From Plate to Plough: The farm-factory
connect (Indian Express)
Mains Paper 3: Economy
Prelims level: agri-GDP growth
Mains level: Situation of Indian factories related to farming
As per the last report of National Statistical Office (NSO)
released on May 31, the Gross Value Added (GVA) at basic prices (2011-12
prices) for the fourth quarter (Q4) of 2018-19 has slumped to 5.7 per cent
for the overall economy, 3.1 per cent for manufacturing, and -0.1 percent
for agriculture, forestry and fishery.
However, for the entire financial year, FY19, GVA growth is more
respectable 6.6 per cent for the economy, 6.9 per cent for manufacturing and
2.9 per cent for agriculture.
Incidentally, for the Narendra Modi government’s first five-year
stint (2014-15 to 2018-19), agri-GDP grew at 2.9 per cent per annum. Many
experts believe that agriculture cannot grow at more than 3 per cent per
annum on a sustainable basis.
Situation of Indian factories related to farming
Indian industry is today complaining that the rural demand is
Tractor sales are down by 13 per cent, two-wheeler sales are down
by 16 per cent, car sales are down by similar percentage, and even FMCG
(fast move consumer goods) sales are down in April 2019 over April 2018.
One of the reasons is that India has never had any major agri-reforms
and farmers’ incomes have remained very low.
But there have been periods, reasonably long enough, when agri-GDP
has grown well above 3 per cent.
In fact during the 10 years of UPA from 2004-05 to 2013-14, agri-GDP
grew at 3.7 per cent per annum.
This dropped to 2.9 per cent during the NDA’s stint between
When the masses do not gain, the demand for manufactured goods
remains limited, slowing down the wheels of industry.
During UPA-2, agri-exports more than doubled, from $18.4 billion
in 2009-10 to $43.6 billion in 2013-14. B
ut during Modi 1.0, they declined, going down to $ 33.3 billion in
2015-16 and then recovering to $ 39.4 billion by 2018-19 but still below the
peak of 2013-14.
Steps required boosting up agri-trade
Officials managing agri-trade need to pay heed to this massive
failure as it has implications not only for overall agri-GDP growth, but
also for slowing down of manufacturing growth due to sluggish demand for
industrial products in rural areas.
There is ample evidence that much of Indian agriculture is
globally competitive. But our restrictive policies constrain the private
sector from building direct supply chains from farms to ports, which bypass
the mandi system. This leads to a weak infrastructure for agri-exports.
The net result of all this is that Indian farmers do not get full
advantage of global markets. Further, an obsessive focus on inflation
targeting by suppressing food prices through myriad controls works against
If these policies continue, Prime Minister Modi’s target of
doubling farmers’ real incomes by 2022-23 will remain a pipe-dream.
It has to be noted that any attempt to artificially prop up
farmers’ prices through higher minimum support prices (MSPs), especially in
relation to global prices, can be counterproductive.
MSPs remain largely ineffective for most commodities in larger
parts of India.
But even if they are operational through massive procurement
operations, a policy of high MSPs can backfire when it goes beyond global
Rice production and export scenario
India is the largest exporter of rice in the world, exporting
about 12 to 13 MMT of the cereal per year.
If the government raises the MSP of rice, by say 20 per cent, rice
exports will drop and stocks with the government will rise to levels far
beyond the buffer stock norms. It would be a loss of scarce resources.
Besides, it would create unnecessary distortions adversely
impacting the diversification process in agriculture towards high-value
crops. This needs to be avoided.
Global competitiveness in agriculture
Our global competitiveness in agriculture can be bolstered by
investment in agri-R&D and its extension from lab to land, investment in
managing water efficiently and investment in infrastructure for agri-exports
Today, India spends roughly 0.7 per cent of agri-GDP on agri-R&D
and extension together. This needs to double in the next five years.
The returns are enormous. The meagre investments in Pusa Basmati
1121 and 1509, for example, have yielded basmati exports between $ 4 and 5
The returns from the sugarcane variety Co-0238 in Uttar Pradesh
are similarly impressive.
The recovery ratio has increased from about 9.2 in 2012-13 to more
than 11 per cent today.
Massive investments are also needed in managing our water
resources more efficiently, to produce more with less.
But augmenting productivity alone without pushing for export
markets can lead to glut at a home and depress farm prices, shrinking their
So, first think of markets and then give a push to raise
productivity and exports simultaneously.
Q.1) National Cyber Co-ordination Centre (NCCC) has been set-up by the
government with the objective of (a) promoting digital payments.
(b) strengthening cyber security.
(c) strengthening cooperative federalism.
(d) promoting Aadhar-linkage of beneficiary accounts.
Q.1) To what extent raising farm productivity is the first step to
increasing rural demand and reviving the manufacturing sector. Comment.