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Dr. Somdeep Chatterjee Extn: 2028 M-105, NAB: Somdeep@iimcal - Ac.in

This document discusses various topics related to the agricultural sector in India. It begins with providing links and summaries of chapters from the Economic Survey that discuss the sectoral composition of the economy, the industrial, manufacturing, services, and agricultural sectors. It then discusses reforms for farms and farmers, identifying basic problems in agriculture. It outlines suggested immediate and medium-long term reforms, research on business implications, and ways to boost farmer incomes. The document concludes with a case discussion on onion price volatility and policy responses.

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V SURENDAR NAIK
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51 views30 pages

Dr. Somdeep Chatterjee Extn: 2028 M-105, NAB: Somdeep@iimcal - Ac.in

This document discusses various topics related to the agricultural sector in India. It begins with providing links and summaries of chapters from the Economic Survey that discuss the sectoral composition of the economy, the industrial, manufacturing, services, and agricultural sectors. It then discusses reforms for farms and farmers, identifying basic problems in agriculture. It outlines suggested immediate and medium-long term reforms, research on business implications, and ways to boost farmer incomes. The document concludes with a case discussion on onion price volatility and policy responses.

Uploaded by

V SURENDAR NAIK
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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You are on page 1/ 30

DR.

SOMDEEP CHATTERJEE

somdeep@iimcal.ac.in
Extn: 2028
M-105, NAB

0
Sectoral Composition
§ https://www.indiabudget.gov.in/economicsurvey/d
oc/eschapter/echap01.pdf

§ Economic Survey Chapter 1 – Table 2

1
Industrial Sector
§ https://www.indiabudget.gov.in/economicsurvey/d
oc/eschapter/echap08.pdf

§ Economic Survey Chapter 8 – Table 1

2
Growth in Manufacturing
§ https://www.indiabudget.gov.in/economicsurvey/d
oc/eschapter/echap08.pdf

§ Chapter 8 – Figure 5 from Economic Survey

3
Services Sector
§ https://www.indiabudget.gov.in/economicsurvey/d
oc/eschapter/echap09.pdf

§ Economic Survey Chapter 9 – Table 1

4
Agricultural Sector

Economic Survey Chapter 7 – Figures 1, 2 and 3

https://www.indiabudget.gov.in/economicsurvey/doc/eschapter/echap07.pdf

5
Farms and Farmers
§ Agricultural Reforms– Neelkanth Mishra
§ Discusses the historical importance of agriculture
§ Lays down a table discussing potential suggested
reforms and a description of how they may operate
§ 2 interesting op-ed articles by author (recommend
reading)
§ Paradox of Plenty – Indian Express (22 Aug 2016)
§ Beyond the Farm – Indian Express (30 March 2017)
§ Neelkanth Mishra: MD and co-Head of Asia Pacific
Strategy, and the India Economist and Strategist for
Credit Suisse
§ Chapter 7 of BGRS textbook 6
Identifying Basic Problems
§ Too many workers in agri-sector in India earning too little
money
§ Improve agricultural productivity – would lead to higher
farmer incomes
§ Access to irrigation not universal
§ If there is access – majorly depleting water table and
causing environmental crisis (tube wells, water intensive
crops)
§ Farmers get too small a share of the eventual price of
what they produce
§ Access to national/international markets not great for
farmers
§ Farmer incomes stagnating – rural distress 7
Suggested Immediate Reforms

§ Target Monopolies in agricultural supply chain: introduce


policies to control the market power of big players –
hope to increase farmers’ share

§ DBT in fertilizers, soil health cards (already in practice) –


idea is to direct the subsidies better – prevent leakage –
distortions created by subsidies can be addressed

§ PMFBY – crop insurance must be improved!! Lot of lack


in demand – resistance from farmers – state govts
reluctant to adopt
8
Medium and Longer Term Reforms
§ Improve infrastructure – storage, marketplaces etc
§ Research paper: Chatterjee (2018): Storage infrastructure and
agricultural yield: evidence from a capital investment subsidy scheme.
Economics, 12 (2018-65): 1–19.

