Can we dream of Swaraj or Self-Reliant India without developing rural India? The country has been through 7 decades in this journey but has it made enough progress that can make us proud? Rural India is still the home for ~70% of the country’s population as per 2018 data, 30% of which live below poverty line, contributing to ~40% of India’s GDP. While Non- Farm activities in rural areas engage 36% of rural population, 64% is engaged in Agriculture or Farm activities contributing to 17% of the country’s GDP, tilling majority of the country’s available land.
Niti Ayog’s discussion paper on “Changing Structure of Rural Economy in India” published in 2017 Rural Economy indicates changing trends in Indian Rural Economy studied over past 4 decades from 1970-71 to 2011-12. The rural economy has grown 7 times, employment has expanded by 2 times with a major sectorial shift to non-Farm from farm activities leaving a wide disparity in labour productivity (Rs/ worker) favouring non-farm. The last decade has also seen withdrawal of female workforce and flight of labour from rural to urban areas.
Despite increasing urbanization, Rural India and Agriculture will remain a key focus. ~95% of the agricultural output is from Rural India. ~80 crores people live in Rural India out of which ~50 crores are engaged in Agriculture. While we have improved agricultural productivity ( MT/ hectare) over the last few decades owing to Green Revolution etc, India still ranks lower to China, Indonesia, Vietnam, Bangladesh in a staple crop like Paddy.
Minimum Support Prices(MSP) is expected to freeze the floor price and provide for upsides to the farmers depending on the market dynamics. Implementation of MSPs is a State subject and many States, especially some of the eastern states did not go full steam on it despite benefits reported by some other states. Wherever MSPs don’t operate, the farmers may be realizing even less than the MSP for their produce. A study revealed that less than 25% of the farmers knew about MSP in India in 2017 and the awareness levels have remained low till date, even with significant increases over the last few years. MSP active states like Punjab, Haryana, Telengana etc have been found to have designated procurement agencies.
Despite the increases, if we look at the current MSP and compare with the cost of production of Paddy, for example, farmers on an average, are left with a surplus of ~Rs 300/ quintal or Rs 16200/ hectare for each crop season of ~4 months (refer table below) to meet their household expenses including high interests on borrowings to local moneylenders.
| Particulars | ~Rs / Quintal |
| MSP of Paddy (approx.) | 1850 |
| Cost of Production (estimated based on 54 Quintals per hectare) | 1550 |
| Surplus per Quintal | 300 |
| Surplus per hectare | 16200 |
With an average earning of Rs 4000 a month, a paddy cultivator can barely survive with his family. And if there is a bad season, they don’t have any savings to fall back on. National Crime Records Bureau reported 12602 suicide cases in this sector in 2015. An urban labour may be earning the same by working half a day or even less than that. These farmers give us food, a basic necessity, and on top of it, undertake the risks and uncertainties of quality and quantity of their produce. Don’t they deserve a better remuneration, an access to better housing, better education, better healthcare services, efficient banking & insurance products, an effective supply chain to market their produce, a better life which should not be inferior to the life of an urban citizen? As the sector gains more economic power, it will pay back multifold through higher consumption demanding higher outputs with diversified products and better services, giving the growth that the country is desperately seeking today. A simple inflation indexed base correction model is redundant in this situation and an overall transformation is called for to realize the dream of Swaraj or Self-Reliant India.
A recipe to transform:
India needs a recipe to transform the Farm sector. There is no doubt that the sector is complex and the supply chain is even more complex. Moreover any transformation in this sector will impact a few vested groups, for sure, but a strong political and social will is required to overcome those challenges. The country does not have a choice. There are multiple models and initiatives on display, though not at scale, and the country has access to enormous talent and resource pool.
