2014 GAP Report® – Policies that Promote Sustainable Food & Agricultural Systems

Invest in agricultural research and development (R&D)

These investments support the discovery of materials, methodologies and information that more effectively and efficiently boost agricultural productivity. The private sector is a growing source of R&D funding, but greater public-sector investment is critical for innovation, basic research and making research findings and technologies widely available.

INDIA’S POLICIES

Research investments in India create high returns in terms of output growth and more efficient use of resources, and they help meet the government’s food security goals. The Indian Council for Agricultural Research (ICAR) is a semi- autonomous institute that coordinates research and education conducted by 99 specialized institutes and 53 agricultural universities across the country.

One of the greatest successes has been in cotton. In the past decade, the Government of India’s spending on agricultural research has stagnated at 0.4 percent of agricultural GDP.64 Meanwhile, farm- level input subsidies for nitrogen and phosphorous fertilizer (to farmers), urea (through manufacturers), and power (borne by utilities) are increasing — from 2008 to 2012, they grew by 8.2 percent.65 Notably, cotton had the greatest productivity growth during that period, which was not attributed to subsidies, but rather to research, development and government approval of 90 cotton Bt hybrids, which are high-yielding varieties that have built-in protection against bollworm and other pests and significantly reduce the use of pesticides.66 Due to synthetic pesticide resistance, farmers had previously been losing much of their cotton to tobacco budworms, cotton bollworms and pink bollworms.

Science-based and consistently applied regulations and approval procedures at the national and state levels would encourage additional research and private sector investments in the production sector. The 1988 Policy on Seed Development allowed import of germplasm for research and lowered import duties for seed and seed- processing equipment, which resulted in the registration of more than 400 seed companies.67 The National Biodiversity Act, on the other hand, limits germplasm movement out of the country to protect domestic stocks and thereby has inadvertently restricted scientists from taking germplasm to research sites outside of the country to create improved hybrids.

In July 2014, the new government, headed by Prime Minister Narendra Modi, expressed strong support for improving agricultural research and development and announced plans to establish two new research centers and four new agricultural universities, but the government has not yet indicated how it will approach genetic engineering trials.68

Embrace and apply science-based and information technologies

Technological innovations are the backbone of productive and resilient farms, fisheries and livestock operations and a safe, wholesome food supply. They contribute to improvements in the quality of seeds, animal stock and inputs, labor-saving devices, effective production and conservation practices, reduction of post-harvest losses, efficient price discovery mechanisms and control of pests, diseases and contamination. Access to these innovations will be essential if farmers and producers along the value chain are to meet the rising global demand for agriculture in the face of climate change.

INDIA’S POLICIES

Numerous technologies and approaches for improving Total Factor Productivity (TFP) have been developed by Indian companies and institutes, from water and fertilizer efficiency and matching seed technology with local soil and climatic conditions to diversification and multi-cropping. Technology-led output growth helped decrease the cost of production in India by 1 to 2.3 percent a year from 1985 to 2005, which helped contain consumer prices.69

Since 2005, however, public spending on extension services averaged 0.14 percent of agricultural GDP, which is insufficient for transferring technologies to producers.70 Consequently, the crop sector is now experiencing diminished returns to input use.

India’s Planning Commission dug deeper to determine what is working and what needs to change. It found that food crop productivity is lagging in the most traditional growing areas that rely heavily on irrigation and receive the highest subsidies, while yields have picked up in rainfed areas due to improved seed, higher seed replacement and better practices. As a result, India’s Twelfth Five-Year Plan for Agriculture (2012–2017) concludes that investments in conservation, water management, extension and universities are good choices for more efficient use of agro-ecological resources and the agricultural budget.71

Farmer demand for mechanization is growing. A variety of manufacturers and dealers sell farm equipment tailored for the Indian environment and some offer customized financing in order to make tractors, implements and harvesters available to more farmers. Efficient micro-irrigation systems are also being introduced along with seeds, chemicals and fertilizers that more precisely meet needs, but to significantly improve yields, these technologies need to be more widely adopted.

Better technologies and extension services are also needed to increase productivity in the livestock sector. India leads in global livestock production and although health and veterinary services account for the highest share of public expenditure in this sector, productivity per animal is about half the world average.72

Animal husbandry and health service companies offering technologies and advice, have expanded operations due to market-driven growth in the livestock, poultry and dairy sectors. Crop service and input dealers use mobile phones and on-site visits to collect soil, water and farming practice information, identify technologies that are most suited to the farm operation, and troubleshoot production problems. Overall, private sector has taken on a more robust role in developing and transferring innovative agricultural technologies in India.

