Making agriculture economically viable

General Studies Paper 3

The Indian government has been aware of the need to make farming more economically viable and sustainable. The government has been taking various measures to address the problems faced by the farmers, such as low productivity, high input costs, market fluctuations, climate change, indebtedness, and lack of institutional support. The agricultural sector is very crucial for the overall economy and society of India, as it provides employment to a large segment of the workforce and ensures food security for the country’s population. Improving the condition of Indian agriculture has been a priority and a challenge for the policymakers in India.

Why is it Important to make Agriculture Economically Viable?

• To Ensure Food Security: India is a country with a large population and a growing demand for food. In order to ensure that everyone has access to enough food, it is important to make agriculture economically viable so that farmers can produce enough food to meet the demand.
• To Promote Rural Development: Agriculture is a major contributor to the rural economy. By making agriculture economically viable, it is possible to promote rural development and improve the lives of people living in rural areas.
• To Support the Livelihoods of a Majority of Indians: Making agriculture economically viable can help improve the living standards and well-being of millions of Indians who depend on farming for their survival. Agriculture is the main source of income and employment for more than 50% of the Indian population directly.
• To Enhance the Growth and Stability of The Economy: Agriculture contributes around 17-18% to the GDP of India. Making agriculture economically viable can help boost the overall economic growth and stability of India by increasing farm productivity, reducing wastage, diversifying crops, enhancing value addition and ensuring food security.
• To Adopt Sustainable and Natural Farming Practices: Agriculture causes environmental degradation, water scarcity, soil erosion, and greenhouse gas emissions. Current farming practices rely on harmful chemicals, irrigation, and subsidies. Making agriculture economically viable can encourage sustainable and natural farming practices that reduce environmental impact and enhance adaptation to climate change.

What are the challenges?

• Lack of Digital Literacy: Many farmers in rural areas may not have access to smartphones or reliable internet connectivity, which can limit their ability to access digitalized agri-services. Another challenge is the need for education and training to help farmers understand how to use these new technologies effectively.
• Small land holdings: Many farmers in India have small land holdings, which can limit their ability to achieve economies of scale and reduce their profitability.
• Lack of Access to Credit: Many farmers in India lack access to formal credit, which can limit their ability to invest in their farms and improve their productivity.
• Lack of Access to Markets: Many farmers in India lack access to markets where they can sell their produce at a fair price. This can result in farmers receiving low prices for their produce and reduce their profitability.
• Climate change: Climate change is resulting in more frequent and severe weather events such as droughts and floods, which can have a devastating impact on farmers’ livelihoods.
• Lack of infrastructure: Many rural areas in India lack basic infrastructure such as roads, electricity, and irrigation systems, which can limit farmers’ ability to improve their productivity and profitability.
• Natural calamities: India is prone to natural calamities such as floods, droughts, and pests. These calamities can damage crops and livestock, leading to losses for farmers.
• Inefficient marketing: The marketing system for agricultural produce in India is inefficient. This leads to low prices for farmers and high prices for consumers.

What are some Policy Options for making Agriculture Economically Viable?

• Digitalisation of Agriculture: The new age technology based Agri start-ups offer full-stack solutions for farmers from seed to market. They prioritize the farmer by providing direct access to supplies, loans, insurance, and selling their produce at the best price.
• For Example, Gurugram-based DeHaat caters to 15 lakh farmers covering over 35 crops, through artificial intelligence, machine learning, and data analytics.
• Typically, the farmers with smart phone can access digitalized agri-services for agri-inputs, farm advisory, and marketing of agri-produce.
• Integrated/Natural Farming: Integrated farming can be profitable for farmers with small land holdings. By having a few animals, fishponds, and vermi-culture for natural manure, farmers can become self-reliant and financially empowered. Family labor is important for this type of farming, and it is both commercially viable and environmentally sustainable.
• Natural farming offers a solution to various problems such as food insecurity, farmers’ distress, health issues and natural calamities by using locally available resources and minimizing external inputs.
• Climate Smart Agriculture: Climate smart agriculture can make agriculture economically viable by shifting towards eco-friendly agri-inputs such as Nano Urea. This can reduce the indiscriminate use of fertilizers, which can lead to irreparable ecological damage, soil infertility, and a toxic food chain. By using cost-effective and sustainable farming practices, farmers can increase crop yields while reducing input costs. This can help farmers become more profitable and sustainable in the long run.
• Adopting Best Farm-practices: Adopting best farm-practices such as co-operative principles can make agriculture economically viable. For instance, Israel, despite its unfavourable climate and limited resources, has become a major exporter of farm-produce and a global leader in agricultural technologies. By following social equality, co-operation and mutual aid in generating agricultural output in the most productive manner, farmers can increase their efficiency and productivity. This can lead to increased profitability and sustainability in the long run.
• Say ‘NO’ to Informal Credit: Besides easing access to formal credit, farmers need to be counselled on financial prudence. Formal credit facilities can increase agricultural productivity and profitability by providing farmers with funds to invest in their farms.
• Despite the availability of formal sources of finance, a recent survey shows that money lenders/traders/landlords still exist in rural India, making farmers financially unstable and dependent on informal credit sources.
• Development of Agri-Value Chains: Key drivers of agri-value chains are customer focus, infrastructure, technology, training & capacity building.
• VAPCOL, a multi-state farmer producer company based in Maharashtra, is a case in point. It has a membership of 55 FPOs covering over 40,000 tribal farmers spread across seven States.
• Leveraging Collectives: Convergence of SHGs, Farmers Producer Organisations (FPOs) and Co-operatives will lead to better bargaining power of farmers in terms of bulk procurement of inputs at a discounted price, economies of scale in transportation and warehousing, access to low-cost institutional finance, farm mechanisation (drones for monitoring of crops and spraying of fertilisers and plant protection chemicals, etc.).