‘Growth in agriculture is not remunerative to Indian farmers’
15th Sep, 2020
Farmers are not earning proportionately to their production or matching agricultural growth. As such, a farmer’s share in consumers’ expenditure on food items is very low; sometimes, it is less than 66 per cent and as low as 20 per cent in case of fruits and vegetables. There are two key facets of the farmers’ crisis – falling income and indebtedness.
- When output increases well beyond the market demand at a price remunerative to producers, market prices decline.
- And in the absence of an effective price support policy, farmers are faced with a loss in income, depending on how much the price decline is.
- The ‘farm distress’ in recent years has been partly on account of this situation, as the loss of income is beyond the ability, particularly of small farmers, to absorb.
- In recent times, agriculture made headlines for all the wrong reasons:
- Farmers quitting cultivation
- the sector turning into a perennial loss-making enterprise
- the country’s official policy to downsize the dependence on agriculture to reduce overall economic hardship among the poorest of the population.
- Agriculture’s fast-declining economic importance reached such an extent that economists suggested India had already turned into a non-agrarian economy and the more people quit farming, the better the fortune of remaining farmers would be.
- But two developments in the first half of September seem to be forcing us to revise these perceptions of Indian farming and farmers.
- First, when India recorded 23.9 per cent contraction in the gross domestic product (GDP) in the first quarter (April-June, 2020), agriculture emerged as the unbelievable winner, growing at 3.4 per cent. This growth in the agriculture sector was based on the rabi or winter crop, that was anyway a bumper one.
- Second, the kharif or the monsoon crop is already an exceptional one in terms of acreage. It has broken a four-year record, with 109.5 million hecatres (ha) under sowing.
- The crops that are sown in the rainy season are called kharif crops (also known as the summer or monsoon crop) in India.
- Kharif crops are usually sown with the beginning of the first rains in July, during the south-west monsoon season.
- Rice, maize, bajra, ragi, soybean, groundnut, cotton are all Kharif crops.
- The crops that are sown in the winter season (November to April) are called Rabi crops. (also known as the “winter crop”) in India.
- The Rabi means, when the crop is harvested. Some of the important rabi crops are wheat, barley, peas, gram and mustard.
- Now, the tough question: how much will farmers earn out of this?
- As per all the indications, Indian farmers are going to suffer one of their worst losses, proportionate to their investment and excitement.
Crop output and income of farmers
- Usually, crop output value is used as a proxy for farmers’ income. But in recent years, the sector has witnessed no co-relation between crop output and the income of farmers.
- For instance, take the situation in 2016-17. This was the year when India had a record acreage that was surpassed only this kharif season. Crop value output in that year grew at 5.9 per cent, the fastest in recent times.
- But according to the National Account Statistics released recently, 2016-17 didn’t register any real growth in farmers’ income.
Wholesale Price Index (WPI)
- The Wholesale Price Index (WPI) for agriculture indicates the price at which farmers sell their produce.
- Thus, it is an indication of how much they could earn. The higher it is, the more is the income for farmers.
- But in the first quarter, WPI for food items was 2.1 per cent. It was seven per cent in the first quarter of last year.
- This means farmers didn’t get a good return from their bumper rabi crops. Similarly, they didn’t receive any good returns for the kharif season.
Why the returns are not good even after bumper harvest?
- The harvest would be bumper but the government is already distributing foodgrains from its reserve as part of the novel coronavirus disease (COVID-19) relief package, free and cheaper as well.
- It already has an overflowing stock.
- These would immediately lead to a market glut for the farmers, reducing prices for their produce.
- On the other hand, there might not be a huge demand for foodgrains since the loss in income caused by the pandemic has reduced purchasing power generally.
- This would lead to a fall in food prices. Ultimately, farmers are not earning proportionately to their production or matching agricultural growth.
Recent Government Schemes for Agricultural Reforms
- Financial assistance: To support farmers in effectively undertaking the post-harvest rabi produce and preparatory work for kharif crops, Rs 30,000 crore additional emergency working capital fund through NABARD and Rs 2 lakh crore of concessional credit has been provided.
- Allocation of Rs 1 lakh crore for Agri Infrastructure Fund will strengthen cold chain and post-harvest management infrastructure in the vicinity of their farm gates for farmers.
- The allocation of Rs 20,000 crore for fishermen under Pradhan Mantri Matsya Sampada Yojana (PMMSY) will provide significant impetus to production and exports of marine, inland fisheries and aquaculture and further strengthen infrastructure for fishing harbours, cold chain and markets.
- The announcement on setting up of Animal Husbandry Infrastructure Development Fund of Rs 15,000 crore will tremendously support private investments in dairy processing, establishment of plants for export of niche products, strengthen value addition and cattle feed infrastructure.
- Amendment to Essential Commodities Act: With the aim to enable better price realisation for farmers to attract private investments and make the agriculture sector competitive, amendment of the Essential Commodities Act and deregulation of agriculture food items, including cereals, edible oils, oilseeds, pulses, onions and potato, have been announced.
