Indian Agriculture: A brief Outlook
- Agriculture accounted for 14% of India’s GDP in 2016-17 and provided employment to more than half a billion people. The share of Agriculture in employment is close to 54% as on 2016-17.
- Indian Agriculture is dominated by the small-scale farming and is characterised by low productivity.
- The average size of land holding in Indian Agriculture is less than 2 hectares.
- The low land holding size means that most of the Indian farmer practices subsistence farming, where they consume the majority of what they produce and sell whatever is left.
- The Indian Agriculture remains the largest employer of the female labour force in India. The share of women labour force out of total women labour force employed in agriculture is close to 65%.
- The Indian agriculture suffers from the twin problem of low productivity and excess workforce employed in it. Due to which the per capita productivity of workforce is very low.
- The low productivity results in depressing the wages in the agriculture sector leading to high level of poverty.
- Agriculture’s importance in India’s Trade is declining, but it still has a share of about 10% in India’s total exports.
- Compare to the high growth in other sectors of the Indian economy, the performance of the Indian agriculture remains poor due to slow and erratic growth rates. The average growth rate of India’s agriculture over the past decades remains low at less than 2%.
- At such a low growth rate of the agriculture sector, it is impossible to uplift millions of rural poor out of poverty.
- The agriculture sector in India has undergone very limited liberalisation. The state still plays a predominant role in the Indian agriculture.
- Concerns about food security and poverty with respect to the second largest population in the world lead the government to remain strongly involved in regulating India’s agriculture through fixing prices for key agricultural products at the farm and consumer levels, high border protection, bans on or support for exports, and massive subsidies for key inputs such as fertilisers, water and electricity.
- The Indian agriculture remains one of highly subsidised sector of the economy.
- Total foodgrains production in India is estimated to be 272 million tonnes in the year 2016-17.
- The estimated production of key cereals like wheat, rice and pulses will be 96.6 million tonnes, 106.7 million tonnes and 22.1 million tonnes respectively in the year 2016-17.
- The other major crops grown in India are oilseeds with an estimated production of 33.6 million tonnes, sugarcane at 309 million tonnes, cotton at 32.5 million bales.
- As per the land use statistics 2013-14, the total geographical area of the country is 328.7 million hectares, of which 141.4 million hectares is the reported net sown area and 200.9 million hectares is the gross cropped area with a cropping intensity of 142 %.
- The net sown area works out to be 43% of the total geographical area. The net irrigated area is 68.2 million hectares.
- The sharp deceleration in the growth of the agricultural sector against the backdrop of an impressive growth of the larger economy is widening disparities between the incomes of workers in non-agricultural and agricultural activities.
Role of Agriculture in Indian Economy
- A growing agriculture sector is a prerequisite for the development of India.
- The growing surplus form the agriculture sector is needed to feed the millions of people who live below poverty line and can hardly sustain themselves.
- The agriculture sector has to maintain a very high growth rate of above 4% in order to sustain the pressure of rising population.
- A growing agriculture sector controls inflation because increased food supplies and agricultural raw materials keep the prices down and stable.
- The agriculture sector has an important backward linkage with the industrial sector. The rural consumers are an important source of demand for the industrial goods.
Issues with India Agriculture:
Why the crisis?
- The main reason for farm crises is the rising pressure of population on farming and land assets
- Government data show the average farm size in India is small, at 1.15 hectare
- The small and marginal land holdings (less than 2 hectares) account for 72% of land holdings
- This predominance of small operational holdings is a major limitation to reaping the benefits of economies of scale
- Crop production is always at risk because of pests, diseases, shortage of inputs like seeds and irrigation, which could result in low productivity and declining yield
- The lower than the remunerative price in the absence of marketing infrastructure and profiteering by middlemen adds to the financial distress of farmers
- The predominance of informal sources of credit, mainly through moneylenders, and lack of capital for short term and long term loans have resulted in the absence of stable incomes and profits
- Uncertain policies and regulations such as those of the Agricultural Produce Market Committee (APMC Act), besides low irrigation coverage, drought, flooding and unseasonal rains, are some other factors that hit farmers hard
Let’s discuss some major issues with agriculture
- Productivity/ Yield- low productivity esp. in pulses is the central challenge facing Indian agriculture.
