The government’s push on infrastructure and opening up the sector to 100% foreign direct investment is commendable. However, India needs over $1.5 trillion in the next decade to build its needed infrastructure. Agricultural infrastructure also needs a boost. Renewed focus needs to be put on irrigation, land resource management and construction of rural roads. The government also needs to invest in crop storage so as to preserve the agricultural produce.
According to the World Bank, “The main objectives of the Agricultural Infrastructure Development Project should be to develop land and water resources for the purposes of increasing farmers’ incomes and protecting the environment through land terracing and harvesting of runoff water in small hill ponds, increase access to and from isolated rural areas through the construction of agricultural roads, and strengthen the institutional and implementation capabilities of the Green Plan and the Directorate of Studies and Coordination within the Ministry of Agriculture by upgrading their human and material capabilities, financing the conduct of a National Agricultural Census and establishing an Information Management System to provide the data necessary for strategy and policy formulation. The objectives should include land and water development, agricultural roads, and institutional support.”
Infra development for agriculture
The Jan Bhagidari or people’s participation for development has been mentioned by Prime Minister Narendra Modi on many occasions. Under the government’s Give It Up initiative, over 10 million people (or 5% of subsidy recipients) have voluntarily surrendered their LPG subsidy. With India having over 300 million stock market investors, the domestic environment seems stable and positive. Demonetisation and the GST are likely to increase investible financial savings across income groups. This creates an opportunity to raise significant capital from domestic investors. Incentivising low middle-income earners to invest also comes under the governmental policy. All these together would be earmarked for agricultural infrastructure investment.
A fund of over $20 billion can be used to rescue Indian farmers from an existential dependence on the monsoons or on largesse via minimum support price escalations that in turn adversely impacts the fiscal situation. Enhanced crop storage facilities will provide farmers flexibility on when to sell, rather than being forced to sell for fear of the produce being spoiled.
The government’s effort to create an electronic national agriculture market need to be supplemented by investment in irrigation and storage. It is not possible for the agriculture sector to grow without such enabling infrastructure.
Madhya Pradesh achieved an agricultural growth rate of 9.7% from 2004-2015 based on a substantial irrigational investment. Madhya Pradesh’s irrigation ratio increased from 24% in 2001, when it was well below the national average, to 42.8% in 2015. Long-term capital coupled with focused execution in states like Uttar Pradesh and Maharashtra on this front performed well for national agricultural growth.
The Pradhan Mantri Gram Sadak Yojana (PMGSY) improved road connectivity across India. It linked India’s hinterland to towns and cities. A programme structured similarly and directed towards agricultural infrastructure and funded through an innovative method can increase agricultural productivity and help the government achieve the goal of doubling farmer’s income by 2022.
In the Budget 2018-19, the government announced an increase in funds allocated for the National Rural Livelihood Mission. The allocated sum was around Rs. 5,750 crore in 2018-19 as compared to Rs. 4,500 crore in 2017-18. Arun Jaitley announced an allocation of Rs. 2,600 crore to ensure irrigation facilities in 96 irrigation deprived districts, besides funds to boost fisheries and animal farming.
India has around 6500 cold storage facilities with a capacity of 30 million metric tonnes. Yet, a mere 4 million metric tonnes of the 104 million metric tonnes of fresh produce is transported through a cold chain. To fill the gap in India’s cold chain, a total investment of approximately $6-10 billion is required in the next five to ten years. This cannot be possible without active governmental involvement.
In 2014, an amount of Rs. 7.3 lakh crore was disbursed as credit to farmers. In 2015, there was an increase of Rs. 9 lakh crore. After this year’s budget, this has further increased to Rs. 10 lakh crore. India also has the second highest spending on agricultural research and development for a developing country, second only to China. But such enormous allocations have not yielded returns of the same magnitude.
Furthermore, as less than 50% of India’s agricultural land is irrigated, the majority is dependent on monsoons. Less than 40% of farms in India are mechanised. Average farm power in India is at 1.36 KW/Ha as compared with Japan and Italy, which are at 8.75 KW/Ha and 3.01 KW/Ha, respectively. Yields of major crops such as rice, wheat, coarse cereals, maize, and pulses have stagnated. Input subsidies form one of the most expensive aspects of India’s agricultural policies. India has witnessed an increasing subsidy budget each year. This has resulted in our agricultural sector being more dependent on input subsidies when compared with other large emerging economies.