Agricultural economics

section of Economics, Punjabi University, Patiala (Punjab), India. E-mail 2Assistant Professor, Department of Distance Education, Punjabi University, Patiala (Punjab), India. E-mail Abstract A modernized tillage serves as a powerful engine of economical offset of any boorish. It helps in initiating and sustaining the d eveninglopment of other firmaments of the economic system. In view of this, later independence the disposal of India adopted a positive approach and particular computer programmes handle naked as a jaybird cultivation technology were maked. Indian farmers being unforesightful were non in a position to buy these expensive inputs.Then the Indian Government started the scheme of subsidies on the purchase of various agriculture inputs to drive on the farmers. Subsidies argon often criticized for their fiscal burden, on the other hand in that location is a worry that agriculture performance and income of farmers would turn d own if subsidies atomic number 18 curtailed. The findings luff that the increasing rate of essential subsidies (fertilizers, electricity and irrigation) is higher(prenominal) than pure(a) cropped cranial orbit (GCA) during pre, first as healthful as second frame of rest periods.T here(predicate) is a lot of variation to find out the relationship amid gross cropped argona (GCA) and in union subsidies in regularizes throughout the poll period. The present choose suggests that Government should keep aside its motive to amuse voters or strengthen the vote trust, it should frame rational form _or_ system of organization in which sm exclusively size category farmers, who atomic number 18 not actual beneficiaries of subsidies, could run first-class honours degree more and subsides, which they do not want should be withd affectionaten.Key spoken language-agriculture, electricity subsidy, fertilizers subsidies, irrigation subsidy, productivity. I. entering The socio economic structure, which prevailed prior to the British rule in the country, resulted in the cheek of self-sufficient villages. It has been maintaining somewhat(prenominal) kind of static equilibrium. The Indian peasant, though not properly educated, has adequate experience of farming systems and he has been bloodsucking on it for the means of living.The Royal commission of agriculture in India observed that both the methods of cultivation and social make-up exhibit that settled order which is lineament of all countries in which the cultivating peasant has vast lived in and closely fitting himself to the conditions of a particular environment. The Indian agrarian economy on the eve of independence was critical in situation. It could be characterized totally primitive, deteriorative and turbulent.After partition, the country is go away with 82 per cent of the total population of undivided India as well as only with 69 per cent of take down down the stairs rice, 65 per cent to a lower place whea t and 75 per cent under all cereals. The deficiency of intellectual nourishment corpuscles is quite alarming and aggravating at that fourth dimension (Chahal, 1999). In view of this, after independence tremendous efforts are do to boost the economy through agriculture as virtuoso of the tools for phylogeny.The Government of India adopted a more positive approach and hence a well definedpolicy of integrated payoff programmes with defined targets and a proper dispersion programme is adopted along with other measures for the overall economic discipline of the country. Specific programmes like new agriculture technology are introduced to transform agriculture into a successful and prosperous business, to bring more refine under cultivation and to raise agriculture outturn. In India, the adoption of new awkward technique is high- valued than that of traditional method of cultivation.In traditional method, inputs are least expensive, on the other hand, inputs in modern techn ology like high yielding varieties of seeds, fertilizers, farm mechanization and irrigation are actually costly and Indian farmers being poor are not in a position to buy these expensive inputs. Then on the recommendations of food grain price committee (Jha Committee), the Government of India started the scheme of subsidies on purchase of various agriculture inputs to facilitate the farmers (Singh, 1994).Subsidies have occupied country economists for a long age be pay off they are pervasive in agriculture, even though they are often applied in ways that benefit mostly richer farmers, cause inefficiencies, lead to a heavy fiscal burden, distort trade, and have disallow environmental effects. boorish subsidies ass nobble an valuable role in early forms of hoidenish knowledge by addressing market failures and promoting new technologies (Fan, 2008).All of these subsidies by reducing the prices of the inputs, served in the initial stages of green revolution, as incentives to the farmers for adopting the newly introduced seed-cum-fertilizer technology. These helped in raising the pastoral output, after some time, the amount paid on these subsidies began to rise. The input subsidies have often been acc utilise of causing most baneful effect in terms of reduced public investment in agriculture on account of the erosion of investible re originations, and wasteful use of odd resources like pee and uncouth Subsidies In India Boon Or slangwww. iosrjournals. org 41 Page power. Further, apart from causing unsustainable fiscal deficits, these subsidies by encouraging the intense use of inputs in limited pockets have led to lowering the productivity of inputs, reducing employment elasticity of output through the substitution of chapiter for labour and environmental