Structural Reforms Necessary to Boost Farmers Income and India’s Agriculture Sector

Agrarian distress continues to spread and take a toll on farmers. Structural reforms are necessary to boost farmers’ income and India’s agriculture. 

Structural Reforms Necessary

As schemes of loan waivers and price deficiency payments fail to provide relief to farmers, governments embrace economists suggested structural reforms in agriculture. The government recently brought in three ordinances in the agriculture sector, which may prove quite useful if implemented honestly by the state governments. 

Surplus Agriculture Produce and Profits 

Producing a surplus does not mean higher profits for farmers. Benefits come only when the rise in the price of agricultural output is higher than the rising cost of inputs. Also, the increase in prices of agricultural commodities depends on both international and domestic demands. However, this becomes difficult with increasing diesel, electricity and fertiliser prices and declining demand

Though the recent lockdown had a low impact on agriculture, the slowdown has given rise to low demand. In turn, this can drive the prices of agricultural commodities down. The government, as a short-run measure, must procure all variety of crops, oilseeds, and pulses at MSP to provide every possible support to the farmers. Further, it should aim to reduce the input cost of farmers, mainly of fertilizers, to increase the profit margin of the farmers.  

Effectiveness of Cash Transfer Policy 

With state governments and central government coming forward to provide relief to farmers, the direct cash transfer schemes are gaining salience. A survey conducted on first such scheme, Telangana’s Rythu Bandhu Scheme (RBS), launched in 2018, revealed that farmers did not use the amount provided for agriculture activities. The field survey showed that 79% of the farmers got the entire cash transfer amount for both the seasons. Further, it suggested that the majority of large farmers made the beneficiaries of the scheme. The small and marginal farmers kept it as a safety net in the absence of access to institutional, agricultural provisions. Also, of the six states implementing such a scheme, only two (Odisha and Andhra Pradesh) have targeted small and marginal farmers and tenants.

The Ground Realities- Reach and Use of Cash Transfers  

When asked about selling the crops on MSP, 45% of the farmers surveyed said they were unable to do so. They experienced being discriminated against based on caste by the traders. The cotton growers of Telangana revealed of selling to private traders rather than to CCI at MSP due to inaccessibility. Hence, cash transfers proved more effective than MSPs.

The survey showed a fiscal wastage of the stimulus provided as 32% of the farmers used it for other purposes. Further, it concluded that the efficiency of such investment support depends on the timing of transfers. This is because transfers made after the early sowing period may not be spent on agricultural activities.

Integrating with the Global Market Through Agricultural Exports

To achieve greater efficiency in production and productivity, India needs to integrate more itself with the global market. Thus, calling for more agricultural exports. The increase in agrarian exports would mean better price realization to farmers, higher thrust on quality, and increased awareness about the global demand.

Reforms need to continue improving the quality of exports. The way Basmati rice faces barriers in the EU for tricyclazole depicts the need to make changes in domestic policies. Also, agencies like APEDA, MPEDA, FSSAI, Export Inspection Council must work regarding market access requests of counterpart countries to India. They should work to have flexibility in leveraging other’s request to access India’s vast market. Besides, it is high time now that India should think of a unified body to handle all Sanitary-phytosanitary (SPS) issues of agriculture. Moreover, there is a need to initiate and sustain an aggressive campaign for the winning sectors of the agricultural arena, like Basmati rice, tea, and Indian organic produce. In all, India must leverage its huge market only for the best bargain.  

 More Reforms in Future

Announcing the provisions for making the country ‘ Atmanirbhar or Self-reliant’, PM Modi about a month ago hinted structural reforms to revive the economy. That said, the government has undoubtedly taken steps to provide relief in times of distress.

In all, this is a great time to reboot our agriculture with systematic reforms and make Indian agriculture more successful.

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