Dr. Debesh Roy, Chairman, InsPIRE
Tuesday 9 April 2024
India's Journey Through the Fourth Industrial Revolution: Growth Prospects and Export Competitiveness
Saturday 22 July 2023
Transforming Indian Agriculture: FPOs as Change Agents
About 86 per cent of operational farm holdings in India are in the small and marginal categories, with farmers practicing subsistence farming, and living in a VUCA (Volatility, Uncertainty, Complexity and Ambiguity) world. Due to fragmentation and disorganisation, farmers face constraints in procuring inputs like seeds, fertilisers and pesticides at reasonable prices, lack bargaining power in the market for realising better value for their produce, and have inadequate access to technology, extension services, market, credit and crop insurance. As a result, majority of small and marginal farm holders are unable to realise optimal value from their farming operations. In order to address these and other problems encountered by these categories of farmers, farmer producer organisations (FPOs)/ farmer producer companies (FPCs)/ collectives have come into existence in the country. the Y.K. Alagh Committee (2000) constituted by Government of India (GoI), recommended the promotion of producer companies that allow the cooperative spirit to co-exist with the operational flexibility of corporates. Over the years, NABARD, SFAC and state agencies have helped form FPOs/ FPCs.
FPOs need to develop as change agents for evolving subsistence farming to farm enterprises, and developing efficient agri-value chains, for transforming the agriculture sector. In 2020, GoI launched a Central Sector Scheme (CCS) for the promotion of 10,000 FPOs within a period of five years, with a total budgetary provision of `6,865 crore. The government will provide financial support of up to `18 lakh per FPO in their first three years. It is expected that from the fourth year onwards, the FPOs will be able to manage without this assistance. Although the government has increased hand-holding and financial support for new FPOs, this may be inadequate, as their working capital needs have not been taken care of. Banks are also reluctant to finance FPOs, as they are unsure of their creditworthiness.
The
issues and challenges faced by FPOs need to be addressed by the government and
all stakeholders in the FPO space, to make them sustainable institutions,
enabling a significant improvement in the income and livelihoods of small and
marginal farm holders. FPOs will require access to cheap credit and much more
for realising their full potential. Enabling member centrality, ownership, good
governance, and business planning capabilities are equally important. There
also needs to be a focus on infusion of technology; well-developed backward and
forward linkages, with focus on export; and improving business orientation,
clarity on compliance needs, and assimilation of market preferences.
FPOs/ FPCs provide end-to-end links between farmers and their markets and allow them to improve their productivity through efficient, cost-effective, and sustainable use of resources. Farmers acquire better capacity for and access to technical know-how on crop planning and management, inputs, credit, post-harvest management, value addition, etc. They will also be able to obtain higher returns for their produce through improved access to markets. This can be achieved through fruitful collaboration with government, financial institutions, CSR foundations, civil society organisations, academia, and research agencies.
There needs to be a policy focus on promoting inclusive agri-value chains, for the benefit of small and marginal farm holders. An effective way to make it possible is through strong and efficient FPOs/FPCs. Linking of FPOs/ FPCs through contract farming arrangements with export-oriented food processing units of food parks created under Pradhan Mantri Krishi Sampada Yojana (PMKSY), for producing processed cereals, fruits, vegetables, fish and marine products, would boost exports of processed food and raise the income of small and marginal landholders and small fish farmers.
It is observed that the larger universe of banking and the rules may not suit the nuanced requirements of FPOs. Therefore, special attention needs to be paid to the aspect of funding arrangement of the collectives in the form of term loan for their investment needs, value chain financing for meeting the credit needs along the FPO value chain, and short-term credit limits for meeting the working capital needs of FPOs/FPCs. The establishment of a social stock exchange by the government may open up the possibility of experimenting with alternative funding opportunities for the FPOs/ FPCs.
The agri-tech start-ups in India have been trying to solve problems of low productivity, sub-optimal efficiency in the supply chain, and lack of access to markets, institutional credit, crop insurance, and quality inputs. The relationship between FPOs and start-ups is symbiotic as most of the challenges faced by FPOs can be solved through partnerships. FPOs truly need to be change agents for transforming Indian agriculture.
