ARTICLE 1: How To Increase Farm Incomes & Growth Post-Repeal

Context: Both Lok Sabha and Rajya Sabha repealed the farm laws yesterday and the question now is how to proceed further in the sector.

Issues with India’s agriculture sector

  • Limited permit of MSP: Procurement of rice and wheat at the minimum support price (MSP), promises continued decent income to farmers in Punjab and Haryana only,
    • Not to ones in poor states like as Bihar, Odisha, where significant procurement under MSP doesn’t exists.
  • Minimal growth: The fastest Indian agriculture growth till-date in any ten-year period is 4.4%. It was during the decade of 1980-81 to 1989-90 when the Green Revolution was at its peak.
  • Selling/export of excess produce: With enough food grains already produced to meet India’s needs, any significant expansion in their sales at home would depress prices rather than boost farmer incomes.
    • Seeking export markets would meet the same fate with importing countries imposing countervailing duties to counter our agricultural subsidies.
  • Hindrances to crop diversification: Repeal of farm laws has created bottlenecks to this possibility. Farmers unable to flourish without being able to sell their produce directly to exporters, processors and corporations or engage in contract farming with them.
  • Reduction in Total cultivable area of food crops: In three and a half decades spanning 1980-81 to 2014-15, area under food crops fell marginally from 73.9% of total cultivated area to 62.3%.

Way Forward

  • Transfer to other sectors: Creation of gainful employment opportunities in industry and services for a sizeable proportion of the current farm population and yet more income transfers to those who continue to remain in agriculture.
    • Migration to the jobs outside agriculture.
    • Increasing the land per worker within agriculture.
    • Help accelerate overall GDP growth.
    • In turn, accelerates growth in government revenues needed to finance the transfers to farmers.
  • Reforms for liberal trade regime: A bold programme of trade liberalisation would accomplish two major objectives;
    • Greatly improve the yield on Insolvency and Bankruptcy Code, GST, labour codes and globally competitive corporate profit tax reforms.
    • Dispel any fears that the future of reforms is in doubt in the wake of the repeal of farm laws.
    • First, bring the high custom duties down in a phased manner just as we had done between 1991-92 and 2007-08.
    • Second to constitute Free Trade Agreements (FTAs). 
  • Constitute Free Trade Agreements (FTAs): Try aggressive programme of negotiation with EU and UK. A shift from less reliable US and relations with EU adds geopolitical advantages.

Conclusion: It is prudent to begin building bridges to the EU, who are keen to diversify away from China through FTAs which shall also secure India’s agriculture sector through corporate connections and direct exports. Thus, India can scarcely afford to miss the opportunity.

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Crop diversification; Liberal trade regime;

  • GS Paper 2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
  • GS Paper 3: Indian economy and issues relating to planning, mobilization of resources, growth, development and employment. Indian agriculture issues and related constraints;