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    We should not expect overnight miracles in farm sector: Swaminathan Aiyar

    Synopsis

    'Agriculture is only 14-15% of the GDP and it can’t prop up the economy, the tail can't wag the dog.’

    Don't expect overnight miracles in farm sector with new agriculture bills: Swaminathan Aiyar
    The whole idea of the new agri law is farmers should be free to sell the grain anywhere they want and that is surely an absolute and fundamental freedom, they should be allowed to, says the Consulting Editor, ET Now.

    What did you make of the farm bills and all the debate around it?
    There is a fear that we are going to end the normal procurement policy of the Government of India and that we are going to shift entirely to a market-based system. The second fear is that of the traders, the mandi people, that the existing mandi system itself is under threat which of course it is and should be.

    The whole idea of the new agri law is farmers should be free to sell the grain anywhere they want and that is surely an absolute and fundamental freedom, they should be allowed to. Now we have gotten these laws earlier about farmers only being allowed to sell in mandis in some places because at that time we were forcing farmers to sell to the government to feed the ration system back in the 1960s. But from that point of forcing farmers to sell to feed the cities, it has now become a support system for farmers.

    Now the question is can this and will this continue under the new regime? The answer is yes. However, it can be very inconvenient for some states like Punjab. In effect, Punjab was taxing the rest of India by putting a big mandi tax. So Punjab and some of the other states may lose that too. Will there be a continuation of procurement? I would say yes there will be a continuation of procurement, farmers will still continue to take some of their stock to the mandis I do not think that is going to end and so that is not going to be a serious problem. But in theory, there could be, in which case I am sure the essential commodities act will be invoked as it still continues to exist. But as of now I would say do not think procurement is under threat.

    How meaningful and tangible will be the effects of these bills to boost farmer income? The basic premise the government is talking about is that these agri bills are going to change the dynamics and realisation for farmers?
    I will not exaggerate. The ITC E-choupal is 15-year-old at least? They got permission from state governments to set up separate direct procurement setups for wheat, soya and up to a point it worked, up to a point farmers came in and got better prices and immediate payment. Yet did the ITC E-choupal revolutionise agriculture in the states? No, it did not, it took care of a small part but bulk of the stuff still went to the mandis. India is not a place of very large farmers who want to send the stuff across to very large areas. That is why they have been using these middlemen and other people. Is it possible for farmers groups to set up their own marketing groups and do their own marketing? It is possible to do that but it will take time. If it is done, there will be a great advantage. Just to give an example, Amul is a milk cooperative where farmers got together and did their own marketing and it produced great results. But to do this for other crops will take time and the example of E-choupal says we should not expect overnight miracles.

    How are you assessing the state of rural economy in India? The feedback we are getting from talking to Mahindra & Mahindra and seeing tractors is that an uptick is clearly visible in rural India. Can it cushion the blow the economy has taken over Covid?
    Agri is only 14% of GDP and that cannot pull up the whole 100%. It is only one-seventh of the total. Secondly, the reason agri is doing relatively well is it I can close down industry, I can close down services, but I cannot close down agri, I cannot suddenly tell the cows not to produce milk, I cannot shut down the crops from growing. So the government lockdown did not affect agriculture and that is why agriculture has done relatively well.

    The lockdown policies did not affect the rabi procurement. The monsoon has been good. In some areas, excess rain has damaged the vegetable crop but overall we can look forward to a good crop for the second year in a row. But let me emphasise again that as agriculture is only 14-15% of the GDP, the tail cannot wag the dog. You cannot expect agriculture to revive the whole economy.

    There has been an opinion on Street that markets and economy are going in opposite directions and the Street really is not acknowledging how grim the situation is on the ground. Where do you feel we are when it comes to recovery?
    The pandemic is a global phenomenon. This is not just an Indian phenomenon. Right across the world, while your GDP has been plunging and misery has been high, unemployment has been enormously high. Stock markets are not only up but sometimes are touching record highs. Why is this happening abroad and in India? The two are connected, because billions of dollars have flowed into India into the Indian stock market from abroad and that is the main reason for the boom in the Indian stock market. It is part of a global phenomenon.

    On the one hand, this is directly connected with the fact that central banks across the world have pumped in so much money into the system and that money is not going into active investment. When you have a huge recession, will companies be investing in Greenfield plants? Certainly not. They will be waiting for the demand to come back. Where will the money go? It will have to go into some other form of holding. Cash holdings have gone up very substantially in India. But beyond that, it will go into things like the stock market. Not only are stock markets supposed to be forward looking, they are not supposed to be reflecting today’s condition, it is supposed to be reflecting what I see ahead of me. What I see ahead of me is that as we have reached the bottom in the first quarter of the financial year, the second quarter will be a little better and will keep getting a little better.
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    10 Comments on this Story

    Dhanasekaran Mariappan35 days ago
    sir
    Agri is only 14% of GDP. Agreed.But
    cleverly hiding the fact that agriculture creates more employment.
    Pradeep Lenka35 days ago
    No one is thinking of Miracles in Agri Sector but any improvement in this sector impacts the largest of the population. Governments are meant to take care of the larger population in any fiscal and policy measures
    The government has set foodgrain production target at a record 301 million tonnes for the 2020-21 crop year, up nearly 1.5 per cent from the previous year's output, on the back of good monsoon rains and higher acreage in the kharif season. This is a Humble Target !
    Shri 35 days ago
    Ok Sweetie. Go do Farming. Cheers
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