Saturday 7 January 2023
Attaining $100 Billion Agriculture and Food Exports: Challenges and Strategies for India
India is among the top ten exporting countries of
agriculture and food products in the world. The country’s agri-exports grew by a robust 20.4% in
2021-22, to touch a record $50.2 billion. The importance of India in the international agri-market
is continuously increasing and the country has developed export competitiveness
in certain specialised products. There has been a rising demand for Indian
Basmati rice, non-Basmati rice, spices, and sugar as evident by their rising
share of the total agricultural export.
The country needs to significantly enhance agriculture
and food exports, while ensuring that agricultural products are globally competitive.
However, global headwinds due to the Russia-Ukraine conflict, disruption in
global supply chain, unprecedented inflation, and monetary tightening by
central banks of the developed countries, have adversely impacted global trade,
and growth prospects across countries, including India.
Unstable agri-trade regime in India, reflected by
knee-jerk reactions by the government to control prices in the domestic market,
by banning exports of major agri-commodities, viz., rice, wheat, sugar, or
onion, has been a major factor affecting agri-exports. Imposition of Minimum
Export Price (MEP) is another tool often used by the government to tame
inflation. Such moves bring relief to domestic consumers, but create
uncertainty among importing countries, and deprive farmers of higher returns
from their produce, which also discourages them to increase the area under
cultivation of the crop in the subsequent season.
India’s Agriculture Export Policy (AEP), 2018, aims at
promoting a stable trade regime, while setting an export target of $60 billion
by 2022 and $100 billion within a few years, thereafter. Considering the strong
agri-export growth during 2021-22, and the urgency of doubling farmers’ income,
a target of $100 billion agri-exports from India could be set for 2026-27.
However, this would be a daunting task, considering the present global economic
situation.
In order to catch up with Brazil and China in
agri-exports, India needs to bring about comprehensive structural reforms in the
agriculture sector, with a focus on agriculture and food exports. The
prerequisite for achieving the agriculture export target of $100 billion should
be a well-calibrated, comprehensive, strategic, and result-oriented agri-export
policy and action plan, along with overall reforms in the agriculture and
allied sector. Agriculture export reforms, free trade agreements (FTAs)/ comprehensive
economic partnership agreements (CEPAs) with major trading partners,
agriculture marketing reforms, developing efficient agri-value chains, and
building agriculture export infrastructure, are some of the major reform
measures that could be expedited.
Primary products constitute about 75 per cent of APEDA
products exported from India, in terms of value (USD). Therefore, the
agriculture export strategy should prioritise the development of
export-oriented value chains in respect of dairy products, processed marine
products, processed fruits and vegetables, cereal preparations, and organic
food. As India moves towards the exports of
semi-processed, processed, and specialised food products, more value addition
will happen in the country leading to more employment creation and the growth
of the food processing sector.
The agriculture export strategy should include the
integration of value-added agriculture produce with global value chains (GVC),
by adopting the best agricultural practices involving productivity gains and
cost competitiveness, while enhancing farmers’ income. Export-oriented
production through the development of clusters, viz., “One District One Product
(ODOP)”, and dedicated supply chains will help to enhance the global image of
Indian products.
In recent years, several Indian agricultural products
have been facing rejection and export bans in the EU, a key export destination
for India’s agricultural exports, due to sanitary and phytosanitary (SPS) and
technical barriers to trade (TBT) measures. To counter rejection by a partner
country in forums like the WTO’s SPS Committee or TBT Committee, there is a
need for data collection and scientific evidence-based reports. Further, it is
important to build the capacity of our small, marginal, and medium farmers and
processors and educate them about the export market requirements. It is, therefore,
eminently important to sensitise and educate farmer producer organisations
(FPOs) and other stakeholders in the agri-export value chains, on ways to address
SPS/TBT-related issues. If domestic standards are aligned to international
standards, there is less likelihood of product rejections, and it is easier to
earn a premium price for certified products such as organic food products.
A key concern for both India and the UK, with respect
to the agro-foods sector would be the removal of non-tariff barriers (NTBs).
For India, for example, removal of NTBs in the form of less stringent Sanitary
and Phytosanitary Requirements with respect to limits of pesticide residues,
while for the UK, removal of NTBs in the form of easier labelling and
registration procedures, customs requirements, etc., would be beneficial.
