Application of knowledge economy the imperative for food security

Know-how to boost production, distribution and consumption of food must be used more widely

The sharp increase in prices of commonly consumed staple foods (rice, wheat, edible oils, etc) the world over in recent months has caused consternation among policymakers and the general public alike.

 If the global futures markets are any indication, there will be no significant price softening of food items in the near future.

In India, the annual inflation as measured by Wholesale Price Index for the latest week was over 8.2%. The food price index has risen 40.8% in the first four months of 2008.

Inadequate and inequitable supply of these commodities not only impacts household welfare, but also has wide-ranging political ramifications.

The need for politicians to be perceived to be doing something about the issue is therefore overwhelming.

It is widely acknowledged that for India to achieve near double-digit growth, which also improves real income and consumption of the people, the annual agricultural growth rate (which averaged 2.6% per annum between 2000-01 and 2007-08) would need to be raised to at least 4%. The vast imbalance between the agricultural sector’s share in GDP of around 17% and in employment of around 60% must be addressed.

Apart from the unusually adverse weather conditions, several factors help explain the recent increases in food and energy prices in many agricultural countries in recent period.

First, there has been above-average growth of the world economy, with several countries with large population (such as China and India) growing rapidly.

This has increased demand for not only food, but also energy and other raw materials.
Second, in 2008, for the first time in human history, the majority of the world’s population has become urban.

Urbanisation, industrialisation and infrastructure needs (particularly for roads) have increased the demand for land, which has reduced agricultural land supply.

Third, the use of bio-fuels, which have diverted agricultural land and produce for energy needs in the developed world, has also been a contributory factor.

Fourth, large subsidies for petroleum-based products, particularly diesel and kerosene, and for water and fertilisers in many countries have also contributed to inefficiencies in their use.

The above factors have also led to demand for food and energy in India going up. The supply of agricultural commodities (and of energy) has, however, not increased commensurately in India.

While the measures, such as increasing domestic supply of rice by export taxes and bans, may temporarily mitigate inflation pressures, they aggravate medium-term supply incentives, and therefore are counter-productive for India’s future food security.

To attain food security and diversify the agricultural sector, India will need to apply knowledge economy processes to this sector in a much more strategic and result-oriented manner.

A knowledge economy in this context requires that different branches of existing know-how and know-why relevant for production, distribution, and consumption of food products are applied throughout the country.

India’s share in arable land in the world, at 11.5%, is second only to the USA. India has the largest share of irrigated area in the world. It, however, lags considerably behind other countries in the per-hectare yield of different crops.

In 2004, India’s yield per hectare for paddy was only 75% of the world average. The corresponding figures for wheat were 93%, maize 38%, cereals 73%, pulses 79% and soybean 48%.

India must apply knowledge economy processes to improve the yield per hectare, bring marginal land into mainstream agricultural activity, improve post-harvesting techniques to reduce wastage, and increase the efficiency of its agricultural supply chain.

While much of the relevant knowledge is already available, it will be have to be adapted to the varying local conditions and contexts within India, and diffused widely.

Certain pre-conditions must be fulfilled before the country can apply knowledge economy to agriculture.

Policymakers must give their undivided attention to the agriculture sector’s challenges, and actively engage individuals, organisations and companies with relevant competence and expertise.

The agricultural ministers at the Centre and in the States must be judged by their performance. Agriculture minister Sharad Pawar’s deep involvement in managing India’s cricket provides a negative signal, reflecting a ruling rather than governing mindset.

The declining trend in agriculture sector investment must be reversed. This involves such areas as better functioning irrigation facilities, farm-to-market roads, seed technology and integrating solid waste management with environmentally sound crop management practices.

The Gujarat government’s Jyotigram Yojana investment project of providing rural areas with 24 hours of power is a good example of the investments needed to expand income earning opportunities in the agriculture sector. The Centre, as well as the other states, will do well to initiate similar innovative investments, which can make a lasting impact on rural livelihoods, and India’s food security.  

Measures that could unify India as a single market and removal of inefficiencies associated with marketing of agricultural output are also needed. According to the 2005 Economic Census, India has 42 million retail trade establishments, with 60% of them operating in the rural sector.

Modernising and upgrading of the retail trade sector will therefore have significant impact on improving efficiency and incomes of rural and urban households.

ITC’s E-Choupal and other such initiatives are reducing transaction costs and information asymmetries between the farmers and the marketplace, but broader national level initiatives, and removal of artificial restrictions on agricultural commerce built over many decades, are needed.

The National Spot Exchange Ltd’s plan to launch the country’s first agriculture spot exchange in Gujarat by August 2008 using a public-private partnership framework is a step in the right direction, and needs to be nurtured.

The network of agricultural universities and research centres must be subjected to zero-based budgeting, with a view to enhancing their effectiveness in bringing about greater application of knowledge economy in agriculture and contributing to food security.

As the application of knowledge economy requires sustained efforts over many years, there is room for well-designed subsidy programmes in the short run.

The policymakers must, however, realise that populist subsidy schemes, with large leakages and poor targeting, have huge opportunity costs as they distract attention and resources away from application of knowledge economy for food security for the population, and constrain agricultural and livelihood diversification.

Mukul Asher (mukul.asher@gmail.com) is professor of public policy, National University of Singapore and Amarendu Nandy (amarendun@gmail.com) a PhD candidate, LKY School of Public Policy, National University of Singapore.
Views are personal.