The government is developing a plan to incentivize value addition in agriculture, which may enhance farmers' incomes, to make sure the sector's development even after agricultural regulations were withdrawn late last year.
According to officials, the strategy's overarching goal is to encourage backward linkages to the farm. The specific details are expected to be announced in the budget on February 1st.
Export Incentives
"The overall goal is to assist with investments to develop value addition and backward linkages," a government official explained. "This will also include export assistance to assist Indian farmers in establishing markets for their products," the official added. Additional transportation, marketing, and branding benefits for farm produce exports are expected.
Steps to improve the cooperative component are also envisaged, with the establishment of a new specialized ministry.
In addition to the 10,900 crores production-linked incentive (PLI) scheme for food processing, the government is considering additional incentives to encourage the development of essential storage and logistical infrastructure. The food processing sector's gross value added (GVA) was 2.24 lakh crore in FY20, accounting for 1.7 percent of the total. The food processing sector's GVA contributed 11.38 percent of the GVA in the agricultural and allied sectors.
The government would want to see this rise in this share.
"Value addition and farm produce exports can go a long way toward ensuring more sustainable export growth, particularly if we can minimize the reliance on exports of water-guzzlers like rice," said Aditi Nayar, chief economist at ICRA. According to the official, a comprehensive support plan is being discussed to help farmers who rely on a single crop for their income through research and development and crop diversification as well as credit support.
The need for Prioritizing Policies
"Policies must prioritize activity that is driven by demand. More crucially, policies should now be developed with the concept of 'global' in view for each agricultural commodity, rather than merely regional or local" aid Sachchidanand Shukla, Mahindra & Mahindra's chief economist.
In 2015-16, Prime Minister Narendra Modi declared an objective of doubling farmers' incomes by 2022-23, but the Coronavirus outbreak has rendered that goal difficult to achieve. In the current financial year's budget, Finance Minister Nirmala Sitharaman announced nine measures for the agriculture sector, including boosting the farm credit objective to 16.5 lakh crore.
