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Sowing the seeds of a farm revival
The Hindu Business Line - 14 May 2014

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.

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