Reported by: banking|Updated: May 1, 2020
Let me start with the obvious first and all that we could turn into opportunity follows. We have a very strong leader who could rally masses and classes of India with one message to light lamps and clap – both are yoga actions. The second obvious is the demonstrated ability of the politicians, and efficiency of the bureaucracy, health sector and the police administration at their best across states. If this continues, to quote Sadguru, “for five years, sans corruption, India will be the strongest economy of the world.” In a webinar by CII on the April 23, he virtually gave a blueprint for the economy.
Given the strengths of the agriculture economy with its goal of doubling the economy, this country will be chasing the $5 trillion economy much sooner than envisaged after the new normal comes back following the lifting of lockdown by all the states, by June1, 2020. The start for the whole dynamics may be not earlier than September 2020. The how of it is the focus of this article.
Farmer who produced ‘food from mud’, near 60% of the population still staying in rural areas, and the rural economy proved the backbone of the economy. This is the only economy in the globe to serve food to millions almost at their doorsteps during this globally tense situation created by Covid-19, whereas Europe, US and several developed nations saw people queuing up for their daily bread risking even the chill weather.
Despite its falling share in GDP to around 13-14% in 2019-20, more than 50% of the population depend on the farm sector and it employs 205 million people, making it the largest employer. There was no shut down of this activity both on land and water during the pandemic.
Yet, it may be enigmatic but true that the goal of doubling of farmer’s income has been eluding us for the last 2 years. To me, the reason is so simple as the definition we adopted for farmer. We linked him to land holding and not the activity the farmer is pursuing – whether crop culture, horticulture, floriculture, animal husbandry, aquaculture or apiculture. Any person who cultivates or produces from land and water – be he the owner or tenant – shall be eligible for all incentives and appropriate levels of credit well in time from the lending institutions. Once we redefine in this fashion, the fulcrum shifts.
Large industry would also shift its supply chains to the rural areas. Agro-based enterprises and Farmer Producer Organizations (FPOs) as aggregators should fast replace the Commission Agents in the Market Yards (AMY); all market yards should be developed as integrated market yards with technology as the driver and farmers as board members, replacing the politicians.
Governance of AMY should improve by amending the AMY Act providing for the Board of AMY to have persons from the local lead bank of appropriate cadre, a technocrat, and an agricultural economist with well laid governance procedures and practices.
The farm produce delivered by any recognised aggregator, including Farmers Produce Organizations (FPOs) should be evaluated for quality and graded appropriately with the displayed prices. The aggregator/FPO should have a mobile app that should enable the farmer who delivered the produce to the aggregator to convey his willingness to sell it at the displayed price of the day for various grades or would choose to turn it to a warehouse in the market yard.
For those who choose the first option, amount should be credited to the farmer’s account with the specified bank. For those who would want to keep it at warehouse, 75% of the value of the produce turned to the warehouse less the service charges will be credited to the farmer’s account. Aggregator/FPO will get its transaction handling charges from procurement to facilitation at such cost as decided by the AMY under the Act.
FPOs will have the option of handling the produce to either give to the agro-industry or will add value by itself and give the benefit of value addition to the farmer. In the process, farmer’s income multiplies, may be not twice as envisaged by the current policy drive, but more.
Digital technology tools offer tremendous scope for monitoring your stock movements within the stores and machine output through CCTV cameras at strategic points and planning for AI where they become cost effective not because they are sophisticated tools adding to branding, and digitising all accounting software through affordable ERP solutions will be the easiest route to reach the new normal.
Insurance policy should be giving a comprehensive coverage whatever be the nature of produce, whether from land or forest or water or animal, its transport to the AMY/FPO, storage and marketing. Crop loss to income loss of farmer related to every type of production, should be covered on the lines of South Korea, the best model of insurance there is. The cumulative effect will be the attraction of unemployed youth – both educated and un-educated to the farm sector. The farm sector will be then the major driver of sustainable growth of the economy. It will also turn as exporter providing food security to the nation and the world.
There are several undercurrents for agriculture to be the gamechanger of this political economy. This is the time when adversity can turn into opportunity as strong leadership alone can make it happen. Hope the global investors see the new opportunities in the farm sector so that they will be able to save themselves from any similar attack that, of course, we would not wish, but cannot be sure.
The author is an economist and risk management specialist