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Approach:

  1. Introduction
  2. Mention the impacts of such populist measures.
  3. Discuss the long-term measures that can be taken.

Agriculture employs more than 50% of the total workforce in India and contributes around 17-18% to the country’s GDP. Compared to the 4.9% growth in 2016-17, agriculture growth slowed down to 2.1% in 2017-18. From trade liberalisation, deregulation and a greater role for market forces to the proposal of doubling the farmers’ income by 2022 and several announcements of farm loan waiver have failed to address the real reasons behind the persisting farm distress.

Impact of populist measures:

  • Minimum Support Price (MSP): the market prices continue to remain below the MSP in the absence of market intervention by the government. Not all crops under MSP are procured by the government. No stable policy regime of procurement and disposal of various commodities and lack of marketing infrastructure. Higher MSPs lead to food inflation. The MSP formula based on just cost is not followed by proper procurement policy.
  • Loan waivers: diversion of funds for loan waivers which can be used for capital investment. It only provides temporary relief measure.
  • Lack of implementation: Various Price Support Scheme, Price Deficiency Payment (PDP) and Private Procurement & Stockist Scheme that were announced have not been implemented by most of the states. Agriculture is a state subject, and there remains a gap between Centre and States’ approach to agrarian distress.

Long term reforms needed:

  • e-NAM should be implemented immediately.
  • Investment in infrastructure and research: Supply-side reforms including those pertaining to technological improvements and water management to boost productivity in a sustainable manner. Large-scale investments in building infrastructure, market access, storage, technology and revival of the non-farm sector to absorb the excess labour from agriculture.
  • Policy intervention: Need to move from price support policies or loan waivers to income/investment support on a per acre basis.
  • Avoiding leakages: The money should be directly deposited into the farmers’ accounts, linked with their Aadhaar number, and the information sent to their mobile phones through an SMS.
  • Public-Private Partnerships are needed to build efficient value chains, especially of perishables, creating more number of jobs.
  • As the Chakravarty Committee on Banking had suggested, long-range market cost of delivering rural financial services is needed. Making rural lending not just a part of ‘Priority Lending’ but also a business.
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