Consider the case of wheat and rice-
As already stated, Indian agriculture has become cereal centric and input intensive and these two crops are grown on most fertile tracts with irrigation facilities and corner bulk of agri support available to all crops across country. Yet, if we compare average yield of wheat and rice in India with China, we find that
- avg yields of wheat is 39% below China and in case of rice 46% below that of China’s.
- In wheat save for Punjab and Haryana, most states have yield lower than that of B’desh
- In paddy even Punjab trails behind yield level of China while other states trail behind even B’desh.
Now if we compare productivity in pulses of which India is topmost producer, consumer as well as importer, yield gaps are even more stark.
- On an avg, countries like Brazil, Nigeria, and Myanmar have higher yields
- even the key pulse producing state of M.P. has 60% yield of China’s
Take home message from above analysis-
- Yield gap varies among states in India and we could make rapid gains in productivity through convergence within India
- For instance, in pulses, if all states were to attain even Bihar’s level of productivity, pulses production would increase by an estimated 41% on aggregate and we would be self sufficient in pulses
Why is pulses productivity so low (land related reasons)
- Most of the land dedicated to growing pulses in each state is unirrigated
- National output of pulses comes predominantly from un-irrigated land
Issue of Intensive use of water (problem of Indian agriculture becoming highly input intensive)
- Although water is one of India’s most scarce natural resources, We use 2 to 4 times more water to produce a unit of major food crop than does China and Brazil.
- We have invested in flood irrigation method (canal and tube wells) which is highly inefficient way of using water
- Also despite being water scarce, we are virtually exporting water by exporting water guzzling crops such as paddy, sugarcane, cotton also meat (not exactly crop)
- India now exports about 1 per cent of total available water every year (demand of 13m people)
Reason for inefficient use of water-subsidies on power and water for agriculture.
Result– water tables are declining at a rate of 0.3 meters per year
Solution- shift to sprinkler and drip irrigation and rainwater harvesting.
- Leverage MGNREGA labour to build rainwater harvesting structures.
- accord “infrastructure lending” status to these new technologies (infra lending status decreases cost of borrowing to invest in these technologies)
Govt. response– Convergence of various schemes under PM krishi Sinchai Yojana which will help in convergence of investments in irrigation, from water source to distribution and end-use i.e. at individual farm level.
What is drip irrigation?
- A type of micro irrigation method in which perforated pipes are placed either above or slightly below ground and drip water on the roots and stems of plants, directing water more precisely to crops that need it
- It reduces consumption of fertiliser (through fertigation ) and water lost to evaporation, and higher yields than traditional flood irrigation <Fertigation is the process of introducing fertiliser directly into the crop’s irrigation system.>
Problem in adoption of drip irrigation- high initial cost of purchase and the skill required for maintenance.
Solution- the increase in yields and reduction in costs of power and fertiliser use can help farmers recover the fixed cost quickly. Hence, provision for credit to farmers to adopt this technology.
But there are teething troubles in agri finance as mentioned in last year’s economic survey box-
Problem of agri finance-
- 40% of agri finance still by informal sector
- 26% by usurious moneylenders
- Share of long-term finance i.e. capital loans in overall credit going down over the years (70% in 1991 to 40% in 2011)
- Share of small loans decreasing (less than 2lakh rupee loan from 78% of total in 2000 to 48 % in 2011 and 10 lakh and above from 8% in 2000 to 28%in 2011) March rush (jan to march quarter) in loan disbursal i.e. loan in lean season to comply with PSL (Priority sector Lending)
- More and more agri loans going to urban and metropolitan areas
Implication of all this is that lending to agriculture is grossly misallocated # largely to ;arge farmers # not being used for capital formation # worst of all may not even be going into agriculture.
Issue of Minimum support Price (MSP) and Procurement being cereal centric and regionally biased
- while the government announces MSP for 23 crops, effective MSP-linked procurement occurs mainly for wheat, rice and cotton and indirectly for sugarcane via sugar mills
- Even in these crops majority of procurement is from Punjab, Haryana, Western UP.
- Poor farmers aof Rajasthan and Jharkhand are not even aware of any such MSP policy
Result– Regional disparity, excess stock of wheat and pulses and import and volatility in prices of pulses.
