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Covid 19 impact on India’s Agricultural Sector

Covid 19 impact on India’s Agricultural Sector

Relevance

  • GS 3 || Economy || Agriculture || Production and productivity

Why in news?

  • The economic impact of the Covid-19 pandemic has caused unprecedented damage to the global and India is no exception.

Impact on Global Agriculture

  • Impact on food demand and food security
    • Food demand has been impacted as a result of lower-income and purchasing power. Consumers are stockpiling foods, which has impacted food availability and price.
    • Food insecurity may arise as a result of a decline in international trade, disruptions in the food supply chain, and disruptions in food production.
    • Markets are more integrated and interlinked, with a Chinese economy that contributes 16 percent to the global gross domestic product. Thus, any shock that affects China now has far greater consequences for the world economy.
  • Rise in prices
    • Global food prices continued rising led by vegetable oils and dairy products.
    • For example, in Afghanistan, food price has increased of up to 20 percent (June estimates). In Yemen, a 35 percent increase in food prices has been recorded in some areas.
    • In Sierra Leoneprices of major food, commodities have already risen well above their long-term average.
    • In Syria, significant price increases (as much as 40-50 percent in food staples) and some shortages in basic goods have been reported since the middle of March.
  • In terms of food production and distribution
    • To control the spread of infection, most countries have implemented measures such as home confinement, travel bans, and business closures.
    • Because agricultural produce is mostly perishable, farmers are forced to keep unsold produce for a longer period.
    • This has resulted in a decrease in food quality as well as an increase in production costs.
  • Crop production and seed availability
    • In terms of crop production, the majority of the seeding process will be virtually unaffected between now and the summer.
    • As a result, there would be no effect on seed availability for the time being.
    • However, if the same scenario continues until the end of the year, seed availability will undoubtedly be a problem.
  • On workers
    • Agricultural workers in low and middle-income countries have inadequate health care and social protection, as well as little or no savings.
    • Despite the self-isolation protocol implemented during the COVID-19 pandemic, many informal agricultural workers are required to work for a living.
    • While COVID-19 likely represents a deflationary shock for the global economy, reflected in early moves by the FAO Food Price Index, in the short term the real cost of a healthy diet may rise because of the increase in the cost of perishable commodities, which would have a particularly adverse impact on lower-income households and raise the price of progress towards the Sustainable Development Goals. 

Impact on Indian agriculture

  • Agriculture accounts for approximately 17% of Indian GDP. Agriculture, along with its allied sectors, is India’s most important source of income. 70% of rural households still rely primarily on agriculture for a living.
  • Fall in prices
    • Agricultural prices have collapsed due to lack of market access including the stoppage of transportation and closure of borders.
    • The rise in labour costs and lack of access means that farmers are staring at huge losses and hence allowing crops to rot in the fields, a better ‘stop-loss’ mechanism.
  • Debt and Cash Flow Constraints as a result of the lockdown
    • The most pressing issue that farmers must address is the repayment of crop loans, gold loans, and other informal debts.
    • Farmers are forced to borrow money from the informal sector at high-interest rates for the new season.
  • No procurement
    • Peak harvest with no purchase
    • Crops such as wheat, gram, lentil, mustard, and others (including paddy in irrigated tracts) were either harvestable or nearing maturity.
  • Lack of labour
    • The scarcity of labour has hampered operations in many areas.
    • As a result, the scarcity of migrant labour has resulted in a significant increase in daily wages for crop harvesting.
    • Some agricultural sectors, such as paddy and wheat, are relatively more insulated because they do not have to rely on large numbers of manual labourers.

Agriculture and allied sector emerged stronger

  • Despite the above challenges what’s unusual this time is that the farm sector (agriculture, forestry & fishing) has grown by 6%.
  • There are two main reasons why agriculture didn’t suffer the fate of the rest of the economy last year.

