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HomeEconomy and FinanceModi government's much needed focus on India's farm sector

Modi government’s much needed focus on India’s farm sector

There have been a lot of firsts for this government as it is for the first that a government has recognized the need to resolve some of the challenges that our agricultural sector has faced from decades.

India’s farm sector has witnessed a systematic decline since the 1991 reforms as its importance in GDP has declined rapidly while its importance as India’s largest employer continued. Successive governments have ignored this anomaly while they gave mere lip service to the farmers. Agricultural sector regained its focus post 2014 when NDA came into power as it realized the need to revive India’s agricultural sector. The two successive droughts in 2014 and 2015 further demanded an urgent policy focus towards the farmers and the government responded to it by taking a holistic view of the situation at hand.

The first decision taken by the government was to reform India’s urea policy in 2014. The decision to coat urea with neem resulted in complete removal of urea shortage from the country. As a result, Indian farmers got an adequate supply of urea which was a first in India. It was believed that the only way to reduce urea shortage was to improve urea’s production or import it from other nations, but most people ignored the fact that the extent of leakage of urea was a major reason behind this shortage.

After providing adequate urea at subsidized rates to the farmers, the government recognized the need to educate farmers about their soil and its nutrients. This was important to ensure that they selected the crop that was fit for production on their soil which would be instrumental to improve the yield of their crop along with their income. Till date, the government has issued over 18 crores soil health cards to farmers and this shows the extent of the soil health care program that was launched by the NDA.

The government also augmented rural credit by launching the Kisan Credit Cards- a scheme that was supposed to be integral towards formalizing credit in the rural areas. This scheme came with the backdrop of Jan Dhan Accounts that made universal access to bank accounts at the household level a reality. It is not just provisioning of formal credit that saw the governments concentrated focus as the government through its experience in first two years realized that droughts have a significant and long-term effect on the lives of India’s farmers. As a consequence, it launched one of the world’s largest crop insurance program to provide some form of support to farmers from such uncertainties. The two successive droughts prompted the government to get into action mode and ensure that the farm sector which had been so neglected in the past was given its due.

The process of reforms in the agricultural sector also saw the government augment India’s irrigation projects in a mission mode. This was critical as access to water significantly impacts the profitability of the farm and reduces the dependence upon monsoon. This was followed up by establishing the e-NAM- India’s online national marketplace that will connect farmers directly with wholesalers of food grains. This is a long-term project that will be instrumental in ensuring that farmers can bypass the middlemen and sell directly to the wholesalers thereby improving their price realization. The government also recognized the need to ensure that farmers got their due with respect to the cost of production and it implemented the Swaminathan Committee’s recommendations while setting the Minimum Support Price for Kharif crops and later even for Rabi Crops in 2018-19.

However, it has been often highlighted that Price Policy has its own set of limitations in terms of providing income support to farmers. It was then argued that direct income support is a much more fiscally prudent and effective alternative than to provide mere price support. The policy of providing direct income support gained a lot of attention over the last couple of months as people explored an extension of the Rythu Bandhu scheme as a solution to bypassing the limitations of the price policy. The Rythu Bandhu Scheme has its own sets of limitations as it is linked to the size of land holdings and thus it has the potential to sharpen rural inequality. What was indeed required as argued by many, was a uniform transfer to poor farmers if not all of poor. The decision to provide income assistance of Rs. 6000 per annum is a historic decision in that direction as it is for the first time that the government is looking to provide direct income support to the farmers. This is historic in the sense that it is a departure from conventional policy wisdom which has failed to resolve the issue at hand for decades.

There have been a lot of firsts for this government as it is for the first that a government has recognized the need to resolve some of the challenges that our agricultural sector has faced from decades. The concentrated approach of the government to look at the complete picture- from procurement of seeds to the market while it made serious policy interventions to improve the life of the rural poor. No government in the past has shown such commitment towards India’s farmers and it is this commitment that will be instrumental in resolving some of the long-standing issues of this sector over the coming years.

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Karan Bhasin
Karan Bhasin is a political economist by training and has diversified research interests in the field of economics. He tweets @karanbhasin95.

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