Economic Outlook, Prospects, and Policy Challenges

19

Source: Refer to footnote 8.

many options available for the farmers to sell their

produce.
Rationalisation of subsidies and better targeting of
beneficiaries through direct transfers would
generate part of the resources for the public
investment that is essential in research, education,
extension, irrigation, water-management, soil
testing, warehousing and cold-storage. Distortions
emerging from various policies, including,
exempting user charges for electricity and water
need to be reduced, though better targeting and
eliminating leakages.
The recommendations of the Shanta Kumar
Committee provide useful suggestions for the future
road-map of food-policy. The functioning of the
Food Corporation of India needs to be revamped
substantially.
There are also wide differences in the yields within
states. Even the best of the states have much lower
yield in different crops when compared to the best
in the world. This is evident from the Table 1.1
below.
Vast amounts of cropped area (approximately 41
percent) are still unirrigated. Providing irrigation
can improve yields substantially. For a shift in the
underlying production function, investment in basic
research will be necessary. This provides ample

opportunity to increase production by bridging the

yield-gap to the extent feasible within the climatic
zone. Institutionally, the time may be ripe for reassessing the role of the Indian Council of
Agricultural Research (ICAR), its relationships
with the state agricultural universities as well as
with individual institutes (say the Indian Agricultural
Research Institute or the National Dairy Research
Institute), and whether research, education, and
extension should be separated.
To provide efficient advance price-discovery to
farmers and enable them to hedge price risks the
Forward Markets Commission is being
strengthened. The concern that there may be
unnecessary speculation should be addressed
though more effective regulation along the lines of
the recommendations made by the Financial Sector
Legislative Reforms Commission (FSLRC).

1.6

T HE

GROWTH - FISCAL POLICY

CHALLENGE

India can balance the short-term imperative

of boosting public investment to revitalize
growth with the need to maintain fiscal
discipline. Expenditure control and
expenditure switching, from consumption to
investment, both in the upcoming budget and
in the medium term will be key.