“India must strengthen technology-enabled farm value chains”

Prof. Kushankur Dey, Food & Agri-Business Management, Indian Institute of Management, Lucknow, tells TPCI  that once the current pan-Indian 21-day lockdown is lifted, it will have serious consequences for the urban economy such as the paucity of labour and job creation in the formal sector. He also argues that any international model of rural development cannot be a blueprint for India.

TPCI: What, in your opinion, has caused the mass exodus of workers despite assurances during the lockdown? How will this impact the urban economy in the near term?  

Prof. Kushankur Dey (KD): The proximate cause for the large-scale exodus of migrants from cities to villages is Covid-19 outbreak and subsequently, a 21-day lockdown. This has compelled hundreds of thousands of migrants to leave their work place in a short span of time. Due to lack of public transport facilities, migrants have desperately been seeking the continuing support of state agencies to reach their homes and in many cases, they have reached bare-foot. In some cases, with the support of states, they are dwelling at temporary shelters.

It is worth noting that the construction sector, which according to the National Sample Survey Employment-Unemployment Rounds in 2011-12, was the largest employer of rural men and women next to the manufacturing sector (78.1% of employment shared by informal sector excluding farm-based activities) has been affected by lockdown, and migrant rural workers have been forced to return to their homes in search of wage and livelihoods.

There must be near-term impact on the urban economy after the lockdown is lifted. First, there will be impact on the supply-side of labour economy as informal sector may not anticipate when the lockdown will be lifted in view of the increasing rate of Coronavirus transmissions and infections.

Secondly, the stalled projects, especially at the construction site are severely impacted and post-lockdown, the project will take a few months to resume and garner momentum to completion and distribution for sales. In other words, stocks/inventories piled up in the real estate market would entail a long gestation period to mature for sale as consumer demand is likely to dip once lockdown is lifted.

Third, though supply chains and logistics companies will resume their businesses post-lockdown, their cash starved situation would affect their operating cycle and without the working capital reserve, it will be difficult to expand their economies of scale and scope.

Fourth, the post-lockdown period will also impact urban employment in formal sector as job creation in the formal sector depends upon certain critical factors such as economy’s projected and actual output, gross employment ratio, skilled workforce, incremental capital-output ratio, among other macro-economic indicators. Since the economy has already been into contraction mode, additional job creation cannot naturally take place until there is a push from government or public sector. Nonetheless, that push should not crowd out the private sector’s investment in job creation or employment structure.  

Fifth, non-food expenditure or conspicuous/hedonic consumption of luxury goods will adversely be affected as the income shock from informal sector spills over to the formal economy and contracts it further.

TPCI: The large-scale migration appears to support the view in favour of large-scale decentralisation of the Indian economy, so that people in remote areas need not migrate to cities. What is your perspective on this?

KD: Large-scale decentralisation may occur as a result of large-scale migration. Cooperative federalism and Panchayati Raj Institutions may accentuate and strengthen the process of decentralisation for rural economy. However, we need to understand the plausible reasons for anticipated large-scale decentralisation. The negative pressure on rural wage and food price inflation can be attributable to this decentralisation that has started in 2016-17, especially post-demonetization period. Agricultural real wage and construction (mason) real wage growth rate (about 14%) had shown an upward trend between 2007 and 2013. Both the real wage rates had become negative from November 2014 and ultimately reached at a meagre 3% in 2017-18. In 2014-15, food grains production was also affected due to subsequent drought breakout and low farm gate prices that impacted wholesale price index, agricultural or rural wage rate, and eventually, the prosperity of rural workers.

So, Covid-19 has further compounded this structural problem and therefore, decentralised rural economy has to ensure livelihoods of millions of rural migrants including farming communities by creating enabling environment for gainful farm and non-farm income generating activities unlike the case of MGNREGS that has lost momentum after 2013 due to wage rate discrimination, exploitation at work place, unreasonable delay in payment and leakage.

TPCI: How can rural India’s contribution to current GVA be augmented? And what role do you see for rural India in the development of the economy, in farm and non-farm sectors?

KD: As of now, rural farm sector accounts for a meagre 14.38% of GVA at current prices and non-farm sector considering manufacturing sector has relatively a higher contribution to GVA. Further augmentation of GVA can only be possible by strengthening the technology-enabled farm value chains and promotion of agri-enterprises and/or integration with non-farm enterprises.

For the farm sector, rural India needs to initiate secondary agriculture through integrated farming activities and thrust on sustainability of production, monetisation of farmers’ produce, strengthening of farm extension services, and recognizing agriculture as enterprises. FPOs should harness the potential of farm economy. For the non-farm sector, MSMEs should come in a big way to absorb the migrant workers apart from MNREGS wage fare program.