Therefore, the India-UK negotiations for CEPA need to take note of this issue.
Growing protectionism across major economies is a
serious threat to raising exports. This would require intense diplomatic
efforts with India’s trading partners to finalise trade deals. Efforts to
upgrade Economic Cooperation and Trade Agreement (ECTA) to CEPA with Australia,
and finalise CEPAs with the UK, the EU, the US and Canada, need to gather
momentum.
The strategy for promotion of agri-exports should
include investments in agri-export zones (AEZs), dairy export zones (DEZ), agro-processing
clusters/zones, marketing infrastructure, cold chains, warehouses, roads,
railways, and logistics along the export-oriented agri-value chains, connecting
to ports and airports through public, private, and Public Private Partnership
(PPP) modes.
Investments in R&D, climate smart agriculture, and
technology in the form of IoT, AI, and blockchain, through a well-defined
start-up ecosystem, supporting pre- and post-harvest activities for
agri-exports, also need focused attention for stimulating agri-exports.
Reducing food loss and waste is a solution to reduce
food and nutrition insecurity and Greenhouse Gas (GHG) emissions, without
impinging on activities related to core economic development. Therefore, GoI should
formulate a comprehensive national policy on ‘Achieving SDG 12.3 Targets by
Minimising Food Loss’, to focus not only on minimising food loss but also on
leveraging the potential to increase agro-based exports, resulting in augmented
farm level income.
It has been observed that there is a strong impact of
export financing on agricultural exports. Availability and affordability of
export credit through lesser-explored mechanisms such as factoring, commodity
exchange-facilitated financing, and value chain financing, would be critical
for the achievement of the ambitious target for agricultural exports.
Concerted and coordinated efforts by GoI, state
governments, APEDA, MPEDA, FIEO, TPCI, NDDB, GCMMF, food and agro-processing
industry, RBI, NABARD, EXIM Bank, banks, agri-tech start-ups, FPOs/FPCs, and
other stakeholders in the agri-export sector, would address a whole range of
issues pertaining to the promotion of agriculture and food exports.
Finally, comprehensive reforms in the agriculture
sector could propel India into the top bracket of agricultural exporters in the
world, while attaining $100 billion in exports of agriculture and food products
by 2026-27.
(The contents of this blog have been drawn from the book India’s Agriculture and Food Exports: Opportunities and Challenges, edited by Debesh Roy & Bijetri Roy and published by Bloomsbury India, 2022)
Tuesday 19 July 2022
Transforming Indian Agriculture: Agenda for Reforms
1. Introduction
India’s
target of achieving a $5 trillion economy needs to be supported by a
transformed and reformed agriculture sector. It is, therefore, imperative that
the agriculture sector should support the objective by focusing on transformational
reforms, while targeting an annual agri-GVA growth of 5 percent.
2. Indian Agriculture Sector: Growth Trends
The
average annual growth of agri-GVA during the period 2012-13 to 2020-21[2] stood at 3.2 percent. The
period witnessed sharp dips in the growth in 2012-13 (1.5 percent), 2014-15
(-0.2 percent) and 2015-16 (0.6 percent) (Figure – 1), due to less than normal
monsoon rainfall in these years. On the other hand, good monsoon rains resulted
in high growth rates in agri-GVA during the years 2013-14 (5.6 percent),
2017-17 (6.3 percent), 5.0 percent (2017-18), 4.0 percent (2019-20) and 3.6
percent (2020-21) (Figure-1). However, in spite of India making great strides
in terms of food security and being the leading producer of rice, wheat, pulses, sugarcane and cotton, agriculture in
the country continues to be heavily dependent on monsoon rains.
Source: Data accessed from: (1) Press Note on First Revised Estimates of National Income, Consumption, Savings and Capital Formation 2018-19, MoSPI, Government of India; and (2) Press Note on Provisional Estimates of Annual National Income, 2020-21, 31 May 2021, MoSPI, Government of India.
