AGRICULTURAL REFORMS

Agriculture In India
• Ranks second worldwide in farm outputs.
• agriculture employed 50% of the Indian work force
and contributed 17-18% to country's GDP.
• India ranks first in the world with highest net
cropped area followed by US and China.
• India exported $38 billion worth of agricultural
products in 2013, making it the seventh largest
agricultural exporter worldwide and the sixth largest
net exporter.
• Most of its agriculture exports serve developing and
least developed nations.
• Indian agricultural/horticultural and processed foods are
exported to more than 120 countries, primarily to the
Japan, Southeast Asia, SAARC countries, the European
Union and the United States.

Indian Agriculture After Independence

• Made immense progress towards food security. Indian

population has tripled, and food-grain production more
than quadrupled.
• Drought in 1965 and 1966 convinced India to reform its
agricultural policies and focus on the goal of food grain
self-sufficiency.
• Initial increase in production was centred on the
irrigated areas of the states of Punjab, Haryana and
Western UP.
• Farmers and the government officials focused on farm
productivity and knowledge transfer due to which
India's total food grain production soared.
• A hectare of Indian wheat farm that produced an
average of 0.8 tonnes in 1948, produced 4.7 tonnes of
wheat in 1975 from the same land.
• By 2000, Indian farms were adopting wheat varieties
capable of yielding 6 tonnes of wheat per hectare.
• With agricultural policy success in wheat, the technology
spread to rice and irrigation infrastructure.
• Indian farmers innovated with tube-wells, to
harvest ground water.
• Technology spread in the 1970s and 1980s to the states of
Bihar, Odisha and West Bengal.
• In the 1980s, Indian agriculture policy shifted to
“Evolution of a production pattern in line with the
Demand Pattern" leading to a shift in emphasis to other
agricultural commodities like oil seed, fruit and
vegetables.
• Farmers began adopting improved methods and
technologies in dairying, fisheries and livestock, and
meeting the diversified food needs of a growing
population.
 Problems that Indian Agriculture face
1. Current Agricultural Practices- Neither
Economically nor Environmentally Sustainable as
India's yields for many agricultural commodities are
low.
2. Poorly Maintained Irrigation Systems- Leading to
crop failures in some parts of the country because
of lack of water.
3. Infrastructure: Farmers' access to markets is
hampered by poor roads, rudimentary market
infrastructure, and excessive regulation.
4. Logistics: Poor rural roads affecting timely supply of
inputs and timely transfer of outputs from Indian
farms.
5. Low price for the produce: Farmers receive just 10% to
23% of the price the Indian consumer pays for exactly the
same produce, the difference going to losses, inefficiencies
and middlemen. Farmers in developed economies of
Europe and the United States receive 64% to 81%.
6. Spoilage: Regional floods, poor seed quality and inefficient
farming practices, lack of cold storage and organised retail
harvest spoilage cause over 30% of farmer's produce going
to waste, lack of and competing buyers thereby limiting
Indian farmer's ability to sell the surplus and commercial
crops.
7. Inconsistent government policy: Agricultural subsidies and
taxes are often changed without notice for short term
political ends.
What all Agricultural reforms do India need?
Agriculture is a State subject but it eagerly awaits its 1991 moment of comprehensive
reforms which should involve the Centre, the States, banks and the RBI.
While many changes were brought about to deal with corporate sector woes in the
last seven or eight years, agriculture has not received as much attention from the
regulator.
Some of the Reforms that Agricultural sector need-
1. Income support
2. Centre-State action
3. RBI moves
4. Change in bank attitudes
 INCOME SUPPORT
• A survey published by NABARD last year assessed the monthly income of an agricultural household
at ₹8,931, using the same methodology of the NSSO. A household has not less than five members in a
farmer’s family. Does anyone really know how with a monthly income of ₹8,900 a family of five survives?
• Therefore, it is a necessary (but not sufficient) first step that some form of income support is given to
farmers in addition to the other subsidies.
• According to an OECD study, the level of support to producers (farmers) in India has been negative for all the
years from 2000. This means that the annual monetary value of net transfers from consumers and taxpayers
to agricultural producers has been negative. In other words, most of us have been having “free lunches” at
the cost of the farmers.
 CENTRE – STATE ACTIONS
• The second pillar of this reform package should be to get the Centre and the States together on a
common platform.
• Here, a GST-like council of agriculture ministers of the States and the Centre should be constituted and
important changes like the adoption of the model APLM Act, abolition of the Essential Commodities
Act of 1955 vintage (which was meant for times of shortages and not surpluses) and faster digitisation
of land records should be implemented.
 RBI ROLE
• In the last five years at least, there has not been any new RBI policy initiative for this sector. It may
come as a surprise to many that the limit for collateral-free loans in the agricultural sector is ₹1.6 lakh.
MSME borrowers get collateral-free loans of up to ₹10 lakh. For educational loans, this limit is ₹ 7.5
lakh.
• There is definitely a case for immediately hiking this limit to ₹3 lakh for small and marginal farmers. It is
high time the RBI came out with totally overhauled realistic norms for the agriculture sector, taking
note of suggestions from other stakeholders as well.

