Rural poverty is a complex problem which needs focused and long-term efforts. Success lies in helping farmers generate the surplus necessary to grow and tide over poor harvests and equipping farmers with the knowledge to help themselves and cement improvements(HT File Photo)
Poverty reduction needs development. The linkage between economic growth and poverty reduction is potent in rural India. We do need to tweak our strategy — stop haemorrhaging resources on bad programmes, protect successful elements of our farming tradition, and a governance regime that ensures farmer access to consumers, financing and technology. Prime Minister Narendra Modi’s programmes — Jan-Dhan Yojana, Digital India and insurance initiatives — can have great utility in reducing rural poverty.
Middle-men’s charges and ‘societal’ expenses place inordinate pressure on farmers.
There are four to seven middle-men before produce reaches consumers. Agricultural Produce Market Committees (APMCs), in the present context, formalise income leakage of 5-15% to licence-holding intermediaries. Rural ‘licence raj’ must be broken. This ‘leak’ should flow to the farmers, or to those investing and adding value to the supply chain.
Apart from just APMCs, credible stakeholders — co-operatives, retailers, professional ‘procurers’ — must be allowed to operate markets. Additional ‘costs’ are unlikely to exceed ‘leaked’ commissions. Competition and profit motive will encourage provision of services like grading of produce and improved storage. In allowing new entrants and some consolidation, competition must be protected, and no government-funded entrants should be allowed. Other measures to counter middle-men include encouraging contract farming and forward sales. The prime minister’s Digital India initiative will encourage use of e-commerce to revolutionise transparency and price realisations.
The massive expenses resulting from ‘honour’ being measured by spending on occasions like marriages and death need checking. ‘Social’ splurging wipes out savings and pushes farmers into debt. As changing mores takes time, short-term measures are the need of the hour. Panchayat and district administrations must convince farmers to save versus wasteful spending. Education too plays an important role in this.
Some ‘restrictive’ measures may help. For instance, banks can insist on making loan disbursements directly to bank accounts of suppliers — reducing leakages. Similarly, booking facilities like community halls can be restricted through the use of bank accounts.
Our success in developing agri-business is mixed. Efforts to save uneconomic ‘heritage’ industries without radical restructuring have little hope. The rural economy remains a gamble on the monsoons. Alternative income streams are imperative.
However, organic farming holds great potential. It is suitable for small agricultural holdings and will wean farmers off indiscriminate use of fertilisers. Similarly, substantial growth is possible in the areas of food processing, dairy, poultry and fisheries, which can supplement agricultural incomes on small farms and also generate employment through larger ventures.
To succeed, these initiatives need ample support like branding, quality control and technology support at the local level. Smart cities and states can develop agri-business hubs — bringing the co-operative sector and agri-research institutes — potentially coordinated and sponsored by a private corporate under its corporate social responsibility (CSR) activities. ‘Hubbed’ institutions should focus on specific agri-businesses, while providing broader support to a catchment area.
With the loss of more than Rs 1,00,000 crore worth perishable commodities each year, improved rural logistics are also needed. This requires investments and a policy environment that encourages profits and viable undertakings. Savings from reduced wastage converted into profits make it attractive for large consumers and professional agri-logistics firms to invest in rural logistics. The expertise of fast-moving consumer goods (FMCG) companies that can get blades and cigarettes into the remotest villages can be used to get goods out of the village.
The financial inclusion schemes launched by Modi, if used creatively, can help. Affordable medical and life insurance needs to expand to cover crops at an appropriate scale. Instead of millions of customised policies, explore macro insurance — weather index-or production-based. Premiums can be paid by partially diverting cash subsidies on input purchases. Pay-outs, distributed through Jan Dhan accounts, will help farmers survive poor harvests and service bank debt without moneylenders.
Investment in education is paramount. The government and private sector’s CSR activities can partner to improve rural schools. Subsidised Internet and computers, e-learning, and tighter monitoring teachers and students is required. Curriculums need more focus on awareness — enabling rural citizens to access information and schemes, and protect themselves against exploitation.
On the policy front, increasing income inequality must be checked. Access to the markets, inputs, technology and financing has to be free and competition needs protection.
We also need to redefine objectives of multiple agri-research institutes from a focus on the number of new type releases, to productivity. Here seeds for productivity combating potential monopoly of MNCs and irrigation are the most important areas.
Rural poverty is a complex problem which needs focused and long-term efforts. Success lies in helping farmers generate the surplus necessary to grow and tide over poor harvests, making investments in infrastructure and financial inclusion and equipping farmers with the knowledge to better help themselves and cement improvements. Ameliorating rural poverty must be through a ‘Team India’ partnership of the government and the private sector.
Saket Misra is a banker based in Singapore
The views expressed are personal