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Agriculture In India Is At The Cusp Of A Transformation

The Government of India has enacted three Bills that are expected to play an instrumental role in effecting a structural transformation in Indian agriculture.

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The agriculture sector is criti­cal for the Indian economy con­tributing to ~15 per cent of the country’s GDP and employing half of the country’s working pop­ulation. Despite the fall in GDP in the April to June quarter owing to Covid-19, the agricul­ture sector managed to clock up a growth of 3.4 per cent over the same period, as produc­tion continued with far less disruption than in many other sectors. Even export of essential agri-commodities for the cumulative period of April-September 2020 has seen a marked increase compared to the same period last year . However, the sector continues to have significant challenges which have adversely affected the farm sector and farmer incomes. 

While a set of challenges are structural in nature, most of the other challenges have ema­nated on account of the pandemic and have repercussions of varied complexity across the agriculture value chain. Acute shortage of labour, reverse migration, non-availability of transportation and logistics infrastructure were some of the unforeseen challenges that the stakeholders across the value chain wit­nessed. The lockdown that was imposed due to the pandemic delayed the harvest of Rabi crops because of non-availability of labour, agriculture equipment (harvesters, thresh­ers, tractors, etc.), transport facilities as well as restrictions on movement. The disruption in the supply chain resulted in losses due to crop damage, despite a favourable climate and a bumper harvest. This in turn affected the working capital requirements of farmers and their profitability which had a spillover effect on the Kharif season as well. In addition, the agriculture supply chain was reeling under the age-old structural issues fraught with inef­ficiencies that have had an adverse impact on output, productivity and quality of produce. 

Given that agriculture is the mainstay of rural India and there is a significant percent­age of small and marginal farmers and MS­MEs who are involved in the agribusiness value chain, the Government of India as part of its Atma Nirbhar Bharat Abhiyan (Self-reliant India initiative), put significant focus on reviving the sector that reflected in a host of announcements towards strengthening farm gate infrastructure, agro-logistics, sup­ply chain integration through a cluster- based approach, driving technology adoption and improving working capital issues. 

In addition, the Government of India has enacted three Bills that are expected to play an instrumental role in effecting a structural transformation in Indian agriculture.

l The Farmers’ Produce Trade and Com­merce Bill provides for the purchase and sale of agricultural commodities without payment of market fees outside the mandis. It aims to provide direct market access and to enable farmers to sell and purchase farm produce per their choice, so that a fair price may be realised. 

l The Farmers’ Agreement on Price Assur­ance and Farm Services Bill provides a broad framework for facilitating contract farming and creates a direct linkage between the farm­ers and the private sector. 

l Lastly the Essential Commodities Act, which has provisions for relaxing storage re­strictions and pricing, except under excep­tional circumstances, should facilitate private investment in warehousing and food process­ing infrastructure. 

While these long pending measures ap­parently augur well for various stakeholders, especially farmers and private-sector players associated with the agribusiness value chain, implementation seems to be a big hurdle in the face of the ongoing protests from the farm­ing community. A fine balance between the market led and institutional support mecha­nism can help allay the fears of the farming community and enable smoother implemen­tation of the laws to usher in the much-needed reforms in the Indian agriculture sector. 

Expected economic recovery in FY 2021 can bring in some cheer for the agriculture sector as well. Gradual easing of the lockdown in phases is expected to bring back normalcy in the supply chain and thereby reduce the post-production/ post-harvest losses while giving a boost to domestic demand, specially from out-of-home consumption. Agriculture exports from India is also expected to get a fillip, due to the recently formulated Agricul­ture Export Policy which provides for cluster-based approach for export-centric farming of specific products across the country and focused interventions in these clusters. 

Government initiatives to augment farm­ers’ income through promotion of around 3,500 commodity-specific FPOs over the next three years under the “One-Product One-Dis­trict” concept are likely to play an instrumen­tal role in establishing forward and backward linkage within clusters. Export Promotion Fora (EPF), set up under the aegis of APEDA are expected to boost export of various agricul­ture/ horticulture products. The action plan formulated by the government in focusing on value addition and import substitution, along with building a robust back end infra­structure, augurs well for agriculture exports from India. 

While consumer spending on food and non-alcoholic drinks as a category is expected to go up , there will be increased focus on food safety and hygiene. The salience of traceability and quality of the produce cannot be undermined, given the difficulty in adopting traceability in the supply chain specially from the farm gate to the processing centres. This will see integra­tion in the supply chain, with increased private sector participation that will play a pivotal role in equipping farmers with good agricultural practices, optimal use of inputs and technol­ogy adoption. 

Technology will be a critical enabler in solving the critical issues in the supply chain. While large corporates are leveraging tech­nology to drive efficiency through backward integration in the supply chain, there has also been a spurt in the growth of the startup ecosystem in the agro tech space. Agri-tech models related to Agri-marketplaces, farm advisory, farm mechanisation; logistics and storage including cold chain solutions, con­tracting procedures, predictive analytics for weather forecasting, pricing, market linkage through farm-to-fork supply will see greater adoption. 

The agriculture sector in India is thus at the cusp of a transformation which will have a positive impact on the economy.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Anand Ramanathan

Partner, Deloitte India

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