Solution-reorienting agriculture price policies, such that MSPs are matched by public procurement efforts towards crops that better reflect the country’s natural resource scarcities i.e. provide higher MSP for those crops which we import such as pulses and oil seeds and at the same time procure thise crops so that MSP policy is effective on the ground.
One way to not only taking economic but social and environmental costs and benefit into account while deciding MSP.
- Eg. Costs of producing cereals in Punjab and Haryana; declining water table, soil quality degradation, post harvest burning of stalks causing pollution, rich farmers getting benefits
- v/s benefits from pulses; nitrogen fixation, lower import dependency etc.
For cereals a system of Price Deficiency payment can be instituted
Under this system if the price in an APMC mandi fell below the MSP then the farmer would be entitled to a maximum of, say, 50% of the difference between the MSP and the market price. This subsidy could be paid to the farmer via Direct Benefits Transfer (DBT)
For eg. If say MSP for wheat is 100 rs per kg. In present scenario, govt would procure it at 100 no matter if market demand is very low and prices some 10 rs per kg. Farmer has no incentive to switch to other crops to reflect market demand.
But in price deficiency payment, he will receive only 10 + (1/2*100-10) = 10 + 45 = 55 rs. It protects farmers while signalling him to produce crops reflecting market demand.
Issue of Agri Research and extension
Agricultural extension is the application of scientific research and new knowledge to agricultural practices through farmer education. Basically educating farmers about the latest technologies being developed in the labs i.e. lab to land linkage.
While Indian Council of Agricultural Research (ICAR) with agriculture research universities played a key role in the Green revolution. Of late agriculture research has been plagued by severe under investment and neglect.
Three key weaknesses
- Agri education is weak in states due to (i) resource crunch, (ii) difficulty in attracting talented faculty, (iii) limited linkages and collaborations with international counterparts, (iv) weakening of the lab-to-land connect; and, (v) lack of innovation
- Low investment in public agricultural research in India. As share of agriculture GDP, it is even less than that of Bangladesh and Indonesia
- Majority (63.5 per cent) of scientists have low to very low level of productivity
- There is need of instituting performance indicators in universities.
- Improve investment as a proportion of agri GDP
- securing participation from the private sector
- instituting a system in which the winner is offered a proportionately large enough award for innovating desirable agricultural traits (such as improving pules productivity considerably) but the intellectual property rights of the innovation are transferred to the government
- Leverage mobile phones to provide timely information to farmers
- Leverage the potential of drones (UAVs) to provide crucial information on crop health, irrigation problems, soil variation and even pest and fungal infestations that are not apparent at eye level to farmers
- Improve regulatory process to address concerns against GM crops while adapting high yielding technologies
Agriculture market segmentation
Last year’s economic survey mentions, effectively, India has not one, not 29 but thousands of agricultural markets.
Why are so many markets bad?
Whole capitalistic economy is dependent on trade, competition and specialisation and so many markets prevent that thus reduces overall welfare because it prevents gains through competition, efficient resource allocation, specialization in sub sectors (everyone has to produce everything as they can’t trade with others resulting in jack of all trades master of none) and fewer intermediaries.
- If there were one common market, prices would be same from Kashmir to Kanyakumari and Dwarka to Puri (don’t add transport and storage cost please).
- In USA which has a common market, maximum price variation is in case of peanuts with highest prices being 1.75 times that of lowest prices. Remarkably it is lower than India’s minimum price variation crop Tur dal.
- It creates particular problem for perishables such as fruits, vegetables, onions, hence sudden and sharp spike in prices in one area while being sold at throwaway prices in some other area
- Pass GST bill that is done
- Create common national agriculture market that is implemented through e-NAM
- Create better physical infrastructure
- Improved price dissemination campaign
- Remove laws that force farmers to sell to local monopolies i.e APMC act
Steps initiated by the Government
The Government has rolled out a number of new initiatives like Soil Health Card Scheme, Neem Coated Urea, Paramparagat Krishi Vikas Yojana (PKVY), Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), National Agriculture Market (e-NAM), Pradhan Mantri Fasal Bima Yojana (PMFBY) and Interest Subvention Scheme. These schemes are for the benefit of all farmers.
(i) Soil Health Card Scheme:
Launched in 2015, the scheme has been introduced to assist State Governments to issue Soil Health Cards to all farmers in the country. The Soil Health Cards provide information to farmers on nutrient status of their soil alongwith recommendation on appropriate dosage of nutrients to be applied for improving soil health and its fertility.