BETTER ACCESS TO CREDIT

Government-funded short-term loans for seasonal production and harvest expenditures are made available to farmers through commercial banks, cooperative banks and regional rural banks. For the 2013–2014 season, the interest rate for loans up to 300,000 Rupees ($4,900) is 7 percent, and is reduced to 4 percent if paid promptly.73 Although agricultural credit increased nearly tenfold between 2000–01 and 2010–11, loans are rarely available to farmers in the bottom 40 percent income bracket.74 Without access to formal credit, they are forced to seek high-interest loans from informal sources that can lead to spiraling debt that put their future livelihoods at risk.75

Enhance private sector involvement in agriculture and rural infrastructure development

GHI estimates an investment gap of $80 billion annually in developing countries to make the infrastructure upgrades that are needed to meet the agricultural production and food system demands of 2050.76 Transparency and coordination between the public and private sector, starting at the early stages of development, attracts financing and promotes successful outcomes. The private sector is an increasingly critical source that can effectively close this investment gap and private- public partnerships are one of the ways forward.

INDIA’S POLICIES

Road density and rail are important determinants of rural sector and agricultural development in India.77 Progress has been made in road infrastructure: from 1991 to 2011, the highway network doubled from 34,000 km to 71,000 km, and from 2001 to 2011, 400,000 rural roads were built or upgraded to all-weather roads, reaching 85,000 small villages.78 Under the current National Highway Development Program, 40 percent of new roads will be built through public-private partnerships.79

Freight rail is a more economical way to transport agricultural commodities and products. Because repairs and expansion of freight railways have not kept pace with transportation needs, the amount of freight moved by rail dropped from 89 percent in 1951 to 36 percent in 2008.80 Barriers to rail freight development include getting land clearances, moving utilities and resettling people.

The Indian Railway has found a solution. Dedicated Freight Corridors (DFC) for the East and West are under development through a separate corporate entity, which plans to increase carriage capacity on faster trains and thereby lower costs. For the Western DFC, the Japan International Cooperation Agency (JICA) provided a loan at below-market rates to finance two-thirds of the construction costs and the Ministry of Railways will pay the remainder of the costs. The Eastern DFC will be funded by the World Bank and Asian Development Bank.

Indicating the importance that Prime Minister Modi’s government places on addressing the deficit in infrastructure expenditures, on August 6, 2014, the Cabinet approved Foreign Direct Investment (FDI) for some railways, including public-private partnerships and dedicated freight lines, and 100 percent FDI for some railway segments, such as last mile connectivity to ports and mines.

Some states have taken their own steps to motivate private sector investment in market infrastructure, including financing of port facilities and connector roads. Maritime handling capacity has nearly tripled over the past decade, largely through private investment. The private sector also plays the predominant role in capital formation in agriculture, accounting for nearly 80 percent of investments, compared to about 50 percent in the early 1980s.81

GUJARAT’S POLICIES GROW AGRICULTURAL GDP

The state of Gujarat achieved 10 percent agricultural growth during the past decade through better energy and water management and by approving Bt cotton use. The government of Gujarat also addressed the problem of fragmented markets by adopting a model law that waives Agricultural Produce Market Committee Act (APMC) marketing fees and allows private companies to contract directly with farmers for horticultural products. An integrated value chain also facilitated financing for technological improvements, such as micro-irrigation and better post-harvest handling and storage, including cold-chain systems.

In July 2014, India’s Finance Minister told Parliament that the Modi government plans to increase agricultural market competition and accelerate development of integrated markets across the country. Thus, the central government will work closely with state governments “to re-orient their APMCs and establish private market yards/private markets.”82

Remove barriers to internal, regional and global agricultural trade

An enabling environment for market development and trade — with transparent and consistently enforced laws, regulations and policies — is central to meeting global food needs, providing greater income opportunity to farmers of all sizes, and building out agricultural value chains. Multi-lateral trade agreements and the World Trade Organization (WTO) are critical for advancing international investment and cooperation in agricultural development. Regional and bilateral trade agreements also improve access to food and agriculture products for nations that cannot meet their own demand through local production. GHI advocates trade policy that is forward-looking and innovative so that farmers of all sizes may take advantage of market opportunities.

