POLICY

BRIEF

18

New Deal for Agriculture for Viksit Bharat@2047

ASHOK GULATI
RANJANA ROY
RITIKA JUNEJA
MANISH KUMAR PRASAD

MARCH 2024

1 | New Deal for Agriculture for Viksit Bharat @2047

Authors
1. Ashok Gulati, Distinguished Professor, Indian Council for Research on
International Economic Relations (ICRIER), New Delhi ([email protected];
[email protected])
2. Ranjana Roy, Fellow, Indian Council for Research on International Economic
Relations (ICRIER), New Delhi ([email protected])
3. Ritika Juneja, Fellow, Indian Council for Research on International Economic
Relations (ICRIER), New Delhi ([email protected])
4. Manish Kumar Prasad, Research Associate, Indian Council for Research on
International Economic Relations (ICRIER), New Delhi ([email protected])

Published by: Indian Council for Research on International Economic Relations

(ICRIER), Core-6A, 4th Floor, India Habitat Centre, Lodhi Road, New Delhi - 110003

© 2024: Indian Council for Research on International Economic Relations (ICRIER)

Keywords: Farmers’ Income, Agriculture, Minimum Support Price (MSP), MNREGA, Diversification

JEL Classification: Q11, Q12, Q13, Q18

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Acknowledgements
The authors would like to express their sincere gratitude to Puja Mehra, Senior Fellow
(Consultant), ICRIER for her comments and editing of this policy brief. The authors
would also like to thank Rahul Arora, who did an excellent job in formatting and
putting it in final shape.
 New Deal for Agriculture for Viksit Bharat@2047
Access to modern technologies and most lucrative markets, along with diversification towards
high value agriculture in line with emerging consumption patterns, can help augment farmers’
incomes substantially and sustainably

and sustainably is essential for making

Introduction
development process inclusive and

A
sustainable, and accomplishing the goal
clarion call for Viksit Bharat@2047
of Viksit Bharat by 2047.
by the Prime Minister represents
his long-term aspiration to
Let us first look at what farmers are
transform India into a developed nation
demanding in their ongoing agitation,
by 2047. There is no standard definition of
and why. Farmers have presented a list of
a developed economy. The World Bank
demands that they believe will help raise
categorises economies with annual per
their incomes with minimal ambiguity.
capita Gross National Income (GNI)
These include: a legal minimum support
exceeding $13,846 as high-income, those
prices (MSPs) guarantee for 23 agri-
ranging between $4,466 and $13,845 as
commodities to be computed as 1.5
upper middle-income, and those
times the comprehensive cost; a
between $1,136 and $4,465 as lower-
minimum of 200 days of wage
middle-income economies. Thus, India
employment at Rs. 700 per month in each
with a per capita GNI of $2,390 in 2022, is
financial year funded by the
a lower-middle-income economy at
government’s Mahatma Gandhi
present by the World Bank’s classification.
National Rural Employment Guarantee
To become a developed nation by 2047,
Act (MGNREGA), state-provided
India’s per capita GNI must rise by about
pensions for farmers and farm labourers;
6 times over its current levels. It is a tall
loan waivers, among other demands.
order. We believe that not only per
capita GNI must increase substantially,
Before we assess the pros and cons of
but the incomes of the masses must rise
these demands, and whether it is feasible
sustainably for development to be
for the government to accept any one of
inclusive. And this depends inevitably on
these, we must recognise that these
farm incomes improving, given that 45.8%
demands essentially reflect a desire for
of the working population is engaged on
significantly higher incomes with least
farms, with an average holding size of just
uncertainty. The resolution of the current
1.08 hectares (ha) (2015-16), and
standoff, therefore, depends on assessing
agriculture contributing only about 18%
the current income levels of the farmers
to overall GDP (2022-23). Their meagre
and how best they can be augmented
incomes and struggle for survival often
followed by persuasive communication
erupts in agitations demanding either
with the protesting farmers to assure them
higher prices for their products or loan
that what they seek can be more
waivers, etc. Thus, resolving farmer issues
effectively accomplished through means
and creating conditions in which their
other than those they have proposed.
incomes can improve substantially
Against this backdrop, we first examine