The country
recorded its highest foodgrain production of 303.3 million tonnes (MT) in 2020-21. However, the CAGR of foodgrain production during the period 2011-12
to 2019-20 was only 2.0 percent, due to low CAGR of rice (1.7 percent), wheat
(1.9 percent), and nutri/ coarse cereals (1.9 percent). Pulses recorded the
highest CAGR of 4.3 percent, due to sharp increase in production in 2016-17, as
the farmers were encouraged to grow pulses, on account of significant increase
in minimum support prices (MSPs).
3. Indian Agriculture: Critical Issues and Challenges
India
is self-sufficient in the production of foodgrains, horticulture crops and milk.
However, Indian agriculture has long been
suffering from structural problems, which need to be addressed urgently. Farmers
in India, truly live in a VUCA world of volatile prices, uncertain rainfall and
income, complex institutional mechanisms, restrictive laws, and policy
ambiguities. Some of the critical issues and challenges confronting Indian
agriculture are presented in the following sub-sections.
3.1 Small Size of Holdings and Low Income
The predominance of small and marginal holdings in India has resulted in inefficiency in cultivation and low average income of farmers. The findings of NABARD All India Rural Financial Inclusion Survey 2016-17 (NAFIS) (NABARD, 2018), reveal that for agricultural source of income, with the average monthly contribution of ₹3,508 (43.1 percent) to the total income of ₹8,136, while cultivation contributed 7 percent (₹566). On the other hand, the share of average monthly income from cultivation in respect of agricultural households with landholdings of greater than 2 ha was 51.6 percent (₹7,572). The findings of NAFIS indicate a positive correlation between the average monthly income and size class of land possessed. Further, states like Punjab (₹23,133), Haryana (₹18,496) and Kerala (₹16,927) have witnessed much higher average income of agricultural households, compared to Uttar Pradesh (₹6,668), Andhra Pradesh (₹6,920), and Jharkhand (₹6,991). Therefore, reducing regional disparities in agricultural income need to be prioritised.
Strategies for promoting sustainable agricultural growth and enhancing farmers’ income, should include a group approach through farmer producer organisations (FPOs), which can improve market access to land, and help spread the risk of farming among a larger number and increase production opportunities by experimenting with higher value, and more risk prone crops with larger payoffs (Agarwal, 2016). Further, a group would be better placed to enter into non-exploitative contract farming arrangements (ibid.).
3.2 Low Agricultural Productivity
India
is the largest producer of pulses and groundnut in the world, and the second largest producer of paddy, wheat
and sugarcane. However, stagnation in yield of major crops has been observed
during the past two decades. The average yield of rice increased from 1,901
kg/ha in 2000-01 to 2,705 kg/ha in 2019-20
(Table-1), at a CAGR of 1.8 percent . The second decade (2010-11 to
2019-20) witnessed a marginally higher CAGR of yield of rice at 1.7 percent
against 1.6 percent in the previous decade (2000-01 to 2009-10). Wheat experienced an increase in average
yield from 2,708 kg/ha in 2000-01 to 3,421 kg/ha in 2019-20, at a CAGR of 1.4
percent. The CAGR of productivity of wheat increased from 0.7 percent during
the decade 2000-01 to 2009-10 to 1.5 percent during the following decade
(2010-11 to 2019-20). Pulses experienced
a CAGR of yield of 1.5 percent in both the decades under review.
