Everyone in the country turns towards the rain-gods every year with lots of hope and prayers. NSEBSEStridesLoading data…
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ChartsValuation & Peer ComparisonCommunity BuzzPEER COMPANIES By Vikas Khemani
This is probably a paradoxical time to be writing this post, given that we have had two consecutive years of good monsoons; but having said that, the role of the monsoons in Indian agriculture cannot be undermined.
Everyone in the country turns towards the rain-gods every year with lots of hope and prayers. The reason is not hard to guess. Agriculture accounts for one-sixth of our GDP and employs almost half the workforce; and close to 60 per cent of Indian farms depend on rains, so a vast majority of the population is dependent on the rain-gods every year for economic well being.
The real reason for this dependence is that famers’ income gets impacted adversely by the fluctuating monsoons, and since the agrarian sector is the life line of the country, the impact is felt by a majority of the work force. The subsequent domino effect including rural demand and rural credit in turn shakes up the GDP of the country.
This, however, might not hold true for long; the problem of poverty must force us to innovate, said CK Prahlad. It is with the aim to insulate this lesser privileged section from the caprice of the rains; and consequently the dynamics of the economy at large that the government has undertaken myriad structural initiatives.
Broadly these measures can be classified in two groups; one that is aimed at preventing volatility of farm income and the other that is directed towards improving farm productivity. I believe that remarkable strides have been made on both fronts, which will have a far reaching and deep-rooted impact on this sector and monsoon dependence will soon come to an end. Most of these initiatives have been largely overlooked by the markets.
Coming to the discussion on the initiatives to reduce volatility of farmers’ income; to my mind, the Pradhan Mantri Fasal Bima Yojna (PMFBY), the crop insurance scheme, is one such master stroke to address the volatility in farmers’ income.
We have had such schemes in the past as well, but they were by and large restricted to loss of investment and not a loss in yield.There is big difference between two. While, the erstwhile schemes addressed only loss of capital invested, loss of income is equally important for economically dependent India on farm income.
This scheme is dedicated to bring in more than 50 per cent of the farmers under its ambit within the next 23 years. Claims will be sent to the farmer’s account directly. Also, under the scheme there will be no cap on coverage and sum insured.
Additionally, it also covers natural calamities, like landslides, hailstorms and inundations, which were not covered in the earlier schemes. The government’s seriousness in implementing crop insurance is evident, given that it has allotted Rs 20,600 crore, up from Rs 5,500 crore spent last year.
Further, the government has set an ambitious target to cover 50 per cent of the cultivable land by next year under this scheme, from the existing 23 per cent.
Successful implementation of the scheme, would lead to migration to an output based insurance thereby reducing the volatility element of income. This will allow farmers to take more risk and invest more freely into better yielding crops and better farm techniques.
Another initiative the government has undertaken is to double farm income by 2022. This is aimed through a series of productivity improvement measures that bode well for the agrarian community at large.
The soil health card will lead to right selection of crops, a judicious use of fertilisers, reduce input costs and lead to overall increase in productivity, and is aimed at increasing soil fecundity.
The Pradhan Mantri Kirshi Sinchai Yojna (PMKSY): More crop per drop is a national mission to improve farm productivity, enhance ranch water use and minimise water wastage, improve irrigation at the farm level and to enhance cultivable land.
The focus is on micro irrigation with the objective to enhance water use efficiency in the agriculture sector by promoting technological interventions like drip & sprinkler irrigation technologies and encourage the farmers to use water saving and conservation technologies.
The government is closely monitoring 99 priority projects, aimed at getting over 76 lakh hectare of agricultural land under the purview of these irrigation facilities.
The Government has allotted Rs 7,400 crore this year to the PMKSY. Many state Governments are also encouraging water storage and other productivity accretive measures through local initiatives.
Finally, the New Urea Policy whose objective is to maximise indigenous production will lead to an additional production of 17 lakh metric tonnes annually in the next three years. Further, the novel idea of providing neem coated urea has not only improved productivity but has gone a long way in plugging subsidy leakages.
The challenges of implementation notwithstanding, these structural measures shall go a long way in improving farmers welfare, by reducing monsoon dependency, insulating them from shocks and improving productivity.
These measures will have another social impact of addressing the farmer suicide issue, NPAs in rural credit, migration of rural labour.
The early signals indicate that we may be well on track to achieve these goals and helpless dependence on monsoon every year soon may be history.
(Author is President, Edelweiss Securities)