India has always been an agrarian economy evidenced by the long and extensive history of agriculture in India going as far as the Indus Valley Civilization. India ranks second worldwide in terms of farm outputs. The Indian Agricultural sector accounted for 17-18% of the GDP of the country forming the primary source of income for more than 50% population of the country as of 2018.Although with the country’s growth and development the economic contribution of agriculture has reduced over the years, but, it still remains the broadest economic sector and plays a very significant role in designing the socio-economic fabric of India.
With the widespread increase of the novel Corona virus in the country and dire conditions of many countries such as Italy, United States of America, China, etc. India has taken proactive measures in order to prevent further spread taking into account the provisions of our current healthcare system and the population. These proactive measures started with the imposition of a nationwide 21-day lock down to curb the spread of the virus.
The lock down led to a complete shutdown of all economic activities across the entire country which was a huge economic blow to an economy that was already in downward decline before the COVID-19 pandemic gripped it in its clutches.
The pandemic has had a multifaceted impact on the agricultural sectors and industry which was already facing many challenges pre-COVID which are listed below.
With both lives and livelihood at stake in the pandemic there is a need for an immediate response on both the healthcare and economic front. The announcement of the lock down saw mass migration of laborer’s working in metropolitan cities and agricultural states like Punjab, Haryana back to the rural hometown leaving the largest economic sector of our country, agriculture, in a particularly vulnerable state. Out of 456 million workers, 422 million workers were informal workers working in agricultural and other informal sectors that were not working as salaried employees and thus saw their livelihoods lost.
The labour scarcity has impacted the infrastructure supporting agriculture and other allied sectors adversely leading to under-staffing in warehouses and storage units overflowing with crop.
Supply chain breakdown
Due to extreme restrictions that have been imposed on travel between states and on an international level has affected the ability of farmers to supply their crops to the consumers. This has led to huge economic losses suffered by small farmers and the Indian agricultural industry as a whole. The export of agricultural and processed food products totaled US$38.49 billion in financial year 2019 and was affected by the pandemic as well. As of August, 2020 after relaxation of many travel restrictions the exports of agricultural products by India has surged by 23.4%.
While exports may have risen, the bigger danger of food shortages still remains imminent. Due to large scale migration of labour force has thrown off the harvesting process completely off balance; the crop of June being the worse affected. The supply chain breakdown and reduction in transportation may cause food shortages coupled with a general lack of access to food due to falling income levels, loss of remittances and in some cases even a rise in food prices.
Depressed demand of food & agricultural products
While the initial stages of the pandemic saw an increase in demand brought on by panic buying of all essential items due to uncertainty and fear but in the long term the pandemic may lead to depressed demands undermining food security further as per the OECD-FAO Agricultural Outlook 2020-2029. The pandemic is going to hit all economic sectors but the agricultural sector is expected to show higher resilience than others in the long run.
Global rise in food prices
There was a surge in prices of agricultural commodities for the second consecutive month in July. The effect of high prices of food products will be felt deeply in developing and import intensive countries as the unemployment levels rise.
While the problems seem to be mounting up much has been done by the Government of India in order to restore the balance and prevent this health crisis from becoming a food crisis.
Government measures taken to mitigate the crisis in the agricultural sector
- Immediately after the announcement of the lock down Indian Finance Minister announced a package for INR 1.73 trillion to help the adversely affected sections of the society. It had provisions such as cash transfers worth Rs.2000 into the bank accounts of farmers and migrant workers and an increase in the wage rates under NREGS, world’s largest wage guarantee scheme.
- Pradhan Mantri Garib Kalyan Yojna was announced to uplift the economically weak sections of the society.
- Additional cash and grain allotments were made for registered beneficiaries over a course of three months.
- PM’s Citizen Assistance and Relief in Emergency Situations was setup and were made open for donations by anyone who wished to do so.
- Indian Council of Medical Research issued specific guidelines for farmers regarding farming in lock down.
- Reserve Bank of India made certain provisions taking into consideration the burden of debt servicing thus giving a moratorium of three months (till 31 May) on agricultural term and crop loans by banking institutions.
- A 3% concession on interest rates of crop loans up to Rs.300, 000 for borrowers with good repayment behavior was announced by RBI.
What changes need to be made in the agricultural sector after COVID-19?
This pandemic has exposed the fundamental flaws in the systems and brought to light the inherent inadequacies of the agriculture industry at the present. In order to recover from the crisis and revive the industry leading to its growth, radical changes need to be made in the existing system.
- Reducing the restrictions on sales of agricultural commodities allowing farmers to sell their goods on various platforms is essential in order to prevent the surplus of goods seen during the pandemic. The temporary suspension in many states of the Agricultural Produce Market Committee Act is a step in the right direction.
- The pandemic has exposed the problems in the supply chain and it can be made more efficient by allowing the use of digital platforms encouraging farmer to market interactions. Agri-Tech start-ups and platforms must be encouraged sufficiently.
- Creation of national database of skilled labour creating a network of workers thus protecting their economic conditions which have proven to be very fragile.
- Agricultural growth has been often hindered by the lack of capital. The farmers of agricultural commodities must be provided adequate financial support under schemes like Pradhan Mantri Fasal Bima Yojna so that they don’t have to bear the brunt of the economic losses.
- There is a need for diversification of food systems in order to tackle the problems of malnutrition. There must be implementation of nutrition focused schemes like National Nutrition Mission to provide adequate food to the people crippled with hunger.
Although this pandemic has adversely affected millions in the country it has helped bring to the forefront many fundamental changes that were required in our agricultural sector. Implementation of new reforms may help the Indian Agricultural sector become more resilient such that a crisis of such magnitude would not affect the sector adversely to this extent.
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