Table – 1
Yield of Foodgrains in India
(Kg/ha)
Crops |
2000-01 |
2010-11 |
2011-12 |
2012-13 |
2013-14 |
2014-15 |
2015-16 |
2016-17 |
2017-18 |
2018-19 |
2019-20 (4th AE) |
Rice |
1901 |
2239 |
2393 |
2461 |
2424 |
2390 |
2400 |
2494 |
2576 |
2638 |
2705 |
Wheat |
2708 |
2988 |
3177 |
3117 |
3075 |
2872 |
3034 |
3200 |
3368 |
3533 |
3421 |
Nutri/ Coarse cereals |
1027 |
1531 |
1590 |
1617 |
1677 |
1729 |
1579 |
1750 |
1934 |
1944 |
1976 |
Pulses |
544 |
691 |
699 |
789 |
764 |
744 |
656 |
786 |
853 |
757 |
817 |
Total Foodgrains |
1626 |
1930 |
2078 |
2129 |
2101 |
2070 |
2056 |
2129 |
2235 |
2286 |
2325 |
Source: Handbook of Statistics on the Indian Economy 2019-20, RBI
Table
– 2
Yield
of Commercial Crops in India
(Kg/ha)
Crops |
2000-01 |
2010-11 |
2011-12 |
2012-13 |
2013-14 |
2014-15 |
2015-16 |
2016-17 |
2017-18 |
2018-19 |
2019-20 (4th AE) |
Groundnut |
977 |
1411 |
1323 |
996 |
1750 |
1400 |
1465 |
1398 |
1893 |
1422 |
2065 |
Soybean |
822 |
1327 |
1208 |
1354 |
983 |
950 |
738 |
1177 |
1058 |
1192 |
928.0 |
Total oilseeds |
810 |
1193 |
1133 |
1169 |
1153 |
1037 |
968 |
1195 |
1284 |
1271 |
1236.0 |
Sugarcane |
68577 |
70091 |
71668 |
68254 |
69839 |
69859 |
70720 |
69001 |
80198 |
80105 |
77893 |
Tea |
1682 |
1726 |
1956 |
2027 |
2121 |
2113 |
2176 |
2165 |
2285 |
2109 |
2126 |
Coffee |
959 |
838 |
852 |
846 |
799 |
847 |
876 |
761 |
765 |
767 |
718 |
Cotton |
190 |
499 |
491 |
486 |
532 |
461 |
415 |
512 |
443 |
378 |
451 |
Jute & Mesta |
1867 |
2192 |
2283 |
2281 |
2449 |
2550 |
2421 |
2585 |
2435 |
2508 |
2641 |
Source: Handbook of Statistics on the Indian Economy 2019-20, RBI
3.3 Stagnant Capital Formation in Agriculture
Capital formation in agriculture is of
critical importance for the sustainability of agricultural growth. The percentage share of Gross Capital
Formation (GCF) in agriculture and allied sector in the Gross Value Added (GVA)
of the sector, declined steadily from 18.2 percent in 2011-12 to 14.7 percent
in 2015-16, before rising slowly to 16.4 percent in 2018-19 (Figure-2), which is
too meagre to address the issue of sustainability of Indian agriculture.
Therefore, capital formation through rural infrastructure development assumes
significance. Public sector investment in rural infrastructure would result in
high growth of the agricultural sector, and could also crowd-in private sector
investment.
Source: Based on data accessed from Economic Survey 2020-21, Ministry of Finance, GoI and National Income Statistics 2020, MoSPI, GoI
3.4 Climate Change and Agriculture
Climate
change poses a major and growing threat to food security (FAO, 2016). It would
be a daunting challenge to produce enough food for the increasing population in
the face of decreasing resources and changing climate. The estimated loss in
yields in respect of major crops like rice (-30 per cent), wheat (-23 per cent)
and maize (-31 per cent) during 2050-69 in India, due to climate change is
quite alarming. Further, the net emissions from agriculture in carbon dioxide
equivalent in 2014 in the world was as much as 5,241,761 thousand tonnes. China
(707,640 thousand tonnes), India (626,864 thousand tonnes) and Brazil (441,905
thousand tonnes) account for the major quantum of net emissions from
agriculture (FAO, 2016).
3.5 Market Constraints
A critical problem faced by India’s
agriculture sector is the fragmented and distortions-ridden state of
agricultural markets. One of the major reasons for low income of farmers is
lack of competitive market structure, which is bereft of transparent price
discovery system. Small and marginal farm holders lack the bargaining power to
sell their produce at remunerative prices due to the exploitation by traders (arhatiyas)
in the Agriculture Produce Marketing Committee (APMC) markets. Lack of
aggregation of produce makes it uneconomical for farmers to transport their
produce to the APMC markets for their sale.
4. Transforming Indian Agriculture: Agenda for Reforms
An
agenda for reforms to transform Indian agriculture is presented in the
following sub-sections.
