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Thursday, April 15, 2021

A high growth plan for Indian agriculture

It requires a diversified approach that takes into account peculiarities and constraints of states, investment in infrastructure and linking farmer producer groups with markets.

Written by Shweta Saini , Ashok Gulati |
Updated: March 15, 2021 8:53:30 am
The study found that in the six states, three factors explained most of the agrarian growth.(Illustration: C R Sasikumar)

The centrality of agriculture in India goes much beyond its immediate employment contribution, where it engages close to 42 per cent of the country’s workforce. The sector not only feeds the large and growing Indian population but with its close interlinkage with poverty, it is best positioned to alleviate problems of malnutrition and hunger. In addition, agriculture supplies inputs for other industries and is critical for triggering a multiplier effect in the economy, where a financially empowered farming community triggers a demand-led growth, particularly for manufactured products and services. There is no doubt that the sector needs to grow not just for those employed in it but also for the economy as a whole.

But “how” to grow is the question? More specifically, one seeks a growth process that is not just more efficient, and inclusive of India’s small and marginal but is also sustainable — both financially and environmentally — and augments farmer incomes. But then comes the question of the diversity in Indian states, where they differ as much on endowments of factors of production like land and water as they do on access to market opportunities. They even differ in their vulnerabilities to climate and weather changes. Can a generic all-India agricultural strategy guide each state? Should the roadmap not be customised to the needs, vulnerabilities, and resource-base of each state?

In a recent publication from Springer Nature, Revitalising Indian Agriculture and Boosting Farmer Incomes, which we have co-edited with Ranjana Roy, strategies for six Indian states — Punjab, Madhya Pradesh, Gujarat, Uttar Pradesh, Bihar and Odisha —have been proposed. We studied each of these states to identify factors that contributed to their growth and issues which constrained it. In addition to suggesting customised solutions, we also identify best-practices for replication in other Indian states.

The study found that in the six states, three factors explained most of the agrarian growth. One, access to infrastructure — mainly irrigation and roads — two, diversification to high value agricultural products like fruits, vegetables, and allied activities like dairy and poultry, and three, price incentives or favourable terms of trade.

Graphic: Ritesh Kumar

Bringing markets closer to farmers and increasing the efficiency of the value-chains emerged as an important factor that explained agricultural growth in Gujarat (mainly cotton, groundnut, livestock), Madhya Pradesh (wheat, soybean, pulses), Odisha (livestock and fruits and vegetables), and Bihar (maize and livestock). Access to irrigation emerged as a critical factor of growth. By ensuring timely access to sufficient irrigation, states like Gujarat and Punjab could explain their high performances. Role of uninterrupted quality power too emerged important in this. Diversification of the agricultural basket of a state was found to strengthen a state’s agri-performance (Figure 1).

For the period between 2000-01 to 2015-16, we found that among the six states, GVO in agriculture grew the fastest in Gujarat at 9.1 per cent. About a quarter of this growth came from growth in livestock, followed by cotton and F&V sectors that each made about an equal contribution of 17 per cent. Madhya Pradesh with an average GVO growth of 8 per cent grew second fastest. Again, it was fruits and vegetables and livestock that together explained about 39 per cent of this growth. The lowest growth was observed in Punjab, about 35 per cent of this came from livestock sector and about 30 percent from cereals. Oilseeds contributed largest to growth in Gujarat (16.9 per cent) and Madhya Pradesh (12.5 per cent). Pulses made a substantial contribution only in case of MP (11.6 per cent) and sugar emerged an important growth driver in UP (11.6 per cent).

The requirement to undertake policy reforms, mainly related to marketing, emerged as a key driver and predictor of growth. We mapped (Figure 2) historical agricultural growth rate averages of Indian states against the state-wise ranks on the NITI Aayog’s Agricultural Markets and Farmer Friendly Reforms Index — AMFFRI, an index that evaluates Indian states on the extent to which each of them undertook required agri-reforms; a low AMFFRI rank implies the state is undertaking desired reforms. It was found that states that undertook reforms, and were thus ranked low on AMFFRI, witnessed a relatively faster agri-GDP growth rate (blue box) and states which did not undertake required reforms, and thus were ranked high on the AMFFRI (red box), witnessed relatively lower agri-GDP growth rates.

There were some exceptions: Karnataka, Haryana and Maharashtra. These states undertook reforms, and thus had low AMFFRI ranks, but they witnessed a low agri-GDP growth rate. This is likely to be attributed to the delayed effect of reforms on the agri-performance.

As a part of the roadmap, the book makes a case for states to move beyond production-centric approach to a value-chain approach with FPOs at its centre. It highlights importance and requirement of growing public investments in basic infrastructure, like roads, markets, power supplies, and agri-R&D. And finally, in the longer run, rationalising subsidies (both input and output) via direct income transfer is suggested, as that will not only empower farmer but will also give them right signals for efficient use of these resources (fertilisers, power, water). This will help put agriculture on a higher growth trajectory, augment farmers’ incomes, and promote sustainable development of agriculture.

If the Narendra Modi government follows this path of investing in infrastructure, ensuring a more diversified agriculture and linking small-holder FPOs with markets, it will pay rich dividends not only to the farming community but also the entire economy.

This column first appeared in the print edition on March 15, 2021 under the title ‘Diversifying the farm income fix’. Saini is Senior (Visiting) Fellow and Gulati is Infosys Chair Professor, ICRIER, New Delhi

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