Tuesday, March 31, 2015

Poverty Elimination & Agriculture Reforms

Poverty Elimination

     Instead of periodic but endless efforts to define poverty, we should for the next 10-15 years adopt the globally accepted definitions of comparative poverty defined by the World Banks in terms of purchasing power parity, of $1.25 and $2 per person per day. The question of inter-state allocation for Centrally Sponsored schemes that remain should be addressed by use of Per Capita State GDP (as is done by Finance Commission).

Financial re-allocation

   1.       Calculations done by us using NSS 1999 data and by Surjit Bhalla using NSS 2004 and 2009 data showed that Indian poverty can be eliminated if the money spent on Poverty Alleviation was re-directed to cash transfers.[i]   NITI Ayog should redo these calculations using the 2011 NSS data and corresponding expenditures for 2011.  
     Based on studies done earlier, on asset based indicators for identifying the poor it should settle/agree on a system for identifying them. 
  To avoid controversies related to poverty line, calculate transfers needed to bring all below Rs x per capita to x using 2011. Add reasonable administrative cost (e.g. 10%) for identifying-locating them and delivering cash directly to them => Calculate Rs. Y per capita achievable.
    We must be clear that many of these will be land-less labor and marginal farmers in rural areas who get a substantial part of their income from agriculture, so that the issue of agricultural-rural poverty is addressed head-on instead of futilely through agriculture programs.

Cash Delivery System

   2.          Find the most effective & efficient delivery method (with UID/Aadhar) for delivering cash: Bank account, RuPay Debit/Credit card or Mobile (payment & use system), or combination of three depending on geographical location & characteristics (urban, rural, hilly, remote). Restrict ration shops to areas where there is none or few private outlets for cereals (i.e, a local retail monopoly).

Quality of Life: Public Goods

   3.          Identify a set of Social “Public Goods” or “Quasi public” goods & services (P&QP G&S)  that are critical for the bottom 40% of the population. Experience & analysis suggests that Sewage and sanitation systems complete chain), clean drinking water, village road side drainage, communicable & vector borne disease, Basic education (3Rs) and basic job skills (low to middle), public health education (germs, nutrition) are the most important ones for the lower half of the population. NITI Ayog should make detailed policy plans and training program (training the trainers) for achieving these goals and propagate to States, Nagarpalikas, Panchayats and public. Identify and disseminate (media, web sites et all) successful models for achieving each Public good.
Two key CG programs can be very helpful if redirected/developed in this direction:

Swach Bharat

   Should incorporate development of Sewerage, Drainage  & Sanitation systems & protocols for all villages and census towns of India. It should also include public health education relating spread of disease through germs and basic nutrition information.

Skill India

    The skill India mission can play an important role in standardization and certification of low to middle skills that are critical for the masses of rural youth and to training of trainers by the government.  It is important to give sufficient attention to skills that are relevant to the rural economy and to agriculture, including those skills related to the introduction of modern technology relevant to them.

Education & Health

   4.      The poor and less advantaged suffer the most from inferior quality of public & private education in rural areas. In India there is the additional problem of high absenteeism among (State) Government teachers, nurses and doctors posted in rural areas.  New ICT technologies provide a way to leap frog the historical evolution of educational improvement in the World’s rural areas, and bypass the problem of poor governance (absenteeism & inability to regulate quality): Make e-education/e-learning and e-health/e-medicine a key part of the Central Governments education and health effort, leaving “Brick and Mortar” approaches to States (who have the administrative set up to supply social services and whose responsibility it is to do so).

Digital India, E-governance

   These two CG missions can play a critical role in opening up rural areas to the modern world and in providing access to information and knowledge that was traditionally available only in urban agglomerations 


    As a an overwhelming majority of poor live in rural areas or are recent migrants to urban areas from rural, agriculture and rural development is a significant element of poverty elimination, particularly in the Eastern States (or parts of States) with sufficient surface water for crops (eg. W Bengal, Jharkhand, Orissa, Chattisgarh, Bihar, C & E UP), but which need better systems of irrigation and drainage.[ii]

Reform Goals

   Governance systems relating to Agriculture, Irrigation (which are primarily at State level given it is a State subject) have deteriorated badly, with associated increase in leakages and corruption. The capacity of State governments to undertake prijects and programs is limited. Reforms must focus on removing the jungle of controls on farmers and on agriculture.
G1: This requires de-control all aspects of agriculture, rural infrastructure and services to allow competition.
G2: More imaginative use of Public-Private co-operation (PPC) to increase agricultural productivity & reduce income volatility, create supply chains, develop new markets and provide weather insurance. The Private sector’s desire to sell to rural markets and their interest in increasing size of that market, should be channeled into PPC.
G3: The government should focus more on planning & providing classic “public” goods and “quasi public goods(infrastructure externalities). A modernized version of “Agro-climatic zones” needs revival as basis for Government development planning. A modernized version would take account of issues like Ground water depletion (zones-red, orange, yellow, green) and effect of Climate change on volatility of weather (low, moderate, high).


