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Wednesday, 01 July 2015 00:56
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Can’t boost eastern India without larger reforms

Prime Minister Narendra Modi was right when he said, while laying a foundation stone for the Indian Agricultural Research Institute in Hazaribagh, that India needed a second Green Revolution in eastern Uttar Pradesh, Bihar, West Bengal, Jharkhand and Assam. Indeed, given the sharp reduction in poverty in states that have had sustained agricultural growth, any poverty-reduction strategy has to be largely focused on getting agriculture growth up. Moving farming growth to eastern India is also critical from the point of saving water—the average Punjab farmer uses nearly double the amount used in West Bengal. But doing this, in its current state, would lower rice output by over a third given the difference in productivity. The obvious answer lies in getting West Bengal farmers—indeed, all of eastern India—to adopt better technologies.

 

But since all technologies take time to bear fruit, farmers also need incentives such as assured procurement of crop by government agencies—it is difficult to see how Punjab and Haryana’s agriculture would have taken off without large FCI procurement or big water/electricity subsidies. This is why the Shanta Kumar committee recommended FCI moving its operations to eastern India. But if FCI’s operations are curtailed by moving to cash transfers, the amount of savings made can be used to give per-acre cash subsidies to farmers—the average Punjab farmer gets R12,000 per acre of power and fertiliser subsidies. While this is something the states give, the Centre can chip in using large savings from FCI operations. With per-acre subsidies or with crop insurance—paid for by the Centre and states—farmers in eastern India will find it easier to shift to higher-yielding varieties of crops and the second Green Revolution the PM wants will take place on its own. Even today, seed firms have far greater R&D and extension services than public sector organisations do—if the Centre/states get the incentives right, nothing can stop the revolution. To supplement this, states need to start working on other incentive structures like getting a processing industry going. Bihar and eastern UP, for instance, used to be India’s biggest sugar production regions, but when it became difficult for mills to get licences, the business shifted to Maharashtra where licences were easy to get. Equally critical in getting the incentives structure right is India’s exports policy. If it continues to be on/off like it is right now, it is unlikely farmers—in eastern or any other part of India—will take to technology in a big way.

 

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