The nationwide lockdown has been hard on the agricultural sector. Though certain agricultural activities have been exempted, problems like disruption in the buying of foodgrains by the government, difficulties in harvesting due to a shortage of labour, and weakened market linkages due to disruptions in transport have plagued the sector during the lockdown phase.
There are 14.43 crore labourers dependent on agriculture for livelihood in India. The lockdown has affected them directly because of diminished paying capacity of farmers due to losses and because of oversupply of labour forces in certain regions.
Governmental response
According to many economists, a feasible way to deal with the economic crisis is to increase governmental spending and ensure enhanced liquidity. The Indian government had announced a Rs. 1.7 trillion package at the onset of the nationwide lockdown. It included the provision of an advance release of Rs. 2000 to bank accounts of farmers as income support under the PM-KISAN scheme. It also raised the wage rate for workers engaged under the Mahatma Gandhi Employment Guarantee Act 2005. Additional grain allotments to registered beneficiaries were also announced for the next three months. Cash and food assistance to persons engaged in the informal sector, mostly migrant labourers, have also been announced. The Indian Council of Agricultural Research (ICAR) issued state-wise guidelines for farmers for the lockdown period, emphasising on specific practices during harvest and threshing of various Rabi (winter sown) crops as well as addressing post-harvest storage and marketing issues. Additionally, agricultural term and crop loans were granted a moratorium of three months (till May 31) by banking institutions with 3% concession on the interest rate of crop loans up to Rs. 300,000 for borrowers with good repayment behaviour.
The National Bank for Agricultural and Rural Development (NABARD) also announced a Rs. 25,000 crore refinancing scheme for NBFC-MFIs, co-operative banks, and Regional Rural Banks (RRBs). It has stated that the repayment period under this scheme would be 18 months. The bank had extended financial support of around Rs. 42,313 crore towards building rural infrastructure in 2019-2020 fiscal year.
The 20-lakh crore package declared by Prime Minister Narendra Modi on May 12, 2020, can also be expected to boost the agricultural sector by ensuring some much-needed liquidity for the sector.
Challenges
A persistent challenge in the agricultural sector is that a significant portion of agricultural households still borrows money from non-institutional sources like money lenders, relatives and input suppliers. The pandemic induced economic stress on the agricultural sector may aggravate this trend, leading to the creation of a vicious debt trap for many agriculturalists.
Additionally, the penetration of crop insurance in the Indian agricultural sector has always been quite low. A lot of farm produce has been wasted due to lack of storage facilities and weak market linkage during the lockdown phase. A focused policy aimed at addressing this issue needs to be worked out.
Ashok Dhawale, President, All India Kisan Sabha (AIKS), informed BE, “The availability of agricultural credit is woefully insufficient to deal with the impact of the Covid-19 pandemic. It was insufficient even before the pandemic. Now the pandemic has made it worse. Much of the Rabi crop has been destroyed or has rotted or not been sold. Farmers are in great difficulty and cannot return their old loans. As a result, most of them will not get new institutional loans. There is a real danger of them losing out on the coming Kharif season as well. This will not only adversely impact farmers but also impact the food security situation of the country.”
Dhawale was one of the architects of the Nasik to Mumbai Kisan Long March, which had highlighted the dismal condition of many Indian agriculturalists. He added, “We are demanding a complete one-time loan waiver to all farmers by the central government. If they can write off `68,000 crore corporate loans, they can very well write off the loans of farmers. Additionally, new crop loans by banks must be given to all farmers for the Kharif season, regardless of whether they are defaulters or not. The government must implement the Swaminathan Commission recommendation of giving minimum support price at one and a half times the complete cost of production (C2 plus 50%). That is the only way farmers can be saved from indebtedness and reducing the incidence of farmer suicides.”
Resolving agrarian issues will have a significant role in regenerating demand in the India economy. Enhancing the ambit of agricultural credit is a good starting point.
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