Shaktikanta Das, Governor, Reserve Bank of India (RBI), in a latest speech talked about some dynamic shifts that are underway in the Indian economy. He highlighted that the fortunes are shifting in favour of the farm sector and Indian agriculture has witnessed a distinct transformation. The total production of food grains reached a record 296 million tonnes in 2019-20, registering an annual average growth of 3.6 percent over the last decade. Total horticulture production also reached an all-time high of 320 million tonnes, growing at an annual average rate of 4.4 percent over the last 10 years. India is now one of the leading producers of milk, cereals, pulses, vegetables, fruits, cotton, sugarcane, fish, poultry and livestock in the world. Buffer stocks in cereals currently stand at 91.6 million tonnes or 2.2 times the buffer norm.
Shifting the terms of trade in favour of agriculture is the key to sustaining this dynamic change and generating positive supply responses in agriculture. Experience shows that in periods when terms of trade remained favourable to agriculture, the annual average growth in agricultural gross value added (GVA) exceeds 3 per cent. Hitherto, the main instrument has been minimum support prices, but the experience has been that price incentives have been costly, inefficient and even distortive. India has now reached a stage in which surplus management has become a major challenge. We need to move now to policy strategies that ensure a sustained increase in farmers’ income alongside reasonable food prices for consumers.
An efficient domestic supply chain becomes critical here. Accordingly, the focus must now turn to capitalising on the major reforms that are underway to facilitate domestic free trade in agriculture. First, the amendment of the Essential Commodities Act (ECA) is expected to encourage private investment in supply chain infrastructure, including warehouses, cold storages and marketplaces. Second, the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 is aimed at facilitating barrier-free trade in agriculture produce. Third, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020 will empower farmers to engage with processors, aggregators, wholesalers, large retailers, and exporters in an effective and transparent manner.
He stated that with this enabling legislative framework, the focus must turn to (a) crop diversification, de-emphasising water-guzzlers; (b) food processing that enhances shelf life of farm produce and minimises post-harvest wastes; (c) agricultural exports which enable the Indian farmer take advantage of international terms of trade and technology; and (d) public and private capital formation in the farm sector. The Committee on Doubling Farmers Income expects the total quantum of private investment in agriculture to increase from Rs 61,000 crore in 2015-16 to Rs 139,424 crore by 2022-23. All these initiatives have opened a whole new world of opportunities for industry and businesses. The consequential creation of jobs and augmentation of farmers’ income can indeed be enormous.
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