Editorial 1 : Farms as Sites of Nurturing
Context: What can the budget do for agriculture?
Introduction: Whatever policies and budgetary allocations the government makes, it must make agriculture more productive, competitive, remunerative to farmers, and also benign to the planet’s natural resources.
Challenges Facing Indian Agriculture
- Climate change and its impact: In India, temperatures have risen by 0.7oC compared to 1951, and precipitation (July to September) has fallen by 6%. This is increasing the risk to the agri-production basket.
- Insufficient Investment in Agricultural R&D: Agricultural R&D is currently less than 0.5% of agri-GDP, and needs to be doubled to at least 1%.
- Soil Degradation and Improper Fertiliser Usage
- Depleting soil organic carbon and moisture retention due to unsustainable farming practices.
- Imbalance in fertiliser usage caused by a skewed subsidy policy heavily favouring urea.
- Overuse of nitrogen (N) and underuse of phosphate (P), potash (K), and micronutrients like zinc, iron, and boron.
- Limited adoption of advanced fertiliser technologies (e.g., nano-urea, nano-DAP) due to policy bias.
- Inefficiencies in Agricultural Markets
- Farmers often receive a small share (as low as one-third) of the consumer price for fruits and vegetables.
- Ineffective export policies and market interventions (e.g., export bans, stock limits) create volatility and impose an "implicit tax" on farmers.
- Negative Producer Support Estimates (PSE)
- India’s PSE stands at -15.5%, compared to 14% in OECD countries and China.
- Export controls and anti-market policies contribute to negative market price support, disadvantaging farmers despite subsidies.
Key Recommendations for the Union Budget 2025-26
- Develop Climate-Resilient Agriculture
- Increase R&D Funding: Double agricultural R&D spending to at least 1% of agri-GDP.
- Focus on developing climate-resilient crop varieties and innovative farming practices.
- Promote Sustainable Farming Practices: Enhance soil health by encouraging appropriate fertilisation using biofertilizers and balanced chemical fertilisers.
- Support initiatives like the Natural Farming Mission with complementary strategies to ensure food security.
- Reform Fertiliser Subsidy Policies
- Shift from product-based subsidies to direct income transfers on a per-hectare basis.
- Promote the adoption of innovative fertilisers like nano-urea and Single/Triple Superphosphates.
- Build Value Chains for Fruits and Vegetables
- Lessons from dairy sector
- Develop robust value chains for fruits and vegetables, similar to milk, where farmers receive 75-80% of the consumer price.
- Establish a dedicated board for fruits and vegetables, modelled on the National Dairy Development Board (NDDB), with visionary leadership to spearhead reforms.
- Encourage cooperatives: Support farmer cooperatives and private sector investments in storage, processing, and marketing infrastructure.
- Rationalise Export Policies
- Avoid frequent export bans on key commodities like onions, rice, wheat, and sugar.
- Align policies to stabilize agri-markets and reduce volatility in farmer incomes.
- Minimize government dumping of food grains in domestic markets at prices below economic cost.
- Enhance Farmer Incomes and Market Access
- Treat agriculture as a comprehensive food system:
- Focus on production, marketing, and consumption.
- Ensure food and nutritional security while augmenting farmer incomes.
- Invest in infrastructure for cold storage, logistics, and value addition for perishable commodities.
Conclusion: Indian agriculture policies should align with global standards and try to get the agri-markets right. Without such policies Indian agriculture will keep limping and our farmers will keep agitating for higher and higher prices.
Editorial 2 : Reversing the Slowdown
Context: Where will growth come from in 2025.
Introduction: For a poor country like India, with a per capita GDP of only $2,700, economic slowdowns are painful and worrisome. To become an advanced country, India will need to grow rapidly for a long period of time.
The Growth Problem: Challenges to Growth
- Growth has declined in four out of the last five quarters.
- Consumption demand has been subdued, especially in urban India.
- Private investment has been weak , even though corporate balance sheets are healthy.
- Government investment has been growing rapidly over the past few years, propping up demand, it is soon going to run into fiscal constraints.
Opportunities for Growth
- Expanding India's Export Share: India’s share in global goods exports is less than 2%, compared to its 4% share of the global economy.
- Increasing this share to 3% over five years could lead to a 50% increase in export volumes and add more than 1 percentage point to annual GDP growth.
- Leveraging Global Realignments
- Multinational companies are seeking alternatives to China for manufacturing operations.
- India, with its large population and growth potential, is uniquely positioned to attract foreign direct investment (FDI) in manufacturing.
- Role of FDI and PLI Scheme
- Production Linked Incentives (PLI) scheme aims to attract investment in manufacturing.
- FDI inflows have stagnated at $66 billion annually since 2019-20, with only 20% directed toward manufacturing.
Strategies for Export Led Growth
- India should adopt a well-defined export-led growth strategy, the critical component of which would be minimising risk and policy uncertainty.
- The country needs a consistent and coherent trade policy that does not involve frequent changes in import tariffs or worse still, import or export bans.
- It also needs a re-liberalisation of the foreign trade regime, which has become increasingly protectionist and an exchange rate that responds to market forces as opposed to being very actively managed by the central bank in a way that erodes the competitiveness of Indian exports.
- Macroeconomic stability and policy certainty: Policy needs to be much more transparent and predictable, without sudden flip-flops. All the firms need a level playing field.
Conclusion and Way Forward
- India is facing a historic opportunity to achieve rapid growth by increasing FDI and raising its share of global good exports.
- Predictability and certainty on the policy front and reorientation towards a free-trade mindset is needed for the growth.