• Despite the general perception that Indian farmers are beneficiaries of major subsidies, a new report says the overall effect of policy interventions between 2014 and 2016 is, in fact, a 6% annual reduction of gross farm revenues.

• Consumers, on the other hand, pay an average 25% less for commodities as a result of policy interventions.

• According to researchers at the Organisation for Economic Cooperation and Development (OECD) — an intergovernmental body of 36 developed countries — and the Indian think tank ICRIER, who analysed policies that affected the agricultural sector over the two-year period, government interventions were more consumer-centric than producer-centric.

• The report “Agriculture Policies in India” points out that Indian farmers face regulations and restrictions — both in the domestic market and also when they attempt to export their produce — which often lead to producer prices that are lower than comparable international levels.

• The researchers argue that despite large subsidies for fertilizers, power and irrigation, which offset somewhat the price-depressing effect of market interventions, the overall effect of policy intervention over the 2014-16 period is a 6% annual reduction of gross farm revenues.
• While consumers have benefited from the government’s efforts to keep prices low, a poorly targeted, inefficient and wasteful public distribution system means that malnutrition and food insecurity continue to persist.
• The report has several suggestions for policymakers, including reform of market regulations, strengthening initiatives such as e-NAM and allowing private players to play a larger role in the sector.

• It also recommends a strengthening of the regulatory environment governing land issues, strengthening access to credit, especially long-term loans, and developing collective-action groundwater and watershed management and correcting measures — including electricity pricing — which incentivise the overuse of water.

• With regard to the PDS, the report suggests gradual reduction and a move towards cash transfers and allowing the private sector to manage remaining stock operations.

• To make trade work for Indian agriculture, import tariffs must be reduced and export restrictions relaxed to create a more stable and predictable market environment.

The Hindu