India needs to rethink farm export policies to revive agriculture

May 16, 2020 4:10 AM

By setting a goal to gradually open up all agri-produce to exports, the country can set an inspiring and exciting new horizon for itself

The choice to move toward export-oriented agriculture also provides a chance to play up our most under-leveraged strengthsThe choice to move toward export-oriented agriculture also provides a chance to play up our most under-leveraged strengths

By Pravesh Sharma

It is now clear that the battle against the Covid-19 pandemic has to be fought on two fronts: the first, of containing the virus itself, and the second, the longer-term and much more complex challenge of getting the economy back on the rails. The first front is under the somewhat wobbly control of central and state authorities, even if it takes another three to four months to declare some kind of victory.

But, the second front is just opening up, and the fog over the battlefield is slowly lifting, leaving us guessing about the challenges that await us. While eminent thinkers and experts are weighing in daily on the broader macroeconomic policy choices, the focus of this piece is on agriculture and the options available to revitalise the sector.

Some context setting is necessary. For almost two months, while the industrial and service sectors largely ground to a halt and are now struggling to restart, agri supply chains have quietly kept humming. This is despite severe disruptions in long-distance road transport and shortage of labour. An even bigger challenge from the ordinary farmer’s perspective was the closure of local mandi across the majority of states, choking off the only real marketing platform available to them.

Yet, all major cities across the country continued to receive supplies of fresh vegetables, fruits, and milk throughout the lockdown. Even as dozens of instances emerged of produce being dumped for lack of buyers or crashing prices, farmers as a community have kept the agri-engine running on a lower gear. They have quietly and without fuss harvested a bumper rabi crop of wheat in North and Central India amid unfamiliar social distancing protocols, and even managed to notch up early kharif planting, topping last year’s figures.

All this has been achieved against a backdrop of institutional credit virtually drying up and informal credit rates shooting up savagely. The good news is that government procurement of wheat is progressing satisfactorily and, by all accounts, the supply chain for inputs like seed and fertiliser for kharif sowing is also beginning to function normally.

But, the macro agricultural story is hardly exciting. We have had several years of sub-4% growth in the sector, prices for most crops are stagnant or falling, and no technology breakthrough has been delivered in over a decade. Markets remain restricted by APMC-led monopolies, and e-NAM has failed in its promise to deliver an alternate channel to farmers to tap a wider, pan-India market. Despite the recent excitement generated by UP, MP, Gujarat, and a few other states liberalising direct sourcing of farm produce, the hard fact is that, till now, no state has notified the rules and regulations under which the new liberal order will operate.

To add to the many woes of agriculture, we also have the unprecedented reverse migration of lakhs of migrant labourers, fleeing locked-down cities, and closed factories and workshops. This burden, too, will have to be shouldered by agriculture for the next couple of years at least, as there is little likelihood of a quick return of the majority of these migrants to industrial or service sector employment.

At the same time, domestic supply of all agri-goods, except oilseeds, is in surplus. We are faced with the prospect of further downward pressure on demand for basic agri-products in the domestic market, arising from the closure of lakhs of eateries, restaurants, hotels and catering establishments, factory canteens, hostels, etc, at least for the next few months. It may be a year or more before we can expect this demand to be restored to pre-Covid levels.

Widely reported layoffs and pay cuts, and restrictions on the functioning of industrial units as well as construction, transport, etc, will force millions of households to curb consumption and rein in expenditure on food. Even the hitherto robust demand for milk and poultry products has been adversely impacted, with an immediate blowback visible in the form of lower procurement prices for primary producers in these value chains.

In this scenario, an export-led agricultural strategy offers an inclusive pathway towards growth, income, employment and rural poverty reduction. One may argue that India is already a major exporter of items like frozen buffalo meat, marine products like shrimp, and basmati rice, besides a varied basket of goods ranging from grapes to spices. However, exports of agri-products in 2018, at $38 billion, made up only 11.76 % of India’s total exports and hardly 2.5 % of global agri-trade. In contrast, a small country like Holland exports $100.5 billion worth of agri-products every year and commands a 6.7% share of the world trade in agri-goods.

We need a proactive agriculture export strategy, covering every category of agri-produce available in India: field crops, horticulture, dairy, livestock, poultry, and fisheries. Today, we are in a position to both address our needs of food security, and become reliable suppliers in the international market. This is not to say we can start exporting from the next marketing season. Too much needs to be done in terms of aligning our cropping systems with globally accepted production, storage, packaging, transportation, and handling norms. Our farmers and supply chains will need to reorganise and reorient themselves to address a global market and its attendant challenges.

By setting a goal to gradually open up all agri-produce to exports, the country can set an inspiring and exciting new horizon for itself. It introduces an entirely new dimension to how investments in agriculture by farmers, cooperatives, and farmer producer organisation (FPOs), SHGs, supply chain agents, technology providers and value addition players—and, most of all, the government—will be viewed.

The choice to move toward export-oriented agriculture also provides a chance to play up our most under-leveraged strengths: The millions of family-run farms spread across the second largest arable area in the world, which is situated in 15 agro-climatic zones, has abundant labour, and a long tradition of farming that makes for quick adoption of new technologies. No other sector offers such an inclusive and pan-India potential for reviving growth, employment, and incomes in the next 18-24 months.

The author is former IAS officer and CEO of Kamatan, an agritech start-up. Views are personal.

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