(ii) Neem Coated Urea (NCU):
Scheme being promoted to regulate use of urea, enhance availability of nitrogen to the crop and reduce cost of fertilizer application. NCU slows down the release of fertilizer and makes it available to the crop in an effective manner. The entire quantity of domestically manufactured and imported urea is now neem coated. The reports from field are positive. The expected saving is 10% of urea consumption, thereby resulting in reduced cost of cultivation and improved soil health management.
(iii) Paramparagat Krishi Vikas Yojana (PKVY):
Paramparagat Krishi Vikas Yojana (PKVY) is being implemented with a view to promote organic farming in the country. This will improve soil health and organic matter content and increase net income of the farmer so as to realise premium prices. Under this scheme, an area of 5 lakh acre is targeted to be covered though 10,000 clusters of 50 acre each, from the year 2015-16 to 2017-18.
(iv) Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) :
Launched on 1st July, 2015 with the motto of ‘Har Khet Ko Paani’, the Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) is being implemented to expand cultivated area with assured irrigation, reduce wastage of water and improve water use efficiency. PMKSY not only focuses on creating sources for assured irrigation, but also creating protective irrigation by harnessing rain water at micro level through ‘Jal Sanchay’ and ‘Jal Sinchan’. Micro irrigation is also incentivized through subsidy to ensure ‘Per drop-More crop’.
(v) National Agriculture Market (e-NAM):
The National Agriculture Market scheme (e-NAM) envisages initiation of e-marketing platform at national level and to support creation of infrastructure to enable e-marketing in 585 regulated markets across the country by March 2018. This innovative market process is revolutionizing agri markets by ensuring better price discovery, bringing in transparency and competition to enable farmers to get improved remuneration for their produce moving towards ‘One Nation One Market’.
vi) Pradhan Mantri Fasal Bima Yojana (PMFBY)/ Restructured Weather Based Crop Insurance Scheme (RWBCIS):
Pradhan Mantri Fasal Bima Yojana (PMFBY) & Restructured Weather Based Crop Insurance Scheme (RWBCIS) were launched from Kharif 2016 to provide comprehensive crop insurance coverage from pre-sowing to post harvest losses against non-preventable natural risks.
These schemes are only risk mitigation tools available to farmers at extremely low premium rates payable by farmers at 2% for Kharif crops, 1.5% for Rabi Crop and 5% for annual commercial/horticultural crops. The balance of actuarial premium is shared by the Central and State Governments on 50 : 50 basis.
The schemes are voluntary for States and available in areas and crops that are notified by the State Governments. Further, the schemes are compulsory for loanee farmers and voluntary for non-loanee farmers.
(vii) Interest Subvention Scheme (ISS):
The Government provides interest subvention of 3% on short-term crop loans up to Rs.3.00 lakh. Presently, loan is available to farmers at an interest rate of 7% per annum, which gets reduced to 4% on prompt repayment.
In order to discourage distress sale by farmers and to encourage them to store their produce in warehouses against negotiable warehouse receipts, the benefit of interest subvention will be available to small and marginal farmers having Kisan Credit Card for a further period of upto six months post harvest on the same rate as available to crop loan.
Agriculture is a State subject and the State Governments are primarily responsible for the growth and development of agriculture sector in their respective States. The Government supplements the efforts of States through appropriate policy measures and budgetary support. Presently the approach of the Government of India has shifted from production centric to income centric platform in the agriculture sector and the above schemes are being implemented for making farming viable.
Steps to be taken:
1. Enterprise diversification: One effective way to reduce income variability on the farm is diversify the enterprise by combining different production processes. Diversification can be included the different crops, combination of crops and live stock, different end points in the same production processes or different variations in the same crops.
2. Guaranteed Agricultural Prices: This measure involves enactment of legislation giving the farmer more or less precise guarantee of the price level or the minimum price he may expect some time ahead. In the U.S.A. for example, legislation provides a system of guaranteed price for a wide range of farm products such as maize, cotton, wheat, rice,
tobacco, groundnuts, wool, honey, milk and butter
3. Smart irrigation systems such as drip, sprinklers and efficient water management
should be made a priority and allocated across the country where needed and
incentives must be provided for adoption of such techniques.