Let’s evaluate the Supply chain in Agriculture by (a) The Produce and (b) The Market
The Produce:
Increase productivity per hectare and reduce cost of production per hectare are the guiding principles to make this part of the supply chain efficient. We have had Green Revolution which did increase the productivity by leaps and bounds but still not enough compared to other Asian countries. Algorithms, considering soil conditions, climate, irrigation facilities, nature of crop etc, can be deployed through ML and AI at scale, mapping the best practices to help the farmers to optimize their outputs. Corporate India is coming up with lot of these solutions aimed at improving irrigation, crop monitoring using sensors and mobile technology to analyse real time data providing farmers with decision support, which are being tested in pockets. These are all collectively called Smart Farming. Even robotics is making its way in, where Agricultural Labour is scarce. This is another revolution in the making. The challenge will be to identify the right solutions for scale and support those solutions to scale, together with bringing in a mindset change of the farmers to pivot on data as the principle decision making support rather than their own intuitions. Internationally, driven by scarcity of labour, innovations and automations including robotics have made significant journey into Farming starting from seeding & weeding to harvesting & storing. India will have to make conscious calls considering the availability of labour force in the country without compromising on real time data driven process.
The Supply Chain to Market:
The conventional supply and distribution channels of farm products are being challenged and new channels are evolving with the participation of several companies driving integrated or coordinated processes.
Fruits and vegetables have seen the maximum evolution of the coordinated supply chains catering to exports and high end domestic markets. The emergence of dedicated export chains have driven higher quality and safety standards while proliferation of hypermarkets or supermarkets including e-commerce platforms have developed new domestic channels, primarily in the cities. These are structured relationships among farmers, processors, traders and marketing firms wherein detailed processes and specifications are laid down with respect to quality, quantity, delivery time, price etc.
Contract Farming is another model which is gaining prominence, wherein the producers or farmers agree to supply farm produce of requisite quality and quantity at a price through forward agreements with the marketing firms. It is likely to expand due to legal reforms (Agricultural Produce Marketing Committee Act or APMC amendments) aimed to cut out the middlemen including State Govt. interventions and allow free market operations with the minimum support price in force. Even opening the avenues for interstate sale of farm produce is an attempt to farther free market operations in this sector. There are debates whether free market operations is a right recipe for transformation and whether it benefits the farmers with better price realization providing more predictability in their operations. As long as the minimum support prices (MSP), appropriately pegged to ensure improved livelihoods of the farmers, are in force across the length and breadth of the country, exposing them to the upsides of the free market may not be a bad idea. Shielding the producers of a basic necessity like Food, who are mostly illiterate, from the market uncertainties, looks reasonable so long we have appropriate systemic checks and balances.
Irrespective of the models, the scale is humongous and complex. The channels are many and a strict implementation of MSP is critical. This gigantic network with so many stakeholders will have to be supported by the automated platform(s), else it will fail to deliver the reforms. There are multiple nodes in play calling for real time data updates. Block Chain technology may perhaps present the best solution for this complex environment with its proven ease of settlements and payments, traceability, digital market creation, data sharing etc. The biggest hurdle of block chain is to bring all the stakeholders on the table and align, but at the same time we must realize that stakeholder alignment is critical to make this supply chain work as per intended design. A transformation in the Agriculture sector is a definite need for a self-reliant India and can itself serve as an economic stimulus as it touches upon different sections of the society including those who are struggling to survive in the current pandemic. Any reform that we bring about in this transformational journey, cannot lose focus on equitable distribution of economic wealth providing a decent opportunity for the farming sector to improve the livelihoods of its members and cannot afford not to have technology as its partner to innovate and automate judiciously considering the sensitivities on the ground with the right understanding of the operators in play.
About the Author:
Susanto Banerjee is a Change Catalyst who
- has served Corporates in Paints/ IT/ Pharma industries for ~ 27 years in various leadership roles including CFO and CHRO
- is an independent consultant in Financial and Business Transformation space
- is the Founder of Ventures, a theatre based activity platform for Behavioral Coaching and pure play theatre where he coaches, directs and acts
- is associated with non profit sector driving social impact.
