India's Tariff Policy: Challenges and Implications
India's approach to protecting agriculture through tariffs has been a fundamental policy since Independence, aimed at ensuring food security and safeguarding farm livelihoods. However, the effectiveness of this policy over the decades is questionable.
Key Issues with Current Tariff Policy
- The policy extends protection to manufacturing and services, creating layers of protection that make agriculture uncompetitive.
- Lack of innovation in protected factory jobs results in slow employment growth, failing to absorb the workforce moving away from farms, which in turn perpetuates low productivity.
- Selective price supports lead to imbalanced farming, favoring crops that the government stockpiles and causing shortages in other crops.
Market Dynamics and Agriculture
- India's food security is challenged by its need to both export excess produce and import what it lacks. Thus, participating in global markets under market rules is crucial.
- Farmers, being the largest group of entrepreneurs in India, are disadvantaged by restricted market access.
- Protection should focus on decreasing farming risks through increased crop productivity and sustainable resource use, rather than the current methods.
Future Directions for Agriculture
- Investments in farm technology, including GM crops, and improvements in marketing, logistics, and warehousing are essential.
- A shift towards making farming a mature industry is necessary for ensuring food security.
- The economic discourse needs to shift from identifying market failures to implementing solutions.
The article underscores that an economy of India's size cannot indefinitely protect half its population from market forces, and economic growth is hindered if agriculture remains in low productivity. This highlights a need for policy reform and strategic investments to enhance the agricultural sector.
