With 60% of Indian population dependent on it and contributing 17% of the GDP, Indian Agricultural sector is facing adverse economic scenario characterised by Fragmented Land holdings; Vulnerability to weather shocks; Increased Input Prices; Dependence on Informal Credit sources; Low Output Prices.

 

Low growth, poor earnings and distress behaviour such as large-scale internal migration and disproportionately high suicides have signalled that something is wrong with the rural sector.

 

Reasons:

 

  • With the advent of the Green Revolution, modern methods of cultivation, primarily use of machinery, high-yielding varieties of seeds, fertilisers and pesticides were emphasised. This strategy led to increase in agricultural productivity but had probably “unintended” consequences.
  • The new advancement led to cultivation of a single crop under the pressure of market. Farmer had to draw more and more credit to plough the land.
  • The uncertainty of crop yield and fluctuation in prices constituted distress to the farmers.
  • There has been an observable decline in groundwater levels and not much has improved in storage and post-harvest risk management.
  • Development of Genetically modified crops have made farmers on private monopolies and chemical pesticides.
  • India’s transportation costs are, on average, 20-30 percent higher than those of other countries mainly due to a fragmented supply chain. This fragmentation is itself the result of policies that have inhibited investment, integration and competition in transport, storage and distribution.
  • Agricultural income declined but could not translate into decline of population dependence on agriculture.
  • The high costs of getting agricultural produce from farm to market erode any advantage the Indian farmer enjoys by virtue of being a cheap producer.
  • Exclusion from institutional credit sources, the dependence on informal sources of credit, such as agricultural input dealers was high. The level of indebtedness were also alarming.
  • With limited insurance against unforeseen events, small and marginal farmers were at greater risk.
  • Other reasons like changed pattern of land holdings, Changed cropping pattern, Liberalisation policies which pushed Indian agriculture into the global markets without a level playing field, Growing cost of cultivation, Uncertainty of crop output, Lack of profitable prices, indebtedness, neglect of agriculture by the government and its agencies, decline of public investment, individualisation of agricultural operations constitute the vicious cycle a farmer is trapped in.

 

Suggestions:

 

  • Implement M.S. Swaminathan committee report on Minimum Support Price (MSP).
  • Create an integrated and competitive domestic agricultural market and improve communication, transport, storage, distribution, and agricultural support services.
  • Providing farmers better access to services from transportation to distribution will enhance the economic gains from, and strengthen the political case for, agricultural trade liberalization.
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