India should take new bold reforms in agri-food sector: OECD-ICRIER report

Stating that India’s agro-food sector is at a critical juncture, facing multiple challenges, a new OECD-ICRIER report suggested to the government to launch new bold policy initiatives and accelerate existing reforms to achieve higher agriculture growth and ensure better income to farmers.

The report ‘Agriculture Policies in India’ pointed out that the gross farm revenue declined 6 per cent annually between 2014 and 2016 period because of low market prices even as farmers got large subsidies for various inputs like fertilisers, power and irrigation.

“Farmers in India face complex domestic market regulations and import and export trade restrictions, which together often lead to producer prices that are below comparable international market levels,” the Organisation for Economic Co-operation and Development (OECD) and the Indian Council for Research on International Economic Relations (ICRIER) said.

Recommending series of reforms, the report said the government should not resort to export curbs for creating stable and predictable market environment.

The government should reduce tariffs and other restrictions on imports, it said, adding that even food subsidies should be either targeted lump sum transfers (DBT) or a food stamp type of mechanism.

Pitching for reform in market regulations and strengthening of market functioning across states, the report asked the government to build on and reinforce initiatives already underway like electronic National Agri Market.

OECD and ICRIER suggested that the input subsidies provided through the budget should be freezed and then gradually withdrawn. This fund should rather be used for providing general services like infrastructure and innovation in the sector.

They suggested to the government to encourage private sector in the domestic agri-market regulations.

Meanwhile, Commerce Secretary Rita Teoatia, who released the report, said, “As far as today’s report is concerned and I must say that in the past we have had some difficulties with the OECD studies and the methodologies adopted and we have flagged those issues but the authors of this report were kind enough to share with me a brief discussion on the methodology and the assumptions made by them.”

“I think now that the report is complete we need to have a robust discussion around that and to understand the underlying data, the basis for conclusion, some of the wider issues which actually affect national agricultural policies as well and to see what perhaps would be the best the best way forward for India,” she added.

Ken Ash, OECD Director for Trade and Agriculture, said, “Many of the policy recommendations in the report are well known to the Indian government, and action on some are already underway. But more can and should be done, and we look forward to continuing to work with India, and to support its efforts to improve outcomes for consumers and farmers alike.”

Observing that large subsidies for fertilisers, power and irrigation have offset somewhat the price-depressing effect, the report said, “The overall effect of policy intervention over the 2014-16 period is a 6 per cent annual reduction of gross farm revenues.”

The gross farm revenue was negative because the market price support remained minus 13.1 per cent, while the budgetary spending was 6.9 per cent of gross farm receipts, it added.

Stating that farm policies in India are designed and implemented by a complex system of institutions, the report observed: “…no sufficiently strong mechanism exists to bring state and central level policy makers together to discuss problems, design solutions and monitor performance.”

The OECD-ICRIER report highlighted the progress made by the country’s agricultural sector over the past two decades and the important challenges now confronting the sector that include prevalence of very large numbers of smallholders, low productivity, climate change, pressure on natural resourcesNSE 0.00 %, persistent food insecurity and an under-developed food processing and retail sector.

Source: Economic Times

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