Agriculture is the source of livelihood for nearly 700 million people in India, representing a huge workforce. More than half the GDP of the rural economy is based on agriculture. It is not just a profession but a traditional occupation, a way of life.
Agriculture is characterised by small and fragmented land holdings. Small (up to one hectare of land) and marginal (more than one ha and up to 2 ha) farms constitute 83.5 per cent of total land holdings, with a major concentration in Uttar Pradesh, Bihar and Andhra Pradesh. The share of land cultivated under these holdings in several states is one-third of the total cultivated area of the respective state, the only exceptions being Maharashtra (31.7 per cent), Punjab (29.9 per cent), and Rajasthan (22.6 per cent). According to the National Commission for Enterprises in the Unorganised Sector (NCEUS), more than 80 per cent of the country&’s farmers are in the small and marginal segments. Paradoxically, even though small farms are superior in terms of production, they are weak in generating adequate income and sustaining livelihood.
While a majority of the workforce is still dependent on agriculture, the GDP growth rates in agriculture are marginally above the rate of population growth, in contrast to the high non-agricultural sector. As per the latest estimates released by the Central Statistical Office (CSO), the share of agricultural products in GDP was 51.9 per cent in 1950-51. This has now come down to only 13.7 per cent in 2012-13 at 2004-05 prices.
Small farmers use land and their labour; and middlemen provide money to facilitate production. Without credit offered by middlemen, over 80 per cent of the farmers would not be able to buy seeds, pesticides and fertilisers. Their participation in the market is insignificant owing to constraints low production, high transaction costs, lack of markets and poor access to information, inputs and credit. The World Bank has pointed out that the farmer&’s access to markets is hampered by poor roads, rudimentary market infrastructure and excess regulation.
Farmers are so poor that they cannot afford to hold on to their produce for better prices. Their indebtedness forces them to sell the commodities immediately after the harvest at lower prices to money-leaders in order to clear their debts. The chain of middlemen in the agriculture marketing sector is so large that the share of farmers gets reduced substantially.
Minimum support price (MSP) is a form of market intervention by the government for providing insurance to farmers against any sharp fall in prices. MSPs have gone up substantially since the mid-1990s, but awareness among farmers is pathetically poor. Moreover, most farmers are unaware of the existing agricultural insurance schemes than can help them to minimise risks pertaining to income.
The absence of proper marketing facilities, indebtedness, and falling public investments became critical in the mid-1990s. Agriculture has ceased to be economically viable. More than 45 per cent of farmers interviewed by NSSO wanted to quit farming. To that can be added the spate of suicides. The gap between their aspirations and the lack of social and economic resources have driven them closer to death. Even in Punjab, where the Green Revolution had first happened, the farmer is no longer prosperous. More than 60 per cent of them reel under the debt trap. Only one-sixth of the rural households borrow from financial institutions. As regards money-lenders, the interest rate ranges from 36 per cent to 120 per cent. In reality, banking reforms in the agricultural sector in terms of credit reach is pathetically disappointing.
Increased production does not guarantee increased income for the farmer. With cereal production at a record level, the country has witnessed several suicides. Potato farmers have committed suicide in West Bengal not because the crop failed, but because of the glut in production. Having spent Rs 5 to Rs 6 on cultivating a kg of potato, they are now getting less than Rs 3 per kg. Vegetable production has increased substantially, but very often farmers are compelled to sell their produce at incredibly low rates due to lack of connectivity and marketing facilities.
Agriculture in India is a highly risky profession. Fluctuating weather, poor development of irrigation, groundwater depletion, and declining productivity are the major impediments. The negative effect of climate change and extreme weather have created greater instability in food production and farmers’ livelihood. The recent spate of unseasonal rain and hailstorms in different parts of the country has damaged rabi crops in about 181 lakh hectares across 13 states between February 28 and March 16.
Agriculture needs to be commercialised to make it profitable. Processing vis-a-vis value-addition of produce is an important aspect of commercialisation. Presently, processing of fruit and vegetables is only 2 per cent in India in comparison to 80 per cent in the USA and Malaysia, 78 per cent in the Philippines, 70 per cent in France and Brazil, 40 per cent in China and 30 per cent in Thailand. Although India is the second largest producer of vegetables and third largest producer of fruit, it is estimated that 20 – 30 per cent of horticultural crops perish due to lack of proper methods of processing and storage. To execute effective food processing on a large scale, we need to create farmers’ groups in collaboration with marketing NGOs, SHGs, agri-processors, modern retailers and agro-exporters.
Agriculture and the allied sectors are essential for development. The strategic vision for better agriculture must give importance to three important elements India&’s comparative advantage, efficient markets at home and abroad, and environmental sustainability. Every scheme must follow this three-dimensional paradigm to help out the distressed farmer.