Policy Induced Inefficiencies are Export Policy

Prelims level : Mains level : Paper - III Indian economy
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Trade policy measures. a variety of trade policy measures applied in 2000-16 – such as export prohibitions, export quotas, export duties, or minimum export prices – have impeded the export of several key commodities and further contributed to depressing producer prices.


  • Streamline and clarify trade policy roles and responsibilities across the different ministries and agencies to iron out inconsistencies and simplify procedures.
  • Move away from the use of export restrictions in order to create a stable and predictable market environment.
  • Reduce tariffs and relax the other restrictions on imports which are applied from time to time with a view to creating a more open and predictable import regime.

Domestic policies:

  • Minimum support prices being set below international prices for several commodities at different periods between 2000 and 2016.
  • Policies that govern the marketing of agricultural commodities include the Essential Commodities Act and APMCs. Through these Acts, producer prices are affected by regulations influencing pricing, procuring, stocking, and trading commodities.
  • Restrictions caused by both the ECA and APMC Acts also deter private sector investment in marketing infrastructure.
  • Differences among the states in the status of their respective APMC Acts and in how these Acts are implemented add to the uncertainties in supply chains and drive up transaction costs.


  • Bring MSP on par with international price.
  • Reform market regulations and strengthen market functioning across states build on and reinforce initiatives already underway (E-NAM, Model Acts).
  • Prioritise institutional reforms to allow development of a single market for agricultural products.
  • Support farmers to integrate in competitive markets and allow the private sector to play a greater role.

Budget Policy:

  • Virtually all of the budgetary transfers to agricultural producers in India are subsidies for variable input use, with overwhelmingly subsidised fertilisers, electricity, and irrigation water.
  • On the other hand, public expenditures financing general services to the sector have declined over the last decades.
  • Most of this expenditure is in development and maintenance , followed by the cost of public stockholding and expenditure on the agricultural knowledge and innovation system.
  • The sum of all agriculture and food-related spending (budgetary transfers to producers, to agriculture as a whole, and transfers to consumers from taxpayers), without accounting for the negative market price support, amounts to 1.9% of India’s GDP in 2014-16.
  • This shows the high cost to the Indian economy and contrasts with the sector’s poor performance in productivity growth, highlighting the need for resources to be applied more effectively.


  • Strengthen the overall access to credit and particularly encourage long-term loans.
  • Re-focus investments on fostering the agriculture enabling environment, such as infrastructure and education in rural areas.
  • Increase research intensity and implementation on field.
  • Move gradually to targeted Direct Benefit Transfers & allow the private sector to play a role in managing remaining stocking operation.
  • Clarify roles and responsibilities at central level by bringing key policy areas under a single umbrella.
  • Strengthen co-ordination among central ministries and agencies and between the centre and the states.


Many policy initiatives are already underway or in the pipeline and these should be continued or reinforced. Only by shifting scarce budgetary resources to investments that will increase resilience and sustainability, while allowing better functioning markets to determine farmers’ remuneration to a much greater degree, can the potential of the sector to contribute to growth and jobs be fully realised.

It would help India improve food security for its vast population, advance the quality of life of its millions of smallholders, overcome severe resource and climate pressures, while generating sustainable productivity growth and creating a modern, efficient and resilient agro-food system that can contribute to inclusive growth and jobs throughout the economy.

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