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Modi govt must treat farmers as businessmen & introduce ease of doing agri-business index

Just like India measures Ease of Doing Business, it also needs a measure of the Ease of Doing Agri-business. Even though agriculture employs close to 47 per cent of the country’s workforce, it contributes just 15 per cent to India’s GDP. The agriculture sector needs immediate reforms, but there is little that the Narendra Modi government can do since it is a state subject. Which is where the index will come handy. Treat farmers as businesspeople For India, agriculture has always been viewed as a production-oriented activity undertaken to achieve food security for the country. And a farmer as one who must provide cheap food and inputs to all sections of the growing economy and rely on government programmes and schemes for her welfare. By consistently increasing production and expanding surpluses and offering her crop at very competitive prices, the farmer has proved her mettle as an entrepreneur. Now it is time that policymakers and the government acknowledge and treat Indian farming as a commercial activity and a farmer as an entrepreneur running it. In his first term, PM Narendra Modi announced his dream of doubling farmers’ incomes by 2022. The 14-volume, 3,000-page Dalwai Committee Report undertook an extensive and robust exercise to identify about 620 recommendations to achieve that dream, especially the need for states to undertake policy reforms in agri-markets, land tenancy and leasing, and contract farming. Agriculture in India is a state subject where the central government can only advice state governments on required reforms. These states move at their own varied pace and this may not necessarily align with the pace required nationally. An ease of doing agri-business index will help. I present a simple statistical exercise below where 20 Indian states, which together comprise 99 per cent of India’s agricultural workforce (as per Census 2011) are studied for two variables: (i) average agri-GDP (AGDP) growth witnessed by the state between 2000-01 and 2015-16 (ii) their ranks on NITI’s AMFFRI (October 2016). It is intriguing to see how the states with the highest AGDP growth rates (x-axis) are ones with low AMFFRI ranks (y-axis). This implies, that states which have undertaken timely and speedy reforms (because of which they have low AMFFRI ranks) have also witnessed faster agri-GDP growth rates. The opposite is also largely true – states that have not undertaken reforms (and thus have high AMFRRI ranks) have experienced relatively lower agri-GDP growth. There are exceptions like Maharashtra, Karnataka and Haryana who have witnessed lower agri-GDP growth rates and are ranked low, but this could be due to the lagged effect that reforms have on agri-GDP, results of which will be visible in recent agri-GDP data. Now the question is about causality: was it the reforms that caused agri-GDP to grow faster or was it higher agri-GDP growth that gave states confidence for reforms? This will require an econometric analysis but prima facie, even if one believes that each caused and explained the other, we can reiterate the importance and requirement of states to undertake reforms while doing everything else to improve the farming ecosystem.

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