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Friday, April 16, 2021

India’s agriculture reform plans: A complete review in 8 points

The Centre is going strong on its agricultural reform plans. After launching an array of economic reforms back in May in the early phase of lockdown to ensure no impact of the pandemic on India’s food supply chain, the government recently gave another major monetary boost to our farmers.

We all know, how important these reforms are for India, being an agrarian economy. In this article, we shall discuss all the plans and reforms the Centre announced/launched so far to keep the agriculture sector going during this pandemic. Also, we will focus on how these plans would help the stakeholders associated with this sector.

Here’s a complete review of India’s all agricultural reform plans since the pandemic outbreak in 8 points

1. What is the Centre’s latest agricultural reform plan?

PM Narendra Modi launched the agricultural investment fund worth Rs 1 lakh crore on Sunday, giving a boost to the farming sector amid the global health crisis. In a major initiative, Modi transferred Rs 17,000 crore directly to the bank accounts of more than 8 crore farmers as the sixth installment of the PM-KISAN scheme. There was reportedly no interference of any intermediaries or middlemen in this cash transfer process. “Rs 17,000 crore under the PM-Kisan Samman Nidhi has been deposited into the bank accounts of 8.5 crore farmers with a single click. There was no commission. I am satisfied that the objective of the scheme is being fulfilled.” Modi said during an online address.

2. How will the monetary support help farmers?

If you follow the PM’s speech on Sunday, he highlighted a number of ways through which the agricultural fund will help farmers. Some of them are as follows:

  • The fund will help farmers build warehouses for their produce
  • Ensure fewer wastage of crops
  • Boost the value of their crop
  • The fund will catalyze the creation of post-harvest management infrastructure and community farming assets such as cold storage, collection centres, processing units
  • These assets will help farmers get higher value for their produce and they will be able to store and sell at greater prices
  • Farmers can also process their produce and opt for value addition

3. When will facilities of the new plan be availed of?

According to a report, under the scheme, a loan amount of Rs 1 lakh crore will be provided to farmers for four years. While Rs 10,000 crore will be made available in loans to farmers between 2020 and 2021. A sum of Rs 30,000 crore will be provided in the remaining three years. Three per cent subsidy on interest will also be given to farmers on loan worth Rs 2 crore or less up to seven years.

4. How has India’s agriculture sector fared amid pandemic?

As major businesses like power generation, railway, traffic, air transportation, petroleum, transfer of goods and services have been severely affected by Covid-19 and still have a long time to recover, the baton of economic recovery is in the hands of the agriculture sector. According to the government data, the sector contributes to 17.4 per cent of total gross value added. The Centre said the agriculture sector will mitigate the shock of the pandemic on the economy in 2020-21 with the forecast of a normal monsoon at 102 per cent of the long-period average (LPA). Modi on Sunday said India’s rural economy has stayed resilient in the face of the coronavirus pandemic.

As per the projections of Crisil, though India’s GDP will decline by 5 per cent this financial year, the agriculture sector, the backbone of the rural economy, will have a growth rate of 2.5 per cent. This could just mean that India will have to rely on its farm economy for the time being.

5. What does the department of economic affairs’ macroeconomic report say?

The report underlined that the agricultural outlook improving and the recent landmark reforms announced in the sector are well-timed. The Modi government recently deregulised and liberalised the agricultural sector in India. “The reforms were extremely important given that agriculture, despite being the country’s largest private-sector enterprise in terms of employing more than half the workforce, is contributing only 15 per cent to India’s GVA,” the report added.

India's agriculture reform plans
Photo: Twitter

6. What were the previous reform plans?

Finance minister Nirmala Sitharaman in May announced an array of financial, legislative and reform measures to increase the pricing power of farmers – or share of profits in farm incomes. The measures aimed at dismantling historical domestic trade barriers and bring fresh laws for more open food and commodity markets and improved infrastructure. Sitharaman’s third tranche of measures, worth Rs 1.63 lakh crore was a mix of new allocations and top-up to already existing agriculturally critical policies.

The department of economic affairs’ monthly macroeconomic report opined that these reforms will help in several ways. Some of them are:

  • Building efficient value chains
  • Offering remunerative prices to farmers
  • Enabling the creation of a dynamic and vibrant agricultural sector in the country
  • Giving farmers the freedom to decide when, where, to whom and at what price to sell their produce

The second tranche of stimulus package had important decisions on credit support for small farmers. The reforms promised to offer additional credit support to small farmers through the National Bank for Agriculture and Rural Development (NABARD), and the Kisan Credit Card (KCC) facility. As per a report, the Centre sanctioned almost 63 lakh loans worth Rs 86,600 crore for the agriculture sector. The report says nearly three crore farmers with agricultural loans of Rs 4.22 lakh crore have availed the benefit of a loan moratorium of three months. Also, a working capital limit of Rs 6,700 crore has been approved to procure farm produce of state government entities since March 2020.

7. What about the Centre’s three ordinances to boost farming?

According to a statement by the Centre, in June India’s law ministry issued three ordinances to liberate existing market restrictions, end free trade barriers in agricultural production and help farmers engage directly with buyers.

India's agriculture reform plan
Farmers carry their produce in an Uttar Pradesh village. Photo: Twitter

Let’s explain the ordinances. First, the Centre has amended the Essential Commodities Act to remove restrictions on stocking farm produce. Second, it has launched a new law — The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 or the FPTC Ordinance — to eliminate monopoly of the Agricultural Produce Market Committees and allow all to buy and sell farm produce. Third, it introduced another law — The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020, to legalise contract farming so that big traders or firms can cultivate vast swaths of land on contract. All these mark the paradigm shift in the agriculture sector of India.

8. What is the present scene in the agriculture sector?

With India unlocking, the worst seems to be over as high-frequency indicators show an improvement from the unprecedented trough the economy had hit in April 2020, says the finance ministry report. “Rural is stepping into the void and clearly the Covid-19 hit for rural India is weaker and hence demand (is shifting) from urban to rural,” Saurabh Mukherjea, an investment manager told a business daily recently, says a report. While strict containment zone rules, endless lockdowns and restrictions have affected regular consumption in urban India, there is an entirely different picture in rural India. Sales of two-wheelers and tractors have been steadily going up, an index for rural optimism, says another report.

8. How did the migrant labourers help in this?

Another report highlights, how migrant labourers fleeing cities after the lockdown was imposed has helped the rural economy. Many of these young workers are staying on in their villages in search of work in their respective rural belts. By following these measures, some state governments have ensured employment for the labourers of their state. Besides getting work from the bumper crops as well as an additional Rs 45,000 crore allotted to MNREGA, state governments like that of Uttar Pradesh are preparing to invite businesses to set up industries across the hinterland. If implemented correctly, it could be a fundamental shift in the rural-urban dynamics of India.

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