Agriculture sector appears to be adversely affected by the reform process. Why?
The economic reforms of 1991 did not benefit the agricultural sector significantly. The following are the reasons that explain the adverse effects of the economic reforms on India’s agriculture sector:
1. Reduction of Public Investment: There has been a drastic decrease in the volume of public investment in the agricultural sector. There has been an acute cutback from the Indian government to provide sufficient irrigation facilities, electricity, information system, market linkages and roads. Moreover, investment in agricultural research and development was not as extensive as it was during green revolution phase
2. Removal of Subsidies: Removal of subsidies on fertilisers pushed up the cost of production of agriculture. This made farming more expensive, thereby, adversely affecting the poor and marginal farmers.
3. Liberalisation and Reduction in Import Duties on Agricultural Products: Due to adherence to the WTO commitments, Indian government reduced import duties on agricultural products that forced the poor and marginal farmers to compete with their foreign counterparts in the international markets. Stiff competition in the international market along with traditional techniques of farming badly affected the poor farmers.
4. Shift towards Cash Crops and Lack of Food Grains: The export oriented production strategies led to the shift of agricultural production from food grains to the production of cash crops like cotton, jute, etc. This led to reduced availability of food grains and, consequently, t lower nutritional values which further reduced their productivity.
5. Inflationary Pressures on Food Grains: The shift towards cash crops production along with the removal of subsidies exerted inflationary pressures on the prices of food grains. This in turn adversely affected the agricultural sector’s performance by making the cost of producing food grains more expensive.