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General Studies 3: Indian Economy and issues relating to growth, development

and employment.

Issues related to Agriculture- Transport and marketing of agricultural produce

and issues and related constraints; e-technology in the aid of farmers; Issues
related to direct and indirect farm subsidies and minimum support prices;
Public Distribution System

Income-less Bharat: Age of Dark Development

In India, agricultural risks are exacerbated by a variety of factors, ranging from

weather variability, frequent natural

disasters, uncertainties in yields and prices, weak rural infrastructure, imperfect markets
and inadequate and sub-optimal financial services. These factors not only endanger the
livelihoods and incomes of small farmers but also undermine the viability of the
agriculture sector and its potential to become a part of the solution to the problem of the
endemic poverty of Indian farmers.

Agriculture engages almost half of Indias workforce and, supports around 60 % of its
population. 2015 hasnt been a great year based on the agriculture-front with the rain
deficit at (-14%), made worse with frequent droughts and lowered level of water stored.

Thus, policymakers need to interrogate into the policies that are hampering the transition
from a poverty-struck farm sector to an affluent class of food providers that can chart the
development path of the country.

Policy Tools
Agricultural Credit: India has a dense network of rural financial institutions and Government
with the objective of providing adequate credit to the agriculture sector framed rules stipulating
that some percentage of each banks net credit should be given to the agriculture sector. But

Difficult credit procedures,

Illiteracy of the farmer and

Ignorance on the part of bank personnel makes it a tough task.

Therefore, procedures should be simplified and proper facilitation of funds should be provided
for mitigating their losses in a bad agricultural year.
Input subsidies: Important subsidies for inputs to the agriculture sector are with respect to
fertilizers; power; irrigation; credit; and agricultural price guarantees.

Capping input subsidies and a phased programme of progressive withdrawal of them

Strengthening rural infrastructure, research and extension;

Well-defined and effective measures to improve efficiency + lug leakages in input


Crop Insurance: Area yieldbased crop insurance and Weather-based crop insurance can go a
long way in securing risk-free steps to be taken by the farmer. But the success depends upon:
1. The product design;
2. Steps taken to minimize the base risk;
3. Adoption of reliable and sustainable pricing mechanisms

4. Resolving issues of product servicing and timely pay-out

Some major constraints include:

A sparse network of weather stations and the lack of high quality weather data for
locations smaller than the district level;

High premium rates for farmers;

Limited scope of weather insurance compared to the all risk nature of area yield
insurance, etc.

Renewed efforts by government in terms of designing appropriate mechanisms and providing

financial support for agricultural insurance are the need of the hour. Livestock insurance is an
important source of rural livelihoods in India and can be encouraged as an additional source of
income for the farmers.
Direct Income Support: While minimum support prices (MSPs), announced by various State
governments, have traditionally been the instrument used to fight declining prices; they have
scarcely been effective at the farm level.
In the current globalised market with widely varying market prices, the scheme is unable to
protect farmers against price fluctuations. Therefore, Direct Income Support mechanism can
prove to be a major game changer and will inject a fresh lease of life among the Indian farmers.

Potential to reverse the city bound distressed migration

Insulate the farmers from the vagaries of the market demand

Location specific support: Depending upon the geographic area and factors such as the
land size, soil quality, water availability

Farm Income Insurance Scheme (FIIS):Aims to ensure guaranteed income by insuring the
difference between the farmers predicted income and the actual income and any decrease in the
predicted income due to yield fluctuations or market fluctuations is insured under the scheme.

Reliable yield and Price Data

Considering yield losses only from natural perilsFarmers are incentivised to produce
more + Inefficiency in farming is not rewarded

Usage of satellite-based yield monitoring systems,

Integration of agricultural markets in India,

Leveraging mobile phone penetration levels and ICT Ensure the availability of real time

Streamlining initiatives:

Assessing soil health through soil health cards,

Rationalising fertilizer and water usage by insuring only the efficient cost of

Encouraging usage of the available agriculture markets

Increased engagement with formal markets to take advantage of insurance in case

of income decline

IASbabas Views:

The income guarantee must


Reflect inter-sectoral parity

A commission for determining Farmers Income can be set up to involve the

farmers themselves in coming up with a proper formula guaranteeing minimum
livelihood income for farmers

Consists of impetus to

ecologically sustainable farming systems,

community control over agricultural resources and

ensuring non-toxic, nutritious and adequate food for all

There should take place a reduction in the number of people dependent upon agriculture,
and improvement in the productivity of agriculture through technology and partnerships
is a must. Rural education, provision of jobs to rural youths with other sectors and
expanding per capita farm holdings is a positive way ahead.

A major limitation has been the supply-driven nature of the government interventions,
which has overlooked the need for building a commensurate social and economic
infrastructure so that the target beneficiaries are equipped to take advantage of these
interventions. Greater representation of relevant stakeholders in the design,
implementation and evaluation of these measures can ensure the more effective inclusion
of farmers demands and a higher level of responsiveness, in turn.

Connecting the Dots:

Analyse the scope of Micro-Insurance in Agro-India

Weather Based Crop Insurance: Panacea or Providence?

Examine the various components of Agricultural Price Risk Management