India’s agriculture can be re-energised if the government has the will. Here’s how
Very few sectors are as important, yet as beleaguered as agriculture in India. Engaging more than 50 per cent of the country’s workforce, it offers livelihoods to 75 per cent of the population living below the poverty line.
It consumes 80 per cent of the nation’s fresh water resources, a quarter of the total electricity and more than 70 per cent of central government subsidies.
However, it accounts for just about 14 per cent of GDP. Woefully therefore, the farmer’s per capita income is less than one-fifth of the rest of the country’s average.
A four-pronged policy agenda in agriculture has the potential to achieve the much desired ‘inclusive and sustainable’ growth of Indian economy.
Arguably, there has been significant progress in making Indian agriculture resilient to recurrent droughts. Nonetheless, it remains a stark reality that the vagaries of nature can potentially cripple the sector at any time. In addition, dwindling natural resources like groundwater can have disastrous consequences.
Therefore, any solution will have to weather-proof production, and replenish and conserve life-giving natural resources, using the right technologies.
The entire technology spectrum — from better seeds to precision-farming practices, from micro-irrigation to watershed development, from renewable energy to power-saving farm equipment — will have to be fully harnessed.
Over the years, among other policy initiatives, liberalisation of imports of improved varieties and breeding lines has revitalised the availability of high quality seeds. The Indian seed market, estimated at over $1 billion, has grown at double the pace of the global seed market.
However, there is a long way to go in developing and deploying seeds that will address extreme weather variations and poor soil conditions, besides serious biotic stresses.
A policy framework that encourages investment in research, and streamlines regulatory processes for accelerated introduction of new technologies will enable sustainable intensification of Indian agriculture.
NextGen in agriculture
India’s young demographic profile is a great source of strength. Unfortunately, a future in the agricultural sector does not seem to evoke enthusiasm among the youth. Income from farming is not only unattractive but also not commensurate with the risks and drudgery associated with the farm sector. This has led to farmers moving away from farms to non-farm livelihoods in villages, besides migration to urban areas.
The next horizon in agricultural progress cannot be conquered without harnessing the vitality of the youth. This will require a policy impetus that encourages two vital components: one that enables greater mechanisation of farm operations to mitigate drudgery and enhance efficiency; and the other that enables larger value creation through farming that blends traditional knowledge with new technologies.
Rising disposable incomes and growing urbanisation has brought about a dimensional change in the pattern of consumer demand. The share of cereals is reducing in the diet, in favour of vegetables, fruits, milk, and meat.
Besides more variety, today’s consumer demands superior quality, enhanced safety, and added convenience while shopping or using products. This dictates a fundamental transformation.
Producing what the consumer demands is an entirely different ball-game from consuming whatever is produced by the farmer. It is a re-orientation from production-driven supply chains to demand-driven value chains, and will entail huge investments in creating appropriate infrastructure in post-harvest, logistics, processing, packaging, retailing, and information systems.
Corporate involvement through vibrant agri-businesses and food-processing can considerably enhance value for farmers by linking them to the value-seeking markets.
However, a variety of policy constraints deter any sizeable investment by the corporates today. Foremost is the non-implementation of the ‘Model APMC Act’ by many states. In addition, the ‘Essential Commodities Act’ imposes stock limits, and curbs movements from time to time, further affecting the viability of agri-businesses. ‘Forward Contracts (Regulation) Act’ also requires reform.
Currently, critical risk management tools, such as Options, are not available. Farmers can realise better prices without undue risk, by buying Options, either directly or through aggregators.
This gives them a right to transact at a future price and not just an obligation, as is the case when only the Futures are available. Trade and marketing policies in agriculture will need a significant overhaul, if the farmers have to benefit from the huge consumption dividend offered by the country.
Targeting social subsidies
Over the years, subsidies in the farm sector have certainly played an important role in aiding resource-poor small farmers. However, subsidies can be significantly market-distorting. There is also a concern that systemic leakages significantly dilute the quantum of subsidies that finally reach the intended beneficiaries.
Direct transfers of subsidies are perceived to be a more effective alternative. Policies need to sharply target the subsidies to ensure social security but in a way that does not distort markets. In the current global and national economic context, market forces are key to unleashing the true potential of the agricultural sector.
While past investments in rural areas have enhanced the quality of hard infrastructure, such as roads, telecom and irrigation, we need to invest in the complementary ‘soft infrastructure’ now.
It is important to create the equivalents of ITIs in the farm sector to train rural youth and enable better implementation of best practices. Investments are also needed in soil health and other natural resource management systems, as also in the emerging agri-services.
The ITC e-Choupal experience in empowering millions of farmers lends confidence that a synergistic and integrated rural programme can significantly raise incomes and secure a better quality of life in rural India. Given the right policy impetus and effective public-private-people partnerships, there is enough reason to believe that the giant agriculture sector can be re-energised to offer a new promise for tomorrow’s India.