INDIA’S POLICIES

India is a net exporter of agricultural products, with a $22 billion trade surplus in 2013. Rice, cotton and fish are the leading exports, and it is the largest bovine meat exporter in the world.83 It is the top world importer of edible oils and pulses.84 Thus, both imports and exports are important to the country’s food security.

India’s trade policy is designed to achieve self- sufficiency in grains, reduce import dependency and promote commercial exports. During the 2000s, the country shifted away from quantitative import restrictions to higher tariffs designed to protect against import surges that could displace local production when world market prices fall. This was accomplished by renegotiating tariff limits under the WTO, setting higher maximum rates for products that the country wants to protect for domestic production such as corn, rice and dry nonfat milk. India still uses export restrictions when concerned about domestic supplies, but to a lesser degree than in the past. For example, reduced monsoon rains this year caused concerns about onion supplies and the government took steps to discourage hoarding, allowed imports, and set minimum export prices, but it did not ban exports.

NEW FOOD SECURITY LAW INCREASES GOVERNMENT SUBSIDIES

Nutrition policy in India focuses primarily on access to food through three large programs. On- site cooked meals and distributed weaning foods are provided through the Integrated Child Development Services, which promotes growth and development of pre-school children in rural, tribal and poor urban neighborhoods. The MidDay Meals Scheme serves primary and upper school children throughout the entire country. The Public Distribution System (PDS) is the largest program — providing subsidized food grains through Fair Price Shops.

In 2013, India enacted a new National Food Security Act that in 2014 will nearly double the number of people who are eligible to receive benefits through the PDS. The government will therefore become an even larger buyer of wheat and rice, the mainstays of food security programs. It will require much higher government outlays to buy grains from farmers at guaranteed minimum prices and then sell them at low prices to beneficiaries, which could breach India’s WTO obligations to contain domestic agricultural subsidies at 10 percent of agricultural output.85

India therefore insists that the WTO give more flexibility for food stockpiling by developing countries for their food security programs and is seeking upward adjustments in base prices used for calculating domestic subsidies. At the WTO Bali Ministerial Conference in December 2013, the members agreed to address stockpiling by 2017, and, until then, to hold harmless developing countries that helped poor farmers by procuring food that would be used for food security needs.86 India believes it is important to settle these issues now, not in 2017. In July 2014, India held up action on the WTO’s trade facilitation agreement, indicating it would continue to do so until its concerns are addressed.87

Can New Policies Unleash Growth?

Some of the policies intended to assure self- sufficiency and protect smallholders now pose challenges to expanding agricultural productivity and marketing.

  • While the minimum support price for wheat and rice worked to incentivize production, it is less useful now as the Food Corporation of India’s (FCI) infrastructure for procurement and storage is focused in just a few states despite shifting demand to other products.
  • The Essential Commodities Act limits the amount of warehousing available to the private sector, creating a barrier to developing efficient market systems.
  • Landholding is limited to about 18 acres with restrictions on leasing and average farm size is 1.16 hectares.88 Such fragmentation makes it difficult to build economies of scale at the farm level and to link into value chains.
  • Fruits and vegetables are reserved for small- scale industry processing, which has impeded industry growth and increased wastage because small processors cannot afford the cold-chain development and handling costs for perishable foods.
  • Organized retail could build out value chains for perishable and processed foods. Officially, up to 51 percent of FDI in multi-brand retail operations is permitted and a few states have implemented that law, but due to some policy uncertainty, many foreign companies are hesitant to invest.

In cases where reforms have been introduced, many studies show that “the private sector response is swift and dynamic, as witnessed by the emergence of contract farming, electronic exchanges, ICT-based market information systems and kiosks and myriad value chain improvements.”89

Strengthen and coordinate international development assistance

The 2009 Group of Eight Summit in L’Aquila, Italy, marked a new beginning for global food security and agriculture policies. Governments rallied around a comprehensive, coordinated approach that leverages public, private and multi-lateral assistance in support of well-designed plans by developing countries to transform their agricultural economies. Change takes time and GHI seeks continued support for the global food security agenda and urges members of the international donor community to meet their promised commitments to global food security and agriculture.

INDIA’S POLICIES

India plays a dual role in foreign assistance — providing support and technical assistance to less developed countries and receiving multi-lateral financial support for its own investment plans.

India participates in USAID’s Feed the Future (FTF) programs for sustainable agricultural intensification and climate resilient crop. In 2010, the United States and India entered into a Triangular Cooperation agreement, a joint effort for transferring agricultural innovations proven in India to Kenya, Malawi and Liberia.

