Now raising intellectual capital
India is high on the list of candidates to help lead the world out of the current recession. The country weathered the global downturn remarkably well and looked poised to race ahead in coming years. Against this backdrop, the modest slowdown in growth caused by this year’s weak rainfall is little more than an annoying speed bump.
But the dry spell should sound an alarm to India’s politicians. Years of misguided agricultural policy have indisputably made the situation worse. Greater investment in irrigation and hardier crops could have halved the economic damage from a lackluster monsoon. More crucially, an overhaul of India’s farming policy could help close the gap with China — which has grown more than twice as fast since 1980.
Nobody could accuse India of neglecting its farmers. The country lavishes huge subsidies on the sector, sets minimum prices to shield farmers from price fluctuations and offers free electricity and water. Yet the spending has contributed to the parlous state of Indian public finances while doing little to increase agricultural productivity and farm incomes. State intervention is a stifling embrace — focusing on welfare and security rather than on efforts to make the sector more dynamic.
As a result, farm productivity growth has lagged badly behind China — where agricultural reform was the starting point of liberalization in 1978. Since the 1970s, the productivity growth of wheat farmers in India has been barely half that of the Chinese, where yields have trebled, according to the statistics by the Food and Agriculture Organization. India’s rice growers are also roughly half as efficient as their Chinese counterparts.