Neglect of agriculture in the development discourse

-Posh Raj Pandey, Nepal

The development discourse mainly initiated after the World War 11 has relegated the agriculture sector to that of the passive role. The central focus during the 1950's and 1960's was on industrialization; agriculture was considered to a large extent just a supporting activity that supplied the labor, resource and food needed in industry. Development thinkers considered that there exists a large surplus of labor in agriculture who are employed at zero marginal product and thus, there was possibility of taking away a large number of workers from agriculture and employing in industry without any drop in food production (cf balanced growth of Rosenstein-Roden 1943 and Ranger Nurkse 1952) and agriculture could also be taxed to provide revenues that could be invested in industry. The theoretical bases for subaltern role of agriculture was propounded from both the supply side and demand side right from the classical literature. From the supply side, Thomas Malthus and David Ricardo who argued that agriculture suffered from diminishing return indicated the limit for agriculture growth whereas the Engel's law –the share of income spent on food decreases-limits the size of the demand. These two theoretical propositions were significantly enough to establish the prospects of slow growth in agriculture. Moreover, export pessimism regarding primary and agriculture products- income and price elasticity of primary products are low- that prevailed in the 1950s and 1960s provided deterministic turn to adopt policies, which are biased towards industry. (cf: structuralist school embodied in the work of Prebisch (1950), Singer 1950 an Myrdyal (1957). Many economists since then have considered the agriculture sector subject to low productivity and slow growth and the prospect for technical progress in this sector to be dim. Rather they highlighted the role of manufacturing sector as an engine of growth since it produces more dynamic linkages to other sector of the economy, it operates under economies of scale, it gives rise to technical changes and the possibility for specialization and the division of labor is greater in within manufacturing than other sectors of the economy. (cf: 'big push' theory of Rosenstein-Rodan). International institution, not surprisingly, for example United Nation's international development strategies for the 1970s and the 1980s deemed the potential growth rate for agriculture output at half (or less than half) the potential growth rate of manufacturing output.

The impact of development thinking has been reflected in the actual policymaking including that of Nepal. Nepal's economic policies during 1950's to 70's aimed at higher economic growth through embracing the policies of import substituting industrialization. A policy of high import tariffs and concessional credit lines to favor industry were adopted whereas while agriculture sector was highly taxed both explicitly-export taxes- and implicitly low import tariffs overhauled exchange rates. This type of traditional policy instruments bias against agriculture, factors, taken together, had the unintended consequences of depressing farm prices and profitability, thus reducing incentive for investment. (Kruguer, A.M. Schiff and A. Valdes 1998). Not only domestic policies were not conducive for agriculture development, the international trading environment has more deleterious impact on the growth prospects. The high levels of subsidies and protection provided to agriculture in the developed countries encourages over production, which in turn increases supplies on world markets (by reducing import demand or increasing export supply) and depresses world prices. Low prices make it harder for producers in developing countries to compete in their home markets, as well as in international markets, thus reducing incentives for production and retarding the development of agriculture sector. However, by the mid 1980s, there has been growing disillusioned with import substituting strategies, and major reorientation has been taking place ever since. The new approach involves a more open economy, and recognizes the active role that agriculture can play as a major tradable sector in most developing countries.

Though Nepal has initiated its economic reform program in mid 1980s, the reform in agriculture sector is reflected only in with the adoption of agriculture perspective plan (APP)-a twenty-year growth frame work- in mid j1990s. The main objectives of APP are:

*Accelerate growth in the agriculture sector by increasing productivity,

*Diversify agriculture to high value crops

*Ensure a policy environment more conducive for private sector/community participation,

*Reduce poverty through increased agriculture growth and employment opportunities. The emphasis of the APP is on harnessing the considerable growth potential in the Terai, while encouraging livestock development and the development of high value crops on a selective basis in the hills. The APP identifies four priority inputs namely, *year-round irrigation, mainly shallow tube wells with farmer participation,

*The supply of fertilizer with private sector participation

*Agricultural research and extension and adapting them to farmers' needs, and

*The rural infrastructure, especially rural roads whose adequate provision is critical to its successful implementation. The ninth plan has adopted the recommendations APP for achieving the long-term development of agricultural sector in the country. Accordingly the basic policy of the ninth plan is to retreat agriculture as the lead sector of the economic development and poverty alleviation through increased employment opportunity and income levels of the common people.

The way the implementation of APP, which was delayed until 1998, does not indicate any firm political commitments on the development of agriculture development. Only the soft options such as elimination of all fertilizer subsidies, reduction of irrigation subsidies and privatization of agriculture Inputs corporation (AIC) have been implemented rather than striking hard on the development of rural infrastructure and irrigation facilities. Not only agriculture sector is hard hit on the domestic policy but also on the international trade-the burning example is the Treaty of Trade between Nepal and India of 19967 which provides duty free and quota free access of Nepalese manufacturing products in India on non-reciprocal basis whereas the preferences are reciprocal in agriculture and primary products which includes agriculture, horticulture and forest produce and minerals which have not undergone any processing, rice pulses and flour, \timber jaggery, animal birds and fish, bees wax and honey, raw wool, goat hair and ones as are used in oil an oil cakes, ayervedic and herbal medicines, articles produced by village artisans as are mainly used in villages, Akara yak tail and any other primary products which may be mutually agreed upon. Such agreement has been done despite the well-known fact that the level playing fields for Nepalese and Indian farmers and uneven in terms of technology, infrastructure and government supports.

Excerpts from author's paper presented at a NEFAS seminar on WTO held last week-chief editor.

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