Agriculture in India has a long history and is one of the strongholds of the economy. The sector provides employment to over 55% of the Indian workforce and accounts for 14.6% of India?s GDP, playing a crucial role in the overall socio-economic development of the country. Given the potential impact and multiplier effect that this sector can have on the economy, the government has given the highest priority to agriculture and allied sectors. The Eleventh Plan allocation has been considerably higher over the Tenth Plan allocation, with allocation of US$ 19 billion for the ministry of agriculture.
While the Indian government?s policies have emphasized on the need for food grain self-sufficiency, it has not necessarily coincided with agricultural sustainability. The trajectory of the Indian agricultural growth, and associated environmental problems, has brought about a consensus that future agricultural growth will have to be enabled through an integrated future policy framework that achieves environmental sustainability.
The challenges for Indian agricultural sector, have been plenty and well documented. However, the impediments or issues being faced today, are quite different from those which the government faced in the previous decades. The compounded annual growth in productivity of food grains in the past one decade has been just about 1%, with net sown area under food grains having declined by close to two million hectares in the past 15 years. These factors, coupled with rapid economic growth and increasing population, are laying stress on the limited agricultural resources. Against the backdrop of projected population of 1.6 billion by 2050 and a projected food grain demand of 450 million tons, it is time that policy-makers deliberate on making strategic decisions that ensure increased productivity and food adequacy. Further, Indian agriculture sector is dealing with several unique challenges including:
Problem of fragmented land holdings, resulting in lesser earnings for the farmer, given their lower per capita production
Lack of adequate accessibility to markets and the challenges of aggregation, resulting in delayed price discovery for the farmer, if not totally denied. Recent initiatives like development of Modern Terminal Markets and Agro Food Parks address the issues of price discovery, accessibility, as well as building a direct linkage between the farmer and the processor. Initiatives like these will provide an impetus to the food processing industry and be a win-win for the supplier as well as the consumer.
Farm credit system is instrumental in enhancing production, marketing of farm produce and stimulating capital formation in agriculture. This necessitates the need for faster expansion of credit coverage in various aspects of agricultural sector. Poor composition of public expenditures, where public spending on agricultural subsidies is crowding out productivity enhancing investments is another area of concern. Lack of investment in agricultural research and extension, rural infrastructure, appropriate technological application along with lack of investment in services such as roads, electricity, fertiliser and pesticides availability etc have hindered the growth of agriculture sector in India.
To create a more productive, internationally competitive and diversified agricultural sector, we would require public expenditures in productivity enhancing investments. The diverse conditions across India suggest the importance of regionally differentiated strategies, specially the adoption of appropriate technology, with a strong focus on the lagging states.
The government also needs to shift its role from direct intervention and over-regulation to creating the enabling environment for private sector participation and competition for agribusiness. Improving the rural investment climate includes building key infrastructure and improving access to credit, by creating an enabling environment for extending these facilities to rural areas.
While the path ahead is clear, it is imperative to note that increased production and productivity need to be environmentally sustainable, by avoiding overuse of fertilizers, pesticides and water. Further, a larger basket of crops, apart from wheat and rice, like fruits, vegetables, oilseeds, pulses, coarse grains and exotic crops need to be included in the productivity missions as well as in research endeavors. And, if the recent years are anything to go by then, vagaries of climate change will require crop insurance policies that offer crop protection and income security to small and marginal farmers. To conclude, while as a nation we have taken progressive steps in addressing the immediate challenges, a new age India will pose much higher demands from its land. The need of the hour is for long term strategic direction, that will address multi-faceted issues on productivity, mechanization, newer technologies, crop diversification, increased public investment, food security and innovation. There is, therefore, an urgent need to focus on key enablers of change and develop a time bound, goal-oriented and comprehensive road map on a pan-India to address the same.
The writer is founder/managing director & CEO, YES BANK