4. Data driven supply-chain management: India must start using data to continuously
improve the efficiency of its agricultural supply chains. New technologies such as
sensors, GPS and satellite imaging can help collect meaningful data to make India’s
agriculture system more resilient. This enables different sections of the supply chain to
monitor environmental and other conditions. It can be used to adapt how crops are
produced, stored and distributed to reduce waste.
5. Evidence based research: Agricultural research will be vital in increasing yields but also in increasing resilience to all the problems that could come with climate change –
including extreme heat and precipitation, pests and crop disease. Research will be
especially important for crops such as pulses and soybean, which are crucial crops and
highly vulnerable to weather and climate change.
Doubling farmer income by 2022
Ashok Dalwai committee on doubling farmers’ incomes
- The solutions(to low farmer incomes) can be categorized into four broad areas:
(ii) access to markets,
(iii) increase in productivity and
(iv) diversification towards high-yield crops and non-farm activities
- Various studies reveal that at any time, 5-10% of the arable land is left fallow because the adverse possession laws discourage leasing
- Even when they are leased out, it is usually an oral lease that does not give the lessee legal protection, preventing him from accessing formal credit and discouraging investment in the farm
- Solution: The Union government has framed the model agricultural land lease law, 2016 and the draft model contract farming law, 2018
- This will help to mitigate these problems by allowing absentee landowners to lease out land without fear of losing title
- Contract farming may help farmers: The sponsoring companies can shield them from their post-harvest anxiety about prices
- As farmers can benefit from pooled purchases of inputs at affordable prices and access to machinery and knowledge provided by the sponsoring company
ACCESS TO MARKETS
- Agricultural produce market committees (APMCs) have perpetuated monopolistic intermediaries
- Given the resistance to the model APMC law of 2003, the Union government has introduced a model agricultural produce and livestock marketing (APLM) law, 2017
- The new law is intended to replace the existing APMC Act
- It allow a single market within a state, freeing farmers to trade at private wholesale markets, allowing them to sell directly to bulk buyers, and promoting trading on the electronic national agriculture market (eNAM)
PRODUCTIVITY OF CROPS IN INDIA
- Productivity of crops in India is low compared to global standards
- The per-hectare productivity for all crops in irrigated regions is Rs56, 510, compared to Rs35,352 for rain-fed areas
- For marginal farmers, raising productivity is likely the single most important factor if incomes of this group are to be doubled
- This requires public investment in irrigation, seeds, fertilizers and other technology
- However, successive governments have preferred to give subsidies rather than invest in rural infrastructure
- Diversification is crucial if farmers’ incomes have to increase
- This is because the average productivity of high-value crops, like vegetables and fruits, is more than Rs1.4 lakh per hectare, compared to Rs40,000 for staple crops
Inter-Ministerial committee for “Doubling the income of Farmers”
- The Government has constituted an Inter-Ministerial Committee under the Chairmanship of Chief Executive Officer, National Rainfed Area Authority, Department of Agriculture, Cooperation and Farmers Welfare.
- It aims to examine issues relating to the doubling of farmers’ income and recommend a strategy to achieve doubling of farmers’ income in real terms by the year 2022.
Building strategy for doubling of farmers’ income by 2022
- The Government has set a target of doubling of farmers’ income by the year 2022.
- In order to realise net positive returns for the farmer, schemes as follows, are being promoted and implemented in a major way through the States/UTs viz:-
- Soil Health Card (SHC) scheme;
- Neem Coated Urea (NCU);
- Pradhan Mantri Krishi Sinchayee Yojana (PMKSY);
- Paramparagat Krishi Vikas Yojana (PKVY);
- National Agriculture Market scheme (e-NAM);
- Pradhan Mantri Fasal Bima Yojana (PMFBY);
- National Food Security Mission (NFSM);
- Mission for Integrated Development of Horticulture (MIDH);
- National Mission on Oilseeds & Oilpalm (NMOOP);
- National Mission for Sustainable Agriculture (NMSA);
- National Mission on Agricultural Extension & Technology (NMAET) and
- Rashtriya Krishi Vikas Yojana (RKVY)
- In addition, schemes relating to tree plantation (Har Medh Par Ped), Bee Keeping, Dairy and Fisheries are also implemented.
- All these schemes are implemented to enhance production and productivity of agriculture and thereby enhance income of farmers.
