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Last Updated : Jun 14, 2019 01:06 PM IST | Source:

Budget 2019 | Five long term measures to revive agriculture

India needs policies for sustainable and climate-smart agriculture.

Moneycontrol Contributor @moneycontrolcom
Representative image
Representative image

S. Mahendra Dev

The agricultural sector needs a big push in policies to boost growth and farm incomes and address the agrarian distress in terms of adverse terms of trade. The interim budget and pre-election promises concentrated on short-term measures such as loan waivers and cash transfers. In this year’s interim budget, the government announced PM-KISAN for small and marginal farmers but now it is applicable to all farmers. This cash transfer may be useful to farmers but may not help revive agriculture. The NDA government with its massive mandate should concentrate on long-term policies for transforming the agriculture sector. It should focus on the following five long-term measures and the forthcoming budget in July can be the starting point to revive agriculture.

First, agricultural marketing reforms should be a priority. We should move away from consumer to producer-centric price policy. Agricultural markets have witnessed only limited reforms. They are characterized by inefficient physical operations, excessive crowding of intermediaries and, fragmented market chains. Due to this, farmers are deprived of a fair share of the price paid by the final consumers. We have been talking about APMC reforms for the last two decades. States have not shown any urgency in reforming agricultural markets. The central government including NITI Aayog should work with states in undertaking marketing reforms. There is little progress on e-NAM which is supposed to create a national market. For better price discovery, agriculture has to go beyond farming and develop value chains comprising farming, wholesaling, warehousing, logistics, processing and retailing.


Second, agricultural exports should be promoted with various policies. Banning exports hurt farmers the most. This is one of the reasons for the glut in farm production and low prices. The National Export Policy is formulated in line with the goal of doubling the farmers’ incomes and increase agricultural exports from the present $30 billion to over $60 billion by 2022. There is a need for a long-term consistent policy on exports and futures markets. India processes very limited quantities of fruits and vegetables. It should promote food processing in a big way.

The third issue is of low productivity in Indian agriculture. Basics like seeds, fertilizers, credit, land and water management and technology are important and they should not be forgotten. Similarly, investment in infrastructure, including rural roads is needed. Water management should be given the highest priority. More than 60 percent of irrigation water is consumed by two crops rice and sugarcane. Basically, it is not investment alone but efficiency in water management, both canal and groundwater, that is important. India uses 2-3 times the water used to produce one tonne of grain in countries like Brazil, China and the US. This implies that water use efficiency can be improved significantly with better use of technologies including drip irrigation. Yields of several crops are lower in India as compared to several other countries. Technology can help to reduce the yield gaps and thus improve productivity.  Government policies are biased towards cereals and we need to shift from rice, wheat-centric policies to promote millets, pulses, fruits, vegetables, livestock and fish.

Fourth, another major issue relates to the shrinking size of farms which is also responsible for farmers’ distress. The average size of farm holdings declined from 2.3 hectares in 1970-71 to 1.08 hectares in 2015-16. The share of small and marginal farmers increased from 70 percent in 1980-81 to 86 percent in 2015-16. In this context, consolidation of land holdings becomes important for raising the incomes of farmers. The late Prof. B.S. Minhas had argued in the 1970s itself that compulsory consolidation of land holdings along with land development activities could enhance incomes in rural areas. Unfortunately, there is little discussion now on land fragmentation and consolidation of farm holdings. The other land policy needed relates to the legalization of land tenure. Organising small farmers in the form of producer organisations is also important.

Fifth, the linkages between agriculture and non-agriculture should be increased. The late Prof. T.N. Srinivasan argued that agricultural policies may be important but the fundamental factor for low productivity lies in non-agriculture. Recent data from NABARD shows that only 23 percent of rural income is from cultivation and livestock. Income from agriculture is not enough for farmers. Thus, we have to walk on both legs i.e. agriculture and non-agriculture for raising farmers’ incomes.

To conclude, we need policies for sustainable and climate-smart agriculture, including conservation and zero budget natural farming. Programmes like PM-KISAN may be useful for farmers but long-term measures are required focusing both on supply and demand factors. Agriculture is a state subject and the Centre has to work closely with states in reviving this sector. The massive mandate of the new government will help such coordination and forthcoming budget should focus on long term issues of the farm sector.

S. Mahendra Dev is Director and Vice Chancellor, Indira Gandhi Institute of Development Research, Mumbai.

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First Published on Jun 14, 2019 01:06 pm
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