Speaking at the foundation day celebrations of the National Bank for Agriculture and Rural Development (Nabard) on July 12, Union Finance Minister Arun Jaitley said that there were reasons to smile on the economic front as India remains a bright spot, despite the global slowdown. He talked about the 7-8 per cent overall growth in hand, and the 8-10 per cent growth that is realisable in the near future. But he admitted that agriculture remains a concern and promised that as tax revenue goes up, an increasing share would be spent on building a strong and vibrant agricultural sector.
Nabard can play an important role in that process. It has completed 33 years of service to the nation. From 1982 to 2015, it has come a long way in terms of extending rural credit for myriad programmes ranging from rural roads and irrigation under the Rural Infrastructure Development Fund to building value chains with farmer producer organisations (FPOs) and micro-finance initiatives. Of late, it has also acquired the distinction of being accredited as the first national implementing entity (NIE) of the Green Climate Fund (GCF) of the United Nations Framework Convention on Climate Change. As an NIE, Nabard is supposed to lead and promote work on climate change adaptation and mitigation, especially in agriculture and rural development activities.
Given that in the first three years of the 12th Plan (2012-17), the average rate of growth in agri-GDP has been a mere 1.7 per cent against a target of 4 per cent, there is cause for concern as this is leading to agrarian distress. No wonder, Nabard chose “mitigating agrarian distress and enhancing farm income” as a suitable topic for discussion, which was inaugurated by Jaitley. It is worth sharing some of the takeaways from this seminar, attended by several brilliant speakers who have devoted their lives to Indian agriculture and rural development.
What are the root causes of agrarian distress today? Basically, two factors: monsoons and markets. A drought last year, followed by unseasonal rains that damaged the rabi crop, and falling global agri-prices, which are pushing down domestic farm prices of several commodities, from rice and corn to sugar and groundnuts. Farmers’ incomes have plummeted and many cannot service their loans, raising demands for a loan waiver. Small and fragmented holdings, excessive specialisation and input intensification of agriculture as well as restrictive markets also contribute to the increasing distress.
What could be the policy solutions? A major focus is needed on water for irrigation — both in terms of developing irrigation in a cost-effective manner to drought-proof agriculture but also managing our water resources more efficiently. Since the pricing of water and power for irrigation is highly subsidised — at places even free — it is but natural for farmers to go for water-heavy crops like rice and sugarcane, wherever they get access to water. Both are being produced in excess of domestic requirements. India exported 12 million metric tonne of rice in 2014-15, becoming the largest exporter of rice for the third year in a row. Sugar is also in plenty, but cannot be exported due to low global prices, creating a major crisis in the sugar industry of cane arrears touching unprecedented levels of Rs 21,000 crore. In any case, exports of rice and sugar mean exporting billions of cubic meters of scarce water. This must be rationalised through innovative policies that can reward farmers for saving water (and power) and diversifying away from water-guzzling crops. Can Nabard take up this challenge under its new role as an NIE of the GCF by promoting sustainable and more diversified agriculture? It could have a high pay-off.
Jaitley mentioned that the government is committed to enhancing investment in irrigation to tackle droughts. The government has already raised the funding of the Pradhan Mantri Krishi Sinchai Yojana (PMKSY) to Rs 50,000 crore for the next five years. Since this programme consolidates the watershed management and accelerated irrigation benefit schemes, one will have to wait and see how much more money is really being put into the PMKSY.
Nevertheless, the policy seems to be a step in the right direction. But to deliver more crop for every drop of water, could Nabard spearhead the promotion of innovative farming practices (such as the system of rice intensification and precision farming) and technologies (like drip and check dams) through its network of NGOs and FPOs? This is a worthwhile agenda for Nabard to follow.
Jaitley also mentioned overhauling the existing crop insurance system to make it more robust and responsive to farmers’ needs and that the government is currently working on this. While irrigation will take time to deliver, crop insurance can be fixed relatively quickly and it could act as an effective coping strategy to contain farmer distress. This is another area where Nabard could chip in.
On the markets front, there is a consensus that we need to organise farmers into groups (FPOs, cooperatives or any other form) to create scale, and integrate them with commodity value chains. For building value chains and ensuring farmers get their due share, a lot of market reforms will be needed — from changes in the APMC regime to building infrastructure (rural roads, warehouses etc). Nabard is already doing quite a bit of work in this area and could scale up its operations to make sure that farmers get a good remunerative price for their produce. Building value chains can also create millions of off-farm jobs within the rural economy. But linking FPOs to front-end organised retailers or food processors will be a challenge as both are at a nascent stage and many states do not even allow organised retail. The announcement of an e-national market by the government cannot take off unless several of these hurdles are cleared and grading of products introduced from the beginning.
Thus, in brief, agrarian distress can be relieved and farmers’ incomes enhanced with better irrigation and water management, more diversified agriculture, robust science-based crop insurance, as well as better access to markets. This will also help promote more sustainable agriculture. Nabard can surely contribute to achieving much of this.
The writer is Infosys Chair Professor for Agriculture at Icrier