Farm insurance, credit access schemes expected in Budget 2017: Kakra of PwC
Budget 2017- In an effort to double the agriculture production by 2020, the government should introduce schemes for greater access to farm credit in Budget 2017, Ajay Kakra, leader (Food and Agriculture) PwC, said. Kakra also underlined that Union Finance Minister Arun Jaitley should also introduce policies for incentives towards irrigation and insurance of farm crops. He further highlighted the need for a digitised farming economy in the longer run. Kakra was answering questions on what announcements related to the agriculture sector are expected in Budget 2017 during a Business Standard live chat. Excerpts:
In his New Year's eve speech, Prime Minister Narendra Modi talked about giving certain concessions and incentives to farmers. It is hoped that the government will follow that up with further concessions and
incentives for the agriculture sector and the agro-input industry in the coming Budget. What can we expect? One of the key focus areas of the honourable prime minister is to provide greater access to farm credit. In my view as well this can be a key area of focus to strengthen the farming sector. As far as the agriculture input sector is concerned, access to seed, agrochemical and fertiliser is an essential requirement for ensuring farm output. The Budget can look at strengthening the distribution network of agri-inputs to ensure availability at the time of sowing or beginning of the season. The rabi sowing has been more or less normal while the offtake of fertiliser has also not been dampened due to cash crunch at the time of demonetisation.
In the financial year, the overall agricultural output was expected to grow at 4 per cent. But with the government's demonetisation move that has likely caused some roadblocks, what kind of favourable policies can we expect to heal the agriculture sector? Agricultural growth is fundamentally governed by the output of food grain and other crops which are showing no signs of decrease. The Rabi crop is also expected to be normal except a shortfall in rabi paddy. Therefore, the sector will see a growth over the last year. Demonetisation had only a onetime effect on the agricultural transactions but has not shown any sign of slow-down in food storage and distribution and even consumption. I believe the policies will look at strengthening the coverage of a greater number of farmers in the formal banking system and providing more credit in terms of crop loans, equipment purchase, technology adoption. Currently, only 52 per cent of the total farming community of 9.2 crore is covered under the financial net. The government should aim at increasing it by another 10 per cent. Apart from this we may see policies and incentives towards irrigation and insurance of farm crop.
Is the government's digital push any good for the Indian farmer? What will be the overall impact of the so-called 'Digital India' on the country's farmers and agricultural labourers?
Our economy is getting digitised, so should the farming sector be. I completely agree that a digitised farming community can be much more efficient and informed than the current one. However, this will be a challenge to both the farmers and the stakeholders working with the farming community. Currently, mobile penetration in the farming community is less than 40 per cent, therefore, limiting the potential to have mobile-based digital services. However, on the long run digitisation can bring in benefits such as better price information, response to climate changes, adoption of new technologies, better working capital management etc. On the other hand, private and public organisations working with the farmers also need to bring in digital business models to have efficiency in procurement, extension, payment solutions, farmer/ vendor management etc.
The Modi government has already promised to increase Indian agriculture's profitability threshold to more than 45 per cent in the next few years, and to double the agricultural production by 2020. Is it even possible? If it is, how? The agriculture sector is fundamentally challenged by multiple issues such as low mechanisation, dependency on rainfall, high cost of inputs, unorganised market structure, inadequate infrastructure, availability of credit, limited farm insurance etc. Making the agricultural operations viable for marginal or small farmer will be a very uphill task although not impossible. Similarly, the target of doubling production will require strong focus on R&D, a very effective extension mechanism and above all convincing farmers to adopt to a new age agriculture.
According to DIPP report, the Indian agricultural services and agricultural machinery sectors cumulatively received FDI equity inflows of about $2.28 billion from April 2000 to March 2016. What's your take on FDI inflows in this sector? What policy push does it require to attract more foreign money?
The focus of many states is changing to streamline its policy and investment environment to boost investor confidence. This can be seen from the examples of Gujarat which has been able to attract global investors in agricultural sector. AP and Telengana and many other states are following suit. The equity flow of foreign investors will depend on the state of basic infrastructure (roads, agri markets, land availability, storage and processing capacities etc) policy framework (investment policies, availability, ease of doing business etc) and suitability to the business plans. Appropriate policy measures to improve these areas needs to be undertaken. There is likely more investors to get in agricultural and food processing sector. We can expect investment in field of agri logistics, warehouses, processing infrastructure. We can also see more home grown investors participating in the new projects. However this needs to be supported by financing through banks/ PE firms.
Article Source – Business Standard