| It is reasonable to surmise an economic policy is a mess when all the stakeholders are unhappy. The continuing disgruntlement over onion prices and policy is a manifestation of the larger failings of agricultural policy. Even as onion prices in wholesale markets have begun to drop, retail prices remain sticky. The distorted market signals nudge the government to continue with its ill-advised ban on exports, thereby hurting farmers. Neither farmers nor consumers are pleased and agriculture remains the slowest growing segment of the economy. |
| Another area where Indias static agricultural policy has become counterproductive is the cereal procurement system, particularly that of wheat and rice. Government warehouses are overflowing with these cereal stocks; it was 81% in excess of the buffer norms in July last year. Food subsidy has become a drag on government finances as the PDS issue price for rice and wheat have remained unchanged since 2013 and cover less than 10% of the economic cost of procurement. Unfortunately, inefficiency in distributing cereals means that a growing food subsidy budget has been accompanied by an increase in grains locked up in warehouses. The adverse fallout spans groundwater depletion as well as aversion to diversifying cropping patterns. |
| Agriculture continues to be the biggest source of livelihood even if it's the slowest growing sector. This can change with a better set of policies in which states play a role. To begin with, government must reform its procurement system. It can start by following through on the suggestion of the Commission for Agricultural Costs and Prices to review open-ended procurement and end the habit of some states declaring a bonus over MSP. This combination nudges farmers to avoid crop diversification and thereby distortions continue. While the procurement policy tweaks can be done quickly, the more far reaching change will be in other areas. |
| About 80% of agricultural investment comes from farm households. Consequently, farmers directly bear most of the risks in a period characterised by extreme climatic events. This can be changed by encouraging private corporate investment which today contributes about 3% of the investment. The risks can then be spread among entities better equipped to mitigate them. Small and marginal farmers will be the biggest beneficiaries if they are linked through fewer intermediaries to the changing needs of the retail consumer. Two urgent changes which will catalyse transformation are digitisation of land records and smarter land leasing laws. |
A) Government warehouses are overflowing with cereal stocks and food subsidy has become a drag.
B) PDS issue prices are fluctuating
C) Issue price cover the cost of production
D) Excess buffer stock were useful to meet the needs of BPL population
Correct Answer: A
Solution :
(a) Another area where Indias static agricultural policy has become counter-productive is the cereal procurement system, particularly that of wheat and rice. Government warehouses are overflowing with these cereal stocks; it was 81% in excess of the buffer norms in July last year. Food subsidy has become a drag on government finances as the PDS issue price for rice and wheat have remained unchanged since 2013 and cover less than 10% of the economic cost of procurement.
You need to login to perform this action.
You will be redirected in
3 sec
