The recent report by the International Monetary Fund (IMF) predicted that India will grow at a rate of 7.2 per cent in the 2017-18 fiscal and 7.7 per cent in 2018-19. The figures are significant for India as many of the international agencies had earlier in their separate analysis stated that demonetization will have an adverse effect on the Indian economy. However, the report also warned that improving productivity in the agricultural sector will hold the key to India’s growth in the future.
The report has raised an important point considering that agricultural sector accounts for nearly 15 per cent of India’s GDP and on which nearly 60 per cent of the country’s rural population is dependent on. Infrastructural bottlenecks and access to credit have been among the primary concerns hindering the growth of this sector. In a 2013 report by FICCI-KPMG, it was estimated that there was a loss of 30 to 40 per cent of primary produce before reaching the market due to inefficiencies in the supply chain. It is evident that unless and until, the challenges facing Indian agriculture are not addressed at the grass root level, the country will not be able to achieve a sustained growth rate.
Right from the sowing of seeds to lack of a unified market to sell the produce, Indian agriculture is fraught with myriad challenges. The high input costs coupled with decreasing productivity due to the adverse effects of climate change are the primary factors wrecking havoc with the sector. Sustainable agricultural practices are yet to be adopted mainly because of the over reliance on cash crops and higher MSPs offered on certain crops. Added to this is the involvement of middlemen and money lenders that keep the farmers in a constant debt-trap unable to explore innovative means of production. Illiteracy and the perceived skill gap are other factors contributing to the backwardness of the sector. The challenges at the supply side like the lack of cold storages and timely transportation result in huge losses for the sector. The lack of a pricing system or a direct access to the market are also among the issues that need to be addressed.
The current government, understanding the challenges faced by the sector introduced the National Agricultural Market which will serve as a platform for the free flow of agricultural commodities across the country. The Crop Insurance system has been made more farmer-friendly to protect from probable crop losses. Unfortunately due to lack of awareness, only two per cent of the farming community is covered under the scheme. The Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) which covers all the ongoing irrigation schemes is also a notable initiative which helps address the problem of droughts. The Soil Health Card Portal and Fertilizer Quality Control System Portal give farmers the required inputs regarding soil quality and the right amount of fertilizers that needed to be used.
But even with all the schemes in place, Indian agriculture is in need of more policy measures to become a profitable sector. With purchasing power rising among the urban classes and population increase, the strain on this sector is expected to be acute in the coming years. It is estimated that if there is no increase in the land under production or no improvement in the yield, there could be a shortfall of 11 million tonnes of food grains by 2025. In such a scenario, introduction of more technology could be the answer to a number of issues that the sector is facing at present. Employment of drones and more number of satellites will help the farmers to be better prepared for climatic adversities. There should be more digitization of the sector in order to make it streamlined.
It is also necessary to bring in more transparency at the supply side with greater governmental intervention in pricing. The private sector should be brought in to address the challenges of cold storage and logistics. A possible way in which the government can help address the issue of storage is through agricultural banks. The banks should be allowed to issue farmers small-term loans while keeping their produce as collateral. This will also increase the credit availability to farmers and let them sell their produce when the market is in their favour. Another sector where there is great potential for the employment of PPP model is the agro processing sector which is still in the emerging phase. If direct linkages are formed with the farmers and the agro processing sector, it will address issues ranging from technological mismatch to lack of credit. It will help in empowering farmers as well as small industries to turn agriculture into a profitable sector and contribute to the growth of India.