1 | New Deal for Agriculture for Viksit Bharat @2047

 how the incomes of farmers have annual basis, give us a reasonably good
increased in the recent years, especially idea of the rate at which farmers’ real
from 2002-03 onwards, for which the incomes have increased after 2018-19.
Situation Assessment Survey (SAS)1 results This analysis leads us to the conclude that
are available. The SAS was followed up in a business-as-usual (BAU) approach is
2012-13, and then again in 2018-19. Not unlikely to result in incomes rising
much information about farmers’ dramatically. For that, concerted efforts
incomes after that is available. For the and a different strategy may be needed.
subsequent period, we have used proxies This policy brief spells out a set of
that closely followed the incomes over alternative strategies that have the
the period from 2002-03 to 2018-19. These potential to significantly augment
proxy variables, which are available on farmers’ incomes.

Farmers’ Incomes (2002-03 to 2018-19)

The real income of an average Indian (National Statistical Office (NSO), MoSPI)
farmer rose moderately at the rate of or so for the last two decades.
3.4% per annum from 2002-03 to 2018-19
(calculated by deflating their nominal In 2002-03, the monthly income of an
incomes by consumer price index for average farming household was
agricultural labourers). This is not bad, but recorded at Rs. 2,115 (equivalent to Rs.
clearly not good enough. Farmers’ 7,160 in 2021-22 prices). By 2018-19, it had
incomes have been low in relation to risen to Rs. 10,218 (adjusted to Rs. 12,132
non-agriculture segment, which has in 2021-22 prices) (Figure 1)2.
been growing at 6.4% per annum
Figure 1: Farmers' Monthly Income (in 2021-22 prices)

14000
12132
12000
10139 10218
10000
Income in Rupees

8000 7160
6426
6000

4000
2115
2000

0
2002-03 2012-13 2018-19

Nominal Income Real Income

Source: SAS, MoSPI, various years

1 Conducted by National Statistical Office (NSO), Ministry deflator, and consumer price index for agricultural
of Statistics and Program Implementation (MoSPI) labourers. Respectively. Since, individuals must spend
2 In real terms, the growth rate depends on the deflator their incomes in retail purchases, consumer price index
used. The growth in real incomes in the period of 2002-03 seems the most appropriate index to deflate nominal
to 2018-19, works out to 5.3%, 4.1%, and 3.4%, depending incomes to know the real purchasing power of their
upon the deflators such as wholesale price index, GDP incomes.