Indian research and academic institutions collaborate with institutes in many other countries on research and through teacher and student exchange programs. One example is a partnership between St. John’s Research Institute in Bangalore and Tufts and Harvard Universities in Boston to address the need for trained nutrition scientists in the region.

The World Bank has been a major funder to India for years. In fiscal year 2014, it provided $5.109 billion in loans for 17 new and supplemental programs.90 Some of these projects are important for agricultural development, including dedicated rail freight corridors, road modernization, watershed management and support for dairy development.

India is a member of the BRICS (i.e., Brazil, the Russian Federation, India, China, and South Africa), a group of countries that is growing in economic influence and is creating its own approach to development. On July 15, 2014, they established a “contingent reserve arrangement to forestall short-term balance of payments pressures, provide mutual support and further strengthen financial stability,” pledging a total of $100 billion as the first tranche.91 Notably, this institution is exempt from the economic adjustments and contingencies that the International Monetary Fund requires before lending money to a country.

GENDER REVOLUTION IN INDIA

India’s Constitution calls for a strongly decentralized and participatory state and local democracy. The implementation of this federal structure and policy devolution, however, varies across India’s 29 states and seven union territories. Local governments are under the authority of state governments and are divided into urban authorities, or municipalities, and rural authorities, or panchayats. Amendments to the Constitution

in 1993 require each panchayat and municipality to reserve a minimum of one-third of the seats in its elected government bodies for women. Implementation of this quota has varied among states. More recently, 10 states have now adopted a 50 percent reservation of seats for women. For example, the southern Indian state of Kerala encourages all Gram Sabhas (elected assemblies) to have a majority of women members.92

Women are highly motivated to improve the health of their communities and their participation in government can have an enormous impact.

The Hunger Project, a global movement committed to ending hunger by organizing leadership, training and education, has helped women become leading decision-makers and change agents in their villages. To give greater voice to women in government bodies, The Hunger Project-India organized 118 Strengthening Women’s Leadership Workshops across India, and has trained more than 87,000 elected women leaders in effective methods for identifying and advocating for local development priorities. These women have successfully brought potable water, health care services and education to their villages. More than 900 women from the State of Odisha became polling agents and proposers/ seconders, who specialize in helping women candidates qualify for and register to participate in local elections.93

Since the Constitutional requirement for women’s representation applies only to local government, women across the country are now rallying the national parliament to pass the Women’s Reservation Bill, which would ensure that one-third of the seats in national and state assemblies are also reserved for women. This bill passed the upper house in 2010, but the lower house yet to act. Currently, women only hold 11 percent of seats in both lower and upper houses of the national parliament.94

Literacy, education and skills development are also critical to advancing women’s role in society. India’s free and compulsory primary education as well as the Mid-Day Meals scheme have helped increase literacy rates overall — the proportion of Indian children above the age of seven who are able to read and write increased from 65 to 74 percent between 2001 and 2011. Nonetheless, there is disparity between men and women — the literacy rate for males is 82 percent and for females 65 percent.95

Setting a tone of respect for women and emphasizing their importance as equal partners in the development of the country, on August 15, 2014, in his first Independence Day speech as Prime Minister, Narendra Modi said, “Girls also contribute to India`s fame and glory. Let’s recognize it. Let’s take them along, shoulder to shoulder. This way we can get over the evils that have crept in social life.”96 In June, the Modi government announced the launch of a country wide ‘Beti Bachao-Beti Padhao’ (save girl child, teach girl child) campaign to protect and educate girls and prevent crimes against women.

 


TABLE OF CONTENTS

The Global Agricultural Imperative

India at a Crossroads

Producing More with Less

The Global Agricultural Productivity (GAP) IndexTM

Measuring Agricultural Productivity Growth in India

Policies that Promote Sustainable Food & Agricultural Systems

India’s Agricultural Value Chain

Cultivating Prosperity through Stronger Agricultural Value Chains

Tailoring Technologies for All Farmers

Public-Private Partnerships Make Farming Profitable for Low-Income Communities

Expanding the Roles, Options and Incomes of Women in Agriculture

Research and Collaboration Improve Productivity and Economic Growth

The Poultry Revolution Picks up Pace

The New White Revolution

Aquaculture — The Blue Revolution

Boosting Micronutrient Intake

Water Use Efficiency and Management

From Field to Fork: Strengthening Value Chains to Boost Productivity and Reduce Food Loss

Agricultural Financial Services

Endnotes