Minimum Support Price (MSP)
- MSP is notified for both Kharif & Rabi crops based on the recommendations of the Commission on Agriculture Costs & Prices (CACP).
- The Commission collects & analyses data on the cost of cultivation and recommends MSP.
- Giving a major boost for the farmers’ income, the Government has increased the Minimum Support Prices (MSPs) of all kharif crops for 2018-19 Season.
- This decision of the Government is a historic one as it redeems the promise of the pre-determined principle of fixing the MSPs at a level of at least 150 per cent of the cost of production announced by the Union Budget for 2018-19.
Farmer’s income is yet to be surveyed
- National Sample Survey Office (NSSO) has not conducted any survey during the last one year for collecting data on the present income of country’s farmers and animal rearers residing in various parts of the country.
- However, NSSO conducted a Situation Assessment Survey (SAS) of Agricultural households during its 70th round (January 2013- December 2013) in the rural areas of the country with reference to the agricultural year July 2012- June 2013.
- The survey collected the details of income generated by the agricultural households during the agricultural year from July 2012-June 2013 from different economic activities.
Loan waiver is not the solution
- Since Independence, one of the primary objectives of India’s agricultural policy has been to improve farmers’ access to institutional credit and reduce their dependence on informal credit
- As informal sources of credit are mostly usurious, the government has improved the flow of adequate credit through the nationalization of commercial banks, and the establishment of Regional Rural Banks and the National Bank for Agriculture and Rural Development
- It has also launched various farm credit programmes over the years such as the Kisan Credit Card scheme in 1998, the Agricultural Debt Waiver and Debt Relief Scheme in 2008, the Interest Subvention Scheme in 2010-11, and the Pradhan Mantri Jan-Dhan Yojana in 2014
- The result is that the share of institutional credit to agricultural gross domestic product has increased from 10% in 1999-2000 to nearly 41% in 2015-16
Farm waiver scheme may slow down this pace
- While the flow of institutional farm credit has gone up, the rolling out of the farm waiver scheme in recent months may slow down its pace and pose a challenge to increasing agricultural growth
- The Uttar Pradesh government has promised a ₹0.36 lakh crore loan waiver covering 87 lakh farmers, whereas the Maharashtra government has announced it’s writing off ₹0.34 lakh crore covering more than 89 lakh farmers
- The demand for a loan waiver is escalating in Punjab, Karnataka, and other States
- This clamor is only poised to increase as the 2019 general election comes closer
International studies on farm loans and waivers
- At the global level, studies indicate that access to formal credit contributes to an increase in agricultural productivity and household income
- Such links have not been well documented in India, where emotional perceptions dominate the political decision quite often
- A recent study by the International Food Policy Research Institute reveals that at the national level, 48% of agricultural households do not avail a loan from any source
- Among the borrowing households, 36% take credit from informal sources, especially from moneylenders who charge exorbitant rates of interest in the 25%-70% range per annum
Advantages of formal credit
- The study using the 2012-13 National Sample Survey-Situation Assessment Survey (schedule 33) finds that compared to non-institutional borrowers, institutional borrowers earn a much higher return from farming (17%)
- The net return from farming of formal borrowers is estimated at ₹43,740/ha, which is significantly greater than that of informal sector borrowers at ₹33,734/ha
- Access to institutional credit is associated with higher per capita monthly consumption expenditures
- Access to formal institutional credit also tends to enhance farmers’ risk-bearing ability and may induce them to take up risky ventures and investments that could yield higher incomes
Need for formal credit
- A negative relationship between the size of farm and per capita consumption expenditure (a proxy for income) further underscores the importance of formal credit in assisting marginal and poor farm households in reducing poverty
- Statistics show that nearly 82% of all indebted farm households (384 lakh) possess less than two hectares of land compared to other landholders numbering 84 lakh households
- Those residing in the less developed States are more vulnerable and hence remain debt-ridden
Intended beneficiaries remain excluded from farm loan waivers
- Problem: A major proportion of farmers remain outside the ambit of a policy of a subsidized rate of interest, and, for that matter, of loan waiver schemes announced by respective State governments
- This sop provides relief to the relatively better off and lesser-in-number medium and large farmers without having much impact on their income and consumption
- Solution: This anomaly can be rectified only if the credit market is expanded to include agricultural laborers, marginal and small landholders
- It is, therefore, important to revisit the credit policy with a focus on the outreach of banks and financial inclusion
What more needs to be done?