2 | New Deal for Agriculture for Viksit Bharat @2047

Farmers’ income growth in this period closely the size of their land holding, the productivity
followed average annual agricultural GDP of the crops/animals reared, the cropping
growth rates that increased by about 3.1%. intensity adopted, and the choice of crops
However, if one looks at the CAGR of grown (staple crops or high value
agricultural GDP, it reached 4.7% annually agricultural produce). At the national level,
between 2015-16 and 2022-23. But to double the average holding size has been declining
farmers’ real incomes by 2022-23 over 2015- over years. It was around 1.08 ha as per the
16, which was the dream shared by Prime latest Agriculture Census (2015-16). It is likely
Minister in February 2016, required a growth to have reduced to one ha by now. We
rate of 10.4% per annum, as per the Dalwai normalise the incomes by holding sizes to
Committee (Report of the Committee on see which state produces more income per
Doubling Farmers’ Income, MoA&FW, ha. Dividing income by the average area
September, 2018). By applying the average operated per holding3, in a way, also
annual growth rate of agri-GDP from 2018- indicates the efficiency of that household in
19 onwards, the estimated level of farmers' earning income. Interestingly, farmers in
real income is projected to reach Rs. 15,410 states that specialize in high-value
in 2023-24. This would be true even after agriculture seem to earn higher incomes on
including the amount of Rs. 6000 per annum per ha basis. For example, Jammu and
received by farming households under PM- Kashmir (fruits), Kerala (spices, rubber),
KISAN. Himachal Pradesh (fruits), Uttarakhand
(fruits), and West Bengal (vegetables and
State-wise variation in farmers’ incomes jute) have a more diversified cropping
pattern in favour of high value agriculture.
A wide variation in the monthly incomes of Farmers in these states seem to earn higher
agricultural households is observed across incomes on per ha basis than those in
various states. The SAS survey (2018-19) Punjab and Haryana, which are largely
found that farmers in the states of engaged in wheat and rice cultivation
Meghalaya (Rs. 29,348), Punjab (Rs. 26,701), (Figure 2). This happens even though Punjab
Haryana (Rs. 22,841) had higher monthly and Haryana have very high productivity of
incomes than those in Jharkhand (Rs. 4,895), wheat and rice on per ha basis. Their
Odisha (Rs. 5,112), West Bengal (Rs. 6762), incomes are lower nevertheless, as they are
and Bihar (Rs. 7,542). The real (CAGR) yet to adopt high value agriculture. States
income growth was slower in the latter states that rely more on horticulture, livestock,
in the period from 2002–2003 to 2018–2019. fishery, that have no MSPs, have market
For instance, the average income of farmers driven, demand driven, systems that seems
in Haryana grew 6.1% as compared to 0.4% to be giving much better incomes on per ha
in the state of Jharkhand. basis than MSP supported crops like wheat
and rice.
The level of income of an agricultural
household depends among other factors on

3 Average landholding data is collected by both SAS and 1.44 ha, but Census gives a much higher value of 3.62 ha of
Agriculture Census (latest 2015-16) but there is a huge gap average operational holding. We have used the holding sizes
between the values from these two data sources especially as given in SAS in this study as the income data is also from
for states like Punjab, Rajasthan, Haryana, and Gujarat. As SAS.
per SAS, average operated area per holding for Punjab is

3 | New Deal for Agriculture for Viksit Bharat @2047

 Figure 2: Monthly Income per ha of Operated Area in 2018-19

40684
40258
35105
45000

32495
40000

26627
35000

23736
23692
23392
Income in Rs.

30000

18577
18504
17561
17080
16245
16097
14546
25000

13688
13435
12733
11094
10349
10152
20000

9027
8352
7904
7464
6753
15000

6209
10000
5000
0

Source: SAS, MoSPI (2019)

A question arises as to why despite the that shifting away from MSP crops
potential for lucrative returns farmers are inevitably involves. The fragmentation of
hesitant to transition to high-value crops. land holdings often prevents economies
Small farmers are often not in a position to of scale, making it harder for small
manage the risks involved in moving farmers to compete in markets,
away from a system of assured returns especially where no level playing field
that can be expected from MSP crops. exists between large and smaller market
Market price fluctuations, unpredictable players. Before discussing how these
weather patterns, and a lack of issues can be addressed, let us
infrastructure linking farms to markets and understand the structural nature of
sellers to buyers adds to the uncertainty agriculture.

The structural shift in agriculture and its impact on farmers’ incomes

During the last 70 years or so, share of from the cities to villages due to the
agriculture in overall GDP has declined lockdowns) before settling at 45.8% in
sharply from 54% in 1950-51 to 18% in 2023- 2022-23 (Figure 3). This relatively slow shift
24. However, the share of the workforce of labour out of agriculture means that
engaged in agriculture has declined the average holding size has declined
from 70% in 1950-51 to only 45.8% in 2022- from 2.3 ha in 1970-71 to 1.08 ha in 2015-
23. It is noteworthy that the secular 16 (Agriculture Census). It is, thus, difficult
decline in the share of workforce to eke out a comfortable living with one
engaged in agriculture was arrested in ha land, especially if staple crops are
2019-20 just ahead of the outbreak of the grown with low productivity. Data
Covid-19 pandemic in 2020. In fact, the suggests that switching either to high
percentage of workforce engaged in value agriculture with some value
agriculture increased from 42.5% in 2018- addition or combining agriculture with
19 to 45.6% in 2019-20. It further increased wages and salaries can help farmers
to 46.5% in 2020-21 (reverse migration make a respectable living.