4.1 Doubling Farmers’ Income
GoI
has envisioned the achievement of doubling farmers’ income (DFI) by the year
2024-25. The following seven-point strategy for DFI is mostly under
implementation: (i) irrigation with focus on water-use efficiency, viz. “per
drop more crop” (PDMC) through Pradhan Mantri Krishi Sinchayee Yojana (PMKSY);
(ii) quality seed and soil health, (iii) investments in warehouses and cold
chains; (iv) value addition through food processing; (v) electronic National Agriculture
Market (e-NAM); (vi) increase in the coverage and effective implementation of
Pradhan Mantri Fasal Bima Yojana (PMFBY); and (vii) promotion of ancillary
activities like dairy, poultry, bee-keeping and fisheries. The strategy for
DFI, involving increase in private investment by 6.62 per cent per annum from
the base year 2015-16 at the national level, should also include among others:
(a) promoting higher agricultural growth in less developed regions, including
rainfed areas, with a focus on marginal and small holders; (b) strengthening
livestock related activities and crop diversification to high value produce
like horticulture, in line with market signals; (c) shifting priority focus to
post-production management and the agricultural marketing system; (d) sizeable
increase in institutional credit to farmers; (e) allocation of more resources
by state governments towards minor irrigation; and (f) incentivising private
corporate sector to participate in investments in agriculture (GoI, 2017). In
order to achieve DFI, GoI can use income policy to protect the poor, free up
prices for farmers, and allow private trade to stock and operate freely and
have unhindered exports (Gulati and Hussain, 2017). What is also needed is the
continuance of PM-KISAN, with possibly a higher allocation, along with top-up
by states, on the lines of YSR-Rythu Bharosa-PM-KISAN of Andhra Pradesh.
4.2 Irrigation
and Water-use Efficiency
India
is a water-stressed country, and the declining per capita availability of water
in the country poses a major challenge to the growth of agriculture. Out of the
country’s 4 percent share of global freshwater availability, the agriculture
sector consumes about 78 percent share of water (Sharma, et al., 2018). However,
while only 48.7 per cent of the net sown area in the country is irrigated, the
depletion of groundwater, which accounts for about 60 per cent of the country’s
irrigated area, has adverse impact on irrigation cost and crop productivity. Therefore, implementation of PMKSY and PDMC should create higher
irrigation potential and ensure water-use efficiency.
The
overall irrigation efficiency in India is observed to be low compared to global
standards due to the use of conventional flood irrigation technique, practised
in large parts of the country. In order to improve water-use efficiency of crop
cultivation, the use of precision irrigation technologies needs to gain
momentum. Water stress can be reduced and availability of water can be
increased through cost-based water pricing. There is also a need to make a
paradigm shift from use of input intensive technology to significantly
enhancing input productivity, e.g., the use of water-saving technology like
micro-irrigation, System of Rice Intensification (SRI), direct seeded rice,
zero tillage, etc.
4.3 Tech-driven agriculture
According to NITI Aayog (2018), Artificial Intelligence (AI) will have significant global impact on agricultural productivity at all levels of the value chain. AI and embedded systems in agriculture sector via smart irrigation system can result in the efficient use of water resources. Drip irrigation system can be fully automated using IoT, resulting in significantly higher crop yield due to much better water-use efficiency than traditional drip irrigation system. NITI Aayog and IBM have partnered to develop a crop yield prediction model using AI to provide real time advisory to farmers. Also, Microsoft in collaboration with ICRISAT, has developed an AI Sowing App. The app sends sowing advisories to participating farmers on the optimal date to sow.
According to NASSCOM and Zinnov (2020), agri-tech start-ups are using technology drivers such as AI, machine learning (ML), robotics and satellite communication to serve farmers’ needs. The interface of agriculture with technology steered entrepreneurship is increasing competitiveness, leveraging digitisation and relying on innovation to solve varied challenges in the sector (Kant, 2021). There are 735 agri-tech start-ups in India which are enabling Indian agriculture to become future ready, and there is a need to scale up the agri-tech start-up ecosystem for the benefit of majority of farmers.
