7 PM | Road to agriculture and rural prosperity | 8th July, 2019

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Context: How Agriculture and rural development are important to maintain the economic growth of India.

India is predominantly a rural country with two third Population and 70% workforce residing in rural areas. Rural economy constitutes 46 per cent of national income. Despite the rise of urbanization more than half of India’s population is projected to be rural by 2050. Thus growth and development of rural economy and population is a key to overall growth and inclusive development of the country.

Why the government should focus on agriculture and rural sector?

• Around two-thirds of India’s population is in rural areas and a large proportion of this population lives in abject poverty. According to the ICE 360° Household Survey conducted in 2016, of the bottom 20% of India’s income quintile, 89% live in rural areas.
• India is a global agricultural powerhouse. It is the world’s largest producer of milk, pulses, and spices, and has the world’s largest cattle herd (buffaloes), as well as the largest area under wheat, rice and cotton. It is the second largest producer of rice, wheat, cotton, sugarcane, farmed fish, sheep & goat meat, fruit, vegetables and tea. The country has some 195 m ha under cultivation of which some 63 percent are rain fed (roughly 125m ha) while 37 percent are irrigated (70m ha). In addition, forests cover some 65m ha of India’s land. Even though India is largest producer in cereals and dairy products but the per capita average consumption is less than world’s average. So the government should focus on increasing the per capita availability of food grains by increasing productivity.
• According to NITI Aayog discussion paper “changing structure of rural economy in India implications for employment and growth” Contrary to the common perception about predominance of agriculture in rural economy, about two third of rural income is now generated in non agricultural activities. Similarly, it looks amazing to find that more than half of the value added in manufacturing sector in India is contributed by rural areas.
• Between 2001 and 2011, India’s urban population increased by 31.8 per cent as compared to 12.18 per cent increase in the rural population. This led to unplanned rural to urban migration, particularly in search of better economic opportunities, is putting severe pressure on urban amenities and forcing a large number of low wage migrants from rural areas to live in unhygienic and deprived conditions. Thus, to check unplanned migration from rural to urban areas and to improve socio economic conditions of vast majority of population in the country, there is a need to make rural economy stronger and create employment opportunities in rural economic activities.
• Rural Segment Quickly Catching Up: The Fast Moving Consumer Goods (FMCG) sector in rural and semi- urban India is estimated to cross US$ 100 billion by 2025. According to the third annual edition of Accenture Research, “Masters of Rural Markets: From Touch points to Trust points – Winning over India’s Aspiring Rural Consumers,” rural consumers are particularly aspiring or striving to purchase branded, high quality products. Consequently, businesses in India are optimistic about growth of the country’s rural consumer markets, which is expected to be faster than urban consumer markets.

Budget interventions with respect to agriculture and rural sector:

• Budget 2019-20 ensured to form 10,000 new Farmer Producer Organizations, to ensure economies of scale for farmers over the next five years.
• Fishing and fishermen communities are closely aligned with farming and are crucial to rural India. Through a focused Scheme – the Pradhan Mantri Matsya Sampada Yojana (PMMSY) – the Department of Fisheries will establish a robust fisheries management framework. This will address critical gaps in the value chain, including infrastructure, modernization, traceability, production, productivity, post-harvest management, and quality control.
• The SFURTI envisions setting up 100 new clusters during 2019-20 which should enable 50,000 artisans to join the economic value chain.
•  The Scheme for Promotion of Innovation, Rural Industry and Entrepreneurship’ (ASPIRE) has been consolidated for setting up of Livelihood Business Incubators (LBIs) and Technology Business Incubators (TBIs). The Scheme contemplates to set up 80 Livelihood Business Incubators (LBIs) and 20 Technology Business Incubators (TBIs) in 2019-20 to develop 75,000 skilled entrepreneurs in agro-rural industry sectors.
• Government will work with State Governments to allow farmers to benefit from e-NAM. The Agriculture Produce Marketing Cooperatives (APMC) Act should not hamper farmers from getting a fair price for their produce. Ease of doing business and ease of living both should apply to farmers too.
• The government and people shall go back to basics on one count: Zero Budget Farming. We need to replicate this innovative model through which in a few States farmers are already being trained in this practice. Steps such as this can help in doubling our farmers’ income in time for our 75th year of Independence.
• Government Propose to expand the Women SHG interest subvention programme to all districts. Furthermore, for every verified women SHG member having a Jan Dhan Bank Account, an overdraft of 5,000 shall be allowed. One woman in every SHG will also be made eligible for a loan up to 1 lakh under the MUDRA Scheme.