4 | New Deal for Agriculture for Viksit Bharat @2047

The absolute number of workforce absorption capacity due to slower
employed in the agriculture sector has growth in non-agriculture sectors. The
increased from 97.2 million in 1951 to high growth rates of population in rural
263.1 million in 2011 (Census). The relative areas, especially among the agri-labour,
proportion of cultivators has fallen from could also be a factor. Understanding
72% in 1951 to 45% in 2011 while that of the relevant causes for the changing
labourers rose from 28% in 1951 to almost pattern of the agricultural workforce is a
55% in 2011 (Figure 3). One of the possible matter of further study. But suffice it to say
reasons for the declining share of here that the sluggish pace of change
cultivators could be the increasing does not allow for fast increases in real
fragmentation and continuous shrinking wages in rural areas. The periodic labour
size of land holdings, which has reduced force survey (PLFS) data shows that in
profitability in cultivating smaller farms rural areas, real wages in fact have had
due to a lack of economies of scale. As a negative growth in the last five years.
result, these cultivators either shift to non- From 2019-20 to 2023-24, the average
farm activities and leave their land fallow annual growth rate of the agriculture
or lease it out to agri-labourers wage rate was negative 0.6% and of the
(Subramanian, 2015). Another plausible non-agriculture wage rate was negative
factor slowing migration of labour out of 1.4%. This indicates that agriculture in
agriculture could be the lack of skills India has not been very remunerative for
required for moving to non-agriculture. farmers4.
Yet another factor could be insufficient

Figure 3: Share of Agriculture in overall GDP and Employment

100% 100
90% 90
80% 80
70% 70

Percent
60% 60
50% 50
40% 40
30% 30
20% 20
10% 10
0% 0
1952-53

2002-03
1950-51

1954-55
1956-57
1958-59
1960-61
1962-63
1964-65
1966-67
1968-69
1970-71
1972-73
1974-75
1976-77
1978-79
1980-81
1982-83
1984-85
1986-87
1988-89
1990-91
1992-93

1996-97
1998-99
2000-01

2004-05
2006-07
2008-09
2010-11
2012-13
2014-15
2016-17
2018-19
2020-21
1994-95

2022-23 (PE)

Share of cultivators in the workforce employed in agriculture (RHS)

Share of labourers in the workforce employed in agriculture (RHS)
Share of GVA of agriculture and allied sectors in total economy (%) at current prices (LHS)
Share of workforce employed in agriculture (LHS)

Source: PLFS (MoSPI), National Accounts Statistics (MoSPI), and Census (various issues)

4Surjit
S Bhalla in his article in the Indian Express dated April wage rate of 1.2% for the period FY2014-21 (based on
25, 2023 reported positive average growth rate of the year-on-year log growth rate estimation method).
agriculture wage rate of 1.5% and of the non-agriculture

