India should urgently look at comprehensive reforms to make agriculture a sustainable and scalable industry, says Barnik Chitran Maitra, managing partner, India, South Asia, at global consulting firm Arthur D. Little. In an interview, Mr. Maitra discussed many issues around sustainability, falling farmer incomes, better price realisation, value addition, cold chain infrastructure and management. Edited excerpts:
Where does India’s agriculture sector stand now?
The country has made big strides in agriculture. Post-liberalisation, the yield has increased, and is the third-largest producer by value.
However, the sector realises only 50 to 60% of its potential. Price realisation is affected by the APMC Act and middlemen. Except for a few crops (rice, wheat) and a few States (Punjab, Haryana, Andhra Pradesh), the selling price for the farmer is 15-50% below the minimum support price (MSP).
The country’s food processing value addition is less than 10% of the produce while for most developed economies this is 100 to 300%.
How can farming be made a sustainable occupation?
The agriculture sector employs over 52% of the workforce, contributing to only 14% of the GDP. Incomes have been stagnant over the last decade with the average worker earning less than 60-70% of the income of their counterparts in the city. With labour moving to rural India and depressed consumer demand, incomes could drop by about 10-20%.
Agriculture and food processing GDP contribution has to rise to close to 20% while surplus labour needs to be deployed in manufacturing and food processing.
The sector needs to grow at 5% per annum, which is double the historical growth rate.
How do we ensure adequate remuneration for farmers?
Increasing remuneration via MSP has drawbacks. It couldn’t be enforced beyond three States and it triggered food inflation and macroeconomic instability.
There are other ways: increased price realisation for the farmers, so [that] they get most of the consumer surplus, and use of technology and supply aggregation platforms for storage, logistics and better price discovery. There is potential to create a segment of processed and branded food, to increase farmers’ income.
Anysuggestions to reform the farm sector?
The country should follow a five-point agenda for reform: focus on sustainable yield improvements through scientific farming practices; improve agriculture marketing to increase farmers’ price realisation through policy changes; set up an Integrated Agriculture Export Mission to scale up food processing and exports to increase value addition from 10% to 50%; promote direct marketing through farmer producer organisations; and, seriously work on reforms in the agriculture sector.