Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

Agricultural Field 4

Agriculture has always been a lifeline of the Indian economy, providing livelihood to millions of farmers; However high production costs, and low access to credit, as well as poor market linkages hinder the sector’s growth. This adversely impacts India’s ranks of small and marginal farmers, which comprises around 85% of the sector. Aggregation and consolidation provide a means for these farmers to unite and reap the benefits of economies of scale, making this a critical means to create new growth paradigms.

A high-powered meeting of senior officers of the Central and State Government representing the Ministries and Departments of Agriculture and Industry and international development stakeholders offered their perspectives on ushering in a new era of growth.

The MSME as well as the agri-business sectors jointly contribute towards providing livelihood income to perhaps 75 percent or 80 Crore of the Indian populace, and support by the GoI should be offered appropriately. Further, the slated GoI programme for the formation and promotion of FPOs at a budgetary outlay of over INR 6,000 Crore will ensure greater infusion of professionalism in the related eco-system.

The need of the hour is for FPOs to be hand-held professionally so as to provide a gamut of value-added services to members. These include helping them

  • establish input facilitation services
  • create a common facility for primary processing and storage and custom hiring centres
  • undertake seed production activity
  • instilling good agricultural practices among members
  • be compliant in statutory and legal terms,
  • develop alternate markets and directly access buyers
  • establish credit linkages
  • aptly advocate for policy and schemes at the Centre and State levels, etc.

Such capacities and capabilities have been successfully developed on a programme mode for 100s of FPOs in World Bank-supported projects, programmes by the SFAC, and in initiatives by several state governments.

In the context of synergized promotion of agri-business value-chains, there is also need to adopt an ecosystem approach involving the multitude of stakeholders ranging from the Ministry of Food Processing Industries, Ministry of Agriculture, Ministry of MSME, Ministry of Commerce & Industry, Ministry of Science and Technology, Ministry of Skill Development and Entrepreneurship etc., as well as their related departments and subordinate offices and institutions.

In essence, this entails the creation of a National commodity value chain approach with cluster focus to optimize resource outlay and develop natural production and processing clusters in the country that need to be incorporated in related interventions. This is a model adopted most successfully worldwide.

Other than economic considerations, environmental and sustainability issues need to be accorded due consideration over interventions. Aspects such as groundwater depletion and climate change are accorded equal priority in the 1000s of crore of world bank and ADB supported programmes in India. Extensive support for micro as well as macro (canal) irrigation systems need be offered, and producer groups including water-user groups need to be promoted for effective implementation of related initiatives. The apt use of various technology apps available for farmers should also be ensured, perhaps by making them eligible for subsidy and support under RKVY and other schemes.

It is also necessary to commercially leverage agri by-products and even “waste” through encouraging micro-enterprise and FPO start-ups in related activities. Promoting the use of solar pump sets and related technology options even in cold stores and transportation facilities will be a sustainable option.

The MSME Ministry’s scheme for common facilities have been most useful to protect and promote the competitive growth of 100’s of MSME clusters in the country. Some states like Tamil Nadu and Maharashtra have already implemented 50-100 common facilities with assistance from the Centre or from their own indigenous cluster development programmes. This intervention is worth replicating nation-wide with greater application of resources and professional expertise.

The development of the MSME sector will merit a range of initiatives for effective promotion. In this regard, there is a need to:

  • Appropriately orient factor conditions
  • Appropriate orient and tap domestic and global demand.
  • Evolve an enabling business environment (in terms of favorable trade policy, particularly)

It is only then that Indian agri-business and MSME value-chains can gain their rightful place in global value-chains. Evidently, even in commodities where we are global leaders in production, we enjoy a negligible share of barely 1 percent of world trade.

Best practices in terms of investment policy at the state level may be viewed in terms of the State GST refund and invest subvention and other incentives offered by Punjab, Maharashtra and Bihar. These are amongst the most favorable in the country. Other incentives typically offered by most states typically include phased support by way of investment subsidies and power tariff support for start-ups. In the National context, fiscal and financial incentives offered by most countries are virtually at par with each other. It is necessary to complement such incentives with strong social as well as industrial infrastructure as well as apt Ease of Doing Business related climate. Favorable negotiations with regard to FTAs will make India a more attractive destination for FDI to tap different global markets.

Summary provided by Knowledge Partners Grant Thornton, and compiled by Prof. V Padmanand and Mr. Kunal Sood, Partners, Grant Thornton India LLP and Sunita Quadros, Business Head and VP, Times Strategic Solutions.

Pictured above in the story, in order of appearance:

Smt. Neelkamal Darbari, IAS. Managing Director, SFAC, GoI

Dr. Ashok Dalwai, IAS. CEO, NRAA and Chairman, Empowered Committee, Doubling Farmers Income (DFI)

Shri. Devendra Kumar Singh, IAS. Additional Secretary & Development Commissioner, Office of the DC-MSME. Government of India

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

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