Budget 2022: Decoding Resilience of Indian Agriculture
Finance Minister Nirmala Sitharaman presented the Economic Survey 2021-22 in parliament ahead of the Union Budget 2022. The survey comes at a time of extreme uncertainty and supply-chain disruptions caused by repeated waves of the Covid-19 pandemic. Thus, the results of the survey do not present just the state of the economy, as traditionally understood, but a saga of resilience and recovery in the face of crisis. In this article, we highlight the resilience displayed by the agriculture sector both in the front of production and exports.
Faced with uncertainty in policymaking owing to the global health crisis, the Government of India opted for a unique response strategy, called the ‘barbell strategy.’ The strategy, commonly used in finance, suggests a balance between risks and rewards by investing in extremes across a spectrum of low-risk and high-risk bonds. When looked at from a welfare perspective, this strategy is the bringing together of two unrelated factors, in this case, safety nets for the vulnerable sections and real-time information-based policy adjustment for challenges posed by the pandemic. This barbell strategy is in stark contrast to the ‘waterfall strategy’ that is marked by sticky policies based on rigorous initial analysis. In the agricultural sector alone, this strategy can also be seen as the combination of innovation on farmers’ end and progressive policy push from the government’s end to minimize the risk posed by the pandemic.
The economic survey for this year brought out important statistics for agriculture, highlighting a buoyant growth in Gross Value Added (GVA) of 3.9 per cent in 2021-22 after the sector grew at 3.6 per cent in the previous year. Exports of agriculture and allied products also grew by 23.2 per cent to $ 31 billion during April-November 2021. This provides hope to 18.8 per cent of Indians who are dependent on agriculture for livelihood. While it seems like this growth and resilience is obvious considering that the pandemic had a little direct effect on the production of crops, it is critical to note that the agriculture sector is highly dependent on a strong supply chain network and families engaged in agriculture are often dependent on remittances from members who migrated to cities. While the reverse migration during the pandemic did provide additional hands on the field, we cannot say for sure which factor had a higher impact on the sector across the country. However, despite the loss of income of migrants’ households, SAS 2021 reveals that the average monthly income per agricultural household, as per paid-out expenses approach, works out to be Rs. 10,218 compared to Rs. 6,426 as per the last SAS Report of 2014 estimated by the same approach indicating an approximate increase of 10 per cent every year.
With supply chain disruption and reverse migration seen during the pandemic, the sector as a whole faced threat that was linked to the pandemic. Additionally, in a crisis, the banking system, traditionally, succumbs to financial stress and financial aid happens to be a key factor in Indian agriculture. With this background, decoding the growth in agriculture despite the ongoing challenges is more than just dismissing it to the lack of pandemic-induced stress as compared to other sectors. This growth comes as a result of consistent policy intervention, in particular, the interventions focused on making the agriculture sector Aatmanirbhar.
The measures taken by the government to enhance credit facilities, promote infrastructure, increase investments, create market facilities, and increase the provision of quality inputs along with good monsoon and ingenious innovations in agritech have helped create favourable circumstances for agriculture to not just sustain but also expand.
Powered by the Startup India initiative, there are over 1000 agritech startups in India as of December 2021.1 DeHaat, for instance, provides end-to-end farming services to the farming communities2 including crop consultation, crop reminder, local voice calls, market to sell and buy inputs and produce, advisory services, etc. These tech innovations have played a vital role in empowering farmers and supporting the agriculture ecosystem at a time when the importance of technology penetration has been laid bare in front of the world.
In view of nutritional requirements, changing dietary patterns, and achieving self-sufficiency in pulses and oilseeds production, the government also fixed higher minimum support prices for these crops to encourage crop diversification. As a result, the oilseed production in India has grown by almost 43 per cent from 2015-16 to 2020-21.3 Moreover, Kharif and Rabi season 2020-21 saw a record procurement of 11.87 Lakh Metric Tonne (LMT). The minimum support price is of immense importance in a market marked by the prevalence of intermediaries and low bargaining power with farmers.
Acknowledging the prevalence of poverty in rural communities, food subsidies remain a deciding factor in agricultural growth. Only a secure rural India can give rise to a growing agricultural sector. The economic cost of wheat has increased from Rs. 1,908.32 per quintal in 2013-14 to Rs. 2,993.80 per quintal in 2021-22. Similarly, the economic cost of rice has increased from Rs 2,615.51 per quintal in 2013-14 to Rs. 4,293.79 per quintal in 2021-22. However, as a pro-poor measure, the Central Issue Prices for National Food Security Act beneficiaries have not been revised since the commencement of the act.4
Infrastructure development in the form of an extensive network of highways increased from 71,772 km in 2011 to 1,40,152 km in 2021 and the network of airports increased from 62 in 2016 to 130 in 2021. This represents a 95 per cent and 110 per cent increase, respectively. The National Agricultural Research System of India has also produced remarkable results in terms of mechanisation of agriculture, development of climate-resilient technologies, and high-yielding varieties (HYVs) of seeds. Along with this, key government initiatives like e-NAM, India Digital Ecosystem of Agriculture (IDEA), and the National e-Governance Plan in Agriculture (NeGPA) has given a fillip to agriculture by enabling a resilient farm supply chain. Thus, with the right combination of physical and digital infrastructure, Indian agriculture got a cushion against pandemic-induced challenges and was in fact able to grab the opportunity that the crisis provided.
Agriculture emerged as a silver lining during the pandemic, showing some semblance of normalcy and growth as contact-based services like construction and tourism contracted. It remained ‘isolated’ from the impact of Covid-19 due to proactive policies of the government under Aatmanirbhar Bharat Abhiyan and key innovations in agritech. In a country that experienced extreme food insecurity right at the time of independence and one that continues to host 1/6th of the world’s population, the growth in the agriculture sector is more than just a macroeconomic figure but, has put India on the path of continued progress in ensuring food and nutritional security.
This blog has been authored by Karishma Sharma and Bhavya Tyagi.