Mobilisation of Marketable Surplus: 2 Methods

The following points highlight the top two methods used for the mobilisation of marketable surplus. The methods are: 1. Measures that Increase the Production of Food Grains 2. Reduction in the Consumption of Food Grains by the Agriculturists.

Method # 1. Measures that Increase the Production of Food Grains:

The first set of measures that can be adopted is to increase the overall production in agriculture. This will imply, besides the provision of irrigation facilities and the extension of cultivation to land so far uncultivated, the use of various modern inputs like seeds, fertilizers insecticides etc.,. that can be made available to agriculture.

This would, in turn,, imply various policy measures like provision of easy credit facilities, cheap supply of improved inputs and demonstration and propaganda to popularize the new inputs. Better health care, education and land reforms, too, can be helpful in increasing the production in the agricultural sector.

The other way to increase the output of food grains is to divert the land from other crops to food grains. Food grains can mainly replace either fodder or fibre crops.

Out of these two, it may not be desirable to reduce the area under fibre crops because these serve as the raw materials for the industrial sector and therefore are as important for the industrial sector as food grains. There is a scope for replacing fodder crops by food crops. Mechanisation of agriculture, especially use of tractors etc. will displace bullocks to some extent and this will reduces the need for fodder.

This method obviously will take long time to yield results. It may, however, be noted that mechanisation will help in increasing the marketable surplus in other ways as well. It may help in increasing the agricultural production.

It may also displace some labour, reduce its income and therefore the consumption of the agricultural sector. Whether such a result is good from social and political point of view is, of course, another matter to be considered while taking a final decision about mechanisation. We may also refer here to the views expressed by some economists that green revolution, after a point, will not go further if mechanisation of agriculture does not take place.

Method # 2. Reduction in the Consumption of Food Grains by the Agriculturists:

We have already suggested mechanisation of agriculture as one method to reduce the consumption of the agriculturists. A suitable price policy is very desirable from this point of view. A higher price will generally reduce the consumption of the agriculturists and help in diverting food grains from domestic consumption to the market.

It is also pointed out that in order to ensure that the non-agricultural sector does not suffer because of extremely high price of food grains, the government should also see that there is ceiling on the prices of food grains as well.

It is also suggested that domestic consumption by the agricultural sector can be reduced if a system of procurement levies is imposed on the agriculturists as is done in some of the Eastern European countries. This would compulsorily reduce the domestic consumption of the agriculturists. Whether this can be followed in a country like India or not, is another point to be considered before this method can be put into practice.

It is also suggested that if land revenue is collected in kind, this will help in the reduction of domestic consumption, the food grains so collected can be disposed of in the market by the government agencies. This method may superficially appear to be very simple. However, in practice, its administration will be very difficult. Cost of collection of land revenue will increase enormously.

In the same vein, it has been suggested that loans advanced to the agriculturists may be recovered in kind. This suggestion again will make the recovery of loans more costly.

Changing the terms of trade against agriculture may also increase the marketable surplus. When the farmers have to pay more in terms of agricultural crops for a unit of an industrial product, more of agricultural products are likely to flow into the market.

The basic problem in this case will be how to change the terms of trade against agriculture. One way to do so is to reduce the prices of agricultural crops. This can be done either by increasing the agricultural production or by artificially lowering the prices of agricultural crops.

The latter step would discourage agricultural production. The other method is to raise the prices of non-agricultural products. This is rather an unwise step-especially-when the non-agricultural sector is still in infancy and is depending on the agricultural sector for its market.

Another step that has been suggested to get more food grains for the non-agricultural sector out of what has been already produced is to manipulate the system of lending to the agriculturists. It is suggested, in this connection that the integrated credit scheme as recommended by the Reserve Bank of India will be a useful step.

The Reserve Bank of India had suggested that when loans are advanced to the agriculturists by the cooperative credit societies, the latter should recover the loan out of the sale proceeds of the crops sold through them. Though this method was mainly devised for a smooth recovery of the loans advanced by the cooperative credit societies to the farmers, it would have the incidental advantage of increasing the marketable surplus also.

Monetisation of the rural economy and encouragement of savings have been suggested as other methods to increase the marketable surplus ‘Monetisation will encourage sale of crops in the markets and encouragement of savings will put a check on the domestic consumption of the farmers.

Both will thus help in bringing more crops including food grains to the market. In this connection, some people have suggested that development of the industrial sector and popularization of its products in the rural areas will be quite beneficial.

Direct cash incentives for increasing marketable surplus have been suggested as another step. The incentives can be in the form of bonus on a progressive rate to the farmers selling food grains in the market. This method necessitates a complete record of the sales made by the farmers in the market.

System of monopoly procurement by the government will make this task easier to some extent. Some economists feel that if the bonus is given in the form of concession permits to purchase improved agricultural inputs, it would be still better.

One of the methods of credit control namely changing the margin requirement can also be used for increasing the marketable surplus. A higher margin requirement will encourage more crop being reserved for the market.

From the point of view of marketable surplus, the redistribution of land, though desirable from other angles, cannot be commended. It is felt that redistribution of land will bring about a better distribution of income and increase the overall propensity to consume of the people in the rural areas. Marketable surplus will fall as result of this measure.

So if redistribution of land is to take place, it must be accompanied by other measures which increase the total agricultural production after redistribution. Increase in production will neutralize the adverse effects of redistribution of land on marketable surplus.