Stimulus a giant step forward in helping farm sector attain global primacy

It is important to sustain the momentum being built on key reforms for India to become a global powerhouse in agriculture and for farmers income to rise in sync with the rest of the economy

Crisis is a time for unified action and revisiting the assumptions of the past. The farm sector and farmers have observed the economic growth story of the country from the sidelines, often constrained by policies that outlived the economic realities within which they were designed. 

The slew of reforms announced as part of the Government’s stimulus package for the agriculture and allied sector promises to change the way farmers interact with the marketplace, introducing more actors in the processing and small food enterprises across agriculture and allied sectors. 

Due to the current structure of agriculture markets and several initially well-meaning but outdated regulations, the price realisation for farmers is severely constrained. Refreshingly, the stance the finance minister took yesterday approaches the issue from the farmer’s perspective.

Changes in the Essential Commodities Act and Agriculture market reforms will allow for the flow of investments and permit inter-state movement in cereals, edible oil, oilseed, onion and potato. These crops are crucial for farmers income and for the agri business sector, allowing prevailing of market prices over these commodities, along with allowing farmers to sell across India. These are big initial step in helping agriculture be more demand led, inclusive but competitive. 

India’s diverse agro-climatic zones offer a bounty of fruits and vegetables across states. Extension of Operation Green to all fruits and vegetables underscores the need to support farmers to enable them to diversify further into fruits and vegetables and add much needed quicker cash generation, which comes with shorter sales cycle of fruits and vegetables. The government’s shift in stance will contribute to greater resilience building and protect farm incomes in the event of future crisis, as demand for such items across urban centres is largely inelastic. 

With agriculture-led food market projected to touch $828.92 billion by FY 2020 and food processing expected to employ nine million people by 2024, the impact of these reforms will be felt at a much broader level. Given the scale of opportunity, there may be a need to revisit the scale of stimulus and upward revision of the stimulus amount may be the need of the hour.

The FM's thrust on allied sectors like bee-keeping, often considered the fifth factor of production, is practised largely by indigenous communities. They also happen to be among the worst-hit by the Covid-19 crisis due to their inability to move the produce to the markets. In this regard the policy focus is significant. Bee-keeping sustains over 300,000 people and, with a production of 94,500 metric tonnes (2016-17) of honey, is a significant contributor to the economy and the households that depend on it. Pollination via bees has the potential to improve yields of various crops like mustard, safflower, orchard crops and sunflower by 5 per cent to as much as 33,150 per cent. The spiralling effect of such a policy thrust on farm incomes will thus be significant. This seen in combination with Operation Green and the specific stimulus for herbal crops, whose demand is only expected to strengthen, will boost farm resilience and incomes substantively. 

The stimulus makes a special mention of the animal husbandry and fisheries sector. The infrastructure strengthening will energise opportunities for value addition, and product diversification. 

India’s dairy market is one of the fastest growing markets, accounting for 13 per cent of the world’s total milk production, but its contribution to the global market (currently 1 per cent) is expected to receive a major push through the slew of policy measures announced. The fisheries sector, termed as the sunrise sector of the Indian economy, stands to gain significantly and will strengthen the arms of the small producers who dominate the sector. It is to their credit that India today is second only to china in terms of fish production and aquaculture. 

India has a fragmented value chain in the agriculture and allied sector. This has also meant a lack of quality control and adherence to food safety, hindering the ability to sell in a globally competitive market. Positive measures such as vaccinating all animals under the National Animal Disease Control Programme will go a long way in establishing India’s claim to producing disease-free animal husbandry products. These measures would also protect India against any future zoonotic disease outbreaks. Stimulating 200,000 micro food enterprises that adhere to food safety requirements, will provide the missing middle in the value chain between large food companies and farmers. This will eventually help position India as a global agriculture and food processing powerhouse. 

These measures are a good beginning towards unleashing the true potential of farmers and the agriculture sector and may help a potential income increase of up to 25 per cent for the cultivator. 

Agriculture needs to respond to the dual challenges of becoming a growth engine for India while providing for the livelihood of the majority of its population. In order to do so, there is a need to look at further reforms such as de-regulating subsides, increasing direct income support to farmers both to absorb the shock from Covid-19 as well as the transitions due to reforms, leveraging strides made in technology to bring trust, transparency and back up contracts between farmers and other actors across the farm to folk continuum. 

It is important that the momentum being built on key reforms is sustained for India to become a global powerhouse in agriculture and for farmers Income to rise in sync with the rest of the economy.

The author is Partner, Government and Public Sector, EY India. Views expressed are personal

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