Why agriculture sector needs higher investment 

Once again, this year, the spectre of drought hangs heavily over numerous regions in Maharashtra, causing concern for farmers like Priya Khadke in the Dharashiv district. The persistence of drought is a perennial challenge, and agricultural practices in drought-prone areas of Maharashtra have shown little change. 

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Farmers in these regions grapple with a fundamental question: who will step forward to invest in agriculture, making it more sustainable and enabling them to better confront natural disasters?    

The data presented in the NITI Aayog working paper titled ‘From Green Revolution to Amrit Kaal’ reveals that approximately 80 per cent of investments in agriculture are sourced privately, predominantly from farmers themselves. Ironically, the NSS 77th round report, titled ‘Situation Assessment of Agricultural Households and Land Holdings of Households in Rural India, 2019,’ shows that for small and marginal farmers, investment in agriculture is the last priority and more than 86 per cent of farmers in the country fall in this category. 

Small and marginal farmers suffering  

The data reveals that households with less than 0.01-hectare land allocated a mere 2.6 per cent of the total loans obtained from various sources for capital expenditure in farm business; a significant 42 per cent was directed towards education and medical purposes. Marriages and ceremonies absorbed about 13 per cent of the loans, while 4 per cent was utilised for revenue expenditure in the farm business. About 93.1 per cent of the total loan availed by households holding less than 0.01-hectare land was for non-agricultural purposes.   

Notably, as landholding increases, there is a corresponding rise in capital expenditure related to activities such as land purchase, land rights, and land reclamation for the farm business. Simultaneously, revenue expenditure, covering expenses such as seed purchase, manure, fodder, and wage payments, also experiences an increase with larger landholdings. 

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The government claims that the PM KISAN scheme has helped farmers towards productive investment in agricultural activities. 

Corporate investment in agriculture? 

The share of the corporate sector in total public and private investment in agriculture has remained meagre, below 0.2 per cent, pointing towards the scope of expansion available for the corporate sector, states the NITI Aayog. The rest of the investment comes from public sources. Investments in agriculture in the NITI Aayog report mainly refer to land, input and production-related investments. It does not include investments in markets, storage, transport, grading and other post-harvest infrastructure. Securing investment in this particular segment of agriculture continues to pose a substantial challenge. 

The lack of adequate and efficient cold chain infrastructure is a critical supply-side bottleneck that leads to massive post-harvest losses (mostly of perishables) estimated at ₹92,561 crore annually, according to the government data.  

NITI Aayog emphasises that the transition to modernising agriculture entails the promotion and adoption of knowledge- and skill-intensive practices. This involves encouraging private and corporate sector investments in agriculture, establishing new producer institutions, implementing integrated food system-based mechanisms, and fostering innovative linkages between producers and end-users. To facilitate these changes, there is a need for liberalisation in the agriculture sector, characterised by the creation of a supportive regulatory environment and responsible public and private investments in and for agriculture. 

Long-term growth 

Indian agriculture has achieved a long-term growth rate of 2.74 per cent between 1950-51 and 2020-21. Within this period, the growth rate accelerated to 3.5 per cent between 2000-01 and 2020-21. 

Subsidies to the agriculture sector have more than doubled between 2011-12 and 2020-21. Subsidies on power have risen the fastest, as more and more States provide subsidised or free electricity to farmers. While public investments have also increased at almost the same rate as subsidies, their level has remained around one-third of subsidies. 

Ram Nirmal, a farmer from Beed, says, “When faced with crop failure, our recourse is to seek daily wage labour or participate in MGNREGA work. Amid this struggle for survival, the prospect of investing in agriculture to ensure sustainability seems like a distant dream.” 

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