Reaping in agriculture today to sow tomorrow in the economy

By Nidhi Nath Srinivas and Purvi MehtaIndian agriculture is at a crossroad, poised for growth, while shocks posed by events such adverse weather and price collapse continue to be a challenge. This year’s budget is not just responsive to these challenges, but also addresses some fundamental structural hurdles faced by farmers.It does so by helping smallholders with less than 2 hectares of land to cope with the income shock from close to 30 months of low crop prices while encouraging them to diversify into mixed agriculture systems through sub-sectors such as animal husbandry, fisheries, and optimise returns by connecting to markets.The low price elasticity of demand and supply in food crops tends to keep agri incomes volatile in the short term. And smallholders are least equipped to respond quickly to negative price signals by switching to alternate crops or access new markets.Given that in 2015-16 smallholders earned `22,325 a year from farming, the announcement of `6,000 a year direct transfer for 12 crore families will mean an additional 26% income/cash f low. This will partly meet the cost of cultivation without creating any distortions in input and output markets.The scheme, however, will have to pay more attention to tenant farmers and women farmers, most of whom do not own the land they till. It will be important to expand the scheme with a more gender-balanced and inclusive approach to ref lect the fact that close to 40% of agriculture and 70% livestock work in India is done by women farmers.Landless poor and smallholders own more than half the cattle, goats, pigs and poultry, and almost 45% of India’s buffaloes to diversify their sources of income and mitigate market risks. Livestock is, thus, a key component of the solution to poverty and agricultural productivity growth. However, milk production per head of cattle remains 5-7 times lower than global average.Given its rising share in India’s total agricultural production, up from 27% in 1995 to 34% in 2016, the thrust towards enhancing productivity in livestock farming through the Rashtriya Kamdhenu Aayog is a welcome step.Studies show that every `1 million spent in agricultural research and extension has the potential to lift 328 people out of poverty, higher than spending on rural infrastructure or input subsidy. The 7.6% higher allocation each for crop science, and agricultural universities and institutions is a smart investment.For these levers to demonstrate sustainable impact, smallholders need to become market-ready and connect to the right value chains. The significant increase in allocation for market intervention schemes designed to remove the overhang of excessive supply needs bolstering by bringing markets to the farmer’s doorstep. Such attention to market strengthening will solve three things: effective solutions to bottlenecks that lead to exclusion; increase their business and commercial orientation to guarantee sustainability; and flexibility linked to buyer/customer needs.Simultaneously, to capture fair value, smallholders need to establish a stronger negotiation position through skills development, col lective bargaining through mechanisms such as farmer producer organisations and clusters, and access to market information, technology, and financial services. The skills and expertise of existing market players, including farmers, traders and processors, must be strengthened to promote value chain collaboration, resilience in volatile markets, transparency in pricing mechanisms, and risk sharing.Given the declining size of operational holdings in India, large agribusiness, too, must revise their strategy to make it easier for smallholders, and medium and small enterprises to become suppliers without raising transaction costs.Overall, attention is now on agriculture as a pathway for food production and an engine for economic growth by providing better resilience to farmers and positioning them for improved market access. Ultimately, doubling of farmers’ income will come not by doubling of food production, but by doubling of efforts in better price realisation for farmers.

from Economic Times http://bit.ly/2GeI1Te