“First Trade Minimum Price” (FTMP): A model to increase farmer’s income

Synopsis: Industrial revolution 4.0, will reduce employment opportunity. The “First Trade Minimum Price” model can be used for increasing farmer’s income.

How Industrial Revolutions are changing employment dynamics?

• The subsequent three Industrial revolutions reduced the dominance of the agriculture sector. They made the service and manufacturing sector dominant.
• This helped the agrarian workforce to shift to secondary and tertiary sectors of the economy.
• The advent of the Industrial Revolution (IR) 4.0 will make this situation more complex.
• The use of new technologies in IR 4.0 will lead to job losses in the service and manufacturing sectors. New techs include Artificial Intelligence, robotics, cognitive analytics, 3D printing, genomics.
• Thus, the industries employing a huge population from the agriculture sectors will have a reduced capacity for employment.

Present status of Agriculture sector 

• However, according to the FAO, about 60 percent of the global population, directly or indirectly, is still dependent on agriculture.
• Yet, its contribution to the world GDP is just about 4 percent. Whereas, the contribution of secondary and tertiary sectors to the economy is 90%.
• In India, the contribution of the agriculture sector to GDP is 12-15 percent. Though it is higher than the world average, it is still much less, compared to the contribution from other sectors of the economy.
• Centre and state governments are continuously trying to improve the economic status of farmers. Yet, their efforts are unable to deliver a sustainable increase in their per capita income.

Thus, there is an urgent need to think about the way to avoid the possible employment crisis of the future. It involves increasing the productivity of the agriculture sector and farmer’s income.

What is the solution to improve the farmer’s income?

The author suggests a new economic model for fixing farm prices. If this model is employed it will address the issue of the agrarian economy, and will also retain the population in the agriculture sector. Also, it will make agriculture more prosperous by bringing rural average household income closer to those engaged in manufacturing and services sectors.

• The author proposes for “First Trade Minimum Price” (FTMP). According to this model, the local farming community will fix the prices of all the agricultural primary goods on a day-to-day basis or periodically.
• Also, this will make it mandatory for the first trader to procure the commodity at a price, not below the price fixed by the above criterion.
• He also suggests the use of robust digital technologies for the exercise of fixing prices.
• This proposal is based on the present market-based pricing of services and products.  Here, the prices of products or services are determined and decided by the manufacturers or providers.
• Similarly, the farming community also can decide the prices of their products. It will increase their per capita income. This will also help to retain the agriculture workforce in the farm sector thereby decreasing the unemployment rate.