Agriculture sector in India is still the primary source of livelihood of millions and around 47% of the total workforce in the country depends on agriculture for their livelihood. Thus, the sector has a significant role to play in food security, reducing poverty and sustaining the growth of India. India’s agro-economic zone is favourable for most of the major varieties of crops, such as rice, wheat, cotton, maize, oilseeds, oilseeds, among others, which makes India a self-sufficient nation in terms of food. The sector has recorded an average growth rate of 3.7% over the years FY2016-FY2019, while on the other hand, the share of agriculture sector in Gross Domestic Product (GDP) has remained stagnant over many years, with the average share of around 17.2% (during FY2016 to FY2019).
At this juncture, the government has very rightly focused on agriculture sector in the Union Budget 2019-20 and increased the allocation of agriculture sector with a whopping 75% hike to Rs 1.5 lakh crores. Further, the government’s decision to promote and encourage ‘zero budget farming’, also called ‘going back to the roots’, is highly inspiring. Zero budget farming means natural farming without using any credit and without the monetary purchase of inputs. Zero budget farming helps in reducing the cost of cultivation, enhance soil fertility, prevent environmental damage and all this without the use of money. Zero budget farming has already been implemented and tested in a few states and according to the government, this model is needed to be replicated in other states also, followed by whole country. This will, at a great extent, help reduce the problem of agriculture distress, as the farmers does not have to take expensive credit to buy the inputs and other raw material from the market. Zero budget farming would also create the scenario of self-reliance among the farmers, going forward.
Further, during last few years, plethora of schemes and initiatives have been announced by the central government, with the aim of development of agriculture sector and doubling farmers’ income by 2022-23. Few of the major schemes are Soil Health Card Scheme, National Agriculture Market (e-NAM), Pradhan Mantri Fasal Bima Yojana, Pradhan Mantri Krishi Sinchai Yojana (PMKSY), Micro Irrigation Fund (MIF), schemes for livestock, fishermen, among others.
However, farmers in India still face many challenges that hinder their growth and development and build headwind in the way of becoming internationally competitive. One such challenge/issue is the landless farmers engaged in farming. Although a significant share of population in India is indulged in farming, however, much of which consist of landless farmers. Lands are generally borrowed by the farmers in India to carry out farming practice, which makes them not eligible for the compensation provided by the government in case of natural calamity. This makes farmers left with nothing and they have to start from the scratch.
Agriculture sector is characterized by volatility in weather and climatic conditions. In the recent past, growth rates of agriculture have been fluctuating mainly due to the deficiency in rainfall, since more than 50% of agriculture in India is rainfall dependent. Thereby a risk lingers on production, prices and policy. To deal with these risks it becomes essential to provide financial safety nets for farmers to overcome climatic vulnerabilities.
Another issue faced by the farmers in India is of high debt burden, along with lack of capability of its repayment. This situation arises out of various factors such as sudden fall in the prices of agriculture produce, monsoon failure, high debt burdens, high cost of production, crop failure, family issues, among others. This critical situation of farmers sometimes converts into suicides. To tackle this issue, many State Government in the last few years have announced farm loan waivers, however, working on the root cause of the problem is what is needed.
Bank credit to agriculture sector has increased over the years, however, significant percentage of farmers still take loans from unorganized sector, such as like money lenders, relatives and input suppliers, among others. The farmers shift to unorganised sector for credit due to lengthy process for sanction of loans by formal institutions, demand for collateral security, and short term of loan. Further, the credit provided by the unorganised sector is highly exploitive in nature as the interest rate charged are very high and time period of repayment is short.
It has to be recognized that awareness and coverage of crop insurance is grossly inadequate in India. There is insufficient awareness on the coverage of crops, rate of crop insurance and procedures. Currently, only a small fraction of farmers or agricultural households get coverage against their crops. There are several reasons for low crop insurance penetration. The most prominent reason is the lack of awareness among farmers about crop insurance, lack of knowledge about the availability of the facility for the harvested crop and limited reach of crop insurance to selective geographical areas.
Given the life-cycle and shelf life of crops, the absence of warehouses and agro-processing units, and lack of market insurance, farmers are forced to destroy their crops. Indian farmers incur huge amount of loss per year in post-harvest losses. The main causes of this loss are the poor storage and transportation facilities. Further, farmers’ ability to monetise their produce is hugely affected by the lack of logistics connectivity. Inadequate infrastructure and logistics connectivity hampers the reach of produce to the markets on time.
Besides these, currently, another problem faced by agriculture sector is the low productivity. The high proportion of agriculture dependent population results in the low levels of income for farmers, which thereby reduces the productivity in the sector.
Further, the subsidies on electricity and fertilisers must be removed as that are now hurting agricultural productivity. Free electricity is helping create a water crisis, thereby resulting into uncompetitive cropping patterns. Transferring subsidy directly into the bank account of the farmers would prove to be beneficial in this scenario.
Going ahead, there is an urgent need to introduce agricultural marketing reforms to increase the market reach of farmers, along with opening up existing Mandi system to Pan India Market. Further, there is a requirement to provide adequate and efficient warehousing support within easy reach of villages, particularly for marginal farmers. This would enable them to store their produce at minimal prices, and use receipt of storage for loans, or later, release the grains to market when price rises.
Further, few measures such as educating farmers to adopt mechanized farming, minimising the wastages to less than 10% from the current level of 30 to 35%, increasing public investments in agriculture sector, modernizing agriculture along with technological reforms, shifting the policy focus from food grains to superior foods, setting up ‘agro food processing clusters’ and promoting food processing exports must give a major thrust in the coming times to spur economic growth trajectory of the county to the next level.
To increase the efficiency and productivity in agriculture sector, there is a need to increase the awareness among farmers regarding ‘what to sow and at what time to sow’. Further, through reforms, government must ensure that adequate credit is available to small and marginal farmers to adopt modern farm techniques and awareness should be created regarding state of the art farming techniques to increase the productivity.
The reforms in the agriculture sector leads to a strong supply chain connecting the farm to Mandi and then strengthening not only the domestic supply chain, but also connecting domestic supply chain to international supply chain. This will go a long way to enhance India’s exports of agro and food processing form current level of US$ 30-40 billion to the level of US$ 60-70 billion in next three years and US$ 100 billion in the next five years.