- The government along with the farmers’ lobby should desist from clamoring for loan waivers as it provides instant temporary relief from debt but largely fails to contribute to farmers’ welfare in the long run
- This is because farmers’ loan requirement is for non-agricultural purposes as well, and often goes up at the time of calamity when the state offers minimal help
- If governments are seriously willing to compensate farmers, they must directsincere efforts to protect them from incessant natural disasters and price volatility through crop insurance and better marketing systems
- It should be understood that writing off loans would not only put pressure on already constrained fiscal resources but also bring in the challenge of identifying eligible beneficiaries and distributing the amount
Report of the Committee on Doubling of Farmers’ Income
- The report of the Committee on Doubling of Farmers’ Income, Ministry of Agriculture and Farmers Welfare, has suggested accelerating investments in agriculture research and technology, irrigation and rural energy, with a concerted focus in the less developed eastern and rain-fed States for faster increase in crop productivity and rural poverty reduction
Suresh Prabhu’s comments on expanding country’s
- He has said that increase in agri-exports will not only increase the country’s export basket, but also augment farmers’ incomes and ameliorate farm distress
Importance of his statement
- His objective is laudable and achievable, provided there is a paradigm shift in policy-making from being obsessively consumer-oriented to according greater priority to farmers’ interests
Comparison of exports and imports
- Before elaborating Suresh Prabhu’s statement, Observe the trends(given in figure below) in agri-trade, both exports and imports, in the period when the UPA was in office (2004-05 to 2013-14) with that of the three-years of the current regime (2013-14 to 2016-17)
Important points from the observation given in figure
- It is interesting to observe that during UPA’s tenure in office, agri-trade surplus surged seven fold, from $3.6 billion in 2004-05 to $25.4 billion in 2013-14
- But then fell dramatically by two-thirds after the NDA assumed office, touching $8.2 billion by 2016-17
- The falling agri-trade surplus was the result of falling exports and rising imports
- Agri-exports, after peaking at $42.9 billion in 2013-14 fell to $33.7 billion in 2016-17, while imports kept rising — from $17.5 billion in 2013-14 to $25.5 billion by 2016-17
What do these trends mean for policy?
- If India has to promote agri-exports, the country’s policymakers must build global value-chains for some important agri-commodities in which the country has a comparative advantage
- Estimates show that India is export competitive in almost 70 per cent of agricultural commodities, non-tradable in about 10-15 per cent commodities
- And import competitive in the remaining 15-20 % commodities
- The commodities to focus on in order to stimulate agri-export: On the exports front, India is relatively competitive in cereals, especially rice and wheat and maize, and, at times, oilseeds, especially groundnuts and oil meals
- The country can also be competitive in groundnut and mustard oil, provided there is an open and stable export policy
- India has also been the world’s second largest exporter of cotton
- The country has a great potential to export fish and seafood, bovine meat, and fruits, nuts and vegetables
- Infrastructure requirement: This would require infrastructure and institutional support — connecting export houses directly to farmer producer organisations (FPOs), sidestepping the APMC-regulated mandis, removing stocking limits and trading restrictions
- India needs to adopt an open, stable and reliable export policy
- Abrupt export bans and high minimum export prices to restrict exports, must give way to a policy that does not put any fetters on exports
- On the imports front, India loses out most in the edible oils sector, especially palmand soybean oil
- Palm oil is used to adulterate several other oils for the domestic market
- Similarly, among pulses, primarily yellow pea is used as an adulterant in besan (chickpea flour)
- The import policy must, therefore, be designed such that the landed price of palm oil and yellow pea never goes much below the domestic prices of their nearest rivals, say, soybean oil and chickpea, respectively
- Liberalisation of factor markets, especially land-lease markets, would also help in building more efficient and reliable export value-chains
- Long land-lease arrangements can facilitate private investments in building export-oriented global value-chains, generating rural non-farm employment and enhancing farmers’ incomes
The way forward
- It is time for the commerce and industry minister to steer a “farm-to-foreign” strategy, improve agri-trade surpluses by promoting agri-exports
- And most importantly create more jobs and bring prosperity to rural areas