5 | New Deal for Agriculture for Viksit Bharat @2047

Farmers Demands and their likely implications

Of the 12 demands in the charter changing consumption demand pattern,

presented by the protesting farmers, the requires farmers to shift towards high-
following could have significant value agricultural commodities. By
economic implications if accepted. capitalizing on sectors’ experiencing
rapid growth, such as horticulture,
Demand 1: MSPs livestock, and spices, farmers can
potentially unlock greater economic
Farmers want that MSPs should be opportunities and mitigate the
calculated based on Cost C2+50% profit. challenges associated with stagnating
Cost C2 includes all the paid-out costs incomes in traditional crop sectors.
plus imputed cost of family labour,
imputed rental value of owned land and If MSPs are raised to cost C2+50%, it would
interest on owned fixed capital. Farmers require, on an average, raising MSP of 23
also want a legal guarantee that no one crops by about 25% in one go (Figure 5).
will be allowed to buy below these MSPs. This would lead to high food inflation. For
many commodities, the supplies will
Let us discuss the likely repercussions of exceed demand, as farmers will likely
accepting farmers’ demands on the respond to the MSP hikes by switching to
agriculture sector as well as on the overall producing these crops. At the same time,
economy. The 23 commodities for which traders may not come forward to buy
MSPs are announced comprised less than these crops if a legally guaranteed MSP is
28% share of the total agricultural output enforced whereby buying at prices
in 2021-22. The other sub-sectors not below it could lead to harassment and/or
covered under the MSP regime have fines. In such a situation, the excess
more than 72% share in agricultural supplies will either stay unsold with farmers
output. These segments, especially or government will have to buy all the
poultry meat and egg (have grown on an excess supplies at the MSP. Many experts
average rate of 7.1% per year in the suggest that instead of government
period from 2000-01 to 2021-22. In buying, government should give price
contrast, cereals grew at just 1.8% per deficiency payments. Our take on this is
annum over the same period (Figure 4). that it was tried in Madhya Pradesh earlier
This shows that demand patterns are and given up in one season as the traders
gradually shifting away from cereals, as gamed it and lowered the market prices
revealed by recent Household further. This would cost heavily to the
Consumption Expenditure Survey (HCES) government.
of 2022-23. Adjusting production to the

6 | New Deal for Agriculture for Viksit Bharat @2047

 Figure 4: Annual average growth rate (AAGR) of agriculture and allied sub-
sectors from FY01 to FY22 (at 2011-12 prices)
8% 7.1%
7%
5.9%
6% 5.5%
4.7%
5% 4.1% 4.3%
3.7%
4%
3%
1.9% 1.8%
2% 1.4% 1.6%

1%
0%

Pulses

Wheat
Horticulture*

Sugarcane

Cereals
Milk

Oilseeds
Fisheries

Cotton (Kapas)
Poultry Meat & Eggs

Paddy
Note: Horticulture includes Fruits, Vegetables, Spices, and Floriculture. Blue coloured bars are non-MSP sectors and Orange bars are under MSP

Source: MoSPI

Figure 5: Price Increase at (C2+ 50% profit) over MSP (2023-24)

Average increase in
price: 25%

45%
40% 37% 40%
35%
35% 31% 33% 31% 32% 32% 31% 31%
29% 30% 28%
30% 27% 26% 25% 21%
24%
25%
20%
14%
15%
9% 9% 8%
10%
3%
5%
0%
Ragi
Jowar

Urad
Moong

Groundnut

Sunflower

Safflower
Bajra

Maize

Sesamum

Lentil

Copra
Soyabean
Paddy

Arhar (Tur)

Nigerseed

Rapeseed & Mustard

Jute
Cotton

Wheat

Gram

Sugarcane*
Barley

Note: For sugarcane cost and MSP data is for 2024-25

Source: Commission for Agricultural Costs and Prices (CACP) reports

The question arises: what prompts farmers 1960s. Continuing policies of 1960s when
to persist in cultivating rice and wheat, India was living from ‘ship to mouth’
especially in Punjab-Haryana belt? The situation, in 2024 and beyond when India
answer lies in the legacy of MSP and has been the largest exporter of rice (22
open-ended procurement in this belt in MMT in 2022-23 accounting for 40% of
the wake of green revolution in late global trade of rice) is simply irrational.

