Until the unveiling of LPG reforms(Liberalisation, Privatisation, and Globalisation) in 1990-91 the growth rates of agriculture and non-agricultural sectors were in tandem and correlated. But after the unveiling of LPG reforms, the non-agricultural sectors have shown the good growth statistics, accelerating from less than 6% to 8% for most of the period since then. However, due to the absence of market reforms in the agricultural sector, the growth has been stagnated at pre LPG levels. Various land and market reforms are needed to fuel and accelerate the growth in the agricultural sector both in productivity and in economics(farmer's income).
Thanks to the green revolution for making India self-sufficient in food production, but the aim and targets of green revolution were to increase the collective production of the country(/state), the focus was not on the upliftment of individual farmer's economic status. In the 22 years from 1993-94 to 2015-16 the farmers' income doubled with an average growth of 3.3% per year, this is the nominal growth rate which means the effect of inflation has not been taken into consideration. So if we take the real growth calculations with the inflation effect, the above calculation of doubling income will go wrong. To achieve the goal of real income and doubling of farmers income, we need to move from productivity centric approach to farmer-centric approach.
Thanks to the green revolution for making India self-sufficient in food production, but the aim and targets of green revolution were to increase the collective production of the country(/state), the focus was not on the upliftment of individual farmer's economic status. In the 22 years from 1993-94 to 2015-16 the farmers' income doubled with an average growth of 3.3% per year, this is the nominal growth rate which means the effect of inflation has not been taken into consideration. So if we take the real growth calculations with the inflation effect, the above calculation of doubling income will go wrong. To achieve the goal of real income and doubling of farmers income, we need to move from productivity centric approach to farmer-centric approach.
The government has set the target of doubling the real income of farmers in seven years from 2015-16 to 2022-23. As a first step towards the farmer-centric approach, the government has renamed the Ministry of Agriculture as the Ministry of Agriculture and Farmer Welfare in 2015.
How can we achieve this target of doubling farmer's income? Do we need to correct and improve some issues within agriculture? Or do we need to adjust some issues that are outside agriculture? Actually, we need both.
Some issues within the agriculture that are needed to be addressed are:
- In India except for wheat, the productivity of all other crops is below the world's average. And also there are huge variations among the states depending on the available irrigation facilities. Adoption of technology and sustainable irrigation facilities will help increase the per farm productivity.
- There are two crop seasons in India - Kharif, and Rabi, which makes it possible to cultivate two crops per year. But the statistics point out that only 39% of the land is used for the second crop. This implies that there's a huge scope of increasing the productivity by utilizing the 60% of land for the second crop.
- Diversion towards the high-value crops, especially the horticultural crops will fuel the farmer's incomes.
Some issues outside the agriculture that are needed to be addressed are:
- More than 50% of the labour force in India are employed in agriculture and allied activities which contributes only 15% to the Nation's GDP. That means a small income is being distributed to a large workforce leaving most of them unsatisfied with less disposable incomes. This also means that the productivity of agriculture labourer is not fully utilized as compared to their peers in the non-agricultural sector. Diverting this excess workforce to more productive activities will increase the farmer's incomes and disposable cash to invest in new technologies.
- Another major problem in Indian agriculture is its landholding patterns. Although India has enough cultivable land, the large population dependent on it leads to economically unfeasible cultivable land per person(farmer). The small farmers will always be at disadvantage of the scale of production, low bargaining power, low margins and hence always reluctant to adapt to new technologies and innovative methods.
- Every year we see farmers from all corners of the country protesting for MSP. This is usually due to the bumper produce. For example, if 25 out of 100 farmers in an area produce cotton in a year and earn good margins on it, in the following year the number of farmers producing cotton may go up to 60 or 70 which in turn puts a strain on the demand-supply formula and hence prices fall. When the prices fall to lower levels that even getting back the investment will be difficult, the demand grows for MSP and protests follow. Crop colonies and FPOs guided by experts can solve this issue.
Various initiatives are being taken to address these problems like forming FPOs, Crop Colonies, Contract farming, opening market opportunities, increased market access, building a chain of cold storages and processing units, liberalized land leasing and marketing laws etc.,
Let's have a look at what some of the above initiatives mean:
FPO (Farmer Producer Organisation) is a legal entity formed by primary producers (farmers). This gives the small farmer a voice and a fair price for their produce. An FPO can be a producer company, a cooperative society or any other legal entity managed "by the producers for the producers". Small Farmers Agribusiness Consortium(SFAC) and NABARD are providing support for FPOs.
A Crop Colony is basically bringing together a group of farmers in an area under the guidance of experts and produce the crops as per the local demand in a scientific way to reduce wastage and prevent the heartbreaks due to price falls. Crop Colonies are being successfully implemented around Hyderabad with an aim to make the city self-sufficient for horticultural requirements.
Contract farming is a transaction between the seller and buyer without routing through the mandis(Market yards). Allowing FDI in the food retail sector will boost this type of farming. ITC and several other Indian conglomerates are actively involved in this type of Contract farming. India has a huge success story in this type of arrangement among the milk producers and the dairy companies in the name of "White Revolution", a similar system is long awaited to be implemented to all the agricultural commodities.
eNAM is Electronic Nation Agricultural Market. This is aimed at opening up the market opportunities to farmers. However, the state governments have to amend their APMC laws to facilitate the free movement of agricultural commodities. Market yards should be facilitated with standard testing equipment to maintain the quality of the products being listed on the portal. It was launched in April 2016 and it still has a long way to go before it truly revolutionizes the agricultural market, as of now 16 states, 2 UTs, and more than 45 lakh farmers are associated with this portal.
Centre has published the draft model law ‘Agriculture Produce and Livestock marketing(Promotion & Facilitation) Act 2017'. The act proposes to have a single license and single point of levy of market fee at the State level and then gradually move towards a single license and single point of levy of market fee at the national level. The idea is to remove disincentives for farmers and traders to trade across the country. The success of the act lies in the state governments as the subject is under the state list.
Land leasing is another major problem which concerns the farmers and the economy in a big way. As we discussed earlier that small land holding is a disadvantage to the profitable farming, some farmers rent the lands from others to produce and earn more. However, some states have stringent laws on leasing farmland. These laws come as a legacy from early post-independence days when tenants were harassed by the landowners and have to be protected. Now the conditions have changed and the new laws facilitating easy leasing must be enacted. Present laws benefit the landowners than the tenants who face difficulties in getting access to loans, insurance and other such benefits from the government. The central government has published Model Agricultural Land Leasing Act 2016 to address this issue. The success of the act also lies in the hands' state governments as the subject is under the state list.
SAMPADA - "Scheme for agro-marine processing and development of agro-processing " clusters, aimed at supplementing agriculture, modernize processing (of marine and agri-produce) and decrease agri-waste. It is an umbrella scheme incorporating ongoing schemes of the government like Mega Food Parks, Integrated Cold Chain and Value Addition Infrastructure, Food Safety and Quality Assurance Infrastructure, etc. and also new schemes like Infrastructure for Agro-processing Clusters, Creation of Backward and Forward Linkages, Creation of Food Processing & Preservation Capacities.
We have almost all the laws in place and many initiatives in force, what we need is the effective and continuous implementation of such initiatives to make the agriculture remunerative by 2022-23.