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The Indian agricultural sector is going through a rough phase. Weak policy focus, widespread droughts (in about 40% of India) in the preceding fiscal, continuously dipping prices for most crops, and uncertain yield are some of the major factors responsible for this.  The fall in prices of crops was due to demonetisation and the global drop in prices. Resultantly, there was no incentive on the part of private traders to stock commodities as there was little scope for appreciation of prices. The benefit provided by the Minimum Support Price (MSP) scheme provided by the government remained limited to a few crops. Additionally, in absence of any governmental intent to incentivise crop diversification, farmers continued to focus on paddy and sugarcane production due to their high assured prices even in regions that were unsuitable for such high water consuming crops. This increased the cost of production and also aggravated the already prevailing drought condition.

Around 70% of rural Indian households still depend primarily on agriculture for their livelihood with 82% of farmers being small and marginal. However, the rate of growth of agricultural output is gradually declining in recent years and the relative contribution of agriculture to the GDP has also been declining steadily. The profitability of agriculture has declined. The solution lies not in some ad hoc packages but in sweeping changes in agricultural policy.

Need for diversification

The crisis in the agricultural sector has provided ideal conditions for major trends towards diversification - mostly in favour of horticultural crops such as fruits, vegetables, spices, plantation crops and ornament crops. The country has taken some important steps towards strengthening the horticultural sector and the area under horticulture crops has increased to 25.49 million hectares in 2018-19 from 25.43 million hectares in 2017-18. The Indian horticulture sector, with its current produce of around 311million MT, exceeds production of food grains.

The horticultural sector in India enjoys certain advantages. It is presently more remunerative as compared to food grains. Horticulture crops that include fruits are more resilient to change in weather conditions and vegetables play an important role in augmenting the income of small and marginal farmers. Water utilisation is low for horticultural produce and this is important in the backdrop of a prolonged drought situation that is prevailing in India. Additionally, horticulture gives the opportunity of multi-farming where numerous crops are planted simultaneously to get more yield and to optimise the cost of production.  

Budget 2020 on horticulture

Budget 2020 has marginally increased allocation for the agricultural sector. However, according to experts, it might prove to be insufficient for the crisis at hand. Additionally, the inflation rate may also play a major dampener. Under the given circumstances, the agrarian distress can be partially managed by focused attention on the horticultural sector.

One of the problems of the horticultural sector is last mile market connectivity. The issue has been addressed through provisions of Kisan Rail and Krishi Udaan aimed to build a seamless national cold supply chain for perishables, inclusive of milk, meat and fish. Krishi Udaan will help to improve value realisation of horticultural products and link them to international markets.

Storage has been another issue for the horticultural sector. The ‘Village Storage Scheme’ proposed to be run by Self Help Groups (SHGs) will provide farmers a good holding capacity and reduce their logistics cost. The Budget has also indicated towards creating warehousing, in line with Warehouse Development and Regulatory Authority (WDRA) norms. The government will provide viability gap funding for setting up such efficient warehouses at the block level. This project will be implemented in collaboration with the state governments, who will provide the land. For better marketing and exports, the Budget has proposed to support those states which by adopting a cluster basis will focus on “one product one district”.

On the flip side, the Budget has reduced the subsidy on fertilisers. This is going to hit the already strained agricultural sector hard; the horticultural segment will be no exception. There is an urgent need to take meaningful steps in expanding the reach of institutional agricultural credit in addition to creating demand in the rural Indian economy. The advantage that can be availed by increasing the penetration of the horticultural sector will be incomplete without meaningful and decisive steps to reinvigorate the rural economy.