- Extension of Operation Green to TOTAL: Another step towards a better price realisation for farmers has been the extension of Operation Green from Tomato, Onion and Potatoes (TOP) to all fruits and vegetables (TOTAL) in a pilot project for six months. Also, this will reduce wastages and promote affordability of products by consumers.
- In addition, during the last few years, a plethora of schemes and initiatives have been announced by the government. A few of the major schemes are:
- soil health card scheme
- launch of a pan-India electronic trading platform under the National Agriculture Market (NAM)
- Pradhan Mantri Fasal Bima Yojana
- Pradhan Mantri Krishi Sinchai Yojana (PMKSY)
- dedicated online interface e-Krishi Samvad
- favourable taxation treatment to Farmer Producers Organisations (FPQs)
- Micro-Irrigation Fund (MIF)
Doubling farmers’ income
- The Government shared the vision of doubling farmers’ income in 2016.
- A time frame of six years (2016-17 to 2022-23) was delineated as the period for implementation of this reform measure to transform the vision into reality.
- The roadmap for doubling farmers' income include-
- increase in productivity of crops
- increase in production of livestock
- improvement in efficiency of input use
- increase in crop intensity
- diversification towards high value crops
- improved price realisation by farmers
- shift to non-farm jobs
- Agriculture Export Policy, 2018: In a major breakthrough, the Government approved the Agriculture Export Policy, 2018 with an objective to double farmers’ income by 2022.
Why Agriculture matters?
- The role of the agriculture sector remains critical to the Indian economy as a large proportion of the population still depends on agriculture directly or indirectly.
- The sector is a supplier of food, fodder and raw materials for a vast segment of industry.
- Agriculture sector in India is still the primary source of livelihood of millions. More than 40 per cent of the total workforce in the country still depends on agriculture for their livelihood.
- India is globally acknowledged as the leading producer of several agriculture and allied products.
- Globally, India is well known as the leading producer of milk, banana, mango, guava, papaya, ginger, okra, wheat, rice, fruits, vegetables, tea, sugarcane, cashew nut, cereals, coconut, lettuce, chicory, cardamon, pepper, among others with availability of diverse agro-climatic zones.
- India supports around 18 per cent of the world’s population with about 2.4 per cent of the world’s land and 4 per cent water resources.
Is raising MSP the ‘only’ solution?
- Raising the minimum support price (MSP), price deficiency payments or income support schemes can only be a partial solution to the problem of providing remunerative returns to farmers.
- A sustainable solution is market reforms to enable better price discovery combined with long-term trade policies favourable to exports.
- The creation of a competitive, stable and unified national market is needed for farmers to get better prices.
What’s adding to the challenges?
- In recent years, agricultural markets have witnessed only limited reforms. They are characterised by-
- inefficient physical operations
- excessive crowding of intermediaries
- fragmented market chains
- Due to this, farmers are deprived of a fair share of the price paid by final consumers. States have also not shown any urgency in reforming agricultural markets.
- For better price for farmers, agriculture has to go beyond farming and develop a value chain comprising farming, wholesaling, warehousing, logistics, processing and retailing.
What needs to be done?
- Focus on ease of doing farm business: Availability of sound ease of doing business is critical for the growth of the agriculture sector. There is a need to strengthen the environment for providing one stop information source on various policy developments, incentives offered, agriculture supporting resources and infrastructure facilities across the country.
- Strong government support: Farmers must be assured that the government will extend necessary help to enable them to continue farming in a profitable way.
- Price stabilisation fund: A price stabilisation fund should be established and proactive measures taken to save farmers from economic collapse.
- Focus on crop insurance: Crop insurance and prompt compensation are important for sustainable agriculture. The government needs to promote a credit-cum-insurance policy, which will insulate farmers from losses due to factors beyond their control.
- Crop-livestock integration: Crop-livestock integration has always helped in ensuring both income and nutrition security.
- The National Commission on Farmers recommended a major non-farm initiative, on the model of the rural township programme of China.
- This would involve agriculture-based enterprises such as mushroom cultivation, use of bio-pesticides and bio-fertilisers, apiculture, inland and coastal aquaculture, and the biological software essential for sustainable agriculture.
- Biomass utilisation: The State needs to adopt more biomass utilisation through bioparks such as the rice bio-park established by the Government of India in Myanmar.
Agriculture is dying, not as in the production of food but as a desirable profession. The clearest indicator of the problems of agriculture as a profession is how there are actually shortfalls of labour in some areas, with larger farms relying on imported farm labourers, drawn not just from the neighbouring states but from the far ends of the country (especially the north-east) and even Nepal.
In the present difficult scenario amid the COVID-19 pandemic, the agriculture sector is the low hanging fruit. At this juncture, the government have an opportunity to boost more and more growth of agriculture with a lot of efforts and technology support. This will also lead to growth of the manufacturing sector and spur the overall economic growth trajectory of the country.