BUSINESS

A budget for India’s rural economy

Despite falling contribution to GDP, agriculture and the rural economy remain the foundation for India’s overall growth story. With two of three citizens living in villages, their incomes and consumption patterns are critical to increase demand for industry. As per the advance estimates of growth in gross value added for 2017-18, farm output will expand 2.1% compared with 4.9% the previous year. Budget 2018-19 can be expected to have a strong focus on rural India.

India is already the largest producer of milk and the second-largest of grains, fruits and vegetables and fish. However, productivity of crops is often below the global average and much of the farm produce is wasted in the absence of a robust cold chain and warehousing facilities. The government has introduced a seven-point strategy for doubling farmer incomes by 2023 and the upcoming budget is likely to action these. For industry, policy priorities relate to building rural infrastructure, addressing pricing of major agricultural crops, amending farm policies and inducing greater corporate participation and linkages with industry.

Direct sale

While minimum support prices are provided for 23 crops, the main procurement takes place for wheat, rice and cotton. Farmers, who suffer from myriad risks, must get remunerative prices which can be done through strengthening and expanding e-NAM (electronic markets) in all States. A single levy of APMC fees across the country can encourage investments. Farmers should be permitted to sell their produce directly to food processing firms, aggregators and retailers. A mechanism to involve the private sector in procurement, storage and distribution of food grains at MSP rates may be considered for the Public Distribution System,which can result in huge savings for the Centre. Under infrastructure, irrigation is a key gap, covering less than half of net sown area. The Accelerated Irrigation Benefit Program received a major thrust in the last Budget. This should be continued to ensure that AIBP projects are completed at the earliest. Further, drip irrigation and micro irrigation too need focus. A chain of post-harvest infrastructure of cold storage and warehouses can effectively link agri-produce with markets and with food processing facilities. Currently, less than 10% of produce is processed. The government has initiated mega food parks and provided incentives for creating post-harvest facilities. It may consider setting up cold chains in all districts and leasing them out to food processing and logistics firms. One way to encourage greater connect with industry is to boost contract farming and long-term land leasing, as has been done by certain States, without giving tenancy or ownership rights. This would aggregate small land holdings and add to productivity resulting in higher income for the farmers.

Another way is to create more farmer producer organisations that will augment collective bargaining and help link with processing clusters for direct offtake of produce. The Budget could incentivise this with easier credit availability or subsidised inputs for FPOs.

A chain of post-harvest infrastructure of cold storage and warehouses can link agri-produce with markets and with food processing facilities

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