Issues and measures related to above budget interventions:

• Women SHG and MUDRA scheme: Pradhan Mantri Mudra Yojana (PMMY) is a flagship scheme of Government of India to “fund the unfunded” by bringing such enterprises to the formal financial system and extending affordable credit to them. The average of sanctioned loans under Mudra Yojana comes at Rs 46,530 while that of disbursed amount is Rs 45,034. This amount could not be considered enough to launch a start up that could provide jobs to others. This amount is also much lower than the average per capita income of Indians – Rs 1.11 lakh for 2017-18, according to advance estimates of the Central Statistics Organization (CSO). So the government should ensure that the budgetary announcement of 1lakh credit to women should reach on time.
• Farmer Producers Organization: An FPO, formed by a group of farm producers, is a registered body with producers as shareholders in the organization. It deals with business activities related to the farm produce and it works for the benefit of the member producers. These organizations face challenges such as funding, capacity building and value chain investments. Domestic policies and laws also needed to be addressed for growing the FPOs. To harness the economies of scale by forming FPO, government and RBI shall frame guidelines for the proper ecosystem to develop FPOs.
• Zero Budget Natural Farming (ZBNF): The word ‘budget’ refers to credit and expenses, thus the phrase ‘Zero Budget’ means without using any credit, and without spending any money on purchased inputs. ‘Natural farming’ means farming with Nature and without chemicals. According to Subhash Palekar, in his home state of Maharashtra, a considerable number of followers have returned to practicing chemical farming as they failed to improve their incomes with ZBNF, because India has 16 agro-ecological climatic zones where each zone has its own specific characteristics. ZBNF has been in vogue on a small scale across several farms in the country for over a decade now, but recently successful in Andhra Pradesh. So the government should replicate the same success story throughout the country.
• e-NAM and APMC act: National Agriculture Market (eNAM) is a pan-India electronic trading portal which networks the existing APMC mandis to create a unified national market for agricultural commodities. The eNAM portal, launched by the Centre in April 2016, has 45.4lakh farmers and 417mandis across the country registered with it. This number is disappointing, given that there are more than 13crore farmers in India. To implement it, each State has to first amend its APMC Act to make a provision for electronic auction as a mode of price discovery, allow a single license across the State and have market fees levied at a single point. Currently, only 13 States have enacted the necessary amendments. So the central government should persuade state governments to implement Agricultural produce and livestock marketing (promotion and facilitation) Act 2017, as early as possible.
• SFURTI: SFURTI is Scheme of Fund for Regeneration of Traditional Industries. To organize the traditional industries and artisans into clusters to make them competitive and provide support for their long term sustainability and economy of scale. While traditional industry has huge potential, but this industry is faced with myriad challenges arising from the absence of patronage, lack of quality Raw Material; want of working capital, poor infrastructure (education, roads, etc.) and the influx of cheaper substitutes. So government should encourage the E-commerce players to participate and to promote the growth of traditional industries.

Way forward: India is a land of villages, and in villages nearly 50% population dependent on agriculture and related activities. Taking the above mentioned measures, both the governments (central and state) can work towards a prosperous rural India with agriculture in focus.

Source: https://www.thehindu.com/business/agri-business/budget-2019-the-road-to-agriculture-and-rural-prosperity/article28307177.ece