Agricultural situation need to honour early warning signals?

Dr BK Mukhopadhyay

(The writer, a noted management economist and international commentator on ongoing business and economic affairs, can be reached at m.bibhas@gmail.com)

Millions still continue to suffer from chronic malnutrition. Worsening food shortages, slow agricultural growth, and a large agricultural workforce with many peasant farmers, rapid agricultural growth has turned to be urgent and essential.

Tomorrow Is Another Day: Getting Ready Steadily

As of now the world produces enough food to feed everyone [17 per cent more calories per person today than it did 40 years ago, despite a 70 per cent population increase] which is enough to provide everyone in the world [with at least 2,720 kilocalories (kcal) per person per day, according to recent estimates]?

But What about Tomorrow??

That is to say in the overall sense the world is not making progress toward the world food summit goal, although undeniably there has been progress in Asia, Latin America, the Caribbean as well as Africa [even farmers across Malawi, struggling to harvest sufficient staple crops of maize and rice in changing weather conditions, are turning to crops they had never previously considered for food - crop diversification gives farmers something to harvest even under the harshest conditions].

Though recurrent drought and volatile food prices have led to countries in Africa and the Near East in a hunger trap, yet there is definitely a way out. Prospect is definitely there. Even in Africa yields can be dramatically increased provided farmers have access to improved technologies and markets. Exploiting this potential on a large scale would require a quantum increase in public investment in agricultural research and rural infrastructure, and definitely supportive policies for agriculture, inclusive of partnering with private firms to strengthen input-supply systems and food grain markets. This, in turn, would generate many productive jobs in agriculture, while at the same time aiding poverty reduction.

What is more: via securing family food supplies through higher yields, the process would enable farmers to free up land and labour for more profitable ventures, increase local demand for higher-value foods and non-farm goods and services, create additional productive employment, cater growing domestic demand for industries [viz. servicing, agricultural processing, etc].

Situation Must Be Bettered

FAO Director-General José Graziano da Silva, while rightly calling upon the international community to work closely with dry land countries to break the cycle of hunger, admitted “...We are losing the battle against hunger in Africa and the Neareast …the number of hungry people in the regions has increased by 83 million to 275 million since the early 1990s. Natural resources degradation in dry land countries threatens more than two billion people.”

Newer avenues must be located so that the growth and development wheels should move simultaneously and the existing gaps could be bridged temporally.

Example is not far to seek: in Bhutan about 65 percent of population is rural and thus depend on the RNR [Renewable Natural Resources] sector for their livelihoods. Though a trend of positive growth in fruit and vegetable crops has been there, both high values, yet a decline in staple crops like cereals has been noticed. As of now around 50 per cent of rice consumed in the country is imported - there’s no option because there’s not sufficient land and soil fertility needed cannot go beyond certain levels as a result of the country will have to continue to import food in order to fulfill the food requirements of the population. Bhutan must work more on exploring its comparative advantages, including off-season, high value fruits and vegetables, to diversify and improve rural income. Investment flow to these newer directions is a must so that the overall growth is ensured over time.

Then, why not to attach much importance to the cooperative sector?

Cooperatives help to generate employment, boost national economies and reduce poverty, which, in turn, helps to improve food security. Cooperative units have been particularly important for farmers in the developing world - agricultural cooperatives provide small-scale food producers with what may be their best chance to compete in global cooperatives can help small- and medium-scale farmers and fishermen add value to their production and gain access to wider markets.

It is good to note that FAO has been taking active interest on this score. The FAO emphasized fostering the growth of agricultural cooperatives around the world, develop approaches, guidelines, methodologies and training tools on organizational development and policy, as well as contribute to the global plan of action expected to emerge from events held in honour of the celebrated International Year of Cooperatives.

According to FAO’S the then Director-General, José Graziano da Silva, “Cooperatives follow core values and principles that are critical to doing business in an equitable manner, that seeks to empower and benefits its members and the community it is inserted in…his is especially relevant in poor rural communities, where joining forces is central to promoting sustainable local development”. Greater cooperativization would have the strength to help reduce hunger and poverty across poor rural communities

The War Is Not Lost Till It is Over

And then the warning bell from the World Bank: all nations will suffer the effects of a warmer world, but it is the world’s poorest countries that will be hit hardest by food shortages, rising sea levels, cyclones and drought [the World Bank said in a recent report on climate change]. It is definitely good to note that the global development lender has since launched a more aggressive stance to integrate climate change into development: “We will never end poverty if we don’t tackle climate change. It is one of the single biggest challenges to social justice today.”

The report [Turn Down the Heat] highlighted the devastating impact of a world hotter by 4 degrees Celsius (7.2 Fahrenheit) by the end of the century - a likely scenario under current policies. In this hotter climate, the level of the sea would rise by up to 3 feet, flooding cities in places like Vietnam and Bangladesh. Water scarcity and falling crop yields would exacerbate hunger and poverty. This is likely to happen if not all countries comply with pledges they have made to reduce greenhouse gas emissions. Even assuming full compliance, the world will warm by more than 3 degrees by 2100.