  • The first is the monsoon
    • The rains were good not just in the main monsoon, but also the post-monsoon winter and pre-monsoon seasons of 2019 and 2020.
    • It led to the filling of reservoirs and recharging of groundwater tables and aquifers, unlike after the deficient monsoons of 2014 and 2015 and the near-deficient one of 2018.
    • Not surprisingly, 2019-20 and 2020-21 produced back-to-back bumper harvests.
  • Agriculture being exempted from the nationwide lockdown
    • The GOI largely spared PDS ration shops and other stores selling food, groceries, fruits & vegetables, milk, meat and fish, animal fodder, seeds, and pesticides from strict lockdown.
  • The problem was due to the demand side
    • The problems agriculture encountered due to the lockdown had more to do with the demand
    • The closure of hotels, restaurants, roadside eateries, sweetmeat shops, hostels, and canteens resulted in a collapse of out-of-home consumption. This was demand destruction not from rising prices.
    • The GOI tried to address the demand side problem partly through various policies.
    • The government is using every arrow in its quiver to ensure farmer health by continuously sensitizing farmers about working in fields with covered faces while maintaining social distance.

Role of the Government

  • The central and state governments have collaborated to address farmers’ concerns.
  • Credit facilities
    • Every day, both have implemented a slew of policies, including crop insurance for farmers, free flow of agricultural credit, unemployment benefits for rural landless/migrant workers under MANREGA, and so on.
  • Enhanced crop procurement
    • Farm harvests reach the mandis for assured procurement operations by designated government agencies.
    • To reinforce a zero hurdle harvest season, the government has exempted farm machinery movement from lockdown.
  • Rise in MSP
    • The minimum support price (MSP) value of such purchases of wheat, rapeseed-mustard,chana (chickpea), tur (pigeon pea), paddy, and cotton.
    • MSP procurement was effective largely in crops and regions where the institutions undertaking such operations, be it the Food Corporation of India, NAFED, Cotton Corporation of India, or even cooperative dairies. 
  • PM-KISAN
    • Direct transfers to farmer accounts under the PM-Kisan scheme, added up to over Rs 1.5 lakh crore of liquidity infusion into the agricultural economy.
    • It has provided them with some cushion against the deflationary effect seen on farm prices due to the prolonged lockdown.
  • Boost to Contract farming
    • Various states have promoted innovative models allowing investors and farmers to enter into an agreement for contract farming given the continuing uncertainties due to the pandemic.
    • For example, the Consumer-Farmer Compact in Telangana has been ensuring food availability and access in COVID-19 times.
      • The consumers support farmers with their agricultural needs; in return, farmers ensure consumers can access food in a hassle-free manner.

Way Forward

  • Structural reforms needed
    • Land leasing, contract farming, and private agricultural markets, among other structural reforms, have long been advocated to increase investment in the agriculture sector and accelerate its growth.
    • However, because state governments have not implemented these laws consistently, the sector’s full potential remains unrealized. These reforms will necessitate a significant amount of political will.
    • Designing agricultural policies, post-COVID scenario, must include these imperatives for a food systems transformation in India.
  • Structural reforms needed
    • Land leasing, contract farming, and private agricultural markets, among other structural reforms, have long been advocated to increase investment in the agriculture sector and accelerate its growth.
    • However, because state governments have not implemented these laws consistently, the sector’s full potential remains unrealized. These reforms will necessitate a significant amount of political will.
    • Designing agricultural policies, post-COVID scenario, must include these imperatives for a food systems transformation in India.
  • Stable Imports-exports
    • India, being trade surplus on commodities like rice, meat, milk products, tea, honey, horticultural products, etc. may seize the opportunities by exporting such products with a stable agri-exports policy.
  • Investments and support
    • A post-COVID situation offers that unique opportunity to repurpose the existing food and agriculture policies for a healthier population.
    • Development of export-supportive infrastructure and logistics would need investments and support of the private sector that will be in the long-term interests of farmers in boosting their income.

Mains model question

  • Discuss the impact of Covid-19 on the agriculture in India. Discuss the various efforts made by the government to take the farmers out of the crises.

References