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Relevant for: Indian Economy | Topic: Agriculture Issues and related constraints

Aug 11, 2020-Tuesday



Delhi, Mumbai, Chennai, Kolkata

Noida, Gurgaon, Bengaluru, Hyderabad, Bhopal , Chandigarh , Dehradun, Indore, Jaipur, Lucknow, Patna, Ranchi

On Sunday, Prime Minister Narendra Modi launched the Agriculture Infrastructure Fund (AIF), a medium- to long-term infrastructure loan financing facility for enhancing post-harvest infrastructure in India. The scheme is aimed at providing ₹1 lakh crore worth of loans for such projects until 2029. The creation of a comprehensive post-harvest infrastructure in India can be a game-changer in agriculture. Last year, Rameswar Teli, minister of state for food processing industries, told the Lok Sabha that 16% of fruits and vegetables and up to 10% of cereals, oil seeds and pulses are wasted in the country due to inadequate post-harvest infrastructure.

Most of the storage infrastructure in the country is not owned by farmers. This also means that they are forced to sell their entire output at one go immediately after the harvest is over, and when prices are low. Because AIF is trying to rope in farmers’ producers organisations (FPOs) to build such infrastructure, it will hopefully also address this asymmetry and allow farmers to dispose their produce in a phased manner to avail better returns. This will go a long way in increasing the bargaining power of Indian farmers.

Laudable as the scheme is, its benefits will only accrue in the medium- to long-term. The government must not lose sight of the immediate economic challenge of boosting growth and incomes. Even before the Covid-19 crisis, the economy was caught in one of its worst deceleration phases. The pandemic’s disruption has made matters worse. If the situation does not revive, it is unlikely that FPOs and other intended beneficiaries of AIF loans will be enthusiastic about committing to such investments. There is a growing consensus that the economy needs a big fiscal push to boost economic sentiment — RBI’s Consumer Confidence Survey (CCS) released last week shows that consumer confidence has plummeted to an all-time low — and growth. The optics of Sunday’s announcement — AIF was approved by the Cabinet a month ago, and the actual loan disbursal on Sunday was just ₹1,000 crore — is yet another signal that the actual fiscal boost to the economy does not match the scale of this government’s big-ticket announcements. This needs to change.

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