In this comprehensive, thought-provoking interview with IFPRI Forum, Dr. Manmohan Singh discusses the state of agriculture in India.

FORUM: India has achieved significant economic growth in recent years. What do you see as the main reasons for that success? How do you intend to sustain success?

Manmohan Singh: The main source of the acceleration in economic growth that has taken place in recent years is the unshackling of entrepreneurial initiatives that came about because of the process of economic reforms beginning in the early 1980s and accelerating during the 1990s. This process has still some way to go in the sense that although most central government restraints on entrepreneurial activity have been virtually removed, some barriers continue to exist at the state level. In particular, much of our success up to now has been in the reform of policies, but little has been achieved by way of reforms in procedures. Procedural reforms will therefore have to be the focus in the future in our sustaining the growth momentum that we have achieved.

FORUM: One of the big questions the government is discussing right now is how to raise the growth rate in agriculture. What do you see as the policy and investment priorities for boosting agricultural growth?

Manmohan Singh: To a large extent our policy framework and investment priorities for agriculture were designed for addressing the issue of food security in the country and not really for a more balanced growth of agriculture. Since these policies have their roots in an economy of shortages, there is an excessive focus on controls on storing and trading of agricultural products. The future direction of policy clearly has to recognize that we are no longer in an era of chronic shortage, and that our emphasis now has to be on providing rapid growth in agriculture-based livelihoods. For this we would need to correct the various distortions that have crept into our policy framework both in terms of geographical focus as well as incentives to specific crops. It is necessary for us to create conditions whereby farmers can respond to market signals in deciding what and how much they produce and to whom they sell.

As far as investment priorities are concerned, clearly water management has to take the highest priority. As far as irrigation is concerned, much of the remaining land can be brought under irrigation with expeditious completion of irrigation projects that have been languishing for many years now. The real area of focus has to be our unirrigated and dry land areas. Watershed development and rain water harvesting hold out immense promise in addressing this issue, but we need to gear up our institutional framework to be able to effectively develop such interventions. Two other areas in water management that also need to be addressed are reversing the damage that has been caused by inadequate maintenance of our existing irrigation works and recharging of the underground water sources that have been overexploited.

In addition to water, the other critical areas of investment for rapid agricultural growth are the marketing infrastructure and science and technology inputs. We need to invest not only in developing efficient multipurpose market yards, but also the connectivities that are required both for transport and communication, which would enable farmers to realize the best prices possible for their produce. The extension system for dissemination of science and technology inputs is under strain and considerable investment would be required to ensure that it delivers the available technologies to the farmers as effectively as possible.

FORUM: Agricultural growth will put additional stress on water resources, which are already under severe pressure from the cities. What do you see as the solution to the problem of growing water scarcity?

Manmohan Singh: As far as stress on water resources is concerned, solutions would have to be found both in augmenting the supply as well as in reducing the demand for water in the country. I have already discussed the interventions that are necessary for improving water availability. There is also considerable potential for reducing the usage of water since, by and large, we have been relatively inefficient in this regard. Technological inputs both in terms of crop varieties and irrigation techniques are only one part of the solution. The other part relates to the institutional structure that governs distribution and use of water. We have been experimenting with water user associations for management of localized water resources, and a number of success stories have been recorded. We need to carry this forward vigorously. Nevertheless, we would have to consider economic disincentives for excess use of water through proper user charges for both water itself as well as energy that is needed for water extraction.

FORUM: What role are smallholder farmers expected to play in the path to faster agricultural growth?

Manmohan Singh: I would like to make it perfectly clear that our vision of Indian agriculture continues and will continue to be based on smallholder farming. In the Indian context, access to land is probably the only source of security that is available to a large percentage of our population, and we do not intend to do anything that would alienate the people from the land at least until alternate social security systems are effectively in place. In view of this, any strategy for agricultural growth in India would have to be based on smallholder farming. We do not, however, see any contradiction between smallholder farming and rapid growth in agriculture. Small farms can be as efficient if not even more efficient than large farms, provided that the requisite support systems exist. In the main there are three types of support that would be required: infrastructure, technology, and credit. There is no reason to believe that we cannot design appropriate public interventions to make these support systems available to our small farmers.