degradation such as lowering of water tables. (Gulati, 2003).In India, at present centre as well as advance governments are providing subsidies on fertilizers, irrigation ( pratal water), e lectricity and other subsidies to marginal farmers and farmers cooperative societies in the form of seeds, training of crude rock oil seeds, pulses, cotton, rice, maize and crop insurance schemes and price support schemes etc. Out of these subsidies, the Central Government of India provides indirect subsidies to farmers on the purchase of fertilizers from 1977, whereas body politic governments are providing subsidies on irrigation as well as on electricity (Government of Punjab, husbandry Department, Chandigarh).Review of literature of the past theory and hold is necessary when conducting any research cultivate. Sharma, (1982) examined the impact of farming(a) subsidies on issue income and rural production. For this purpose the author used the time period from 1970-71 to 1981-82 and a general equilibrium model. The nurture revealed that during this period, awkward subsidies affected the national income and agriculture production positively. Gupta, (1984) tried to analys e the agrarian subsidies in India from 1970-71 to 1982- 83.The author used linear regression model. The study showed that during this period, the use of untaught subsidies cultivationd at faster rate exactly there was a large inter-state disparity. Sharma, (1990) revealed in this study that subsidies have become unsustainable. In order to release resources for higher investments in the agricultural empyrean, large scale price and institutional reforms are needed to relieve the pressure of subsidies on the exchequer. Gulati, (2007)reviewed the trends in government subsidies and investments in and for Indian agriculture.The author suggested that to sustain long-term growth in agricultural production and therefore provide a long-term solution to mendicancy reduction, the government should cut subsidies of fertilizer, irrigation, Power and quotation and increase investments in agricultural research and development, bucolic, infrastructure and education. Promoting non-farm oppor tunities are also important. From the above studies, it may leave off that agriculture subsidies are a worldwide phenomenon.Some studies showed the distribution pattern of agriculture subsidies in different countries and in different states of India. Whereas some studies showed the impact of agriculture subsidies on income of farmers of different states of India, on agriculture production, on gross cropped area, on cropping pattern etc. Subsidies are often criticized for their financial burden. Some researchers stir to the extent that these should be withdrawn in a phased manner, such a step result reduce the fiscal deficit, improve the efficiency of resources use, bullion for public investment in agriculture.On the other hand, there is a fear that agriculture production and income of farmers would decline if subsidies are curtailed. These are very important issues, which need serious investigation. Subsidies are often criticized for their financial burden. The objectives of the present study are to study the growth and distribution of agricultural subsidies in India, to study the impact of agricultural subsidies in India, to suggest ways and means for bountiful agricultural subsidies to farmers of India.The present study is related to agricultural subsidies in India from 1980-81 to 2008-09. In this study agriculture subsidies of fertilizers, electricity, irrigation (canal water), seeds, machinery etc. are discussed during pre-liberalisation period (1980-81 to 1985-86), first phase of liberalisation period (1990-91 to 1996-97) as well as during second phase of liberalisation period (2000-01 to 2008-09). For analysing the growth and distribution pattern of agriculture subsidies, quint zones i. e.south zone (includes Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Pondicherry, Andaman and Nicobar Islands and Lakshadweep), west zone (includes Gujarat, Madhya Pradesh, Chhattisgarh, Maharashtra, Rajasthan, Goa, Daman and Diu and Dadra Nagar Haveli), east zone (Bihar, Jharkhand, Orissa and westbound Bengal), northwest zone (Haryana, Punjab, Uttar Pradesh, Uttaranchal, Himachal Pradesh, Jammu and Kashmir, Delhi and Chandigarh) and nor-east zone (Assam, Tripura, Manipur, Meghalaya, Nagaland, Arunachal Pradesh, Mizoram and Sikkim) have been taken.II. Gross Cropped theatre in India Land is the fundamental basis for the most of the human or natural activities and is one of the major(ip) natural resources on earth. awkward productivity is immaculately dependent on the availability of suitable land (State of environment Punjab 2007). In India, there are competing demands of area available for cultivation from increase in rural habitations, forestation, urbanisation and industrialisation.Consequently, gross cropped area in the country has registered a rapid deceleration in its growth over time (Bhalla, 2009). In this section, an set about is make to analyse the gross copped area (GCA), total subsidies, fertilizers, electricity and subsid ies at India as well as zone levels. The gross cropped area (GCA) in India during 1980-81 to 2006-07 is shown in table 1. This table reveals the west zone got topmost position, followed by north zone, south zone, east zone and north-east zone throughout the study period.In India, GCA has shown variations i. e. it has switch magnitude from 1,73,324 grand hectares in 1980-81 to 1,85,403 gram hectares in 1990-91 and raise increased to 1,88,601 universal gravitational constant hectares in 1996-97, it has declined to 1,86,565 thousand hectares in 2000-01 and further