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Incentivizing High Value Agri produce for Self Reliance in Agriculture
Atmanirbhar Bharat Abhiyan is announced by Indian government to promote self reliance in Indian economy. This was in context of COVID 19 induced disruption in global supply chains and economic downturn. Agricultural policy reforms were part of this scheme. Reforms in marketing, stock limits, contract farming were announced to promote self reliance in agriculture
In agriculture, India has achieved significant progress in self-reliance compared to the 1960’s when there was dependence on food aid. Currently India is self reliant in food crops like rice and wheat.
Indian foreign exchange reserves too have increased from about $1.1 billion in 1991 to more than $500 billion currently. Thus India has good forex cover to fund any emergency agricultural purchases.
Let us examine India’s agricultural trade to identify areas where import dependency can be reduced and where exports can be boosted.
Agricultural trade of India:
Trends seen are:
- India maintained trade surplus in agriculture since liberalization of 1991
- Downturn in agricultural exports in the past 5 years. This impedes vision of doubling agricultural exports by 2022.
- Agri-export basket in decreasing order of exported value in 2019-20:
- Marine products
- Rice – Basmati and common
- Buffalo meat
- Tea and coffee
- Fresh fruits and vegetables
- Edible oil imports account for nearly 50% of total agricultural imports. Malaysia and Indonesia are major suppliers who supply cheap palm oil. This is making Indian oil seed producers uncompetitive.
Achieving self reliance through comparative advantage:
Comparative advantage principle means exporting where there is a competitive edge and importing where competitiveness is lacking. Competitiveness in agri produce can be improved by increasing productivity.
Currently rice and sugar cultivation is given incentives in form of power subsidies, fertilizer subsidies and price support(MSP and FRP – Fair and Remunerative Price).
- India has low productivity in these cropscompared to competitors. Hence there is need to improve productivity in these crops.
- These crops are water intensive. This is leading to depletion of groundwater and India becoming a netvirtual exporter of water. Overuse of fertilizers is causing land degradation through leaching of nitrogen in urea into groundwater and air pollution due to evaporation into the atmosphere.
Incentives must be given to other crops to promote diversification. This will ensure self reliance by increasing exports and reducing imports. High value agri produce like fruits and vegetables, spices, tea and coffee must be incentivized to achieve competitiveness in these crops.
Edible oils in particular is an area of focus for self reliance. India imported more than 15 million tonnes(mt) in 2019-20. This can be cut down by incentivizing domestic production.
- Comparative advantage must be created by increasing productivity and recovery ratio of oil from oilseeds
- Oil seeds cultivation needs a gestation period of 4-5 years. Government must support farmers in this period.
- Oil palm has the maximum potentialto increase domestic edible oil output. Domestic oil palm production can replace nearly 50% of edible oil imports. Hence this must be incentivized in states of Andhra Pradesh, Karnataka and Tamil Nadu where it is suitable for cultivation.
- Processing capacities must be enhanced to create economies of scale. Currently there is lack of vertically integrated plants with all 3 stages – Crushing and expelling; solvent extraction; oil refining
By improving competitiveness of Indian agriculture, self reliance can be achieved. Oil palm in particular needs emphasis through long term vision and strategy.
- Edible oil imports make up the majority of Indian agricultural imports. What are issues for domestic production of edible oil and what steps can India take to address them to become self reliant in edible oils?[15 marks, 250 words]