Fortunes Shifting in favour of the Farm Sector: RBI Governor

Today, RBI Governor Shakti Kant Das while addressing the members of the National Council of the Confederation of Indian Industry, touched upon five such major dynamic shifts that are underway in the Indian economy. They are (i) fortunes shifting in favour of the farm sector; (ii) changing energy mix in favour of renewables; (iii) leveraging information and communication technology (ICT), and start-ups to power growth; (iv) shifts in supply/value chains, both domestic and global; and (v) infrastructure as the force multiplier of growth, he said. 

Stating that Indian agriculture has witnessed a distinct transformation, he said that fortunes shifting in favour of farm sector. The total production of food grains reached a record 296 million tonnes in 2019-20, which is registering an annual average growth of 3.6 percent over the last decade. Further, aggregate horticulture production also reached an all-time high of 320 million tonnes, rising at an annual average rate of 4.4 percent over the last 10 years. India is now one of the leading producers of milk, cereals, pulses, vegetables, fruits, cotton, sugarcane, fish, poultry and livestock in the world. Buffer stocks in cereals currently stand at 91.6 million tonnes or 2.2 times the buffer norm, adding that the annual average growth in agricultural gross value added (GVA) exceeds 3 per cent.  These achievements represent, in my view, the most vivid silver lining in the current environment he said.

Till now the main instrument has been minimum support prices, but the experience has been that price incentives have been costly, inefficient and even distortive, he said.  Governor proclaimed that India has now reached a stage in which surplus management has become a major challenge. We need to move now to policy strategies that ensure a sustained increase in farmers’ income alongside reasonable food prices for consumers. Speaking on efficient domestic supply, he said that firstly the amendment of the Essential Commodities Act (ECA) is expected to encourage private investment in supply chain infrastructure, including warehouses, cold storages and marketplaces. Secondly, the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 is aimed at facilitating barrier-free trade in agriculture produce. Thirdly, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020 will empower farmers to engage with processors, aggregators, wholesalers, large retailers, and exporters in an effective and transparent manner.

 With these enabling legislative frameworks, he said, the focus must turn to (a) crop diversification, de-emphasising water-guzzlers; (b) food processing that enhances shelf life of farm produce and minimises post-harvest wastes; (c) agricultural exports which enable the Indian farmer take advantage of international terms of trade and technology; and (d) public and private capital formation in the farm sector. The Committee on Doubling Farmers Income expects the total quantum of private investment in agriculture to increase from ₹61,000 crore in 2015-16 to ₹139,424 crore by 2022-23. All these initiatives have opened a whole new world of opportunities for industry and businesses. The consequential creation of jobs and augmentation of farmers’ income can indeed be enormous, he said.

On targeted infrastructure projects, for efficient domestic supply management he said: “This could begin in the form of a north-south and east-west expressway together with high-speed rail corridors, both of which would generate large forward and backward linkages for several other sectors of the economy and regions around the rail/road networks.  Both public and private investment would be important for financing infrastructure projects he said. As per estimates of NITI Aayog, the country would need around $4.5 trillion for investment in infrastructure by 2030.