Shaktikanta Das said that when terms of trade remained favourable to agriculture, the annual average growth in agricultural gross value added (GVA) exceeded 3 per cent.
RBI Governor Shaktikanta Das today said that shifting the terms of trade in favour of agriculture is the key to sustaining the dynamic change and generating positive supply in the agriculture sector. Shaktikanta Das added that when terms of trade remained favourable to agriculture, the annual average growth in agricultural gross value added (GVA) exceeded 3 per cent. He further said that the main instrument has been minimum support prices, but the price incentives have been costly, inefficient, and even distortive. Showing concern over these challenges, the RBI Governor further said that India has now reached a stage in which surplus management has become a major challenge and thus the need is to move to policy strategies that ensure a sustained increase in farmers’ income along with the availability of food for consumers at reasonable rates.
Listing out the steps needed to bring improvement in the agriculture sector, Shaktikanta Das added that an efficient domestic supply chain is critical and the focus must now turn to capitalising on the major reforms that are underway to facilitate domestic free trade in agriculture.
Three steps to facilitate domestic free trade in agriculture
Shaktikanta Das said that at first, the amendment of the Essential Commodities Act (ECA) is expected to encourage private investment in supply chain infrastructure, including warehouses, cold storages and marketplaces. Second, the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 is aimed at facilitating barrier-free trade in agriculture produce. Third, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020 will empower farmers to engage with processors, aggregators, wholesalers, large retailers, and exporters in an effective and transparent manner.
Adding to the above measures, he highlighted that the focus must turn to crop diversification, de-emphasising water-guzzlers; food processing that enhances the shelf life of farm produce and minimises post-harvest wastes; agricultural exports which enable the Indian farmer to take advantage of international terms of trade and technology; and public and private capital formation in the farm sector.
Meanwhile, the RBI Governor also noted that the Committee on Doubling Farmers Income expects the total quantum of private investment in agriculture to increase from Rs 61,000 crore in 2015-16 to Rs 1,39,424 crore by 2022-23. He added that the government’s initiatives have opened a new world of opportunities for industry and businesses and thus the creation of jobs and augmentation of farmers’ income can be enormous.