   1.      Exim-Policy: Follow the successful model of moving from QRs to Tariffs and export duties, and then gradually lowering them. For a few agricultural commodities an variable/adjustable and transparent system of Tariffs and/or duties could be adopted, based on medium term trends in international and domestic prices.
   2.      Essential Commodities Act (ECA): Narrow in terms of crops (none on perishables) & restrict usage to very precisely defined conditions (e.g. in terms of acceleration in prices).
   3.      Agricultural Produce Marketing Act (APMA): De-license setting up of competitive markets (including E-markets). Help land acquisition for this purpose. De-control direct purchase of produce from farmers by publicly listed Agro-processing Companies (w/o going through agro market).
   4.      Land Policy: Remove all controls on private sale, purchase, leasing, mortgaging, renting in or out of land (except reserved forests & carefully defined tribal areas). Reduce stamp duties for registering tenanancy and mortgages. Identify & notify areas where large scale corporate farming will be freely allowed-decontrolled (e.g. Degraded, Fallow, water logged areas) 
   5.      Unsustainable levels of Central Minimum Support prices (MSP) and State advised Prices (SAP) that are even higher than MSP, have resulted in Indian inflation rates exceeding those across the World, instead of enhancing productivity or income security. Dis continue SAP & MSP and de-control cane prices and sugar industry so that farmers get competitive prices. Help provide self-insurance by diversification into livestock, fisheries and farm forestry. Partner with private insurers providing weather insurance.
    6.      Allow 100% FDI in Food retail, agricultural/weather insurance & rural banking and rural health insurance.
   7.      Subsidy: Replace incentive for soil destroying/polluting subsidies for fertilizer use by a combination of fertilizer & seed purchase linked cash (a la LPG), Insurance (income support) & subsidy for adoption of new technology/technology up-gradation to enhance land, water, energy productivity. Over time the first element could be replaced completely by the other two. De-control import and production of fertilizer and all inputs into fertilizer production.
   8.      Water Policy: Water use efficiency in China is two times that in India. Ground water is being rapidly depleted in many areas (Punjab, Haryana, Maharashtra). In these areas we need a depletion tax to be imposed (beyond a free allowance for every resident). This would be offset by a subsidy for adoption of technology for efficient water use (eg drip irrigation).
   9.      Productivity: Professional independent regulator for introduction of new crop varieties including GM crops. Expedite GM crop trials. Strengthen Central agricultural research institutions and encourage agro-industrial corporations to do co-operative research ad dissemination.
  10.  Completely de-control private, de-centralized, unconventional power supply networks for difficult/remote/hilly/tribal areas and regulated decontrol for other rural areas. Provide the same Govt. support for such systems as is done for conventional generation, transmission & distribution systems.

Expenditures, Programs, Projects

Some of the programs that Central government can and should focus on are,
    1.      Information: Telecom/Broadband (open access to wires; publicly funded fibre network), E-governance centers as hubs for Agro-climatic information (Rainfed, Ground water depleting, soil conditions/analysis), best Practices and Market information.
    2.      Knowledge/Technology: Agro technology (GM seeds, R&D, TOT/Extension) Farm management (water, soil, sowing,..).
   3.      Weather/Crop Damage Insurance, Human & health insurance. Technical development & Govt. co-insurance in high premium conditions.
    4.      Technical/Professional Services: Train the trainers/suppliers of all Agricultural, Animal husbandry, fishery & other services (including farm management consultants).
   5.      Road network as Development Drivers. State highways as (better) planned hubs of integrated rural, semi-urban development.  
    6.      Railway stations: Develop as Agro-processing/Information/commercial hubs in rural, semi-urban areas

[i]  Arvind Virmani, “Poverty And Hunger In India: What is needed To Eliminate Them,” Working Paper No. 1/2006-PC, Planning Commission, February 2006. http://planningcommission.nic.in/reports/wrkpapers/rpwpf.htm.
[ii] Arvind Virmani, “The Sudoku of Growth, Poverty and Malnutrition: Lessons For Lagging States,” Working Paper No. 2/2007-PC, Planning Commission, July  2007. http://planningcommission.nic.in/reports/wrkpapers/rpwpf.htm .

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