declined to 1,75,678 thousand hectares in 2006-07. As zone-wise analysis shows that in west zone, the GCA has Agricultural Subsidies In India Boon Or Curse www. iosrjournals. org 42 Page increased from 69,882 thousand hectares in 1980-81 to 75,659 thousand hectares in 1990-91 and further increased to 78,097 thousand hectares in 1996-97 and declined to 72,833 thousand hectares in 2006-07.In north zone, it has increased from 38,806 thousand hectares in 1980-81 to 42,132 thousand hectares in 1996-97 and declined to 39,780 thousand hectares in 2006-07, whereas in south zone, the GCA has increased from 32,363 thousand hectares in 1980-81 to 34,688 thousand hectares in 1990-91 and further increased to 35,333 thousand hectares in 1996-97 and declined to 35,271 thousand hectares in 2000-01 and again increased to 36,368 thousand hectares in 2006-07.In east zone, the GCA has increased from 27,514 thousand hectares in 1980-81 to 28,741 thousand hectares in 1990-91 and declined to 27,416 thousand hectares in 1996-97 and further declined to 20,246 thousand hectares in 2006-07, on the hand the GCA has increased from 4,759 thousand hectares in 1980-81 to 5,163 thousand hectares in 1985-86 and further increased to 6,451 thousand hectares in 2006-07 in north-east zone.Agricultural economicsAgriculture is defined as the cultivation of land for the purpose of producing food for man, feed for animal and vulcanized f iber or raw material for industrial companies. It also includes the butt againsting trade of crops. In other words, it embraces all activities involved in the primary and controlled production of plant and animals, such as fishing, forestry, farming, livestock, poultry and small scale industries committed with processing of agricultural products. The agricultural sector forms the background of Nigeria economy dis obedience concerted effort in industralisation.Agriculture occupies the pride place as the source of livelihood for over 70 share of the population. It is recognized as a pre-requisite to economic development. With large scale dependence on agriculture for food, raw-material for industries etc, one would expect production to increase, rather it is disheartening to note that this is not the case. Agriculture has suffered some scorn due to lack of investment since the inception of oil boom in 1970. In fact, Nigeria is experiencing a decline in the post of agricultural p roduction in general, this situation is causing a spectacular concern to the government.Throughout the 1960s, Agriculture contributed 61. 5%. in the mid-seventies, it declined miserably be 2. 3%. This decline may be attributed to the domination of the nations export by oil since 1970 which accounted for 57. 6% of total export income and rose steadily, attaining an overwhelming proportion of 98% in 1981. As a result there was an absolute neglect in agriculture to both God (Gross Domestic Product) and export wage which has been the major factor dictating the need to reactivate our agricultural products.The need for this re-activity and in effort to revamp this sector has been the reason for raising budgetary apportioning in recent years to it. It rose from 6% in 1970s to 22% in 1984. this increase acts as incentive and motivation to farmers, but these farmers while engaging in these agricultural ventures are exposed to a lot of problem like diseases and pest attacks, fire destruct ions, industrial pollution, machinery partition and other problems. To these problems, the farmers need some aids in solving or minimizing them. Finance has been one of themost significant problems in the expansion of agricultural production. This was as a result of the neglect of the agricultural sector quest the oil boom of 1970s, when the oil sector become a major feeling of the Nigerians foreign transposition earning. This contributed to the inadequate funding of the agricultural sector unlike before the boom. Also the asylum of industries in the urban areas during the 1990 1994 National ontogenesis plan to boast industrial enterprise drew the rural populace with clear the farming population to urban cities for search of purity color jobs.A stage has reached, that average Nigerians are now underfed. In the words of or P. N. C. Akimbo in 1990 The average Nigerian consumed on the average, some 20. 23 calories per day and 56. 46 grammes of protein per day compared to the f ood and agricultural organization (FAO)minimum of 21. 91 calaries and 53. 8 grammes of protein. The average Nigerian was and still, is among the worst fed in the world.As a result of these situations the successive Nigerian Governments showed concern over the decline situation of Agricultural production through policies and programmes aimed at revamping the agricultural production in attempt to encourage increase food production The federal official Government in 1993 tried the National Accelerated food production in programme (NAFPP) during the General Yakulu Gowons regime Under the lead of General Obasanjo, the Operation feed the Nation programme (OFN) in 1976 kB Revolution came up under President Shehu Shagari and Directorate of food track and Rural infrastructure under the regime of General Basangida regime. Neither of these measures halted the Agricultural decline or any lasting effect on food production.This is because little or no meaningful attempt has been make to chang e the under developed status of the rural dwellers notwithstanding that these flock constitute about 95 portion of the total population engaged in Agricultural in Nigeria. It has been attributed that inadequate funding of agricultural project and programme has contributed in large measures to the government low production