of dairying that has helped boost rural incomes far more than growing wheat and rice; milk is now the single-biggest commodity to come out of Indian agriculture, and most milch animals are owned by small and marginal farmers, landless workers and shepherds — all poor people.
If protecting poor consumers and poor producers is not a convincing explanation for the extraordinary focus on wheat and rice, what about the country’s food security, which is defined by self-sufficiency in staple food? India has to grow enough to avoid large-scale imports, chiefly because such imports are not feasible (the global trade in rice, for instance, is barely 25 million tonnes). But if national food security is the real reason, surely we would be doing more to boost wheat and rice productivity. Mexico has 80 per cent higher wheat productivity than India, and Sri Lanka has double India’s rice productivity per hectare.
No matter how one looks at the wheat-rice economy, the conclusion is inescapable that, despite all government efforts, producers achieve poor productivity, consumers complain of high prices, and both get subsidised, even as other parts of the agricultural economy shine in comparison. Any takers for reform?
Mr Editor,
I wish your calculation of subsidy were not limited to subsidy on Urea which itself is 2% of GDP.What about the free/subsidised electricity, diesel for pumps as also cheap and sometimes free credit. Then there are costs of MSP, procurement and distribution. Keeping these factors together, India will perhaps be a net gainer if all Indians were given free rice and wheat using food stamps by importing and doing away with all subsidies given in the name of food(i.e rice and wheat). On a lighter note, this will also perhaps solve the problem of land for industry.
An excellent analysis of the situation of high subsidy to low productivity wheat and rice crops. But why the article stopped there. Please suggest a solutions which benefit all crops and improve productivity and income of farmers. High time the focus is shifted from water guzzling rice and focused on improving yields of rainfed crops like coarse grains and pulses. Nutrition wise too coarse grains are far better than rice and wheat.If we price water, we will see how uneconomical rice and sugarcane growing is.
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