New Delhi: India is considering simpler regulations to attract more corporate investment in agriculture as Prime Minister Narendra Modi seeks to keep his promise to double farmers’ income by 2022, an adviser to the government said.
Asia’s third-largest economy, more than half the country’s population depend on farming for their livelihood, should relax rules for companies investing in contract farming, transport, marketing, warehouses and food processing, said Ramesh Chand, member of the government think tank National Institution for Transforming India, also called NITI Aayog. India’s farms should become outsourcing hubs for global supermarket chains, he said, noting he expects an announcement on the policy in the 1 February budget.
“We need to simplify regulation, give incentives and remove hurdles in their way," said Chand in an interview in New Delhi. For any improvement in farmers’ income, private corporate investments in farming should at least double from the current 2% of total annual investments in agriculture, he said.
Agriculture, which contributes 17% to the $2.3-trillion economy, has remained relatively untouched by reforms with growth rates averaging below 3% over as many decades. Lack of technology, inefficient markets and small landholdings have worsened challenges.
About a quarter Indian farmers live below the official poverty line, while 52% of farming households are indebted in spite of guaranteed prices for crop purchases by the federal government on at least three crops—wheat, rice and cotton. Farmers have long been demanding 50% profits over the cost of production and waiver of their agricultural loans.
Jagdish Thakkar, a spokesman in the Prime Minister’s Office, didn’t respond to a call seeking comment.
Indian states currently allow contract farming only for selective crops. The federal government has sought public comments for a model contract farming act unveiled in December.
Higher investments by companies including PepsiCo., Hindustan Unilever Ltd., ITC Ltd., which buy from farmers in some states, could boost incomes faster at a time when India is predicted to expand at the slowest pace since Modi came to power in 2014. Gross domestic product is expected to grow at 6.5 percent in the year through March, mainly due to poor performance of agriculture and manufacturing.
In consultation with states, Chand said his think tank is pushing for a new price support scheme.
Under the proposed Market Assurance Scheme, states procuring crops other than rice, wheat and cotton from farmers will be compensated by the federal government for up to 40% of the losses on procurement cost, he said. Bloomberg