RBI says management of surplus foodgrain the biggest challenge for India


Photo courtesy - Asian Development Bank

Management of surplus foodgrain in India has become a major challenge, the Reserve Bank of India (RBI) said in its annual report.

“India has now reached a stage in which surplus management has become a major challenge… Going forward, shifting the terms of trade in favour of agriculture is the key to sustaining this dynamic change and generating positive supply responses in agricultural production,” the RBI said.

The total production of foodgrains reached a record 296.65 million tonnes in 2019-20, while total horticulture production  accounting for about 40 per cent of gross value added (GVA) in the farm sector also reached an all-time high of 320.48 million tonnes, the report stated.

India is now among the leading producers of milk, cereals, pulses, vegetables, fruits, cotton, sugarcane, fish, poultry and livestock in the world. As a result, the growth in agricultural GVA rose to four per cent in 2019-20. The farm sector contribution to overall economic growth surpassed that of the industrial sector for the first time since 2013-14, it added.

Priority should now be to move towards policy strategies that ensure a sustained increase in farmers’ income alongside reasonable food prices for consumers, the RBI recommended. An efficient domestic supply chain becomes critical here, it suggested.

The RBI further said the recent spate of reforms in agricultural marketing and infrastructure could open up new opportunities for agriculture if complemented by trade policies that are predictable. The amendment to the the Essential Commodities Act (ECA) is intended to encourage private investment in supply chain infrastructure, including warehouses, cold storages and marketplaces.

Further, the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020, is aimed at facilitating barrier-free trade in agriculture produce. Third, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020, will empower farmers to engage with processors, aggregators, wholesalers, large retailers, and exporters in an effective and transparent manner.

With this enabling legislative framework, the RBI recommended that the focus must turn to crop diversification, de-emphasising on water-guzzling crops, however politically difficult it may be, (read sugarcane) as well as promoting food processing.

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