To conclude in the words of FAO Director General: ‘At the Rio+20 Sustainable Development Conference held in June, 2012, the world leaders sent out a clear message that development will not be sustainable while hundreds of millions continue to be excluded, suffering from hunger and extreme poverty…If we can find sustainable ways to ensure food security in dry land areas, then we will be well on our way to achieving a ‘zero hunger’ world…Investments needed to respect the rights, livelihoods and resources of all those involved, especially the most vulnerable’.

Appropriate action is required urgently specifically in the three areas to feed into future policies, strategies and investments to boost agricultural production to enhance food security and increase resilience to future prices shocks. Priority is to be assigned to: supporting sustainable management of land and water resources; scaling up the sustainable intensification of agriculture and adapting production to climate change; building resilience in rural communities and strengthen global food security governance.

Entrepreneurial Woes: Ease of Doing Business Not That Easy

In most cases it takes a tragedy to bring the worlds focus to a plight prevailing for long, the same happened with V.G. Siddharthas death, as it brought to light the dark side of the Indian entrepreneurial environment.

Although the NDA government has put much emphasis on easing regulations for doing business, harassment by tax authorities, high taxes and liquidity crunch among other issues have proved that the government has largely not been able to walk the talk.

According to official data, around 6.8 lakh companies registered with the Ministry of Corporate Affairs (MCA) have shut. This accounts for 36 per cent of the total firms registered with the MCA.

A total of 6,83,317 companies, of the 18,94,146 registered firms, are closed. At 1,42,425, Maharashtra recorded the highest number of closed companies, followed by Delhi (1,25,937).

Harassment by tax authorities, famously known as ‘tax terrorism’, has been a known phenomenon in India and in recent times, it has only risen.

Apart from claiming pressure from a private equity firm and some lenders, the late founder and Chairman of Coffee Day Enterprises said in his last letter to the board: “There was lot of harassment from the previous DG Income Tax in the form of attaching our shares on two separate occasions to block our Mindtree deale.”

This led to the rise of other voices of concern as industry veterans, Mohandas Pai and Kiran Mazumdar Shaw too came out against the harassment caused by tax officials against businessmen.

Interestingly, as avenues of businesses increased with time, avenues for taxes too rose in tandem.

A glaring example of this is the angel tax, the phrase used for the income tax payable on the capital raised by unlisted companies through the issue of shares through off-market transactions. Startups are the most affected due to angel tax.

“Ever since its introduction in 2012, angel tax has been stifling the entrepreneurial activity in the country,” said Digvijay Singh, the Chief Operating Officer of Indian Angel Network. Although the government has made some changes for DIPP-registered start-ups to be exempted from angel tax altogether if they fulfill certain conditions, these very set of conditions have been troubling for both start-ups and angel investors, Singh told IANS.

One of the latest strikes on businesses has been the 20 per cent taxation on share buyback by companies, which industry representatives say, would be a major hurdle for businesses.

Not just taxation and clampdown by tax authorities, a slowing economy led by a severe liquidity crisis and low consumption too have posed serious threat towards the growth of businesses and entrepreneurship in India. Even as the Reserve Bank of India (RBI) has in its last four monetary policy meets reduced lending rates, the transmission of the same to the retail borrowers has not been swift and proportionate.

“We note that since June, RBI has ensured that the banking system liquidity remains extremely comfortable. This in conjunction with 110bps rate cuts has improved the transmission but the transmission has been shallow,” said Madhavi Arora, Economist with Edelweiss Securities.

She noted that overall financial condition is still tight, implying that businesses still lack funds at a good cost and thus the growth cycle is getting impacted.

“One of the key factors has been the savings rate and investment rate in the economy. The savings rate and investment rate of the economy have not been too good,” she told IANS.

Sunil Sinha, Principal Economist at India Ratings and Research said: “Depressed demand along with inadequate credit flow situation has hampered the entrepreneurship spirit as well as growth in the economy.”

According to Sinha, the government must accept that there are serious issues plaguing the economy and there is a need to find specific solutions to spur growth.B.K. Chaturvedi, former member of the erstwhile Planning Commission, was of the view that falling savings and eventual investments in the past couple of years is among the major reasons for the slow decline of entrepreneurial spirit.

“The overall environment is such that there is no demand, so many of the entrepreneurs have also not grown... and it depends a lot on the state governments, so many of the states have not really provided the sort of incentives which are required for industry to grow,” he told IANS.

So, although the government claims of making efforts to clean the economy and the corporate environment by going after norm violating and tax-evading companies, these very steps if not taken carefully and legitimately, may ultimately harm the industry and the economy.

The government according to industrialists and experts should have a more transparent tax regulatory and investigation system and also should provide the needed incentives and economic environment so that India can have more ‘unicorns’ and become a global startup hub. (IANS)

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