4.4 Agriculture Marketing Reforms
GoI’s vision of DFI signified a paradigm shift in agriculture policy from ensuring food security to income security of farmers, by maximising their gains through post-production activities. The enactment of Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 (FPTC Act, 2020), Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 (FAPAFS Act, 2020) and Essential Commodities (Amendment) Act, 2020 (ECA, 2020), signified the ushering in of the long-awaited comprehensive agri-marketing reforms. However, the Acts have since been repealed, in response to the year-long agitation by a section of farmers against the Acts. It is, therefore, imperative for the central and state governments, along with agriculture scientists, economists, farmers, agri-tech companies, corporate sector, and all stakeholders to start a consultative process to facilitate state governments to enact agriculture marketing reform Acts, and for GoI to enact a law facilitating easy inter-state movement of agri-commodities/ produce. Further, in order to develop an efficient nation-wide agri-marketing system, e-NAMs need to be scaled up and made more efficient, and all private markets and accredited warehouses should be linked to e-NAMs.
4.5
Rural Infrastructure and Efficient Agri-Value Chains
Investment in rural infrastructure is a pre-condition to enable the acceleration of agricultural growth, creation of new economic opportunities, and generation of employment. It is, therefore, worth appreciating that the Union Budget 2021-22 has enhanced the allocation under Rural Infrastructure Development Fund (RIDF), administered by NABARD, by a whopping 33.3 percent to `40,000 crore over the allocation in the previous year’s Budget.
Further,
setting up of mega food parks, integrated cold chains, food processing units,
agro-processing clusters, and implementation of Operations Greens Scheme, under
GoI’s comprehensive package of PM Kisan SAMPADA Yojana (PMKSY) , will not only
provide a big boost to the growth of food processing sector in the country but
also ensure higher income to farmers, while creating huge employment
opportunities especially in the rural areas, reducing wastage of agricultural
produce, and enhancing the export of processed foods. The Production Linked
Incentive (PLI) Scheme for the food processing sector is a step in the right
direction.
4.6 Agriculture
Export Reforms
India ranks among the top ten exporters of agricultural products in the world. According to WTO’s World Trade Statistical Review 2021, the country’s share in global agricultural exports increased from 1.1 percent in the year 2000 to 2.2 percent in 2020, valued at $39 billion, In order to catch-up with Brazil ($89 billion) and China ($82 billion), India needs to bring about structural reforms in the agriculture sector, including a stable trade policy regime (Roy, 2021).
India’s
agricultural exports experienced huge fluctuations during the period 2011-12 to
2020-21 (Figure – 3). The ten-year CAGR was -0.6 percent. During the first
five-year period 2011-12 to 2015-16, the CAGR was -3.0 percent. The second
five-year period (2016-17 to 2020-21) witnessed a positive CAGR to 2.4 percent.
CAGR: 2011-12 to 2020-21 = -0.6%; 2011-12 to 2015-16
= -3.0%; 2016-17 to 2020-21 = 2.4%
Source: Author’s calculations
based on data accessed from Economic Survey, Government of India (various
issues) and World Trade Statistical Review 2021, WTO
The
Agriculture Export Policy (AEP), 2018 of GoI, aims at achieving an export target
of $60 billion by 2022 and $100 billion within a few years, thereafter. This is
indeed a humongous task, and achieving the target would involve a paradigm
shift from a “business-as-usual” approach to a well-calibrated, comprehensive,
strategic and result-oriented agri-export
policy and action plan.
4.7 Climate
Mitigation and Adaptation for Sustainable Agriculture
Development
Climate
Smart Agriculture (CSA) works to reconcile the objectives of sustainably
increasing agricultural productivity and incomes, building resilience and
adapting agriculture to climate change, and reducing and removing greenhouse
gas emissions from agriculture (FAO, 2019). Drip irrigation is a CSA technology,
which saves water and energy, while reducing GHG emissions. Expansion in the
use of solar-powered AI-based drip irrigation systems across all states in
India and for major crops, viz. rice, wheat, horticultural crops and sugarcane
can be an integral part of a Water-Energy-Food (WEF) nexus approach to support
water-use efficiency, use of renewable energy and mitigation of GHG emissions,
food security and sustainable agriculture.
