IAS UPSC Prelims and Mains Exam – 27th May 2019

Archives

(MAINS FOCUS)

AGRICULTURE/ECONOMY

TOPIC: General studies 2 and 3

• Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
• Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
• Issues related to direct and indirect farm subsidies
  

Achieving the target of doubling farmers’ income

Background:

• In 2016, the government set a target of doubling farmers’ real incomes by 2022-23. At that time, the time frame for that task was seven years and it required a growth rate of 10.4 per cent per annum.
• Three years have passed and one does not see any acceleration in farmers’ incomes compared to the trend line of 3.7 per cent during 2002-03 to 2015-16.
• So, in the remaining four years, the new government has to increase the farmers’ real incomes by 13 to 15 per cent per annum.
• Agri-marketing reforms, therefore, should be the top priority in the government’s agriculture agenda.

Way ahead:

• Ensuring that the Model Agricultural Produce and Livestocks Marketing Act of 2017 is implemented by all the states, in letter and spirit.
  Recent attempts to implement the Act in Maharashtra show how strong the opposition to it is by mandi commission agents and other vested interests.
• Setting up an Agri-marketing Reforms Council (AMRC), on the lines of the GST Council, to carry out agri-marketing reforms in states in a synchronised manner.
  This council will also have to review and prune the Essential Commodities Act of 1955, revamp the livestock marketing and the warehouse receipt systems and revitalise the agri-futures markets.
  The AMRC should be led by the Union agriculture minister, who should be supported by the chief ministers of the agriculturally-important states. The experience gained in implementing the GST reforms should be tapped.
• The agri-vision for New India should be based on building competitive and inclusive value chains for several products, on the lines of AMUL’s model for milk.
  Food processors, organised retailers and agri-exporters should be encouraged to bypass the mandi system and buy directly from farmers’ groups.
• The agriculture portfolio should be given to someone who is well respected for his understanding of farm-related matters and can also carry his voice in the Cabinet.
• The only sustainable and efficient way to ensure remunerative prices for farmers is through structural reforms in agri-marketing.
  The path of higher minimum support prices (MSPs) has serious limitations because it bypasses the demand side of the equation. The grain stock with the Food Corporation of India and NAFED is already higher than the buffer stock norms of these commodities.

Lessons from China:

• After 2008, China increased the MSPs of key commodities such as rice, wheat, corn and cotton significantly. China’s list of MSP commodities is smaller than ours (we have 23 commodities under MSP). The stocks of grain with the government system in China touched almost 300 million tonnes, leading to massive inefficiency.
• From 2016 onwards, China set out to reform its agri-pricing support system.
• First, the MSP support for corn was withdrawn, then the government’s cotton procurement was reduced and now the MSP for wheat has been reduced.
• Interestingly, and simultaneously, China moved from price support operations to direct income support on a per acre basis.
• In 2016-17 alone, China gave direct income support of 21 billion dollars to its farmers.

Conclusion:

The recent move by the government towards a direct income support scheme for farmers is a step in the right direction. Ensuring that the shift is one from price policy to income policy and reforms the current agri-marketing system, it will effect a fundamental structural reform in agriculture with high pay offs in the years to come.

Connecting the dots:

• Achieving the target of doubling farmers’ real incomes by 2022-23 needs structural overhaul in agri-marketing reforms. Comment.

ECONOMY

TOPIC: General studies 2 and 3

• Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
• Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
• Inclusive growth and issues arising from it.
  

Focusing on fundamental reforms

Introduction:

India’s economy is facing a slowdown. The new government needs to focus on fundamental reforms.

Reforms in past:

• While the bankruptcy code, shift in the indirect tax regime and inflation-control brief to the central bank qualified as moves in that direction, other measures seemed to betray a lack of conviction.
• Import tariffs rose, disinvestment made questionable progress, and fiscal consolidation did not result in expected outcomes.

Way ahead:

The need of the hour is to focus on fundamental reforms.

• Easing land acquisition and labour rules could attract new business projects, revive mass recruitment and lift the economy’s growth capacity to a new level.
• A reliable social security net would help bring down resistance to relaxing rules that deter companies from multiplying their payrolls. With added assurances of state support, a relatively flexible labour market could be achieved.
• Less risky but more complex would be capital market reforms.
  On these, the government should start with the banking sector, which remains overly state-dominated and needs market oversight to stop good money from being thrown after bad.
  The state needs to either withdraw from other fields of business or turn public sector enterprises uniformly profitable.
• The autonomy of institutions, such as the Reserve Bank of India and Election Commission, should be guaranteed via devices that are open to public scrutiny. Independent regulation would assure all participants fair treatment and check legislative and market forces that could imperil the economy and our democracy.

Conclusion:

The current ruling party’s scale of victory is the largest in three decades. The government can push ahead with politically difficult reforms. A state-led economic model has yielded poor results in the past. Market reforms should be given another chance.

Connecting the dots:

• India’s economy is facing a slowdown. The new government needs to focus on fundamental reforms. Comment.

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