Triple revolution in agriculture

The primary sector, particularly agriculture, still holds the key to double-digit sustainable growth in India. But for unlocking the potential of this sector a multiple revolution impacting value added processing, modern marketing strategies, including a robust derivatives market, and retailing is needed. The contours of such a revolution are on the horizon, though it needs to be clearly articulated to solve the jigsaw puzzle conclusively.

Though in absolute terms the agri-sector in India has only 18 per cent of the gross domestic product as its share, even a four per cent growth that would push overall GDP to nine per cent or above is considered a difficult task.

But, is enhancing the productivity or reducing the transformation costs and ushering in second green (production) revolution the key to the success of the agricultural sector?

Another round of production revolution is indeed needed, as without productivity and production enhancement there is no salvation.

However, an equally important question is to spread the benefits of the second revolution to the entire 60 per cent of the population and beyond. It involves generating a plethora of opportunities for value addition, wealth creation and in generating an all round growth momentum using the agricultural sector as the base.

This requires not just another round of production revolution but a processing revolution and knowledge based marketing revolution. This means integrating the primary production sector with the manufacturing through a host of processing activities and with the tertiary sector through a multiple of market making and marketing strategies.

Indeed, the essential components of such a triple revolution are already on the horizon whether as the culmination of a deliberate strategy or the end result of multiple disjointed endeavors. It appears the latter is more appropriate as the jigsaw puzzles need to be still put in place to usher in the multiple revolution.

The essential components of such a triple revolution are as follows:

• A renewed focus on production and productivity.
• A robust derivatives market that would help in proper price discovery and risk mitigation.
• Recognition at the federal and at least in some of the provinces that all artificial barriers to trade and marketing need to go so that the commodity economy gets integrated with the national economy in a seamless manner.
• The advent of food processing as a major opportunity for value creation and employment generation apart from removing the seasonality factor from agricultural commodities.
• The emergence of large scale organized retailing of agricultural commodities significantly reducing intermediation and thereby lowering the transaction cost, benefiting both the producers and the consumers.
• A somewhat friendly attitude towards global integration forgetting the past policy paradox of erecting high tariff/quota walls to protect a few producers at the cost of a billion plus consumers.

Many initiatives on all these fronts are already in pipeline, which needs to be further integrated and accelerated for faster result.

While the first green revolution was focusing mainly on production through a seed-fertilizer-technological revolution, the new production strategies are mainly focusing on the institutional framework altering the incentive structure. This is reflected in a gradual shift towards accepting market-based prices as a significant tool.

Statutory support to regenerating a conducive institutional environment has been provided by the model Agricultural Produce Marketing Committee Act - the emphasis on contract farming, private markets etc. Removal of ban on futures markets of all commodities (though four have been recently delisted) and initiatives in aligning the Minimum Support Price mechanism with the market prices either directly or indirectly are also major incentive generating steps.

Similarly, there is a renewed focus on channeling more institutional credit to the primary sector. Further, the forward linkages with processing and marketing at the retail level are also being strengthened. Thus the new revolution of creating the right incentive structure is more broad-based covering, apart from the productivity enhancing mechanisms (seed-fertilizer-technology), a marketing-credit-processing revolution.

A robust and vibrant futures market, with all its linkages-quality, standardization, warehousing, warehouse receipt based financing- is an important signaling mechanism that would strengthen the institutional structure helping the physical market as well.

It is this multiple revolution, affecting various sub sectors in the primary, secondary and tertiary sectors of the economy that will be the key to income and employment growth of the population at large and the farmers in particular, that is important.

We need to leverage this revolution to the full advantage of our economy and people.