A notable feature of the Indian economy in the Covid-19 period has been the good performance of agriculture. The growth rate agriculture and allied sectors achieved was 4% in FY 2019-20, a targeted rate of growth of agriculture to stabilise the Indian economy. This is considered to be special at a time when other sectors are not performing well. Even in the present FY 2020-21, growth of agriculture is expected to perform satisfactorily as a good monsoon has been predicted. But it is not wise to depend fully on monsoon. Indian agriculture has to grow in a stable manner as even today about 50% of the population still depend on agriculture directly. The prospect of the economy depends on this sector as it generates the most demand. In spite of that, the planners of the country never thought of big reforms for the sector to improve its productivity. This hadn't been the case in most of the developed countries.
Production of agricultural output has been rising, and it is as high as 292 million tonnes in 2019-20. India attained self-sufficiency in food grains years back but its distribution is still poor. Per capita food grains production has been more or less constant, in the range of about 465 gm to 480 gm per day per capita in the last four decades or so. At the same time, quite a number of economists believe that per capita availability of food grains has not been increasing with increasing volume of output. But one of the major problems of the sector is the low income earned by the farmers. Measures have been taken but the result is not satisfactory. The present discussion concentrates on the effectiveness of recent reform measures in marketing of farmers produce and Agricultural Produce Marketing Committee (APMC) markets and also touches the debate that whether Direct Cash Transfer (DCT) could be the better option for the betterment of the farmers.
Three areas of agricultural reforms have been declared by Finance Minister Nirmala Sitharaman last May. Firstly, is liberalisation of Essential Commodity Act. Secondly, from now on farmers can sell their products to anybody and hence APMC Act has been changed. Thirdly, a new model contract faming rule has been introduced. Actually, the declarations have been made with a view to reform agriculture towards liberalisation. The most important of this has been the reform in APMC Act.
It is true that there have been many deficiencies in APMCs. Farmers have to pay high commission to sell goods and that varies place to place, there have been payment problems for the farmers, most of the centres are not modernised and few in number in each district and hence transportation of goods to the centres are costly and time consuming. Moreover, buyers of the centre manipulate prices of farm products. Instead of all the weakness in the marketing of farm produce how marketing in the free market can be a better option remains a valid question. The main argument against APMC Act is that it creates barriers to the entry and exit of traders for the purpose of making sale and purchase of produce a must for traders also. In this regard Himangsu, Associate Professor, Jawharlal Nehru University, mentioned after the Finance Minister’s announcemet, in the national media, that reform of the APMC Act is not a new one but two decades old. As many as 17 state governments have already amended the APMC Act to make it more liberal. Kerala does not have an APMC Act and Bihar repealed it in 2006. But several other states such as Maharashtra, West Bengal, Odisha, Gujarat, and Andhra Pradesh deregulated fruits and vegetables trade and allowed private markets. They have introduced a unified trading licence and have introduced a single-point levy of market fee. Tamil Nadu has already reformed its APMC with no market fee. Several others such as Jharkhand, Himachal Pradesh, Uttarakhand, Haryana and Rajasthan have undertaken one or more of these reforms. Many States have introduced direct marketing of farm produce. Some examples will be helpful. The Uzhavar Sandhai (Tamil Nadu), the Rythu Bazaar (Andhra Pradesh and Telangana), the Raitha Santhe (Karnataka), the Apni Mandi (Punjab) and the Krishak Bazaar (Odisha) are notable examples.
Reason behind farmers’ distress lies elsewhere
The reason behind the ongoing distress lies elsewhere. It is estimated that at least 80% of the farmers do not have access to APMC markets. Therefore, any announcement of reform it is useless. The demand deficiency of farmers’ products in the economy is the main reason behind the precarious condition of the Indian farmers. Himangshu noticed that for more than two years, terms of trade of agricultural goods as against industrial and services products turned negative. This means prices of farmers compared to other products have gone lower. Moreover, it is important to note that the price inflation of agro-products has been negative in many places of India. Therefore, in this context how any reform measures in APMC Act would help the farmers of the country is difficult to understand. Suitable price realisation of the farmers is the need of the hour. At the time of Covid-19, government has to go for proper fiscal measures by which income of the people increases to such an extent that demand in the economy is enhanced. This would lead to generating more income, which in turn, would lead to higher level of production. But there is little sign of this in the government policy.
It is estimated that at least 80% of the farmers do not use APMC markets in India. During FYs 2014-15 and 2015-16, a vast area of the country suffered drought conditions. But even after that the farmers were unable to see better situation as the income of the people, particularly, of the rural people continued to deteriorated. Demonetisation and hasty implementation of Goods and Services Tax (GST) made the situation worse. Now, India has entered into a deep economic depression. Farmers’ condition cannot be better unless macroeconomic situation turns around and until then no agricultural marketing reform will work.
Direct Cash Transfer
India’s farmers get several subsidies. Free power, water, heavy discounted fertiliser, interest subsidy on loans, discounted premiums on crop insurance, and also minimum support prices for crops are important among them. Government allocated about Rs. 2.56 lakh crore for all the subsidies in 2018-19 union budget. The same for 2019-20 budget was Rs. 2.77 lakh crore. It is said that subsidies are drain on public finance. Many economists suggest that direct cash transfer (DCT) can be a better way of farmers’ support and the subsidies should be stopped. In an article in a national media a few days back, Ashok Gulati, Professor for Agriculture, ICRIER, preferred DTC in comparison to supporting farmers by subsidies. He elaborated his view and went so far to show how quickly this method would to nearly attain doubling farmers’ income. But Gulati’s view is a matter of criticism and several studies found that farmers were not happy with the repeal of the subsidy regime.