Culture or Agriculture: What needs a bigger debate?

Sometimes answers are obvious but we still close our eyes to the reality.

The Coronavirus pandemic has shown us a mirror—rather to the entire world. It’s served a wakeup call for the need to go back-to-basics and get priorities right.

No matter how flourishing industry may be, during crisis we first care only about the supply of essentials. Food safety can’t be compromised for any level of industrial revolution, indeed.

Late M.K. Gandhi, a visionary and the father of the nation, had envisaged India’s future in villages and had advised the “Village First” approach. And in search of higher GDP, we are focusing largely on globalization, urbanization and industrialization—completely rescinding Mahatma’s vision of making every village a growth centre.

Has the time come for the government to take bold decisions and think beyond depositing a paltry Rs 6,000 in farmers’ accounts?

According to Economic Survey 2019-20, Agriculture contributes 16.5% to India’s GDP. Agriculture is the primary activity of 58% of India’s population. Yet, Indian agriculture faces a plenty of challenges such as low productivity, high wastage and inefficient management of buffer stocks, amongst others.

Do you know, India is one of the largest producers of rice yet its per hectare productivity is one of the lowest. On productivity count, India is not only behind China but also smaller countries like Vietnam, Bangladesh and Indonesia, to name a few.  Irony, isn’t it?

Wait a moment, there are many more paradoxes. For instance, during the present crisis time, everybody is bothered about the supplies of essentials, hardly anybody’s cared about the present state of Indian agriculture; and perhaps its future as well.

While there’s no dearth of analysts, experts and policy advisors demanding a special stimulus package for the industry to stave off a hard landing, agriculture is not even on the agenda.

Indian agriculture is gasping for fresh air. Despite having record harvests year-after-year, India is miles away from ensuring food security. Farms and farmers both are still production driven and not market driven.

Shouldn’t this call for a sea change in Indian agriculture?

The world is pondering upon the idea of Agriculture 4.0, which includes growing crops on barren land, using sea water for cultivation and introducing new farming methods such as vertical farming, desert farming and hydroponics, among others.

And despite growing budgetary allocations to Indian agriculture, it’s moving nowhere!

Another shocker: India ranked 102nd among 119 countries considered for Global Hunger Index in 2019 denoting that it suffers from serious hunger. In 2013, India ranked 63rd on the then 78 nation-comprising Global Hunger Index. Doesn’t it suggest that, despite National Food Security Act (NFSA) 2013 entering the 7th year in 2020, India hasn’t achieved much success on this front? Doesn’t it, then, call for policy review?

On the other hand, farmer distress is widely known and well-documented.

Yet, India still awaits a second green revolution and another round of farmer upliftment.

Prudent inventory management is the lowest hanging fruit…

Giving agriculture a face lift would start with prudent inventory management.

At several platforms various pundits and economists have criticized India’s food procurement and distribution policies. Fortunately, India has stuck to its strategy of maintaining higher food grain buffers. However, there’s a vast scope for improvement in food grain inventory management.

As a part of Pradhan Mantri Garib Kalyan package—a COVID-19 lockdown relief package, government decided to give away 5 kgs of rice or wheat per person and 1 kg of pulses of choice per household every month for three months to 80 crore poor across the country.

Is it a strategic plan to rationalise the buffer stock? Looks like. But here too, the government has been shying away from taking bold steps. Why not redefine the entire system?

As on March 31, 2020; India’s rice and wheat reserves were respectively 56% and 73% in excess of prescribed levels of operational and strategic food grain reserves. As 80 crore people are covered under India’s food security mission, if the excess reserve was to be distributed among the poor, based on their consumption patterns, there’s a room to give away the excess stock of 35 kgs of rice and 60 kgs of wheat each person.

Note: According to National Food Security Mission, 60% of India’s population depends on rice and the rest on wheat.

India’s overstocking and poor distribution policies are creating a double-whammy. Overstocking discourages Minimum Support Price Hikes (MSPs) and crores of people stay hungry despite the country having adequate food stocks, due to poor distribution policies.

Of course, there are high costs of moving stocks from the place of storage to the place of consumption, but hadn’t they been taken into account when we decided to implement NFSA 2013.

No wonder, the Minimum Support Price (MSP) for rice and wheat has increased at a compounded annualized rate of just 5.2% and 4.9% respectively over the last 5 years, causing rural distress. And that’s not all. Many farmers complain MSPs aren’t keeping pace with rise in the cost of production thus making farming activities less lucrative. It means higher MSPs don’t automatically translate into higher profitability for farmers unless they are more realistic about costs involved.

The government agencies are still following age-old procurement and distribution practices. Therefore, when government sells rice and wheat at Rs 3 and Rs 2; it barely recovers 8% of the actual procurement and distribution cost.

No wonder rural demand is in the slow lane. Rural markets are more value conscious.

The contribution of rural markets in the total demand pie of FMCG, 2-wheelers, 4-wheelers and telecom sector is roughly 36%, 50%, 30% and 45% respectively.

Instead of just handing out packages to the industry, the government should go at full throttle towards making the Indian agriculture ecosystem more efficient, transparent and market-driven before we can even ponder on Agriculture 4.0. Now is the time to go beyond catchy slogans of doubling framer incomes by 2022 and the likes.

The path of success of India Inc. goes through villages. If India has to adopt expansionary fiscal policies, indeed, to prop up falling economic growth in the aftermath of Coronavirus pandemic, agriculture is the right place to let coffers loose. Agriculture is in trouble, take care of it and it will take care of the industry and markets.

The present government has a track record of taking bold decisions and dealing with tricky situations with great aplomb. Modi 2.0 has an invincible mandate and strong leadership but it needs to shift the gears soon.

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Disclaimer:

We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:

We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflict of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.

 

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