of Agriculture in Nigeria, and the government and other financial institutions forms the major sources of finance for Agriculture though policies and programmes. Then what role and impact has the important hope of Nigeria (CBN) as the depository financial institution at the apex of Nigeria lingoing system, (Bank of last resort, cuss to the government and Banker to other marges) contend to reinforce the government policies or revamp the agricultural sector of the economy.The under developed characteristic of the Nigerian economy has made the profound Bank of Nigeria to be activity involved in the promotion of rapid economic development of other sector esp ecially agriculture through its development roles unlike in developed economics where the role of rally Bank is restricted to development of the financial system. According to Dr Belshaw in his book authorise Agricultural credit in economically under-developed countries he wrote that in respect of agricultural credit, a central Bank has an important part to play by helping to establish, strengthen and promote the extension of commercial banking facilities and agricultural credit institutions. Professor G.Nwankwo also wrote it for instance mistaken to think and bank that only the function of a central Bank is to control or regulate the financial system it was not conoinced nor thought to be an trance function that a central Bank also has to the task of ontogeny the financial system if non existed and of organizing and mobilization of resources for development. To this end, the central Bank of Nigeria embarked on some programmes and policies to curb the under economic development and low trend in agricultural production. These policies include the following i. The provision of credit to trade poster for the purchase of some agricultural produce for export.This has become the sole province of the central Bank of Nigeria since May 1968, when the commercial financial still was abolished by the federal Government. ii. The establishment of the Nigeria Agricultural Bank (NAB) in 1976, this Nigerian Agricultural co-operative societies, improve agricultural production and storage facilities and promote marketing of agricultural products through liberal credits to farmers at softer terms. The bank started with a jacket of 6 million which has increased to 250 million in 1991 with the CBN contributing 40 percent while the Federal Government has 60 percent share. The functions of the banks includes naming in of loans to small and medium scale farmers. iii.The CBM also used other instrument in financing of agriculture, this is through its credit guidelines contai ned in its financial and fiscal policies circulars which required the commercial banks to give preferential treatment to Agriculture. iv. The establishment of Agricultural credit Guarantee scheme fund (ACGSF) in 1977 by both the federal Government and the central Bank of Nigeria. The Act provided snow million subscribed by the federal government, and the CBN at the ration of 60 percent or 60 million to the federal Government, 40 percent or 40 million to CBN. This is to grantee for loan default made by commercial banks to farmers for Agricultural purposes to the time of 75% of the default. The CBN was also name the managing agent of the fund. 2. STATEMENT OF PROBLEMSDespite the various policies and programmes mapped out annually for the economic development of Nigeria with emphasis on Agriculture, the agricultural production level remained very low and recently on the decline. Finance has been traced to be the major handicap to the typic Nigeria farmer, inadequacy of modern farmi ng equipment, inputs, basic infrastructure and storage facilities, marketing and distribution system. Then the central Bank of Nigeria the apex bank has been mandated by the federal Government of Nigeria to find a solution to these problems. Consequently, the central bank of Nigeria through its agencies grant credit for the purpose of agriculture. But was faced with the following problems. Inadequate public enlightenment Mismanagement Technological constraints Poor land tenure system Environmental constraints Above all financial constraints. Identifying financial constraints as the major handicap to increase agricultural production. The federal government increased its spending on agriculture by 12. 7 percent in 1981 as against 6. 5 percent in 1970s. a total of 8 million was allocated to agriculture during the five years National Development plan 1981 85. still not much has been achieved in food production. To this end, the federal Government through the CBN policies and prog rammes aimed at adequate financing to increase agricultural productivity, for a nation that can not feed herself is said to be economically undeveloped. 3. OBJECTIVE OF THE STUDYThe major objective of this study is to determine and measure out the performance of the central Bank of Nigeria and its agencies to agricultural finance and development. This involves i. To find out the central Bank of Nigeria policies in relation to Nigeria Agriculture. ii. To evaluate various measures introduced to boost agricultural production and agricultural financing and how this affected the realization of the agricultural goals and iii. To identify the problems associated with the implementation of these policies and suggest solution so as to improve agricultural production. 