TPCI: What should be done to facilitate the industrialisation and development of rural regions in India? What are the key sectors that should be developed to promote gainful employment?

KD: Local government should facilitate the industrialization and development of rural regions in India. Cluster-based farming can be adopted for growing high value crops with a thrust on food security and nutrition. Storage structures should be set up under PEG scheme (NABARD funding) at farm gate to avoid the wastage or post-harvest losses of crops.

Market linkage needs to be established for better price realization. Farming communities should also be encouraged to participate at MSP-based procurement operation. eNAM can link millions of farmers with the distant buyers and harness the potential of food supply chains.

Promotion of MSMEs/small-scale industries by linking the farm sector should take place. Stated differently, primary and secondary sectors can contribute to industrialization and development of rural India.

Based on Ashok Dalwai report (2018) on the secondary agriculture, three types of rural enterprises can be identified, which should be promoted by government/private sector in terms of capacity building and scaling up for financial mainstreaming. For example, Type A enterprise should make value additions to primary agricultural production systems. Type B enterprises are alternative enterprises, but linked to off-farm activities. Type C enterprises thrive on crop residues or wastage of primary agricultural systems.

Type A enterprises can be achieved by livelihood enhancement action plans that are implemented by farmer-based/community-based organizations. Collectivisation, cluster farming, financial literacy and marketing skills are important to build this avenue. Type B enterprises are based on utilization of alternative enterprises to primary agriculture, but be associated with rural off-farm activities. For example, poultry, bee-keeping, duck farming, piggery, and livestock management are off-farm enterprises that can be promoted as part of the integrated farming system. Type C enterprises strive on crop residues or by-products of primary agriculture. Sugar and cotton ginning mills can give rise to by-products for utilization in secondary agriculture.

TPCI: What suggestions would you like to offer to the government or private players to make sure that the rural economy becomes as vibrant and attractive for jobseekers?

KD: Agricultural Skill Council of India and Start-up India programs should take the opportunity to identify at least dozen agri tech-start-ups to infuse the technology-based smart/precision agriculture and agribusiness.

Skill development for farm sector is must for knowing the market structure, conduct and performance. Financing should then come to the fore. Apart from KCC/ crop loan, NABARD-funded storage and micro-entrepreneurs schemes and MUDRA schemes should reach to the last mile for enterprise development.

To promote rural enterprises, there must be recognition of priority sector status for institutional credit; low-cost skilling; knowledge-based exposure of farm communities; specialized extension services for enterprises owned by women; priority under rural electrification and micro-irrigation objectives; fast-track procedures to avail benefits of central sector schemes; and label geographical indicators to products of village-scale secondary agriculture.

TPCI: Is there an international model of rural development that can be emulated by India? Please elaborate.

KD: Any international model of rural development cannot be a blueprint for India as setting, processes, events or actors are different from developed world. However, the model adopted by developing countries can be considered for India. For rural development, growth models can be used, fore mostly, balanced growth theory and Lewis’ dual economy approach can be adopted for India. In other words, the integration of farm and non-farm sector has potential for livelihood promotion and gainful employment. The best practices of cooperative/federal organizations can be drawn and assessed in consultation with community based organizations/FPOs/self-help groups and other village-level associations for implementation. Participatory Learning Action (erstwhile PRA) can be a reasonable tool for need assessment of rural populace and thereby, actionable measures can be devised.   

Kushankur Dey is Assistant Professor at the Indian Institute of Management, Lucknow, having associated with Agri-Business Management Group (ABM). Before joining IIM, Lucknow, he has served on the faculty of IIM Bodh Gaya, Xavier University Bhubaneswar (formerly XIMB Rural Management), and T. A. Pai Management Institute for about four-and-half years. Before moving to doctoral education, he has also worked at managerial capacity in agriculture input sales & marketing (Rallis India) and procurement (NCML) for two years. He is Post-Doctoral Fellow of Centre for Management in Agriculture, Indian Institute of Management, Ahmedabad and holds Fellowship in Rural Management (equivalent to PhD) from the Institute of Rural Management, Anand. Dey is a recipient of Reserve Bank of India Chair-Unit Fellowship at IRMA and Indian Council of Agricultural Research conferred Junior Research Fellowship to pursue Fellow (Doctoral) and Post-graduate degree programmes, respectively. His research interests include namely, agricultural value chain finance, agriculture insurance and risk management, price efficiency testing of agricultural commodities markets, organization and governance of farmer organizations.

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