Poor data, worse
policy
Although the
Ministry of Agriculture has not rung alarm bells, its first advance estimates
of the kharif crop should cause acute alarm. It expects the output of coarse
cereals and of cotton to be 7 per cent and of oilseeds 22 per cent below last
year. Coarse cereals may worry no one because the poor are expected to eat
wheat and rice nowadays. But shortage of cotton and edible oil could only mean
imports.
Given our large
exchange reserves, that would be all right, but for the fact that the estimates
are almost certainly hugely wrong. The heartland of kharif crop production –
especially, Gujarat, which produces most of groundnut and much of cotton –
received copious rains in August – so torrential as to cause a century’s worst
floods in some parts. All that water has sunk into the soil and will give
bumper crops of dry crops.
The reason why
the ministry has got it all wrong is that it starts preparing estimates almost
before the monsoon has arrived. Its crop estimation committee reviews the rains
till the end of July, adjusts last year’s figures up or down and makes up a
first estimate. It is an average committee’s average guess based on early data.
It may argue
that the sowings are over by July and should give a good idea of the eventual
crop. But monsoon rains in the west and the north are notoriously capricious,
and the farmers are quite used to moving the date of sowing as well as changing
the crop on their basis. There is a risk in late sowing, but less than the
definite outcome of not sowing, namely no crop. So the output of cotton,
groundnut, sesame and bajra is likely to show a considerable rise this year.
These estimates
matter only because they are the basis of policy. The government keeps
reviewing such unreliable figures and pondering on which commodities to import
or export, and how much. Their deliberations look even more important because
interested industrialists queue up to lobby them. Right now, for instance, mill
owners are lobbying the agriculture minister to let them export a million tons
of sugar. Sensing that the government is making a convenient mistake, spinning
mill owners will now start lobbying him to let them import cotton. Opposing him
would be the minister of consumer affairs or commerce or finance – whoever
feels like jumping in. This is how frantic ministerial activity is generated
over inconsequential policy issues.
All these
acrobatics would be unnecessary if the government reduced the prohibitive
agricultural import duties and allowed free imports and exports. Trade would
deal with shortages or surpluses far more expeditiously than the government
ever can. The only role the government might then have would be to ensure
sufficiency of domestic stocks; it can do so by giving cheap loans on
inventories up to certain limits.