BANKS
• Commercial banks must expand the attention bandwidth of both top and junior management for rural
and inclusive business. The credit morality of the small borrower in our country is much better than
those who borrow in crores and disappear in droves.
• Generally, there has been no case of an “absconding” farmer even if there is default. While there is no
doubt that the farmer should be “credit-worthy”, it may be time to look inward and see whether
changes are required to make banks much more “rural-worthy or farmer-worthy”.
Doubling Farmers Income Till 2022
 What is to be double?
Income of farmers not the farm incomes only not the output or income of the sector or the value added
or GDP of the sector
ie. Real income
Real income= Nominal income-Inflation

• Nominal income is the income expressed in currency or money terms

• Real income is income after adjusting inflation
 In order to achieve the objective what factors to
consider?
• Increase in productivity of crops
• Increase in production of livestock
• Improvement in efficiency of input use
• Diversification towards high value crops
• Improved price realization by farmers

Strategies for increasing income

* Initiatives in infrastructure
* Development in technology
* Introducing new policies in favour of farmers
GOVERNMENT PERFORMANCE
 Farm Income and Non Farm Income
• Farm income refers to profits and losses incurred through the operation of a farm

• Off-farm (non-farm) income refers to the portion of farm household income obtained off the farm,
including nonfarm wages and salaries, pensions, and interest income earned by farm families.

So how can a farmer earn more-

1. He grows More
2. He gets more
 Trends in Farm Income

The data on growth rates of farm income given by NITI Aayog in its policy paper on doubling
farmers’ income shows that the real income of farmers has grown at a rate of 3.4% between
1993 and 2016. Further, if we use the gross value added (GVA) by agriculture as a proxy for
farm incomes, we see that the GVA of agriculture at constant prices has historically grown, on an
average, at a rate of 3% per annum. Following this trend, the real GVA took as many as 25
years (in the period 1990-2016) to double!
 Trends in Non Farm Income

Non-farm rural incomes have also been adversely affected with slower wage growth and the lack
of new jobs during the past five years. Rural wages grew 3.8 per cent year-on-year in December
2018. Annual wholesale inflation was minus 0.07 per cent for food items and 4.45 per cent for
non-food items during that month.
With farm prices depressed, the situation is bad for daily workers without land, as well as for
small and marginal farmers whose incomes kept falling.
 Income Support Scheme

Pradhan Mantri Kisan Samman Nidhi, to provide income support of Rs 6,000 per year to small
and marginal farmers in the Interim Budget 2019. The government has allocated Rs 75,000 crore
towards the scheme.

The scheme will provide assured income support to small and marginal farmers. Under the
scheme, farmers with small landholdings, of up to two hectares, will be provided direct income
support of Rs 6,000 per year.

Income Support Scheme will lead to only marginal increase in farmer’s income.
 Rythu Bandhu scheme
The Telangana Government has issued a notification to extend the Rythu Bandhu scheme for 2019-20, while
enhancing the amount from Rs 4000 to Rs 5000.
The Rythu Bandu scheme , K Chandrasekar Rao’s pet scheme, is aimed at providing income support to the
agriculturists directly to back their crops.
The scheme, which provides Initial Investment support to agriculture and horticulture crops through a grant of
Rs 4000 per acre per farmer each season towards purchase of inputs like seeds, fertilisers, pesticides,
labour and other filed operations, has now been enhanced from Rs 4000 to Rs 5000 per acre per farmer
per season.
The scheme was successfully implemented during Kharif 2018 and Rabi 2018-19. Based on the
recommendations of the Commissioner and Director Agriculture, the Chief Minister had during the last
legislative assembly session announced that the amount would be enhanced from Rs 4000 to Rs 5000 per
acre, per season.
The amount would be paid through electronic transfer to all the pattadars and title holders through e-Kuber,
the RBI payment platform.
 INCOME SUPPORT SCHEME VS RYTHU BANDHU SCHEME
Average farmer income is Rs 44027
So as average farm size is 1.08 hectare.

According to Income Support Scheme he will get an additional Rs 6000 which totals to Rs
50027.
Which means the scheme will only increase farmers income to 13 percent.

According to Rhythu Bandhu Scheme he will get an additional Rs 26676 which totals to Rs
70703.
Which means the scheme will increase farmers income to 60 percent.
If farmers’ income grows at 3-plus per cent or if the Centre increases the cash transfer in any
year, the target of ₹88,000 would have been achieved easily.
 Is Increasing MSP the solution?
MSP of Paddy increased by Rs 65 per Quintal, Jowar by
Rs 120 per Quintal and Ragi by Rs 253 per Quintal
Giving a major boost to the farmers' income, the Cabinet
Committee on Economic Affairs chaired by Prime Minister
Narendra Modi has approved the increase in the Minimum
Support Prices (MSPs) for all kharif crops for 2019-20
season
From the NITI Aayog to industry leaders to the Reserve
Bank of India (RBI), all are apprehensive that any major
increase in MSP, following the 2018-19 Budget
announcements, would push up prices, if not immediately, in
the next six to eight months after the decision is taken.

Continuous increase of MSP creates inflationary pressure on the society.