Agriculture, the largest livelihood generating activity, is fast transforming itself from a supply-driven to a demand-demand scenario. The discerning consumer (urban, rural and global) is increasingly demanding better quality, multiple choices, food safety and convenience.

Diversification is the key to convene these changing demand patterns with supply, and more importantly, to act as an overall risk mitigant for the producer himself. Further, diversification is also a key enabler for achieving sustainability, given the current state of affairs on usage of water, agri inputs and soil.

The average land holding of Indian farmers has been consistently declining over the last two decades, down by 20 per cent to 1.15 ha. The silver lining though, is that nearly 2/3rds of the total agriculture production today is of high value in nature, a definitive contrast from the state of affairs during the Green Revolution.

In terms of horticulture production, India witnessed a significant increase in production to the tune of 270 million tonnes (area of 23 million ha) in 2013, from 97 million tonnes (area of 13 million ha) in 1990, registering production growth of over 160 per cent and area growth of over 70 per cent.

Similarly, milk production, which stood at around 53 million tonnes in 1990, has increased to 140 million tonnes today, witnessing a growth of more than 150 per cent.

However, this diversification has been largely driven by a few States like Andhra Pradesh, Uttar Pradesh, Madhya Pradesh, Rajasthan, Maharashtra and West Bengal, which have been the forerunners in diversification and today produce more than 40 per cent of the high value commodities – milk, fruits, vegetables, sea food and spices.

Others like Himachal Pradesh, as well as the north-eastern States, have diversified to high-value produce, due to the inherent agro-climatic zone best suited to produce fruits and vegetables.

Boosting diversification

To further augment rural income and make diversification a pan-India phenomenon, it is time to move up the curve through key focus areas of intervention.

Innovative institutional mechanisms & structures: Diversification should be augmented through institutional innovations like contract farming, producers’ companies, cooperatives and modern retail formats that engage a larger gamut of stakeholders. In India, farmer producer organisations (FPOs) are witnessing impressive success stories and many small holder farmers have benefited from the model. It is the FPO structure that has united small producers and given them the capacity to enhance their livelihoods through aggregation, development of market linkages and value-addition, thus helping them reap benefits of diversification.

Policy interventions: This is the core requirement for building upon the strengths of diversified agriculture, which India has already attained to quite an extent. Government support in identifying commodity-specific clusters, developing basic infrastructure and processing infrastructure, and encouraging entrepreneurial skills, shall go a long way in providing sustainable livelihood . Goods and services tax (GST) application needs to be uniform, easy to administer and incentivise processing over fresh produce. Also, farmers may be nudged to shift to a less water-intensive crop so as to reduce dependence on rain.

Sustainable risk management: So far, inefficient subsidy structures on the input and output sides of the value chain have been curtailing growth, ineffectively reaching beneficiaries and promoting unsustainable farm practices, thus dis-incentivising diversification and adding to the twin deficits challenge.

These challenges need to be overcome through a prudent policy intervention. Further, the entire paradigm of risk management for farmers through warehouse receipt financing, crop and weather insurance as well as efficient price discovery/marketing infrastructure, needs to be brought into the mainstream, and the entire policy of price support needs to be done away with.

Technology and innovations: The scope of diversification should expand to the wider dimension of value addition – collaborative researches in technology are required to produce process-able grades of commodities. Specific clusters need to be identified to produce such grades at a large scale. This shall not only have a far-reaching effect but also help the nation to curb imports of processed food.

Localisation is the key to achieving prolific results of diversification. Product innovations that use local resources are best suited to adapt to any kind of agri practice and its value addition. Innovative use of ICT in the Indian context, to communicate weather-based information, new technologies available, extension services and market price alerts, is key to determining risk mitigation.

Infrastructure development: Inadequate and skewed distribution of infrastructure such as road, power, market, pre- & post-harvest handling, and irrigation, are all major impediments for diversification. Access to basic infrastructure shall boost entrepreneurial capacities of farmers to take up non-conventional activitiesand enhance their income.

Skill development: India has witnessed several initiatives in the past focusing on the agriculture domain. However, with nearly stagnant agriculture growth, there is a clear need for a shift in the perspective of skill development, with a focus on sustainable rural livelihoods. We need to look beyond the farm cycle and engage manpower in value-added activities like processing, trade dynamics and building efficient marketing channels. This shall generate ‘on farm’ as well as ‘off farm’ livelihood options.

The way forward

Diversification has surely made its mark in select States, though value addition is still in its infancy. Further, many States are still outside the purview of mainstream diversification.

The way forward to develop sustainable livelihood for the Indian farmer needs to be addressed through a collaborative approach between the Government and industry, for establishing a much larger and significantly more efficient supply chain for value-added produce, which in turn shall generate sustainable livelihood opportunities.

The writer is President & Country Head, Food & Agribusiness Research, YES Bank