Agri-sector Can Thrive Under Enabling Ecosystem

The agri-system has proved to be an ecological, social, and financial failure. It continues to be vulnerable and fragile. The government funds survival. Not growth.

We have invested in policies that were made to fail. Our competitive advantage lies in agriculture. Farming can be lucrative and sustainable if the policies are agri-centric and ecosystem remodelled.

We can learn from China.

Subsidy & waivers keep them alive. Gasping nevertheless

While the sector has been neglected the sops to the farmers has been increasing. Political parties of all hues plough, sow, reap, and harvest power at the cost of the farmer’s distress.

The opaque ‘trivialities’ half-hearted ‘waivers’, and populist ‘support’ (while needed in the absence of the enabling ecosystem) has aggravated the farmer’s plight. Both the state and the market exploit them. It kills the spirit of the small farmers, often takes their lives too.

Our farmers may well be entrepreneurs. They are brave, toil their life away; and like our MSMEs are struggling, and forever in the survival mode. Most have lost hope.

Many have no faith in the system either.

A Crux insight across 16 states, covering 18,000 farmers reveals ‘what could be; and if’. Over 80% believe farming can be viable for many, though not for all. Farmers are realistic. Farm size of more than 3 hectares can generate INR 15,000 – 25,000 a month depending on the ‘cultivable’ land, soil quality, access to irrigation and distance from markets.

Over 85% marginal farmers earn less than Rs 7000 a month.

Governments talk tall, policies neither purposive nor agri-centric

The government must go beyond ‘support’. Farmers are entrepreneurs and seek growth, not sustenance. Growth oriented policies and holistic investment in enabling ecosystem leverages opportunities, triggers growth, prompts a virtuous cycle, catalysing rural development. The Crux research says it well. Every Rupee invested in agri-economy yields a 15 multiplier. The social benefit is many times more, manifesting across several value drivers.

Ecosystem must incentivize, equally facilitate, even encourage ‘robust & rewarding’ public-private investment in infrastructure, irrigation, warehousing, utilities etc. Farming needs mechanisation for higher productivity, better yield. Farmers lack techniques to adopt hybrid crop. They have neither the resources nor the ‘will & skill’ to invest in their ‘enterprise’.

The Crux study, across investors’ highlights; it is not the lack of confidence in the farmers but a lack of faith in the ecosystem, and the indifferent attitude of the government that discourages investment, deprives farmers. Government must ‘open’ public investment, encourage crowd funding to spur investment.

Government solving wrong problems

To its credit, the government’s push for ‘Farmers’ Producer Organizations’, a concept that creates and, in several ways, models self-help group at its infancy and a joint stock company eventually is a step in the right direction. The goal incentivises farmers to collaborate within, and with other agri stakeholders outside, to emerge as a sustainable, robust economic & legal entity.

The FPO model ‘elevates’ farmers to the core of the agri-ecosystem. Today they are side-tracked. The agri-market is so deviously designed that the producer i.e. the farmer has absolutely no role in pricing, marketing or cropping. Vested interest aided by state apparatus artificially inflates MSPs which benefits the large farmers, and influential middlemen, bleeding the rest. Consumers pay higher price.

FPOs can be a game changer if implemented well. It will attract investment and ‘next’ generation. The sector can thrive.

Top 5% take home 95% of agri profit

India is an unequal society, agri landscape even more. The landholding is fragmented, and ‘sprinkled’. Small & marginal cultivate only one crop; own an average of 0.6 hectares. 65% hold evens less. 150 million

farmers hold 86% of the land, but ‘own’ only 47% of the crop area. Inequality is on the rise; losing half their land every 6 years due to ‘emergency’ fund, family split and inheritance.

Farmers’ ‘real’ income (indexed for inflation, growth) has been declining, while the input cost and associated ‘risk’ (diminishing productivity environment) is rising. Under the present agri ecosystem it will take twenty years for the farmers to match the income of lowly paid and expansively exploited migrant labour.

Inadequate and inefficient farm insurance protects only a quarter of the farmers.

Agri reforms is an economic multiplier: explore and exploit

The new Act will expand the market, resulting in better prices. Reforms must nudge & incentivise to collaborate, pool in resources, effort and expertise. Collaboration gives them strength and courage to diversify into high-value crops; intensify focus on farm value-adds. Size gives them muscle to mitigate risk; assuage vagaries of nature. Farmers attain, even seize both the marketing & purchasing power to influence ‘demand & supply’ uncertainties of the agri- sector.

They acquire a say in the agri value cycle. Today they have none.

However much more needs to be done beyond the reforms. Tech-enabled platforms can provide equity and efficiency. Access to data will help plan better, ‘crop’ relevant, ‘price’ right & procure economic order. Technology pivoted robust framework, and effective linkages will provide capital, reduce procurement & transaction costs and better yield.

Agri sector can attract agri-tech companies, encourage start-ups & agri-entrepreneurs, and create jobs.

Policymaking needs a mind-set shift

We need to clearly recognise the entrepreneurial spirit of farmers. They are poor but not ‘bechera’. Farmers suffer inefficient ecosystem, ineffective policy framework.

Policymakers over the decades have addressed the agri challenge with a narrow focus. It has been value depreciating.

Farming can be growth business if policies are holistic, focused on growth & sustainability; centred as much around the farmers as around the agri-ecosystem. Agri-system needs both the hard and the soft infrastructure, an enabling ecosystem that nourishes the small and strengthens the large farmers.

While the PM Modi’s farm acts are reformist and truly transformational, however he will be the first one to recognise it is only the ‘beginning’. He needs to intensify his effort in making agri sector a growth opportunity.

Farming impacts the lives of 500 million. Their growth is worth a lot more.