Resource centre on India's rural distress

Remove shackles on agricultural prices

-The Economic Times blog

As policymakers debate what form of income support will cure India’s extensive farm distress, we have a study whose insights suggest that the right policy has to look beyond ratcheting up support prices to unsustainable levels and cash transfers to farmers. Agricultural policy is deeply flawed and calls for structural reform. This crisis can no longer be contained with band-aid. It calls for proper diagnosis and remedy.

Such a diagnosis comes from a large-scale study on India’s farm policy by ICRIER-OECD led by Ashok Gulati and Carmen Cahill, published last year. It says there is a crucial imbalance between farming and the rest of the economy: contrary to popular belief, farmers are not subsidised by everyone else; they are taxed very heavily. Among more than 50 major economies globally, Indian farmers got a negative 14% price support from government between 2000-01 and 2016-17: in other words, farmers were taxed by limiting marketing, storage and credit opportunities. Only Ukraine treats cultivators worse. Norwegian farmers, with 60% price support, are best off, way ahead of 20% support for cultivators in OECD nations. The report reckons over 17 years, Indian farmers have been milked for Rs 45 lakh crore in implicit taxes, the highest globally.

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