Agri still plays vital role in providing jobs: OECD

The Financial Express
New Delhi, 19 March 2009

While the economic importance of the agricultural sector is falling relative to other sectors, it continues to play a vital role in providing employment and contributing to food security especially in countries like Brazil, Chile, India, Russia, South Africa and Ukraine. A report titled “Agricultural Policies In Emerging Economies :Monitoring and Evaluation 2009” by Organisation of Economic Cooperation and Development (OECD) finds that although weather conditions can cause large short-term fluctuations, over the longer-term both agricultural production and, in particular, agro-food trade are growing rapidly. Brazil , Chile , India and Ukraine are net exporters of agro-food products, while China and Russia are net importers. Along with a large number of other countries, the seven emerging economies made various policy interventions in response to higher food prices. The most common policy response taken by the emerging economies - and also worldwide - has been to reduce or suspend import tariffs on food products. The products on which tariffs were reduced, and the time and quantity limit varied between economies, as well as the extent of the tariff reduction. For example, while Brazil has provided tariff-free access for 2 million tonne of wheat, the MFN applied tariff is just 6%. Changes of this magnitude can be expected to make only a limited impact on inflation. The next most common response has been to impose export barriers in the form of export restrictions or export taxes. The measures imposed by India , Russia and Ukraine were particularly significant given the potential quantities involved. Export barriers are likely to lower domestic prices for the products concerned but have serious spill-over effects, impeding price signals to producers and decreasing supplies for importing countries. As far as India is concerned, improvement of rural infrastructure has been given a high priority to make India ’s growth “more inclusive and equitable”. A large part of this rural investment is to be undertaken within a programme Bharat Nirman focussing on the expansion of irrigation area, improved water management, support for rural roads, housing, electrification, telecommunication, research and diversification of economic activities. The National Policy for Farmers, introduced in 2007, places greater emphasis on the economic well-being of farmers and rural development rather than just on agricultural production. In 2006, a new package was introduced to revive the short-term rural co-operative credit structure and to expand credit available to farmers at preferential interest rates. In 2008, the government announced a large scheme to waive overdue and unpaid debt, initially for small and marginal farmers, but then extended to include commercial producers. Retail price controls have been introduced in China , Russia and Ukraine . China and South Africa made changes to their biofuel policies to reduce pressure on food security. Chile and South Africa provided additional direct transfers to those most vulnerable to the effect of higher food prices: a cash-based transfer in Chile and the provision of food in South Africa .