South Asian Insider
India's future prosperity depends on extending opportunities to farmers
Over the last decade, India has experienced sustained economic growth, bringing opportunities and prosperity to millions. The World Bank estimates that extreme poverty in the country has dropped from 46% to 13.4% over the two decades before 2015. Yet, there is also recognition that these gains have not accrued equally to all. This is particularly true for those who rely on agriculture for their livelihood. While India's overall GDP growth rates have ranged between 7-8%, agriculture has grown between 2-3%.
Over 20% of our farmers live below the poverty line. Evidence suggests that the speed with which the agriculture sector reduces rural poverty is at least twice of what the rest of the economy and when growth in agriculture is rejuvenated, poverty decline became faster. This paradox means that Indians employed in agriculture have not fully participated in benefits of this growth, either because they are not equipped to do so, or because opportunities provided by growth have not reached them.
One way to approach this is by viewing the farmer and others engaged in the agri-economy as rural entrepreneurs. Since an enterprise can grow if it has some degree of predictability, policy makers will have to focus on interventions that create an enabling ecosystem for the famer entrepreneurs to achieve profitability, and higher incomes.
Take the crucial role of credit. Credit enables growth, investment in business, the leverage to tide over tough times, and the power to negotiate with buyers. Studies show that farmers get better prices when they receive credit because they can avoid harvest pressure and access better markets. Yet, lack of formal financial resources has long hampered production budgets of farmers, their risk-taking capacity, their technology adoption, diversification and their overall capacity to generate income. One percentage increase in credit supply from public banks leads to approximately 0.82% increase in price realisation of crop, barring paddy. Further, the maximum gain is felt by small holders. Thus, policy makers need to think of enabling financial mechanisms and credit offerings that respond to the needs of small famers.
Other key areas where policy programmes need to focus range from support in pre-production such as better input management to post-production like strengthening agri-logistics and marketing. Take the supply chain infrastructure. Estimates by the committee on Indian Council of Agricultural Research's Vision 2020 points out that losses from farm to market in Indian agriculture are between 18 to 25%, and perishables such as milk, meats, fish, fruits and vegetables get hit the most. Yet it is these very commodities that are proven to have higher potential for farmer's income and profitability.
Almost every agri-category needs to know how to adequately market their produce to realise the best prices. Yet the farmer-to-consumer relationship has not been harnessed in ways that could benefit the former. Policy makers must ask what interventions in this area are required to enable the farmers to get the best possible prices.
Model aggregation groups such as co-operatives or farmer producer organisations help significantly. They leverage collective strength and bargaining power to access both financial and non-financial inputs and services, and appropriate technologies, that reduces costs. This allows them to better negotiate with markets and gain greater benefits.
Policy interventions need to focus on filling these gaps - credit, supply chain, marketing - and make the farmer market-ready. Many steps in this direction have already been taken: One is the unified National Agricultural Market and the Model Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017. The e-Nam network was launched in 2016. The SAMPADA scheme targets the creation of food processing infrastructure. There are several others. But more needs to be done. The Niti Aayog estimates that to double farmers' income between 2015 and 2016 and 2022 and 2023 will require an annual growth rate of 10.4% in their real income
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