Allocation with Aimless Approach for Agro Business

by July 8, 2019 0 comments

Agro Business

The agriculture sector received the biggest allocation but without the right kind of reforms, policy interventions and focussed approach, India cannot become a $5 trillion economy

The Union Budget 2019-20, which made a strong pitch to transform India into a $5 trillion economy by 2025, provided a precursor to the future of ‘New India’. However, the Government will have to clearly outline and delineate how it plans to catapult the economy to the $5 trillion mark in the next six years. The  move is well-intentioned, but often, the way to hell is paved with good intentions. This is especially true in the present context when many of the past initiatives such as ‘Start-up India’, ‘Make in India’ and the much-hyped ‘Swachh Bharat’ mission have failed to leave a mark. Today, India stands at a crucial juncture where its evolution into a global economy largely depends on how efficiently it tackles the menace of rising unemployment, agrarian distress and burgeoning debt burden.

On the agricultural front, the budgetary focus on creating 10,000 new Farm Producer Organisations (FPOs) to improve economies of scale over the next five years is praiseworthy. It will help create institutional structure to aggregate the farmers and also help them with the necessary funds. But in order to provide a holistic outlook to FPOs, the Government will need to create an eco-system wherein farmers can seamlessly collaborate with private entities to ensure higher realisation from sales. In addition, the decision to set up 80 Livelihood Business Incubators (LBIs) and 20 Technology Business Incubators (TBIs) to produce 75,000 skilled entrepreneurs in agro-rural industries will improve the farmer’s life and boost income in the long-term.

Yet another area that the Budget focussed on was the adoption of Zero Budget Natural Farming (ZBNF). This is a practice where farmers adopt traditional practices of farming, leading to a decline in the usage of chemicals and pesticides, promoting soil health and other environmental benefits. Many believe that this will help improve land productivity, besides contributing to doubling farmer’s income. However, the essential question that needs to be answered is: Will this model be economically viable? Because farm crisis has already reached a saturation point and despite having bumper crops, farmers’ lives have not improved substantially.

According to the Periodic Labour Force Survey (PLFS), around 38 per cent of India’s households were self-employed in agriculture sector during 2017-18. How then will the adoption of ZBNF help improve the farmer’s life in a country where nearly 55-60 per cent of the population still relies on agriculture and allied activities for livelihood?

India’s farm sector grew at a slower pace of 2.9 per cent in 2018-19 as lower prices impacted farm incomes despite higher output. Besides, droughts and natural calamities across several Indian States in the past few years have fuelled agrarian distress. One of the reasons for crisis in the agriculture sector is a rise in input costs of seeds, fertilisers, diesel and electricity, which largely resulted due to the decontrolling of input prices and the imposition of the Goods and Services Tax.

Despite going through a major crisis, the Budget fell short of providing any relief or policy direction to the struggling farm sector. This sector plays a key role in boosting the rural economy and encouraging people to spend more. If this situation is left unaddressed, it will have serious ramifications for the economy. The goal of a $5 trillion economy by 2025, too, will remain on paper only. As far as the introduction of new schemes is concerned, the Budget announced the Pradhan Mantri Matsya Sampada Yojana, apparently aimed at plugging critical gaps and strengthening of value chain in the fisheries sector. Another important announcement was made for the traditional industries around bamboo, honey and textiles. 

From 2014 and 2019, the suffering of the average farmer came a full circle. Droughts in 2014 and 2015 made way for bountiful harvests in the following years, leading to a collapse in farm gate prices. As a result, numerous protests and marches, demanding remunerative prices, followed suit. High-profile loan wavers by various State Governments were well-timed with elections around the corner but when the polls were over, nobody really cared about the farmers.

What can be done to improve farmer’s life?

A holistic action plan needs to be put in place to give a leg up to the struggling farm industry. In addition to the allocations in the Budget, a policy direction, technological interventions and uninterrupted access to markets without the existence of middlemen is the need of the hour.

Focus on smart irrigation:

There is a dire need for efficient irrigation systems in farming, considering rising problems of water scarcity and groundwater depletion.

In India, hardly 50 per cent of the agriculture is irrigated and the rest is dependent on erratic monsoons for irrigation. Most Indian States, including the coastal ones, are extremely vulnerable to climate change due to poor irrigation facilities and contamination of water bodies. Farmers must be encouraged to use smart irrigation systems such as sprinklers or drip water wires  and even efficient water management.

Policy direction and budgetary focus:

Along with policy direction, allocation of funds is also important to ensure that the farmers have enough to live a decent life. Most times it is observed that despite bumper crops, they fail to sell their produce at existing market prices. If addressed, this will go a long way in addressing a majority of the grievances. On this front, the Budget did not disappoint as this sector saw an increase of 75 per cent in budgetary allocation over interim budget. Against the Budget 2018-19 (revised) estimates of `86,602 crore for agriculture and allied activities, Sitharaman’s Budget 2019-20 proposed to invest `1,51,518 crore in this sector.

Reduce post-harvest loss:

Post-harvest loss of major agricultural produce is estimated at $13 billion. About 16 per cent of the fruits and vegetables, valued at $6 billion were lost in 2015. Only 2.2 per cent of the fruits and vegetables, which are perishable agricultural produces, are sorted and packed for consumption in India, which has high chances of wastage as it gets sent abroad.

However, in comparison, the US with 65 per cent and China with 23 per cent are far ahead of India when it comes to processing and storing the crops. This also reflects the priority of successive Governments in addressing the likely food shortages and preparing for a sustainable future.

Due to various economic challenges, farmers are not in a position to transport their centralised large-scale processing or preservation. This results in a lot of wastage. Budgetary provisions must also address the acute cold storage shortages in India. Cold storages in adequate numbers can help farmers preserve their produce and sell them when the market prices are best.

Farmer-centric crop insurance:

Changes in climate cause a lot of uncertainty for the farm sector. In southern parts, monsoon is a major cause of worry as crops get damaged due to rain. To compensate for the uncertainty caused by climate change, the need is for crop insurance schemes that can protect the farmers from bad yields. Changes must be made to ensure that small farmers are protected by low premium and long-term insurance cover, instead of being designed as at present, it seems to be purely for the profit of insurance companies.

In conclusion, India has set an ambitious target of transforming itself into a $5 trillion economy by 2025. This may seem unachievable but with the right kind of reforms, policy interventions and focussed approach in key sectors like agriculture, it may become a global economic power and provide its people with a better standard of living.

(The writer is a communications professional and a graduate in Economics)

Writer: Nithin Augustine

Courtesy: The Pioneer

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