Agriculture and Rural Development: Need for Reforms

Abstract

There has been a significant slowdown in agricultural growth and decline in poverty in the 90's. The reasons include stagnating yield levels in irrigated pockets, non-realisation of potential growth in non-irrigated regions, lack of sufficient buoyancy in the non-farm sector, decline in rural non-agricultural employment, casualisalion of labour, rising relative cereal prices etc. In this scenario, major new initiatives are needed to spur growth in agriculture and thereby induce growth in other sectors through inter-sectoral linkages. Reforms are needed in pricing policy, trade policy and land relations. The major pre-requisite for agricul1ural growth is investment in irrigation, rural infrastructure, R&D in unirrigated regions. Due to significant gestation lags in these sectors, private investment is unlikely to flow in and public sector investment is a must. Resources for public investment should be raised by curtailing and diverting resources from current expenditure like food, fertiliser and power subsidies through better targeting and rationalisation of tariffs. To this end, reforms on pricing of inputs and outputs (supported procurement prices) are needed. The needed trade policy reforms include export emphasis on non-food crops like milk and milk products and fruits and vegetables and continuation of self-sufficiency policy in case of basic food crops. These reforms need to be supplemented by rigorous land reforms to realise the full potential of benefits from trade liberalisation.