India’s agro-food sector has made strong progress, but a new policy approach is needed to meet future challenges, says new report by OECD and ICRIER

Modi OECD 2018This article is brought to you in association with OECD.

India has made tremendous economic progress since the mid-1990s, raising GDP per capita by more than 5% per year, cutting the incidence of poverty in half, significantly decreasing undernourishment and transforming itself into a major agriculture exporter. For these past successes to continue into the future, India will need to accelerate existing reform efforts and launch bold new policy initiatives, according to a new publication by the Organisation for Economic Co-operation and Development (OECD) and the Indian Council for Research on International Economic Relations (ICRIER)

Agriculture Policies in India proposes a comprehensive set of policy measures that, taken together, would raise incomes and well-being of farm households, improve nutrition outcomes for the most vulnerable members of Indian society, enable the farm and food sector to grow sustainably and strengthen India’s competitiveness in global food markets.

Launched jointly by OECD, ICRIER and India’s Department of Commerce, the report highlights both the notable progress made by the country’s agricultural sector over the past two decades and the important challenges now confronting the sector: declining but still persistent food insecurity and nutrition deficiencies, large numbers of small and resource poor farms, increasing water scarcity, low productivity growth and the uncertain impacts of climate change. It highlights the opportunity for policymakers to rebalance their efforts away from complex, volatile and often competing market interventions in favour of measures that target the nutrition needs of the poor and the productive possibilities of farmers and rural residents.

“Many of the policy recommendations in the report are well known to the Indian government, and action on some are already underway,” said Ken Ash, OECD Director for Trade and Agriculture. “But more can and should be done, and we look forward to continuing to work with India, and to support its efforts to improve outcomes for consumers and farmers alike.”

Building on over thirty years of agriculture policy analysis at the OECD, the study provides for a unique quantification of how government support impacts farmers and consumers. It uses a consistent methodology which also allows India’s agricultural policy performance to be compared to over 50 other emerging and developed countries, comprising 80% of global agricultural production and trade.

Farmers in India face complex domestic market regulations and import and export trade restrictions, which together often lead to producer prices that are below comparable international market levels. Despite large subsidies for fertilisers, power and irrigation which offset somewhat the price-depressing effect of market interventions, the overall effect of policy intervention over the 2014-16 period is a 6% annual reduction of gross farm revenues, according to the report.

Consumers pay on average 25% less across all commodities as the result of policy interventions. However, in spite of the government’s efforts to keep prices low, food insecurity and malnutrition persist, in part because the public food distribution system is poorly targeted, too costly and subject to large inefficiencies and waste, according to the report.

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