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Sail with the trade winds: The Indian Express
Dec 02: It is wrong to say that India and its friends were against trade at Cancun. In fact, the problem in trade negotiations has arisen because the large developing countries have now begun taking trade seriously. They are arguing for a rule based system and transition to one in a fair manner.
Dec 02: It is wrong to say that India and its friends were against trade at Cancun. In fact, the problem in trade negotiations has arisen because the large developing countries have now begun taking trade seriously. They are arguing for a rule based system and transition to one in a fair manner.
Having taken that stand, it is important that we do our own homework. I have argued for long that we need to establish our own road map at the crop level showing how we will work out a policy strategy in trade dominated agriculture. This must make sense to the farmer and so has to be operational in each of our agro-climatic regions, because agriculture is land, water and weather specific, in spite of great technological changes.
Friends ask me if such strategies are possible in a game which is fixed from the word go. We will never find out if we don’t try and anyway there is no other option. Also, it will make some of our policy-makers less lazy and might even — if we are lucky — stop the politicos from being irresponsible.
We work with that favourite, paddy cultivation. It has been growing at a faster rate in the last decade, but is also under stress. Growth is higher in eastern and central India, but these regions complain that the Central government only intervenes in the north-west. In those states there are problems of plenty. The old system will not work much because the states are broke anyway and the Centre will also not have infinite funds to keep on buying stocks at unrealistic prices. In any case, even before the US-EU proposals, there were specific arguments against buying at unrealistic prices. That game — the FCI buying at prices more than what the CACP suggests — will anyway be under pressure as we go along. Are there alternatives? We need to give powerful signals, using markets to internalise the technological options available at the margin and to try and take advantage of our rich genetic heritage by encouraging quality as a feature. When as chairman, APC, I had suggested a quality premium for paddy in 1983, I was not heeded by those who now champion reform. The farmer sells basmati without moisture, because he knows the bania won’t give him a good price with it, but the FCI buys by weight, so add on water. Transport is a free cost in India so the Bihari, Oriya and Chhattisgarhi farmer doesn’t get a good price because we sell grain there ignoring transport as a real cost. All this must stop in a market economy. The poorest states must not be discriminated against.
We need to work out harmonised policy packages for at least six to seven crops. Capital costs of agriculture at the margin will be higher, but these have to be met to make us competitive. But working costs per kilogram of output will be lower, because that is what technology means. Our policies must provide for this transition to a brighter day tomorrow. It should not take more than three to five years to adjust. Even at Cancun there was sympathy that support to farmers’ groups for these kinds of adjustments must be WTO compatible. The focus will have to shift from state traders to more even-handed instruments.
Friends ask me if such strategies are possible in a game which is fixed from the word go. We will never find out if we don’t try and anyway there is no other option. Also, it will make some of our policy-makers less lazy and might even — if we are lucky — stop the politicos from being irresponsible.
We work with that favourite, paddy cultivation. It has been growing at a faster rate in the last decade, but is also under stress. Growth is higher in eastern and central India, but these regions complain that the Central government only intervenes in the north-west. In those states there are problems of plenty. The old system will not work much because the states are broke anyway and the Centre will also not have infinite funds to keep on buying stocks at unrealistic prices. In any case, even before the US-EU proposals, there were specific arguments against buying at unrealistic prices. That game — the FCI buying at prices more than what the CACP suggests — will anyway be under pressure as we go along. Are there alternatives? We need to give powerful signals, using markets to internalise the technological options available at the margin and to try and take advantage of our rich genetic heritage by encouraging quality as a feature. When as chairman, APC, I had suggested a quality premium for paddy in 1983, I was not heeded by those who now champion reform. The farmer sells basmati without moisture, because he knows the bania won’t give him a good price with it, but the FCI buys by weight, so add on water. Transport is a free cost in India so the Bihari, Oriya and Chhattisgarhi farmer doesn’t get a good price because we sell grain there ignoring transport as a real cost. All this must stop in a market economy. The poorest states must not be discriminated against.
We need to work out harmonised policy packages for at least six to seven crops. Capital costs of agriculture at the margin will be higher, but these have to be met to make us competitive. But working costs per kilogram of output will be lower, because that is what technology means. Our policies must provide for this transition to a brighter day tomorrow. It should not take more than three to five years to adjust. Even at Cancun there was sympathy that support to farmers’ groups for these kinds of adjustments must be WTO compatible. The focus will have to shift from state traders to more even-handed instruments.