An additional investment of Rs 6,399 billion is required from both public and private sectors to enable doubling of farmers’ real income by 2022–23, a government committee said in its latest report.
At present, public investment is below national average in states like Assam, Kerala, Uttar Pradesh, Madhya Pradesh, Bihar, West Bengal, Tamil Nadu, Rajasthan, Punjab and Odisha.
Less developed states in the eastern region continue to lag behind in private investment, suggesting an urgent need to develop financial and other infrastructure, it added.
These are some of the suggestions made by the Committee on Doubling Farmers’ Income headed by National Rainfed Area Authority CEO Ashok Dalwai, in first four volumes of the report released for public comment. The remaining eight volumes are yet to be released.
Given the large variations in the existing investment requirements across all states, the panel said, “The resource allocation for higher growth should be designed in such a way as to help achieve a balanced growth.”
For a targeted 10.41 per cent annual increase in farmers’ income, the required rate of increase in investment on private account is estimated at 7.86 per cent per annum, it said.
The estimated increase in weighted public investment (together in agriculture, irrigation, rural roads and transport and rural energy) is pegged at 14.17 per cent per year. “The investment rates vary considerably across the states, ranging from 1–24 per cent. The less developed states would require higher rate of public investment owing to initial low capital base in rural areas,” it said.
To boost farmers’ real income, the committee said there is need for an additional Rs 617 billion of private investment by 2022–23 at 2004–05 prices and Rs 1,318.4 billion at 2011–12 prices.
The committee strongly recommended the stepping up of institutional credit on a large scale, as only 50 to 60 per cent of the investment requirements of farmers are being fulfilled through institutional loans.
It has also worked out total public investment ‘for’ agriculture at Rs 2,843 billion at 2004–05 prices and Rs 5,080.8 billion at 2011–12 prices for all the major states.
The capital requirements are found to be much higher in the poorer and agriculture-dominant states such as Bihar, Uttar Pradesh and Madhya Pradesh. More funds would be required for developing irrigation systems, it added.
With government continuing to play key role in farm sector development, the panel said: “By 2022–23, the private investment should increase by nearly two times while public investment should increase four times from the base year 2015–16.”
Need long-term solutions
The report also noted, “Policy should focus on creating a favourable investment climate for increasing investment ‘in agriculture’ and ‘for agriculture’ for exploiting their relative potential strengths through public and private sources to ensure that accelerated private investments crowd-in from farmers and private sector enterprises.”
Since public investment in agriculture in the less developed states has been historically low, investment in agricultural infrastructure needs to be significantly stepped up to boost productivity growth, it said.
The marginal returns in terms of income from additional public investments in agricultural research and development, irrigation, energy and education are relatively higher in agriculturally less developed states, which highlights the need for enhancing investments in these areas, it added.
Besides, the panel suggested that the focus should be on the “demand-driven fork-to-farm approach”, diversification towards high value crops, market reforms and investment in infrastructure for cold-chain integration to reduce wastages among others.
It, however, cautioned that income support system alone may not work as a long-term solution for tackling farmer distress, particularly in the backdrop of depleting natural resources and uncertainty caused by climate change, as also the dependence of a huge labour force on the farm economy.