The centre’s failure to steer agriculture right


Like its many previous avatars stretching back almost two decades, this budget too lacks an overarching direction in which the central government wants to steer agriculture. At least in the case of industry or services, there is some link to larger themes and ongoing initiatives: Make In India, goods and services tax (GST) consolidation, affordable housing, health coverage to vulnerable households, Swachh Bharat, etc. But there is no clear vision for agriculture in the budget.

Three things stand out as the headline readouts:

1. Implementation of Schemes:

  • Ongoing schemes in agriculture have acquired the status of railway projects sanctioned over the years: New ones keep getting added but no one can shut down any of the existing ones.
  • This potpourri is hardly a recipe for the transformation so desperately required in the sector.
  • So, a lack of ambition is the biggest disappointment in the budget as far as agriculture is concerned.

2. Agriculture Financing:

  • Second, the focus, as always, is on outlays, ignoring outcomes.
  • Agriculture credit provisioning, among a plethora of interventions, goes up substantially, while the challenge of connecting millions of small and marginal farmers to institutional finance has remained unaddressed for the last two decades.
  • This is unlikely to unshackle these farmers from the grip of moneylenders, the only avenue available to them to finance cropping operations.
  • With informal sector interest rates starting at 24% (compared to 0-7% from banks and cooperatives), there is likely to be no breakthrough in investments on small farms, where the maximum unutilized productivity potential waits to be tapped.

3. Agriculture Marketing:

  • Third, the thorny but critical issue of agriculture marketing reform has again been sidestepped, perhaps in deference to impending state assembly polls and the parliamentary election next year.
  • Rural marketing hubs will benefit from some infrastructure upgrade, which is welcome.
  • But the real knot to be untied in marketing is rearranging the institutional arrangements under the agriculture produce marketing committee (APMC) legislation. This challenge has been ducked, yet again. 

The need of the hour:

  • There is an urgent need to introduce competition, transparency and technology-enabled transactions in the 7,000-plus mandis in the country.
  • These measures are fiercely resisted by incumbent players, who have managed political cover to support their stance all these decades.
  • Even e-NAM, the electronic trading portal for agricultural commodities launched by Prime Minister Narendra Modi, remains stunted and has failed to provide an alternative and efficient marketing platform to farmers.
  • To be fair, the political economy of agriculture marketing is complicated and does not lend itself to easy solutions. 
  • Farmers, especially in the central, eastern and North-Eastern regions, are not likely to be incentivised to make investments in land improvement, machinery and technology unless the prospects of better prices materialize.
  • This can only happen by treating the entire country as a unified market for agricultural goods, as is the case for industrial products.
  • Supportive policies for allowing direct purchase at the farm gate, portal-based trading, reform of antiquated storage and movement restrictions, and a more liberal external trade stance will be among the other essential components of a marketing reform package.

The Way forward

Most of these measures are within the power of the Central government, though the states will have to be brought around to play their role. 


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