15-November-2024-Editorial

OECD’S AGRICULTURAL POLICY MONITORING REPORT

The Organisation for Economic Co-operation and Development (OECD), a global forum supporting economic growth, releases an annual Agricultural Policy Monitoring and Evaluation report to assess agricultural support across 54 nations.

The 2024 report highlights that India effectively taxed its farmers around $120 billion in 2023, the highest among evaluated countries, largely due to policies that control agricultural exports and impose domestic price controls.

Key Highlights of the OECD Report

Global Financial Support for Agriculture:

• Across 54 countries, annual support for the agricultural sector averaged $842 billion from 2021-2023.
• Total support has decreased slightly since its 2021 peak, yet remains higher than pre-pandemic levels, emphasizing continued global backing for agriculture.

Market Price Support (MPS):

• MPS policies aim to keep specific agricultural products at a minimum price domestically, elevating them above international rates.
• MPS fell by $28 billion between 2021 and 2023, though it remains a large part of global agricultural support.

Agricultural Challenges Globally:

• Conflicts like Russia’s Ukraine invasion and unrest in the Middle East have destabilized global food markets, impacting trade.
• Climate issues and extreme weather disrupt productivity, creating uncertainty for agricultural sustainability.
• Export restrictions imposed by various countries further distort global trade, and rising farmer protests highlight systemic agricultural challenges.

Agricultural Support in India

India’s Market Price Support (MPS):

• In 2023, India’s restrictions on exports of key crops (e.g., rice, sugar, onions) led to a significant MPS drop, resulting in a $110 billion loss for farmers.
• Indian farmers received less income for their produce than they would in a free market, with these policies negatively impacting the price they receive.
• India’s MPS was the most negative globally, accounting for 62.5% of global negative MPS in 2023—an increase from 61% in 2000-02 to 75% from 2021-23, reflecting an increasing load on Indian farmers.

Support through Subsidies and MSP:

• Despite subsidies and Minimum Support Price (MSP) payments totaling $10 billion, India’s price-restricting policies outweighed these benefits, leading to overall financial losses for farmers.

Indian Agricultural Policies and Farmer Impact

Negative Market Price Support:

• Indian policies have consistently resulted in a negative market price support. Between 2014-2016, the Producer Support Estimate (PSE) was -6.2%, mainly due to a -13.1% negative MPS.
• PSE measures transfers from consumers and government to farmers, indicating the economic strain on Indian agricultural producers.

Export Bans and Restrictions:

• Government restrictions on exporting key products such as rice and sugar decrease market access, thereby lowering domestic prices and farmer income.

Regulatory Constraints:

• Acts like the Essential Commodities Act (1955) and Agricultural Produce Market Committee (APMC) Act (2003) impose controls on commodity pricing, stockpiling, and trading.
• These regulations aim for food security but often suppress farmer incomes by controlling procurement prices below global levels.

Low Minimum Support Prices (MSP):

• MSP aims to shield farmers from market fluctuations, yet in some years, it falls below international rates, reducing farmers’ earnings in a competitive market.

Inefficiencies in Agricultural Marketing:

• Limited infrastructure, high transaction costs, and fragmented markets reduce the actual earnings farmers receive for their produce.

Resource Allocation Challenges:

• Subsidies on fertilizers, irrigation, and electricity provide short-term relief but don’t address climate challenges, market access, or low investment in agricultural research, thus limiting long-term growth and sustainability.

India’s Key Agricultural Initiatives

• National Mission on Sustainable Agriculture: Focuses on climate-resilient practices.
• Paramparagat Krishi Vikas Yojana (PKVY): Promotes organic farming.
• Sub-Mission on Agroforestry (SMAF): Supports integrated tree-crop farming.
• Rashtriya Krishi Vikas Yojana (RKVY): Boosts agriculture growth through state-led initiatives.
• AgriStack and Digital Agriculture Mission: Supports digital advancements in agriculture.
• Unified Farmer Service Platform (UFSP): Provides centralized services for farmers.
• Mission Organic Value Chain Development (MOVCDNER): Supports organic farming in the Northeast.

OECD Recommendations

• Sustainable Productivity Goals: Countries should set clear, measurable targets to enhance sustainable productivity in agriculture, focusing on technology and resource-efficient practices.
• Total Factor Productivity (TFP): TFP measures input-output efficiency, showing if farmers can increase productivity with the same or fewer resources, essential for sustainable agricultural growth.
• Agri-Environmental Indicators (AEIs): AEIs monitor environmental impacts of agriculture and assess sustainable practices, providing insights into sectoral performance.
• Environmental Public Goods Payments (EPGP): EPGP funds environmental initiatives in agriculture, such as biodiversity and climate protection, yet these payments currently form only 0.3% of total producer support, indicating room for expansion.

About OECD

·      Founded in 1961, OECD includes 38 democracies committed to a market economy, with headquarters in Paris, France.

• It promotes global economic prosperity, equality, and anti-bribery practices.
• India, though not a member, has been an OECD Key Partner since 2007, contributing to global discussions alongside Brazil, China, and others.

Way Forward

• Reform Export Policies: Gradually reduce export bans, invest in cold storage and transport infrastructure, and align MSPs with global prices to increase market competitiveness and boost farmer incomes.

• Budgetary Shifts: Reallocate funds towards resilience, infrastructure, and reducing supply chain inefficiencies to improve sustainability and farmer profitability.
• Enhanced Market Functioning: Encourage coordination between state and central policies to streamline agriculture operations, reduce fragmentation, and address sector challenges.
• Promote Digital Marketing Platforms: Encourage platforms like the National Agriculture Market (e-NAM) to connect farmers directly with consumers, bypassing middlemen and boosting income.