§ Grameen Bhandaran Yojana – Govt of India

9
10
11
Medium and Longer Term Reforms
§ Improve infrastructure – storage, marketplaces etc
§ Income transfers and CCTs
§ Encourage agri-exports
§ Formalization of tenancy – fragmented land holding –
states have contractual frictions – interests of
landowners and tenant farmers often not aligned –
causing inefficiencies
§ Increase technology adoption – GM crops, organic
farming, bio-pesticides etc
§ Promote agricultural research, education and formal
training
§ Public irrigation system needs improvement - modern
pipeline technology – reduce leakage 12
Solutions Suggested to Problems
§ Open up markets for farmers
§ Break down cartels and monopolies at local wholesale
markets
§ Potentially create a national agri-market and/or a market
for agri-exports
§ Emphasize water management as a long term strategy
§ Encourage water intensive crops in less arid regions and
vice versa (realign cropping incentives)
§ Cash payments and transfers – lumpsum, input
subsidies, bonus for technology adoption etc
§ Clear policy on GM crops and IPR on technological
advancements in agriculture 13
Research on Business Implications

§ McKinsey Report on Indian agriculture


§ Harvesting Golden Opportunities in Indian Agriculture: From Food
Security to Farmers’ Income Security by 2025
§ https://www.mckinsey.com/industries/agriculture/our-
insights/harvesting-golden-opportunities-in-indian-agriculture
§ India’s pursuit of agricultural self-sufficiency - relatively high-growth
agriculture sector.
§ India’s farmers are not faring too well and only a third of all
agriculture companies posted a profit in recent years.
§ Goal of Govt: Doubling farmer incomes
§ There is scope for agriculture companies and the government to
ride emerging trends and successfully be a part of this
transformation.
14
Boosting farmer
incomes in
India

But, HOW??

15
§ To increase farmer incomes, India needs to adopt a higher value mix of
farm output

§capture greater value through better storage and processing

§ make market mechanisms more efficient for farm inputs, financing, and
sale of output.

§ New policies – focussed at micro levels – local mandi reforms to providing


impetus to certain types of farming

§New business models? Leverage agri-incubators?


16
17
Additional food demand
of around 400 million
tons by 2025
20
Scope to improve
yield
23
24
Case Discussion
§ Tears with them, tears without – rising onion prices!
§ The case analyses volatility in onion prices (very relevant
even today in the Indian economy)
§ We will analyze the case from the policy and business
point of view
§ What implications are there for the Indian economy if
prices for such a key commodity rises and how the
government can respond?
§ Discuss the appropriateness of various policy measures
§ Also assess the role of private players and large retailers
in dampening the price volatility

25
Intermediaries and Middlemen
§ Huge gap between retail price (Rs 100) and the price
that the farmer is paid (Rs 4).
§ Are the intermediaries:

§ Market breakers? (rent-seeking behaviour


leading to exploitation)

§ Market makers? (exist naturally because of


loopholes in regulatory framework and
inefficient administration)

26
Regulatory Intervention
§ Commodity markets: ideally neither buyers nor sellers
have market power - competitive
§ (Why) do we need intervention?

§ Can market forces lead us to a desirable


equilibrium?

§ Usually need intervention when market fails :


can you think of such a scenario here?

§ Externalities?

27
Policy Instruments
§ Analyze the effectiveness of select few policy
instruments that may help the regulatory framework
§ Public Distribution System
§ Shelf-life of onions – problematic?

§ Alternatives: food stamps?


§ How will budget line shift? (impact household
budget constraints?)
§ Minimum Support Prices (MSP)
§ Political economy concerns?
§ Contributes to inflation? Higher costs of inputs for other
production?
§ Price-Deficiency payments – further burden on fiscal?
28
Role of Private Players
§ Processors and big retailers?
§ ITC e-choupal? How does it operate?
§ Soybean market
§ Equivalent for onions?
§ Issue with onions (compared to soybean, coconut or
potatoes)?
§ Soybean - oil
§ Potato – PepsiCo
§ Coconut – Marico
§ Lack of cooperatives?
§ Successful for sugarcane, lentils, milk
§ Is there enough value addition for onions?
§ Seasonal – ¾ of the time non functional 29

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