7 | New Deal for Agriculture for Viksit Bharat @2047

 New Deal for Punjab and Haryana Farmers

Punjab and Haryana farmers can gain substantially from doubling the area under
high value fruits orchards (like plums, peaches, litchi, strawberries, guava, etc.) and
vegetables that are suitable to their climatic conditions. And, by encouraging
poultry and fishing through contract farming. Instead of banking on public
procurement as in the case of rice and wheat, Government (centre and state
together) should invest in marketing as well as in value addition/processing of these
commodities. Promoting food parks, cold chain investments, cluster based
FPOs/FIGs, etc. could very well support the diversification. They will need to be
linked to processors, organized retailers, and exporters, well in advance. Market
access to Gulf countries for these commodities could be the way forward. This
would require major investments in cold storages and reefer vans, for exports.
Government could also incentivise trade by giving some air freight subsidy, as well
as consider a tax exemption to export houses through SGST refund on the export
value or raw materials sourced for export business efforts. This will go a long way to
augment farmers’ incomes in a sustainable manner. A corpus fund, say of Rs 15,000
crores, on 50:50 basis by the Centre and the respective state governments of
Punjab and Haryana, can be established to incentivise farmers for adopting these
new crops, and build marketing and processing infrastructure suitable for these
crops for exports from these states.

Demand 2: MGNREGA increased to more than Rs. 10.4 lakh

crores!
The protesting farmers have also asked
for guaranteed 200 days of employment The higher MGNREGA wage would also
under MGNREGA at a wage of Rs. 700 push up the cost of all labour. That in turn
per day, up from 100 days the present could potentially push up the MSP, as
provisions assure. The MGNREGA got a they depend on labour costs, leading to
budget outlay of Rs. 86,000 crores in the even higher increases in the MSPs and
budget for FY25. The MGNREGA data food inflation. The burden on the budget
shows that an average household is of the additional costs on account of
working on an average for 48.7 workdays higher MSPs and MGNREGA outlays may
a year at present at an average wage not be sustainable. More importantly, as
rate of Rs. 236.6 per day. A minimum daily already explained above, these fiscal
wage of Rs. 700 for 200 days would resources would end up going towards
require the budget outlay to be incentivising production of items that
consumers want less and less of.

Way Forward: New Deal for Agriculture

We discuss alternative policy options that placing any undue costs on the rest of the
can be beneficial for farmers without economy.

8 | New Deal for Agriculture for Viksit Bharat @2047

1. Diversification away from Crops towards based approach can be an effective
High-Value Commodities: Our study investment strategy. The 27% increase in
finds that the contribution of livestock allocation 2024-25 (BE) over last year’s
sector in total income of the agricultural revised estimate for the Ministry of
households has increased from 4% to Fisheries, Animal Husbandry and
16% between 2002-03 and 2018-19. The Dairying, this may allow it to allocate a
poultry sector has seen a remarkable special package for farmers of Punjab-
transformation from a mere backyard Haryana which will encourage them to
activity to a fully integrated and shift away from paddy.
commercial industry, primarily led by
private players. The introduction of 2. Improved Market Access: Small
institutional innovations such as producers, who constitute 86% of
contract farming and vertical agricultural households, dominate
integration of farm operations have agriculture and allied sectors and they
helped the poultry industry become contribute significantly to farm output
one of the fastest-growing sectors in and employment. However, they face
India. Next, the fisheries sector market challenges typical to small size
contributed approximately 15.2% to holdings. They have to contend with
India's agricultural exports in 2022-23, limited bargaining power, inadequate
and became a substantial source of storage facilities, and the perishable
income for fishing families. Even nature of their agricultural produce.
horticulture is growing at much faster The following marketing channels can
pace than cereals. Innovative help farmers reap better returns.
production techniques, such as under
controlled environment in polyhouses 2.a. Contract Farming: Since farmers may
equipped with fertigation can augment not always be able to access
productivity and incomes of farmers, markets, they can rely on contract
while saving on water and fertilizers. farming arrangements with business
entities. These arrangements can
These findings suggest that the potential facilitate a direct link between the
for increasing farmers' incomes lies market and primary producers. They
primarily in animal husbandry and assure pre-determined market
pisciculture. It is noteworthy that there is demand, thereby mitigating price
no MSP for animal husbandry or fisheries and production risks and
products, and the government does not uncertainties in the market, helping
engage in procurement. The market for smallholders navigate imperfections
these products is demand-driven, and of markets and their own asset
most of their marketing occurs outside limitations. This insulation from risk not
of the Agricultural Produce Market only benefits farmers but also fosters
Committee (APMC) mandis. This trend is the introduction of innovative
expected to strengthen in the future as farming techniques and skills.
incomes of consumers rise and dietary Contract farming arrangements for
preferences diversify. Encouraging different types of crops like
private sector investment in building sugarcane, cotton, vegetables,
efficient value chains through a cluster- coffee, and tea are already in use in

