How to double farmers’ income: Moving beyond income generation

It needs funds at both institutional and enterprise levels, for which a robust institutional credit flow mechanism is a must

Through the user-friendly mobile technology based platform which integrates a toll-free number, farmers can call to report a wildlife conflict incident. (Reuters)
But a new "climate-smart lending platform" aims to make credit easier and cheaper to access for farmers working to protect their crops, while helping lenders find customers who are a lower credit risk because their harvests are less vulnerable to extreme weather. (Reuters)
It needs funds at both institutional and enterprise levels, for which a robust institutional credit flow mechanism is a must

Prime Minister Narendra Modi, while addressing a farmers’ rally at Bareilly in Uttar Pradesh on February 28, expressed the government’s desire to double farmers’ income by 2022. This was followed up by several measures announced in Budget FY17 and by the ministry of agriculture and farmers’ welfare. This has also evoked interest among a variety of stakeholders—farming community, scientists, economists, political commentators, besides the general public.

During the run up to the Green Revolution and thereafter, the emphasis was always on production and productivity. Enhancing farmers’ income was not in focus per se. Many a scheme in agriculture, during the five-year planning cycles, generally aimed at enhancing production and productivity which would indirectly enhance farmers’ incomes. Our policies were usually farm-centric and not farmer-centric. This is one of the reasons why there is farmers’ distress despite the fact our country has achieved commendable position in food production. India is either first or second in the world in terms of overall production of many agricultural commodities, but we still need to make efforts for achieving the coveted position in productivity in these commodities. The finance minister, in his Budget speech, emphasised that “we need to think beyond food security and give back to our farmers a sense of income security.” He mentioned the government’s resolve to reorient its interventions in the farm and non-farm sectors to double the income of farmers by 2022.

Historically, there is little evidence that this idea was attempted or even articulated, but in the recent past several states have clearly demonstrated that this is achievable. It is also true that no government has ever enunciated this idea in the public forum. For achieving this objective, we will have to devise micro-level action plans to augment farmers’ income from all sources and not just from crop cultivation. We must also take into cognisance that rural demand drives our economy and exports are declining in recent years. A natural question is, how do we go about?

Farmers’ income can be improved if/when productivity goes up, if/when the cost of production comes down, if/when we ensure agricultural commodities produced get a remunerative price through a transparent price discovery mechanism. It can also happen due to improved income from allied activities to agriculture and non-farm sector or even wage employment during the agricultural off season. The strategy must integrate them all. Given the time horizon of six years, doubling of farmers’ income must be attempted by creating a framework where all related agencies come together and work in harmony, with a maestro conducting that orchestra.

Considering that substantial yield gaps exist in major crops and across all regions, we have to leverage technology, adopt precision farming and ensure that farmers get correct and timely crop advisory and market information. To simplify, every variety of a crop has a genetic yield potential which can be achieved if a proper agronomic package is adopted. There are several ideas being tried to put agricultural extension on digital medium, but a well-coordinated approach harmonising the efforts of traditional institutions is the need of the hour. Likewise, irrigation efficiency too has to be addressed. The Prime Minister has pithily worded this as “more crop per drop.” The challenge of climate change is real and there is a crying need to develop a climate-resilient agriculture.

The approach to saving on costs involves developing localised solutions as no universal solution works. A cost accountants perspective of what can be saved must be adopted in all the segments of farming. This too involves a huge amount of information dissemination using digital technology for extensive outreach.

Land laws require changes to formalise land leasing practice, in the absence of which term investments are not made by the tillers to enhance production and productivity. Focus of funding by banks should be on term investments as there is a correlation between long-term investments and capital formation.

Infrastructure creation in connectivity, irrigation, marketing, storage, communication, small farm equipment, etc, is also important for reducing cost of production and improving efficiency. Information technology can contribute enormously in this endeavour by ushering in efficiency of agricultural markets, better price discovery and, above all, transparency. Banks have to finance these measures too. Suitable skill building and enterprise development in the farm and off-farm sector warrants attention.

It is an opportune time to move beyond income generation from farms and focus on reducing post-harvest losses, explore opportunities in allied sector, food processing both at local and regional levels, and off farm income complementarities. Recent literature is gradually building up and highlighting the importance of inter-sectoral complementarities and convergence opportunities.

Doubling farmers’ income needs funds at institutional level as well as at enterprise level, for which a robust institutional credit flow mechanism is a must. We have to create a healthy credit environment by enhancing access to credit through technology in an equitable manner. Our resource-scarce farming community such as small and marginal farmers, tenant farmers, share croppers, etc, and farmers in east, centre and northeast regions deserve special attention. NABARD is committed to make it happen.

The author is chairman, NABARD

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