Bharat SainiLast Updated on September 27, 2017 by Bharat Saini
The farm sector in India is very crucial for food security of the country’s large population and for the livelihood of majority of its population. Therefore, the performance of this sector is closely monitored by the government and various measures and strategies are put in place to counter the adverse effects of various factors on this sector from time to time. These measures and strategies include several instruments like regulation of import and export, monetary policy, public investments, minimum support prices, input subsidies, credit supply, direct intervention into market, regulation of market and private trade, special packages for the sector, etc. These instruments have been effective in decoupling India’s agriculture sector from rest of the world and in minimising the effect of severe shocks in the global economy on the sector. This was seen during the period of global food crisis in 2007 and 2008 when India did not witness even a double digit growth in food prices whereas global prices touched an increase in three digits. A similar experience has been repeated in the aftermath of the global economic slowdown during 2008-09 and 2009-10. A high inflation in food prices in absolute and real terms show that it was not the prices which were leading to an adverse performance of agriculture during 2008-09 and 2009-10 but the low growth of agriculture which was leading to a high increase in food prices.
As India is increasingly exposed to the fluctuations of the international markets in the context of a global supply deficit, low inventories; and in the similar manner India’s positions on the international markets can significantly destabilize world prices, as evidenced by the recent bid solicitations for wheat. Demand from India is a significant driver of worldwide growth, an influence that continues to grow given that its food security is strategic which must ensure that its 1.3 billion inhabitants are fed. The government has to monitor imports of agricultural goods deemed sensitive in nature for competing directly with nationally-produced goods, such as dairy, fruit, nuts, coffee, tea, grains, food oils and spices. The government may also decide to limit exports in order to preserve national supply and the stability of domestic prices, as for example wheat exports were also prohibited, in February 2007, to contain a rise in domestic prices.
India’s farm sector is unable to meet the challenges of liberalization of international agricultural trade as the products imported at lower cost will enter into direct competition with locally-produced goods. At the same time, India’s exports will suffer due to exports from other emerging countries that are better able to compete given their more modern agricultural techniques.
Finally, the TRIPS and TRIPS-plus agreements, which establish significant intellectual property barriers, will cause direct harm to India’s agricultural sector, as the benefits of innovation will be reaped by foreign companies rather than Indian companies or farmers, due to the intellectual property game. The phenomenon can already be observed today with rice.