9 | New Deal for Agriculture for Viksit Bharat @2047

 many parts of the country. The and innovation. ONDC seeks to
benefits that accrue from these streamline existing e-commerce
contracts to farmers also include processes, reduce the barriers to
inputs, credit facilities, insurance, and entry for small businesses, and
cold chain infrastructure. Studies promote fair competition. In the
have also found that farmers returns agriculture sector, ONDC can
have been higher in contract farming bring transformative changes by
(Gulati et al., 2019; Das, 2022). providing farmers direct access to
digital marketplaces, eliminating
2.b. Farmers’ Producers Organizations intermediaries, ensuring fairer
(FPOs): A well-functioning FPO prices for agricultural produce,
enhances market access for its and enhancing competitiveness
members by improving their for FPOs. This facilitates equal
bargaining power, enhancing visibility to potential buyers across
their productivity, increasing India, expanding market reach
incomes, and ultimately mitigating and profitability. Additionally, small
rural poverty. In a bid to promote traders, farmers, and sellers can
FPOs, the Government has participate on an equal footing
introduced a Central Sector with larger players, promoting
Scheme, with the objective of inclusivity and fair competition
establishing 10,000 new FPOs by while accelerating transactions,
2027-28. By June 30, 2023, a total of and reducing time and resource
10,000 FPOs had been allocated wastage.
to various Implementing Agencies
(IAs), 6,319 FPOs had been 2.d. Futures Market in Agriculture:
successfully registered across the Farmers in India encounter both
country (PIB, 2023). Based on SAS price and production risks due to
2018-19 data, it was estimated that significant uncertainties in market
the monthly income from prices. At the time of sowing,
cultivation of member farmers was farmers lack visibility into the prices
Rs. 4,808 as against Rs. 2,978 their produce will command post-
earned by non-members in 2018- harvest or the yield levels they can
19. It requires more effort from the expect, leading to considerable
government to bring more farmers uncertainty. In the absence of this
under producer organizations to information, they often base their
increase their bargaining power sowing decisions on the previous
which will fetch better returns and year's price realizations, resulting in
augment their incomes. a cycle of boom and bust (typical
cobweb problem). It is imperative,
2.c. The Open Network for Digital therefore, that cropping patterns
Commerce (ONDC) initiative led and sowing decisions adopt a
by the government aims to forward-looking approach rather
establish open networks for e- than relying solely on historical
commerce in goods and services, data. India initiated futures trading
fostering transparency, inclusivity, in agricultural commodities more

