New Delhi: Reserve Bank of India (RBI) Governor Shaktikanta Das on Monday said that the country now requires policies to ensure a sustained increase in the income of farmers along with maintaining "reasonable' food prices for the consumers.
Addressing Confederation of Indian Industry (CII's) National Council, Das said that price incentives have been costly, inefficient and distortive.
He noted that shifting the terms of trade in favour of agriculture is the key to generating positive supply responses in agriculture. Experience shows that in periods when terms of trade remained favourable to agriculture, the annual average growth in agricultural gross value added (GVA) exceeds 3 per cent, the Governor said.
"Hitherto, the main instrument has been minimum support prices, but the experience has been that price incentives have been costly, inefficient and even distortive. India has now reached a stage in which surplus management has become a major challenge. We need to move now to policy strategies that ensure a sustained increase in farmers' income alongside reasonable food prices for consumers," he said.
According to him, an efficient domestic supply chain becomes critical in such circumstances.
He said that the focus must now turn to capitalising on the major reforms that are underway to facilitate domestic free trade in agriculture including the amendment of the Essential Commodities Act (ECA).
Das was of the view that Indian agriculture has witnessed a distinct transformation as the total production of food grains reached a record 296 million tonnes in 2019-20, registering an annual average growth of 3.6 per cent over the last decade, along with production growth in horticulture.
He also noted the changing pattern of energy production in favour of renewable energy and shifts in supply chains, domestic and global.
"In a competitive market economy, an efficient supply chain can enhance economic welfare. Investment in sectors with strong forward and backward linkages in the supply chain can generate higher production, income and employment," Das said.