• UGI USER
  • Mar 05, 2024
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DON’T LET INDIAN AGRICULTURE TURN INTO AN UNENDING TRAGI-COMEDY

Syllabus:

  • GS 3 : Agriculture Issues related to Direct and Indirect Farm Subsidies and Minimum Support Prices; Public Distribution System.

Focus:

  • Indian agriculture, despite its declining share in the economy compared to previous decades, remains a vital sector with deep societal resonance, as evidenced by the recent resurgence of agricultural protests near Delhi’s outskirts.
  • Lal Bahadur Shastri’s iconic slogan ‘Jai Jawan, Jai Kisan’ still reverberates in the collective consciousness, underscoring the enduring importance of agriculture in India’s cultural and economic fabric.
Source: India Today

Significance of Indian Agriculture:

Agriculture in India holds a special place, symbolizing the backbone of the nation’s economy and serving as a lifeline for millions of farmers and rural communities.

National Income Impact: Historically, agriculture contributed 48-60% to India’s GDP but decreased to 26% by 2001-2002, signaling a shift in its economic role.

Employment Generation: Agriculture remains a primary employer for two-thirds of India’s workforce, surpassing other sectors in providing jobs.

Food Provision for Population Growth: Addressing the surge in population, agriculture must consistently boost food production to meet the rising demand and avoid potential crises.

Capital Formation Contribution: As the largest industry, agriculture holds the potential to significantly contribute to capital formation, crucial for overall economic development.

Raw Material Supply to Industries: Acting as a vital supplier, agriculture provides raw materials to agro-based industries, influencing their development and sustainability.

Rural Purchasing Power and Industrial Growth: Increased rural purchasing power, especially post the green revolution, positively impacts industrial development by fostering demand for products.

 Trade and Commerce Impact: Agriculture plays a pivotal role in both internal and external trade, contributing to the expansion of India’s service sector.

 Government Revenue Source: A major revenue source for governments, agriculture not only contributes through produce but also allied activities like animal husbandry and transportation.

 Labour Force Supply: Agriculture serves as a crucial supplier of skilled and unskilled labour for various sectors, including construction and manufacturing.

 Export Sector Advantage: Enjoying competitive advantages, Indian agriculture thrives in the export sector due to low labour costs and self-sufficiency in inputs, enhancing global competitiveness.

Government Interventions in Agricultural Trade:

  • Government Budget Allocation for Agriculture (2024-25):
  • The Indian government has allocated over ₹4 trillion in its budget for agriculture during the fiscal year 2024-25.
  • This substantial allocation covers various subsidies, schemes, and credit facilities aimed at bolstering the agricultural sector and aiding farmers.
  • Credit Allocation to Agriculture:
  • Indian banks are obligated to allocate a substantial portion of their lending to the agriculture sector.
  • In 2022, nearly 12% of the total credit extended by banks went to agriculture.
  • While this policy demonstrates the government’s commitment to supporting agriculture, it also imposes an implicit burden on other bank customers.
  • The incremental cost of extending agricultural loans is distributed across all sectors, impacting non-agricultural customers as well.
  • Comparison with International Standards:
  • When compared internationally, India’s investment in agriculture stands out significantly.
  • The budgetary allocation for agriculture in India far exceeds that of both developed and developing countrieswhile.

Impact of Government Intervention:

  • The government actively intervenes in agricultural trade through measures such as tight control over exports and price stabilization.
  • The primary goal is to ensure stability in domestic prices and safeguard the interests of both consumers and producers.
  • Despite occasional price volatility, India’s policy framework is designed to maintain stable prices for consumers.
  • This stability is achieved through effective government interventions in agricultural trade.
  • The policy framework not only focuses on consumer interests but also ensures predictable outcomes for farmers.
  • By implementing measures to stabilize prices, the government safeguards farmers’ livelihoods and provides them with a sense of security.

Challenges in Agricultural Spending:

  • Inefficient Allocation: Agriculture spending faces challenges related to inefficient allocation of resources, leading to suboptimal outcomes in terms of productivity and sustainability.
  • Lack of Targeting: There is a lack of proper targeting in agriculture spending, with a significant portion of funds often failing to reach the intended beneficiaries, particularly small and marginalized farmers.
  • Corruption and Leakages: Corruption and leakages in the distribution of agricultural subsidies and benefits pose significant challenges, resulting in funds being diverted away from their intended purposes.
  • Dependency on Subsidies: The heavy reliance on subsidies in agriculture spending creates dependency among farmers, inhibiting innovation and productivity growth in the sector.
  • Limited Access to Credit: Despite the availability of credit facilities, many small and marginal farmers struggle to access formal credit due to stringent eligibility criteria and bureaucratic hurdles.
  • Fragmented Policies: Fragmented policies and lack of coordination among different government departments and agencies lead to inefficiencies in agriculture spending and duplication of efforts.
  • Inadequate Infrastructure: Insufficient investment in rural infrastructure, such as irrigation facilities, storage facilities, and market linkages, hampers the effectiveness of agriculture spending and impedes overall sectoral growth.
  • Climate Change Impact: The adverse effects of climate change, including erratic weather patterns and natural disasters, pose additional challenges to agriculture spending by necessitating investments in climate-resilient technologies and practices.
  • Market Distortions: Government interventions, such as minimum support prices (MSPs) and export restrictions, can create market distortions and disrupt the natural price mechanism, affecting the efficiency of agriculture spending.
  • Limited Research and Development: Inadequate investment in agricultural research and development (R&D) limits the adoption of modern technologies and best practices, constraining the impact of agriculture spending on productivity enhancement.
  • Diminishing Share of Agricultural Income: The diminishing share of agricultural income in rural households underscores the need for more effective and targeted agricultural spending.

Way Forward / Proposed Solutions:

  • To address the targeting issue and ensure more equitable distribution of benefits, a paradigm shift in agricultural expenditure is necessary, with a focus on targeted direct cash transfers (DCT) to agricultural households.
  • Converting a significant portion of the budgetary outlay into Direct Cash Transfer (DCT) could provide more effective poverty relief compared to the current system of subsidies and schemes.
  • Additionally, devolving agricultural subsidies to states through a formula similar to tax devolutions would enable local governments to design bespoke support mechanisms tailored to the specific needs and challenges of their respective regions.

Conclusion:

  • Indian agriculture stands at a critical juncture, with the need for transformative reforms to address persistent challenges and ensure sustainable growth.
  • By repurposing agricultural expenditure through targeted direct cash transfers and empowering local governments to devise region-specific solutions, India can mitigate the risks of agricultural distress and foster inclusive growth in the sector.
  • Without such reforms, Indian agriculture risks becoming a long-running tragi-comedy, highlighting the urgency of decisive action to safeguard the interests of farmers and rural communities.

Source:

https://www.livemint.com/opinion/online-views/we-must-not-let-indian-agriculture-turn-into-an-unending-tragicomedy/amp-11709557696728.html

Mains Practice Question:

Indian agriculture, despite its historical significance, is facing numerous challenges that hinder its growth and sustainability. Analyze the government’s interventions in agricultural trade and the impact of these measures on the sector.