10 | New Deal for Agriculture for Viksit Bharat @2047

 than two decades ago (in 2003), create an environment of uncertainty
but momentum was lost due to that not only dampens trade
poor policy choices made by sentiments but may also harm farmers'
successive governments, interest in cultivating that crop in the
especially from 2012 onwards, long run. This ECA of 1955, when India
when futures trading was was in the grip of food shortages,
frequently disrupted by needs to be repealed to create a
suspensions and bans. These need unified national market for farmers.
to be revived with liberal policy
framework. 4. Incentivising workforce away from
agriculture: A positive indicator of
3. Liberalise Trade Policy: Indian farmers structural transformation is the shift in
often lose out on opportunities for employment away from the low-
higher earnings presented by high subsistence agricultural sector.
international prices for their produce However, sometimes, there could be
due to policies aimed at preventing a “push factor” too—since agriculture
exports. In times of high domestic cannot sustain the workforce, job-
prices, imports are incentivised for seekers are pushed to take up any
lowering prices that result in lower work that can give them subsistence
earnings for Indian farmers. To provide earnings. Structural change in India is
a level playing field for Indian farmers, peculiar. Almost 45.8% of the working
the government should remove all population living on only 18% of GDP
curbs on selling farm produce. The cannot make them prosperous. Quite
most prudent policy would be a substantial part (about 15%) of
liberalising the trade policy, especially labour force needs to move out of
on exports side so that farmers can agriculture. But how to incentivise this
benefit from access to lucrative exit? One possible way is to link
foreign markets. In contrast, what the MGNREGA with development
government has done recently is to schemes of the government such as
ban wheat and rice exports and PM Awas Yojana, Nal se Jal, Swachh
restricted sugar exports. Such abrupt Bharat Mission, and Gramin Sadak
export bans and restrictions, adversely Yojana for building rural infrastructure
impact farmers’ prices and incomes. such as housing, drinking water,
Rather than an outright export ban, a sanitation and rural roads at a higher
better solution would be to filter pace. They can also be used for
exports through a gradual process of constructing agri-markets, value
minimum export prices and chains and storage facilities. Also,
transparent export duties for shorter MGNREGA employment can be
durations, if that is needed at all to linked with environmentally
protect the consumers from rising sustainable activities such as
food prices (Gulati, 2022). Similar ad- groundwater recharge, soil
hoc restrictions on the domestic front protection, green cover, water and
such as invoking the Essential biodiversity conservation, sustainable
Commodities Act (ECA), and food production, and mitigation of
imposing stocking limits on pulses, land degradation etc. This will create

11 | New Deal for Agriculture for Viksit Bharat @2047

 remunerative and labour-intensive (IFPRI, 2018). USDA estimates indicate
employment opportunities outside that agricultural TFP in India increased
agriculture. Gujarat has created at an average annual growth of 2.2%
history in water conservation, by during 2000-21 (USDA). Investments in
launching a drive for the blue infrastructure, R&D and extension
revolution and constructing several services are important indicators of
check-dams, boribunds and Khet sustainable agricultural growth
Talavadi (farm ponds) using (Global Harvest Initiative, 2014). In the
MGNREGA labour and NGO interim Union budget 2024-25, out of
cooperation. Investment in skill the total budget expenditure of Rs.
formation for new India can also play 47.6 lakh crores, the Centre has
a pivotal role in a country’s structural budgeted Rs. 5.5 lakh crores for
transformation. welfare/subsidy schemes (including
food subsidy, fertiliser subsidy,
5. Augmenting Total Factor Productivity MGNREGA, PM Kisan, Fasal Bima
in Agriculture (TFP): TFP in agriculture is Yojana, and Interest Subvention). At
a holistic measure of a sector’s least 30% of this can be easily
growth, defined as the share of output rationalised by making food subsidies
increase with the same amount of targeted to only the most vulnerable
inputs such as fertilisers, land, labour, (Antyodaya) and by direct transfer of
capital, or material resources food and fertilizer subsidies to relevant
employed in production. TFP captures beneficiaries, and freeing up fertiliser
the effects of technological change, prices.
skills, or infrastructure, as well as the
increase in efficiency with which These are some of the essential elements
inputs are utilized in production that can help form a New Package for
(USDA, 2018) (OECD/ICRIER, 2018). It is Agriculture for journey towards Viksit
calculated as the ratio of total Bharat@2047. We hope that the Central
agricultural output to total production Government can take it up after the
inputs. A higher ratio implies that Parliamentary elections.
resources are being used efficiently

12 | New Deal for Agriculture for Viksit Bharat @2047

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14 | New Deal for Agriculture for Viksit Bharat @2047