Speaking at the Foundation Day celebrations of the National Bank for Agriculture and Rural Development (Nabard) on July 12, Union finance minister Arun Jaitley said that there were reasons to smile on the economic front as India remains a bright spot, despite the global slowdown. He talked about a 7-8% overall growth, and 8-10% growth realisable in the very near future. But he admitted that agriculture remains a concern, and promised that as tax revenue increases, an increasing share of it will be spent on building a strong and vibrant agriculture sector. Nabard can play an important role in that process.
This year, Nabard completed 33 years of service to the nation. From 1982 to 2015, it has come a long way in terms of extending rural credit for myriad programmes, ranging from rural roads to irrigation under Rural Infrastructure Development Fund (RIDF) to building value-chains with Farmer Producers Organizations (FPOs) to micro-finance initiatives, and so on. Lately, it also got the distinction of being accredited as the first National Implementing Entity (NIE) of the Green Climate Fund (GCF) of the United Nations Framework Convention on Climate Change (UNFCCC). As an NIE, Nabard is supposed to lead and promote work on climate change adaptation and mitigation, especially in agriculture and rural development activities.
Given that in the first three years of the 12th Plan period (2012-17), the average rate of growth in agri-GDP was a mere 1.7% against a target of 4%, there is cause for concern as it could lead to agrarian distress. No wonder, Nabard picked “Mitigating Agrarian Distress and Enhancing Farm Income” as the suitable topic for discussion at the function. It is worth sharing some of the takeaways from this seminar as it contained wisdom of several brilliant speakers who have devoted their life to the cause of Indian agriculture and rural development.
Diagnostics of agrarian distress:
What are the root causes of agrarian distress today? Basically, two factors: Monsoons and markets, as Sudhir Kumar Goel, ex-additional chief secretary, government of Maharashtra, put it very succinctly. A drought last year, followed by unseasonal rains damaging rabi crop early this year, coupled with falling global agri-prices pushing down domestic farm prices of several commodities, from rice and corn to sugar and groundnuts, even below minimum support prices, have hurt farmers. Their incomes have plummeted, and many of them cannot service their loans, raising demands for loan waivers. Small and fragmented holding sizes, excessive specialisation and input intensification of agriculture, and restrictive markets, also contribute to this increasing distress.
What could be the policy solutions? A unwavering focus on water for irrigation is needed, both in terms of developing irrigation in a cost-effective manner to drought-proof agriculture as well as managing our water resources more efficiently. Since pricing of water and power for irrigation is highly subsidised, and even free in some places, it is but natural that farmers would go for crops with heavy demand for water, like rice and sugarcane, wherever they get access to water. Both are being produced in excess of domestic requirement. India exported 12 million metric tons (mmt) of rice in FY15, becoming the largest exporter of rice for the third year in a row. Sugar is also in plenty, but cannot be exported due to low global prices and has thus created a major crisis for the sugar industry, with cane arrears touching an unprecedented level of R21,000 crore. In any case, exports of rice and sugar mean exporting billions of cubic meters of scarce water. This must be rationalised through innovative policies that can reward farmers for saving water (and power) and diversifying crops, away from water-guzzling ones. Can Nabard take up this challenge under its new role as an NIE to promote sustainable and diversified agriculture? It can have a high pay-off.
Jaitley mentioned that the government is committed to enhance investments in irrigation to tackle droughts, and they have already raised the funding of Pradhan Mantri Krishi Sinchai Yojana (PMKSY) to R50,000 crore for the next five years to realise the dream of ‘More crop per drop’ of water, a vision outlined by the prime minister himself. Since this scheme consolidates watershed management and the accelerated irrigation benefit scheme, one will have to wait and see how much additional resources are really put into PMKSY’s kitty. Nevertheless, the policy step seems to be in the right direction. But, to deliver more crop for every drop of water, can Nabard spearhead the promotion of innovative farming practices (such as SRI and precision farming) and technologies (like drip irrigation and check-dams) through its network of NGOs and FPOs? This is a worthwhile agenda for the rural development bank to follow.
The finance minister also talked about overhauling the existing crop insurance system to make it more robust and responsive to farmers’ needs, and said that the government is currently working on that. While irrigation will take time to deliver, crop insurance can be fixed relatively quickly and it can act as an effective coping strategy to contain farmers’ distress. This is another area where Nabard can chip in. On the markets front, the consensus is that we need to organise farmers into groups (FPOs or cooperatives or any other form) to create scale, and integrate them with commodity value-chains. For building value-chains and ensuring farmers get their due share of value in these, a lot of market reforms will be needed, ranging from APMC reforms to building infrastructure (from rural roads to warehouses). Nabard is already doing quite a bit of work in that area, and it can scale up its operations to make sure that farmers get a good remunerative price for their produce. Building value-chains can also create millions of off-farm jobs within the rural economy, and it needs to be taken up on a priority basis. But linking FPOs to front-end organised retailers or food processors is a challenge as both of these segments are still at a nascent stage in the country, and many states do not even allow organised retail. The announcement of an electronic national market by the government cannot take off unless several of these hurdles are cleared, and grading of products introduced from the beginning.
Thus, in brief, agrarian distress can be relieved and farmers’ incomes enhanced with better irrigation and water management, more diversified agriculture, robust science-based crop insurance, coupled with better access to markets. This will also help promote more sustainable agriculture, and Nabard can surely contribute to achieving much of this.
The author is Infosys chair professor for agriculture at ICRIER. Views are personal