The intense debates around the recently enacted farm laws have brought to light the issue of developing a sound regulatory framework to promote India’s agricultural growth and in keeping pace with the changing times.
While the country is divided on the need for the three new farm laws, the fact remains that farmers, mainly smallholders, across India continue to face various constraints in carrying out farming activities.
Constraints in Indian Agriculture:
The farmers in the country face various constraints such as accessing agricultural inputs, markets, finance, human resources, and information. All these factors are critical for increasing farmers’ competitiveness.
The existing institutional structure controlling farm production fails to handle these issues.
A way out of this problem is to develop a suitable regulatory system that would enable farmers to overcome their constraints.
Where does India stand on this front in comparison to other countries?
A recent publication by the World Bank titled Enabling the Business of Agriculture (EBA) 2019 provides some interesting insights on this question.
Based on eight indicators, the EBA measures the extent to which government regulatory systems in 101 countries worldwide make it easier for their farmers to operate agricultural activities.
The indicators are supplying seed, registering fertilizer, securing water, registering machinery, sustaining livestock, protecting plant health, trading food, and accessing finance.
These indicators measure the strength of a country’s agricultural regulatory environment pertaining to market integration and entrepreneurship in agriculture.
The EBA is akin to the Doing Business project of the World Bank, which ranks the ease of doing business in countries.
India’s poor standing in (EBA) 2019:
Among 101 countries covered, India ranked 49 on the EBA aggregate score. France, Croatia, and the Czech Republic are the three top-ranking countries.
Among emerging groups of 20 (EG 20) countries, India has the second least favourable regulatory environment for farming activities after South Africa.
Turkey is the top-performing country among EG 20 countries, followed by Argentina, Brazil, the Russian Federation, Mexico and China.
Notably, India lags behind its close competitors in world agriculture, namely China, Brazil, and the Russian Federation.
8 parameters of World Bank titled Enabling the Business of Agriculture (EBA) 2019:
Compared to other top performing countries, India has the weakest performance on five out of eight indicators.
- They are registering fertilizer and machinery, securing water, sustaining livestock, and protecting plant health indicators.
- Registering fertilizer and machinery indicators measure domestic laws and regulations that provide farmers access to fertilizer and agricultural machinery.
- The regulatory processes that help farmers make appropriate decisions regarding the level of investment in irrigation are measured by securing water indicator.
- Sustaining livestock indicator captures the quality of regulations affecting farmers’ access to livestock farming inputs.
- The quality of legislation on phytosanitary standards (SPS) is captured through the protecting plant health indicator.
- Inadequate access to quality agricultural inputs such as fertilizers, water, and mechanical power can cause productivity loss, higher cost of food production and uncertainty, and lower capacity of farmers to produce surpluses, adopt new plant varieties and accept new opportunities to improve their income.
- The regulatory system that governs irrigation management is essential for reducing the variability of farm output, prices, and incomes, minimising vulnerability to natural shocks, and incentivising the production of riskier and high returns crops.
- Gaining access to the global agricultural value chain requires a sound regulatory framework on SPS.
- For instance, thanks to active involvement by the SPS authority, namely National Agrarian Health Service (SENASA-Peru), Peru had become one of the world’s leading exporters of asparagus.
India’s Performance on Seed supply and use of warehouse receipts:
- The comparative score of India on supplying seed, trading food, and accessing finance indicators is high.
- Supplying seed indicator evaluates laws and regulations that ensure timely release of seed to farmers.
- A robust seed supply system is required for improving yield and adopting new crop varieties.
- The trading food indicator assesses laws and regulations that facilitate exporting of farm products by farmers.
- The regulatory framework on the use of warehouse receipts is assessed using accessing finance indicator.
- A robust warehouse receipts system enables the farmers to obtain the credit needed to invest in agriculture.
- Warehouse receipt operators accept deposits of crops and provide warehouse receipts to farmers as evidence of deposited crops. By using warehouse receipts as collateral, farmers can receive credit.
- The EBA project results reveal that, compared to its close competitors, the strength of India’s agricultural regulatory environment is weak on the whole and with respect to key performance indicators.
Role for the government:
Governments can play a critical role in this regard by enacting laws and regulations that influence farmers’ access to agricultural inputs, cost of production, farmers’ participation in agricultural markets and value chains, the competitiveness of farmers, and private investment in the farming sector.
Some Way Forward measures:
- The consolidation of land holdings becomes important to raise farmer incomes. In this Cooperative Farming and Contract Farming plays a major role in executing reforms.
- Farmers can voluntarily come together and pool land to gain the benefits of size. Through consolidation, farmers can reap the economies of scale both in input procurement and output marketing.
- There is a need to make a shift from rice and wheat-centric policies to millet, pulses, fruits, vegetables, livestock and fish.
- The creation of a competitive, stable and unified national market is needed for farmers to get better prices.
- Farmers’ income can improve substantially if they are able to capture a greater share in the supply chain from farm gate to consumer.
- For this to happen, farmers must have the freedom to sell what they want, where they want, and when they want without any restrictions on sale, stocking, movement, and export of farm produce.
- These will require legal and institutional changes, major investments in market infrastructure and storage (including cold-chain storage), and incentives for the creation and operation of infrastructure by FPOs.
The future of world agriculture and food production is expected to increasingly depend on middle-income countries such as China, India, Brazil, and Indonesia, just like the high-income countries dictating the fortunes of global agriculture in the past five decades.
To make the best use of this great opportunity, India needs to put in place an agricultural regulatory system that would make it easier for its farmers to conduct agricultural activities, thereby improving their productivity, competitiveness, and income.