4.8
Research and Development and Extension Services
The needs of farmers in terms of information and technology support have become more complex, due to the rapid pace of developments in the agriculture sector. India needs a vibrant, responsive, market oriented and globally competitive agricultural research ecosystem (NITI Aayog, 2017). Budgetary resources for R&D on seeds (HYV and GM), and agri-technology, need to be enhanced significantly. The private sector, too, needs to enhance investment in R&D. Further, there is a need to revitalise agriculture extension services by making them more relevant and useful in order to improve agricultural productivity. Also, efforts need to be made to enhance post-harvest processing and value-added activities at the farm. FPOs/ FPCs could be developed into alternative agencies for providing extension services to farmers.
4.9 Agriculture
Credit
Adequate
and timely availability of bank credit, at affordable rates of interest is
essential to improve agricultural productivity and sustainability. The focus needs be on ensuring increased credit
flows to high-growth and high-value activities, viz. animal
husbandry, dairy, and fisheries, along with horticulture, farm
mechanisation, warehouses and cold chains, to farmers, FPOs and agripreneurs.
It is imperative to increase the share of agriculture term loans in total
agriculture credit disbursed, from the current 40 percent to 60 percent, to
accelerate capital formation in
agriculture.
4.10
Risk Management
The
PMFBY, which aims to provide insurance coverage and financial support to the
farmers in the event of failure of any of the notified crops as a result of
natural calamities, pests and diseases, needs to be redesigned for timely and
adequate support to farmers. Futures
markets provide a market mechanism to balance the imbalance of the supply-demand
pattern of agricultural commodities. Also, the combination of futures and
options can give market participants the benefit of price discovery of futures
and simpler risk management of options. FPOs need to be encouraged to
participate in futures and options trading of NCDEX.
An
enabling environment for agricultural sustainability needs to be created
through massive investment in irrigation, with a focus on water-use efficiency,
enhancement in total factor productivity of crops, tech-driven
agriculture, climate-smart agriculture, creation
of rural infrastructure, development of efficient agri-value chains, agri-marketing
reforms, promotion of agri-exports, enhancing spending on R&D, credit innovations,
and agri-risk management. Also, tenancy reforms need to be carried out by
states. Effective implementation of these transformative
reforms, could lead to sustainability of Indian agriculture, and facilitate the
achievement of doubling farmers’ income by 2024-25, while mitigating agrarian
distress. Reforms would create an ecosystem which promises to enable
farmers to come out of the VUCA world.
References:
Agarwal,
Bina. 2016. “Rethinking Agricultural Production Collectives: The Case for a
Group Approach to Energise Agriculture and Empower Small Farmers” in C.Ramasamy
and K.R.Ashok (Eds.) Vicissitudes of Agriculture in the Fast Growing Indian
Economy: Challenges, Strategies and the Way Forward, Indian Society for
Agricultural Economics, Academic Foundation, New Delhi.
FAO.
2016. State of Food and Agriculture 2016.
FAO. 2019. Climate-smart Agriculture and the Sustainable Development Goals
Government
of India. 2017. Report of the Committee on Doubling Farmers’ Income,
Volume II, Ministry of Agriculture and farmers’ Welfare, New Delhi.
Government
of India. 2021. Economic Survey 2020-21, Vol.2, Ministry of Finance.
Gulati,
Ashok and Siraj Hussain. 2017. “Chasing a Dream: Doubling Farmers’ Income
by2022", Financial Express, August 28, 2017, Mumbai.
Kant, Amitabh. 2021. “Sowing Future Growth: Advantage Agritech for Farm Sector Transformation.” Financial Express, January 15, 2021.
NABARD, 2018. NABARD All India Rural Financial Inclusion Survey 2016-17 (NAFIS)
NASSCOM and Zinnov. 2020. Indian Tech Start-up Ecosystem 2020.
NITI Aayog. 2017.
India: Three Year Action Agenda 2017-18 to 2019-20, NITI Aayog, New Delhi.
Sharma, Bharat R., Ashok Gulati, Gayathri Mohan, Stuti Manchanda, Indro Ray, and Upali Amarasinghe, 2018. Water Productivity Mapping of Major Indian Crops. NABARD & ICRIER
[1]
Based on data accessed from
Press Note on Provisional Estimates of Annual National Income, 2020-21,
National Statistical Office Ministry of Statistics & Programme
Implementation, Government of India, 31
May 2021.
[2]
2020-21 data is as per Second Advance Estimate of GDP, 26 February 2021,
MoSPI, GoI.