FORUM: In the international development community, there is growing interest in developing public-private partnerships for research and development in agriculture. In your opinion, what scope do such partnerships have for advancing agriculture in a way that benefits those most in need.

Manmohan Singh: There is no doubt that public-private partnerships for research and development in agriculture hold great promise for improving the technological base of agricultural systems around the world. However, it is not entirely clear that as things stand at present these developments would benefit those most in need, such as the small and marginal farmers in most developing countries. The international intellectual property rights regime creates a situation where the costs of new technology are not only well beyond the reach of resource-poor farmers, but also that the individual benefit may not in fact justify the costs that the farmer has to incur. You will recall that the technological breakthroughs that enabled the Green Revolution around the world were carried out primarily in the public domain and were therefore available to poor countries and even more so to poor farmers, at virtually no cost. Public-private partnerships, no matter how efficient, are unlikely to be quite so benevolent. It is, therefore, necessary to devise ways in which privately developed technologies can be accessed into the public domain so that they in turn can be made available to the farmers at costs that are not only affordable, but consistent with risk-to-return ratios. We may need to think of international cooperation in this regard, since it is very unlikely that developing countries would have the resources to be able to access such technologies from private developers for dissemination to their farming communities.

FORUM: What role do you see social security programs, such as food-for-work programs, playing in the effort to reduce rural poverty? What plans does the government have in this area?

Manmohan Singh: In poor countries like India, it is very difficult to devise social security programs in the sense that it is understood in developed countries, since the potential surplus that can be generated from the upper-income groups is simply not large enough to support the needs of the poor. In such a situation, workfare programs such as food-for-work hold more promise because there is an economic return to the nation from the expenditures made. In view of this, the Indian government proposes to enact an Employment Guarantee Legislation that would ensure a minimum amount of paid work to all poor households at reasonable wages. However, we should not have too much expectations from such programs for reducing rural poverty in the country. These programs are meant primarily to address impoverishment and distress, and not for poverty reduction per se. There may of course be reductions in poverty arising from such programs but this would be a bonus. Our main focus in reducing poverty in the country would be to ensure sustained and rapid growth of our rural economy, in particular agriculture.

FORUM: Agricultural subsidies seem to be politically volatile issues for both developing and developed countries. What are your thoughts on agricultural subsidies in India? Should they be modified? If so, in what way?

Manmohan Singh: Agricultural subsidies per se are not particularly a major issue in India. At present, there are three broad areas of government interventions that are interpreted as subsidies. The first is the Minimum Support Price System for a very limited number of agricultural products. For the most part, the price support that isprovided is not hugely out of line with the costs of production, and therefore cannot really be treated as a subsidy. The real subsidy in this regard arises from the reduced price at which foodgrains are made available through the Public Distribution System (PDS). This is a subsidy to consumers and is a part of our Food Security System and not really an agricultural subsidy. Even here, since the entitlements under PDS are limited for each household, the food subsidy may not annually distort the overall food economy at the margin. This is quite unlike what prevails in developed countries, where agricultural/food subsidies tend to be open ended and not limited.

The second area is subsidy on fertilizers. Here again a major part of the so-called subsidy is a price that we pay as a country for maintaining a viable fertilizer production industry. This is a part of the broader concept of food security since we do not want our farmers to be exposed to the volatilities present in the international market for fertilizers. Finally, there are the subsidies on power and water. As far as the first is concerned, I am not sure that low-priced or even free power amounts to much of a subsidy in a situation where the provision of power is highly erratic and unreliable. It would in fact be unfair to charge farmers for electricity that they may not get at the time when they need it. There is considerable evidence that suggests that farmers are more than willing to pay the economic price for power provided that it is supplied on a regular basis and of the right quality. Our focus therefore should be on improving our rural power supply situation so that we could legitimately ask the farmers to bear a fair price. In the case of water, there is no doubt that there has been significant undercharging in our water rates, but a greater problem has been institutional mechanisms that are in place to effectively collect these payments. The experience that we have had with water user associations by and large suggests that with the right kind of institutions, collection of user charges can be made effective. We would, therefore, be attempting to move in the direction of decentralized provisioning of water, with the power to levy water charges also decentralized commensurately.