Globalisation-induced neglect of farm sector must end

Globalisation is a process by which regional economies, societies and culture have become integrated through networks of communication and trade. The impact of globalisation on our economy should be looked into in two time periods. The first phase was the period of economic policies of 1991 up to 2005, and the second phase is the period since then. The Indian economic reform of 1991 helped to overcome the crisis faced by the economy both internally and externally. In the first period, the Indian economy intensified its interdependence on and competitive spirit in the world market. The period of transmission of this interdependence has had tremendous impact on overall economic development, both positive and negative.

The rate of growth of India’s GDP increased from an average of 5.6% in the 1990s to 7.5% in 2003-04. In the second phase, it has been around 7%. In this period, we focused on industrial and services sector development, especially of big corporate companies.

During the first phase, we did not notice any setback to different sectoral development, but more emphasis was given to sectors that responded to globalisation. But in the second phase, we noticed the negative impact of globalisation — as seen in the agrarian sector as well as small and medium industries.

Presently, over 58% of Indians depend on agriculture for their livelihood, and the sector contributes 17-18% to GDP, thus the lower per capita income of farmers and increasing rural indebtedness. The reasons for low agricultural growth are low investment, imbalance in fertiliser use, low seed replacement rate, a distorted incentives system. The number of landless families increased from 35% in 1987 to 55% of farmers in 2005. The import of agricultural products under the WTO agreement caused price fluctuations internally, and thus uncertainty over farmers’ incomes.

Nobel Prize winning economist Joseph Stiglitz said that the trade agreement forbid most subsidies, except for agriculture goods. Today’s international trading regime is unfair to developing countries. Stiglitz pointed out that the average European cow gets a subsidy of $2 a day (which is also the World Bank poverty line). More than half the people in developing countries world live on less than that.

Economic development has been influenced by domestic and international policies. The domestic economic policy lost its autonomy to some extent. Globalisation has pushed the Indian economy to high growth rate, but weak sustainability. During the second period, globalisation contributed to the decline of both manufacturing and agriculture. Fresh investment into both sectors has been on a decline. The economy seems to be failing in major sectors.

Farmers are facing a vicious circle of debt trap and farmers’ suicides. It is basically due to no savings among rural communities for healthcare and other expenses such as marriage, etc. The following suggestions may help to overcome agrarian distress.

In any development strategy, the method or approach is a fundamental ingredient. For agricultural development, governments should adopt cluster approach. Nearly 70% of farmers are marginal and small farmers. The present method of cultivation is costly and yield is low. The corporate or cooperative method of farming recommended by experts will not be suitable in our conditions. Farmers want ownership of lands. A cooperative system with government involvement can change agriculture.

For promoting agricultural products, we should have suitable policy guidance and cash subsidies for farmers. We need to have a national agriculture policy, taking account of domestic and international trade under WTO. So far, we have adopted an indirect method of subsidy for farmers, without a cash component. But in the 2019-20 budget, an attempt has been made to give cash, which is welcome. In the US and many European countries, major segment subsidy is in cash, to promote agricultural sector and curb inflation in the economy.

Food processing industries should be encouraged in rural areas than in urban areas. The government should support and promote agriculture cooperative system or a PPP model for cold storage and warehousing facilities.

Rise in unemployment

Agriculturists are practicing farming based on their own experience rather than trained in our education system. Rural students are given training on general and technical education rather than agricultural management. As a result, there is growing unemployment among rural youth. Some 70–80% of higher education content is too general and not geared to improve agriculture. At least at the graduation level, agricultural management education should be introduced to help improve production and productivity.

There is also a need to increase linkages among agriculture, industry and services. A 1% rise in agriculture growth leads to a 0.5% rise in industrial output and 0.7% increase in national income.

For farmers to overcome the debt trap, Centre and state governments should bring farmers under a general healthcare system and a separate fund should be constituted to provide loans for their social needs, such as to fund a marriage.

A stable society must have minimum ecological disruption, practice maximum conservation. There is wide disparity in income between farmers and others. More economic activity should take place in rural areas rather than urban areas if we are to bring down disparity in rural and urban incomes. As seen from the experience of western countries, without a substantial component of government subsidy in cash, agriculture sustainability is impossible. So, a major cash subsidy is essential for faster agricultural development.

If we neglect agriculture in the development process, we will have to face multiple consequences that may result in an even deeper crisis in the economy. Development of agriculture, linkages between agriculture and industries and service sectors, will go a long way in ensuring the sustainability of economic development in India. It will also help generate rural employment and rural development.

(The writer is a retired Professor of Economics, Mysore University)