Rakesh Magotra
India has traditionally been a predominantly agrarian economy. But today, it is a contradiction in itself. On one hand, it employs nearly half of the workforce in the country. On the other, it contributes only around 17-18 per cent of the GDP. Over the past few decades, the manufacturing and services sectors have increasingly contributed to the growth of the economy, while the agriculture sector’s contribution has decreased from more than 50 per cent of GDP in the 1950s to just over 17 per cent in recent years. To put this into perspective, around half the workforce of the country toil every day in their fields, and at the end of the year have little to show for it – precisely around five times less value compared to the other half of the workforce.
This data clearly indicates that India needs a tectonic shift in the way it looks at its agriculture sector. If India has to graduate as an Economic Superpower, it cannot afford half its workforce generating value several times lower than its true potential. The question is how can productivity in the agriculture sector be improved? To put it simply, it needs to make a transition from traditional agricultural practices, that focuses solely on the crop cycles, to agribusiness, which includes not only production, but also other activities like food processing, packaging, market linkages, and even directly delivering food products to consumers. The major bottleneck to the transition used to be the distance and remoteness of the rural areas making it difficult for farmers to connect to the market but the situation has changed substantially in the recent years with the advent and diffusion of information and communication technology (ICT).
Indian Agriculture Facing a Crisis
The Indian farming sector is facing a number of challenges, some of which have led to a crisis in recent years. Not only Indian farmers have traditionally had low productivity levels compared to their counterparts in other countries, they also have lower profit margins, often selling their produce at prices lower than the production cost. This is due to a combination of factors such as lack of access to modern technology, poor infrastructure, high input costs, and lack of access to markets.
The severity of the crisis in the agriculture sector could be understood from the fact that many farmers are pushed to the wall and commit suicide due to financial burden they face resulting from a play of above-mentioned factors.
Agribusiness -Need of the Hour
Agribusiness, involves the integration of agriculture with industry and commerce, to enable farmers to increase their productivity, profits, and competitiveness. By adopting modern technology and practices, farmers can increase crop yields and reduce costs. Diversifying income streams by growing high-value crops such as fruits and vegetables, which can fetch better prices on the market, is also an important aspect of agribusiness.
One major reason why farmers in India need to move to agribusiness is to improve their access to markets. Traditional agriculture in India is often characterized by poor marketing and distribution systems, which makes it difficult for farmers to sell their produce at a fair price. Agribusiness, on the other hand, is characterized by better marketing and distribution systems, which allows farmers to sell their produce at a fair price and get a better return on their investment.
Investment in infrastructure is also crucial for the success of agribusiness. Cold storage facilities, processing units, and packaging facilities can help farmers to preserve their produce and add value to it, making it more attractive to buyers. Developing value chains and working with intermediaries such as traders and processors can also help farmers to ensure that they are getting fair prices for their produce.
Agribusiness can also help create employment opportunities in rural areas. Rural India is plagued with a lack of employment opportunities, which leads to migration to urban areas in search of work. Agribusiness can help bridge the gap by creating employment opportunities through the creation of processing, packaging, and distribution facilities. This can help to stem the tide of migration from rural to urban areas as well and promote rural development.
Challenges
There are also some challenges that must be addressed in order to make the transition from traditional agriculture to agribusiness. One of the main challenges is the lack of access to credit and other financial services, which makes it difficult for farmers to invest in agribusiness activities. Another challenge is the lack of access to information and training. Government and Financial institutions need to work together not only to provide farmers with access to credit and other financial services, but also impart practical training to ensure they can successfully implement profitable models and turn their livelihood to successful businesses. Promoting Microfinance institutions can also provide access to small loans to farmers at a lower interest rate than traditional usuries channels. This can help farmers to access the capital they need for agribusiness ventures, even if they do not have traditional collateral.
Farmer cooperatives can also help farmers to access credit by pooling resources and using the collective bargaining power to negotiate better loan terms. In some cases, the Government can provide subsidies to farmers to help them access credit. This can include direct subsidies for interest payments or indirect subsidies such as tax breaks.
In conclusion, the transition from traditional agriculture to agribusiness is inevitable and necessary for the survival of India’s farming sector. The Indian agriculture sector is at a crossroads. Despite being a vital part of the country’s economy, providing livelihoods for millions of farmers and feeding the nation’s rapidly growing population, the sector is facing a number of challenges. As India’s population continues to grow and the country’s economy continues to develop, the demand for food will only increase. It’s time for India’s farmers to take the necessary steps to meet this demand by transitioning to agribusiness.
I am tempted to quote Henry David Thoreau who once remarked “I have great faith in a seed. Convince me that you have a seed there, and I am prepared to expect wonders” The current government has initiated the right steps and made the right kind of noises which seem to be lost in the cacophony of current dichotomous discourse and lack of understanding on a broader scale However seeds are being sown silently by a bevy of startups in the Agribusiness/ Agritech space who are leveraging the ICT to bridge the gap between agriculture and business by showing the way forward. I reiterate, the shift to agribusiness from agriculture is inevitable, but with the right diffusion of policy on the ground and promoting startups in agriculture domain by liberal incentives in the ensuing budget, government can help the sector to exponentially improve productivity, profits, and competitiveness, even in the face of challenges such as the credit gap.
(The author is a Deputy General
Manager in JK Bank)
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