Imperatives for sustainable agricultural growth

Agriculture covers all the sub-sectors of crops, fishery, animal husbandry and forestry. In the wake of declining share of contribution of agriculture to GDP (Gross Domestic Product), agriculture sector must play an essential role in food and nutritional security for the populace. Poverty and hunger reduction is greatly dependent on buoyancy in agriculture.
In terms of employment agriculture is the greatest employer yet and is still employing 47 per cent of total labour force in agricultural sector. But agriculture is yet a low-wage, low-productive sector. We need to move labour from agriculture to manufacturing sector to allow them having a better living standard of life. Without wage increase or increase in income livelihood can not be improved; real wages have to be increased higher than the inflation rate.
 PROSPECT OF AGRICULTURE: Now in the wake of liberalisation of the economy, what is the future prospect of agriculture?
Prospect of agriculture in terms of increased value addition is bright because agriculture is getting more commercial and more responsive to market signals. Farmers are price responsive to real price changes and the price responsiveness has also increased over the time. Agricultural commodity markets are integrated in terms of price relationship. Development of transport communication and cell phone penetration make     the commodity markets highly integrated at this juncture of economic transformation.
But there may be supply disruptions for any non-market reasons like hartal/excess rains/extortions in the stages of commodity movement. The good thing is price distortions do not sustain for long as markets are both integrated spatially and temporally in Bangladesh.  
Agricultural product markets are in general purely competitive and within the available infrastructural set-up efficient, in general. There is more or less acceptable level of competition particularly at lower tiers of marketing chains. There is competition at the retailers' level also.   
This created a problem of not having scope of earning handsome profit from agricultural domestic trade and in production activities.
TRENDS EMERGING AS A MARKET RESPONSIVE AGRICULTURE: (i) Crop diversification is taking place towards high value crops, like vegetables, fruits, wheat, maize and orchards.
(ii) Farmers tend to produce more export crops like vegetables.  
(iii) Aquaculture is more preferred than crop production activities which is a more profitable sub-sector.
(iv) Farmers tend to choose advance technologies where embedded in seeds, tools, techniques, production practices. These ultimately promise decrease in production costs. Both land-augmenting and labour-saving technologies are preferred. Agricultural mechanisation is therefore getting a momentum.
(v) Cost-decreasing technologies are panacea for advancing towards modern agriculture and market access both in domestic and international markets. Thus, the commodity markets are really the true arbiter of advancement in agriculture.
So the government has only to see where and why any input or commodity market is failing. Government can only intervene in case of market failure. Government can increase or decrease tax rate, can provide subsidies, can allow export and import but can not control or fix any farm commodity price. Government is virtually helpless to millions of small producers and thousands of traders while they involve in commodity transaction.    
Price volatility or high price fluctuation should be carefully diagnosed whether due to seasonality or supply disruption. Supply disruption for non-market factors like hartal/natural hazards like excess rain, flooding/road obstruction should be handled as deem fit by the government. For any domestic supply shortage, timely importation should be allowed giving comfort to consumers. Similarly, during excess supply, exportation should be allowed to keep the prices stable.
If there is excess production, allowing adequate reserve, if necessary, exportation should be allowed otherwise price would be depressed and price-responsive farmers will divert crop areas to alternative crops. This is also true for our main staples.
Crop area changes each year mainly due to:
(a) Relative price changes in the past years.
(b) Availability of new production technologies.
(c) Climate change impacts may also influence cropping pattern change.
Increase in relative price or increase in total production either or both can help more value addition in agriculture contributing to growth. Even if physical production remains constant but real prices go up, there will be value addition to contribute to GDP growth.
In the financial year 2013-14, terms of trade was in favour of agriculture due to a relatively higher output prices which were unfavourable during preceding two years. The physical production also increased in those years. Agriculture growth rate was higher during the past fiscal year than the preceding two years. Due to lower growth rate in 2012-13, total GDP growth was down to 6.01 per cent while this has been estimated to be 6.12 during 2013-14 with higher growth and value addition in agriculture.
Farmers should get competitive prices for ensuing recovery of cost of production, including both fixed and variable cost, in the long run (simple economic theory). Otherwise, they would have to give up their profession. For ensuing incentive prices, if necessary, there should not be any barrier to export any crop including rice. Profitability is needed to ensure adoption of new or improved technologies.
Public spending should be increased extraordinarily for agriculture researches to make new innovations - for having new improved varieties for Aman and Aus seasons. BR 51, 52 were developed for Aman season; likewise, more flood-tolerant varieties are needed. Winnowing and drying technologies should be made available for expansion of Aus crop which is produced in peak monsoon season. We need more varieties for Boro season like BR 58 (short maturing) and more short maturing varieties, improved varieties, are needed for cattle population also. Stress-tolerant varieties need to be popularised.
To conclude, we need favourable price regimes for agriculture that in turn would help technology adoption, increasing productivity and releasing labour for manufacturing sector. Research is needed to develop new and appropriate technologies. Research capabilities also have to be enhanced. Research should get the highest priority for making breakthrough and maintaining dynamism in agriculture. One-Taka investment in agriculture provides return to equivalent of Taka Ten.    
Export, import, general price level, inflation, tax polices and exchange rates are macro variables but all these have implications for the performance of the agricultural sector. Macroeconomic policies are needed to be carefully crafted so that no macro policy inflicts negative impact on agricultural profitability.
Professor Shamusl Alam is Member, General Economics Division, Bangladesh Planning Commission. The article is adapted from his presentation as a Panelist in a session on 'Agricultural Development' in the First Conference of the Bangladesh Economists' Forum (BEF) held on  June 22, 2014 in Dhaka.