The story of agriculture, which is the backbone of the country in terms of livelihoods, has not been good in the past two years. Agriculture GDP (gross domestic product) grew at (-)0.2% in 2014-15 and 1.1% in 2015-16. The distress in agriculture is due to two factors—first, the crash in global commodity prices and, second, deficit rainfall for two years in a row; 10 states have declared drought this year. These two factors have affected farmers’ incomes.
Low agriculture growth also affects the prospects of manufacturing and services due to forward and backward linkages. For example, tractor sales have declined. In this context, a big push for the agriculture sector is needed in the forthcoming budget.
A two-pronged strategy is required for agriculture: raising productivity and incomes of farmers and coping with risks due to climate change and the crash in commodity prices. The following measures are needed in the budget to revive the sector.
First, increase in productivity can be achieved through an emphasis on investment in infrastructure such as irrigation, rural roads and electricity. Public investment in rural infrastructure is crucial as the private sector does not invest in it.
The Pradhan MantriKrishiSinchaiYojana (PMKSY) introduced by the current government is a step in the right direction. There is a need for more funding for PMKSY and the RashtriyaKrishiVikasYojana (RKVY).
Apart from funding, water-use efficiency has to be increased with better policies on watershed development, groundwater and involvement of farmers in the management of irrigation systems.
The use of drip irrigation should be encouraged as it covers 10 times the area covered by usual flood irrigation. The main strategy should be to increase water productivity—“more crops per drop of water”.
Second, there is a need for climate-resilient agriculture (CRA). To achieve this, three things are highlighted here:
(a) Diversified cropping systems in view of climate-related risks: For example, cultivation of pulses can be an important strategy for CRA. Pulses are legumes which improve soil fertility. India is deficient in the production of pulses and imports them from other countries. Thus, diversification to pulse cultivation can lead to a win-win situation in terms of both attaining self-sufficiency and raising soil fertility. This is the international year of pulses. The budget should give incentives for the cultivation of pulses, which are largely grown in rain-fed areas. A focus on pulses can also reduce food inflation.
(b) Crop insurance for risk mitigation: In this context, the recent introduction of the Pradhan MantriFasalBimaYojana (PMFBY) by the central government is a good move and one expects a higher allocation of funds under PMFBY. There are many features in the new crop insurance scheme which makes it different from earlier schemes. However, crop insurance has not succeeded in many countries. Lessons have to be learnt from these failures. The budget should give emphasis to the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) as it is useful for asset creation and drought proofing. Studies have shown reductions in vulnerability due to the implementation of MGNREGA works and resultant environmental benefits.
(c) A focus on the role of research and extension systems: Research can lead to the development of climate-resilient technologies and the extension system will promote these technologies among farmers. Research on adaptation and mitigation should cover crops, livestock, fisheries and natural resources management. India should invest in research and extension in agriculture as technology improvement is crucial for increasing productivity and conserving natural resources. Investing here gives high returns.
Third, reforms in fertilizer subsidies: These are overdue and subsidies should be directly given to farmers. This budget should kickstart the reforms process. The saved funds can be provided for investment in infrastructure like irrigation.
Fourth, there has been a consensus among economists and others on legalizing tenancy. The budget should announce the policy on land tenancy. This will lead to access to land for the rural population and also increase private investment in agriculture.
Fifth, remunerative prices and development of markets: These are important for raising farmers’ incomes. The government’s plan to introduce a national agricultural market, an online platform for selling agricultural produce, will help in securing better prices for farmers. But much more is needed on the marketing front using a value chain approach to connect farmers to input and output markets.
Sixth, farmer producer organizations (FPOs) must be strengthened. One issue is whether small and marginal farmers are benefiting from FPOs. What are the lessons for FPOs from milk cooperatives? Incentives can be given to commodity-specific FPOs to develop value chains. For example, FPOs for pulses can be developed on a large scale.
Another issue is agricultural credit. Every year, budgets announce higher agricultural credit for farmers. Measures have to be taken to increase the formal credit to small and marginal farmers as a Reserve Bank committee found that their access to it was limited.
The monsoons may come to the rescue of agriculture and the economy in 2016-17. But a big push by the government and bold measures in the budget are crucial for agriculture’s long-term revival.
S. Mahendra Dev is director and vice-chancellor, Indira Gandhi Institute of Development Research, Mumbai.
