The finance minister while unveiling the Budget FY17 declared the government’s ambition to double farmers’ income in five years. Many have questioned if it is realistically possible to achieve this feat as it requires total real income to grow at around 25% a year for the next five years. Be that as it may, the government must be applauded for putting the focus back on the agriculture sector at a time when rural wage growth is on a decline.But what efforts are needed to give a thrust to the stagnant agriculture sector? While we mostly talk about monsoon, technological upgradation, minimum support price and various input subsidies; the rural-urban digital divide tends to get neglected.
Farmers and end- consumers in India are connected with a long value chain which is characterised by several stakeholders and this distance is increasing because of the poor agricultural marketing and rent seeking behavior of players involved in this chain. Inefficient agricultural marketing is a reflection of poor dissemination of technology in the country. Ability of farmers to reach market is possible through efficient network of Information and Communication Technology (ICT) which increases the farmers bargaining power and provides a chance to interact with trader and government agencies. ICT Development Index (IDI) 2015, published by UN International Telecommunications Union, measures the level of information and communication technology access. It ranked India a low 131 out of 167 nations. This is reflective of the poor access of the population to ICT services. Although India has made tremendous progress in raising its telecom density, the country remains far behind when it comes to providing internet access. The report noted that 43.4% of the global population has access to internet. In contrast, only 18% Indians have access to the internet.
Does India’s ICT penetration match its level of development? To analyse this we undertake a cross-country comparison (for 150 countries) plotting the IDI value against a country’s level of development using the log of per capita GDP at constant prices (figure 1). As countries become richer, the access of households to ICT services increase, as reflected in the upward sloping trend line. India falls below this trend line; for its level of development, ICT penetration is inadequate.
Next, we compute IDI values separately for urban and rural India and plot it against per capita income in urban and rural India. Once we do it, the stark rural-urban digital gap becomes evident. Urban India is close to the trend line whereas rural India falls way below it. It becomes evident how strongly we need to increase rural population’s access to ICT.
What would be the impact of ICT penetration on agricultural income level? To check this we undertake cross-country comparison (for 150 countries) plotting log of agricultural value added per worker added against IDI (figure 2). As ICT penetration increases, workers become more productive and agriculture income rises. India is close to this trend line implying that agricultural income at present is consistent with the level of ICT penetration. But most important, it is indicative of the fact that the agricultural income would go up if India could increase its ICT penetration.
So, what would happen if we are successful in raising ICT penetration in rural India consistent with its level of income? First, the IDI value for India improves from 2.69 to 3. Second, our international ranking would move few notches up up from 131 at present to 124. Third, and most critical one, the per capita agricultural income would go up by nearly 25%. This translates into per capita rural income increasing from Rs 40,772 (as per 2011-12 data) to nearly Rs 50,000. Thus, digitisation of agricultural sector can play a significant role in increasing employment opportunities, improving the standard of living in the agricultural sector and reducing the risk and uncertainties that our farmers have to face at present.
In this background, it is important for the government as well as the private sector to take initiatives to empower our rural population with the latest information and communication technologies. The launch of the National Agriculture Market (e-NAM) is a move in the right direction. Equally important is successful and efficient implementation of previously started projects like National e-Governance Plan, National Knowledge Network, National Optical Fibre Network, digital cities, etc. which will help in digital inclusion and empower the citizens to eradicate the digital divide. Also, the private sector too will have to play a key role to compliment government’s efforts. The competition from private players will not only bring efficiency into the processes but can also help in faster and greater adoption of digital services in the remote and rural areas.
(Anand is with the Indian Economic Service and is a research officer, department of economic affairs, MoF, and Sharma is MSc (Economics) with specialisation in agribusiness, Gokhale Institute of Politics and Economics. Views are personal)