Spending on agri for bigger, better gains

How to ensure that India’s farmers are well-equipped to face the future at a time when the new government sets its agenda for the next five years? — a question that attracts considerable discussion and debate.

There are many different and sometimes competing visions of how best to reduce rural poverty and boost farmer income, with policies running the gamut from agricultural research and development to farm mechanisation, and from input management to leveraging ICT to improve the performance of the wider sector.

A timely new non-partisan report highlights several approaches that economic analysis shows could be especially transformative in the area of agriculture.

India Consensus, a partnership between Tata Trusts and Copenhagen Consensus, has undertaken a swift, initial analysis of more than 100 government programmes. These were selected by the Niti Aayog for their importance in supporting India’s commitments under the Global Goals. This international development agenda has a huge array of 169 targets and no government in the world has the resources to achieve everything.

So the new India Consensus study zeroes in on existing and potential policies and approaches that do the most for every rupee spent. This approach has huge potential to ensure effective spending outcomes: If India were to spend Rs 50,000 crore more achieving the Global Goals, focusing on the most phenomenal programmes identified by India Consensus would create extra benefits for the nation worth Rs 20 lakh crore.

The full study will be released after extensive consultations with all relevant ministries, but it already clearly shows several promising initiatives that would boost agricultural productivity.

The first of these approaches is increased investment in agricultural R&D, which is highly cost-effective given the huge untapped potential of the agricultural sector in India. According to one study, spending an extra Rs 39,000 crore annually on agricultural R&D in India will increase yields by an additional 0.4% for crops and 0.2% for livestock.

These percentage gains may sound like very small margins, but this investment would benefit producers substantially by providing them with a greater return on their farming activities. And it would also help consumers who would pay less for food. The economists calculate that every rupee spent would return Rs 22 in benefits to society.

The second high-impact investment area is certified seed development and distribution. In India, farm-saved seed from previous crops remains the most prominent source of seed, year after year, accounting for nearly three-quarters of all seed usage. This leads to low crop productivity as optimal yield potential is a function of the quality of seeds used.

Although a lot of improved varieties of seeds have been released for cultivation, their full impact has not been realised because of poor adoption rates and seed replacement rates. An India Consensus study focusing on Andhra Pradesh revealed that every rupee spent on production and dissemination of high-quality seeds returns Rs 15 to society. The costs are Rs 400 crore per year, 95% of which goes on new seeds, with the remaining being the cost of seed promotion.

Certified seeds help increase productivity of major crops by around 10%, leading to statewide gain of Rs 6,200 crore. Another study in Rajasthan looking at the same intervention revealed that returns to society worth Rs 20 for every rupee spent, and there is wide consensus that providing more effective seeds can boost yields at low cost.

The benefits of certified seeds can be realised only if adequate water is available, so ensuring irrigation is a pre-requisite. However, a full, state-by-state analysis is likely to identify further programmes that are especially useful in some contexts.

With the right settings in place including good irrigation, agricultural R&D and certified seed production and distribution are two policies that everyone should be able to support — every rupee spent generates amazing results for India.

(The writer is President of the Copenhagen Consensus Centre and Visiting Professor at Copenhagen Business School)