Agri sector likely to cushion Covid shock
NEW DELHI: The Budget-eve Economic Survey 2020-21 backed the three agricultural reform laws of the Modi government, which have set off a massive farmers’ agitation, described them as a “remedy, not malady”, and made an economic case for the legislation along with detailed explanations as to why they are needed.
The survey pointed out that agriculture is “set to cushion the shock of the Covid-19 pandemic on the Indian economy in 2020-21 with a growth of 3.4 % in both Q1 and Q2 (quarter 1 and quarter 2)”.
“It is the only sector that has contributed positively to the overall Gross Value Added (GVA) in both Q1 and Q2 2020-21,” the survey added. Gross value-added is simply gross domestic product minus taxes, the widest measure of income growth in an economy.
The Economic Survey recommended raising the price at which the government sells cheap food to the poor under the National Food Security Act because of rising costs of buying, storing and distributing food through the public distribution system. A hike in the price charged by the government for subsidized food could spark protests from beneficiaries and is unlikely. The Economic Survey, a document that presents the state of the economy on the eve of the Union Budget has, over the past decade, also become a platform for raising issues about the economy and discussing solutions, even radical ones unlikely to find political support.
Nearly 800 million Indians receive grains at subsidized prices of ₹3, ₹2 and ₹1 per kg per person per month for rice, wheat and coarse grains.
In an apparent attempt to dispel scepticism over the laws, the survey, authored by the government’s chief economic adviser Krishnamurthy Venkata Subramanian, spelt out inefficiencies in the country’s farm sector and how the laws were aimed to “remedy” them.
“There is a need for a paradigm shift in how we view agriculture from a rural livelihood sector to a modern business enterprise,” the survey stated.
Nearly half of all Indians depend on agriculture but the sector tends to swing from one crisis to another, from poor producer prices to lower yields, and has lacked sufficient capital investment for growth.
Attempts to reform the sector have unleashed the staunchest protests by farmers in decades. Farm unions have demanded a repeal of the three pro-reform laws—farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, and Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 and Farm Services and the Essential Commodities (Amendment) Act, 2020.
The contentious laws aim to ease restrictions on trade of farm produce by setting up free markets, which will co-exist with regulated markets, allow food traders to stockpile large stocks of food for future sales and lay down a national framework for contract farming based on written agreements.
Farm unions say free markets under the laws will erode their bargaining power, weaken a system of assured prices and make them vulnerable to exploitation by corporate giants. The Supreme Court put the three laws on hold on January 12.
“Agricultural produce market committee regulations have resulted in a number of inefficiencies and consequent loss to the farmers. Presence of multiple intermediaries between farmers and final consumers has led to low realisation by farmers,” the survey stated.
The Economic Survey pointed out that a larger number of taxes and cesses levied by state-run mandis or regulated markets have “cut into farmers’ price realisation and poor infrastructure at the mandis compounds the problems”.
It states how the delay at selling perishable produce at markets due to lack of modern sorting and grading facilities leads to post-harvest losses of up to 4-6% in cereals and pulses, 7-12% in vegetables and 6-18% in fruits, making a case for the farm laws.
“Farmers have been provided adequate protection as sale, lease or mortgage of farmers’ land is totally prohibited and farmers’ land is also protected against any recovery,” the Economic Survey said on the new contract farming law, one of the legislation being opposed by farmers. Farm unions claim the law is tilted in favour of corporations and could jeopardise their land titles.
“The survey makes a strong case for the farm laws in a bid to make them acceptable, but rather than economic rationale, only political outreach can achieve that objective now,” said Arunim Saikia, an economist with the North Eastern Hill University.