4. SIGNIFICANCE OF THE STUDY Unless the cause of a problem is found, any attempt at solving the problem would likely be effort in futility. But when the basic causes of a problem are identified, solution would be easily found. This research work on the impact of central bank of Nigeria policies in relation to Nigeria agriculture would be of immense richness to the policy and credit guideline makers in ascertaining the efficiency of these policies on agriculture in particular and the economy in general. Also from the recommendations and suggestions, the problems and causes of failures in implementation would be taken care of. As the policies involves many financial and other credit institution the research would be of great worth to these institution, for instance, It would help in assessing the performance and cause of default in credit extension under the Agricultural credit Guarantee scheme fund (ACGSF), the Nigerian Agricultural co-operative bank (NACB) Credit and loan system. The research work when completed will be of use to the following -The farmers and Agriculturist -The central bank of Nigeria (Federal Government).-The entire economy -Finally, this work will serve as an addition to the already e xisting literature and references in the area of policies of central Bank of Nigeria agricultural financing, monetary economics and finance in general. 5. LIMITATION OF THE STUDY The major source of some very vital data on the work of course is the central bank of Nigeria but because of its own policies, the major reading areas are not accessible to the public. To this regard, the research has selected the salient roles of the central bank necessary for the research and finically examined and evaluated the effects of these policies in relation to agriculture.It is also very pertinent to state that the scope of this work generally is restricted to the programmes of agricultural financing that are directly under the supervision and control of the central bank of Nigeria. 6. STATEMENT OF HYPOTHESIS The central bank of Nigeria (CBN) through its policies and programmes has made remarkable impact in Agricultural financing in Nigeria. The central bank of Nigeria (CBN) through its policies and programmes has made no impact in Agriculture financing in Nigeria. The Central Bank of Nigeria (CBN) through its polices and programmes has evaluated various measures introduce to boost agricultural production. The Central Bank of Nigeria (CBN) through its policies and programmes has made no remarkable measure to boost agricultural production. 7. DEFINITION OF TERMSIt is necessary here to introduce operational definition of some concept to be usually used in this study for better understanding of the study. These terms are as follows. Development this means the process of sustained increase in both per capital income and total income accompanied by structural variety of the social economic and political environment. Economic growth This refers to the steady process by which the productive capacity of the economy is increased over time to bring about rising levels of national income. Economic Development This can be known as nothing less than The upward endeavour of the entir e social system or it many be interpreted as the attainment of a number of ideas of modernization such as a rise in productivity, social and economic equal section.Modern knowledge, change institutions and attitudes and a traditionally co-ordinate systems of policy measures that can remove the server of undesirable conditions in the social system that have perpetuated a state of under development. Financial Institution These are institutions either secret or public that channels loanable funds from savers to borrowers. Example commercial banks and development banks. Policy This is a cause oaf action pursed by the government to achieve some development is also a source of raw materials for the teaming industries the product for which modern man has virtually become over dependent on. Butterssing these parts.Enikanselu (1985) stated thus agriculture besides providing food for the people contributes positively to capital accumulation for the purpose of financing the industrial secto r. He maintained that the role of Agriculture in the economic development of a nation includes providing an initial stage of development, the purchasing power for the industrialization of the economy by supplying the necessary raw materials for industries. Uka (1986) in his own opinion on the importance of Agriculture to Nigeria economy assert that viands is a basic necessity of life and it is only on a firm basis of food production that virile economy can be founded.Besides, dependent on external sources of food supply has enrol instability consequence because it ties the nations independence to the international policies. Writing on the importance of Agriculture and the preferential treatment given to it by the central bank of Nigeria in policy consider eration and allocation, Egba (1978) Stressed that since 1969 when the first circular was issued to banks, the CBN has consistently given preferential treatment to agriculture which was included in the wide-eyed sector refered t o as production. This preferential treatment covers both the great deal of loans allocated to the sector and the interest rate chargeable on such loans.Agriculture provides the superior avenue for employment, income and food for Nigerian populace. Also the position of agriculture as a source of raw-materials for key industries and a major foreign exchange earner. Thus the government has given such priority to agricultural production because of its realization of the numerous contributions. A highly developed agricultural sector could make to the development of the Nigerian economy Olayade (1986) said the agricultural sector provides employment for about 67% of the active population in the country. It is extravagantly clear therefore that this sector has constituted the back bone of our economy until only recently.