Time to integrate farmers digitally

India is a land of complexity and contradictions, a rich country of poor people. In particular, the dichotomy is glaring in the agricultural sector. Despite having the second largest arable land in the world, the country is reeling under an agrarian crisis, what with a shortage of farm labour, farmer suicides, and large-scale rural-to-urban migration. Chained to debt, distressed farmers are in dire need of effective intervention.

Quite clearly, the traditional approaches to improving farmer incomes and social security have proved insufficient. But there are other approaches to explore.

It would be a great idea, for instance, to integrate the government’s commitment of transitioning to a cashless economy with the pledge to double farmers’ income. India’s cashless economy story is linked intrinsically with the agricultural sector, and a relevant technological intervention can turn the constraints on their heads.

Among those constraints are such major issues as the lack of access to credit at reasonable rates, high cost of inputs and fluctuating produce prices. Though there is an abundance of piecemeal approaches, they are not enough to tackle these issues.

The big question is how to make farmers prosperous. Farm productivity needs to be increased alongside cutting production costs. Besides, the access to reasonable credit needs to be enhanced while ensuring farmers get the right price for their produce.

Initiatives to achieve these goals are under way across the country and include efforts at uniting farmers into communities. Farmer producer organisations (FPOs) are an excellent example of aggregating forces to access better credit, market and inputs.

There is a significant opportunity in enabling such communities, through technological interventions, to make agriculture more productive, profitable, and sustainable.

FPOs also serve other key objectives. For instance, the formal banking sector avoids lending to individual farmers because such credit is perceived to be high-risk. When the demand for credit is aggregated through an FPO, the perceived risk may be lower, there is the advantage of economies of scale and banks themselves may be more willing to lend.

In sum, the amalgamation of such farmer communities with enabling technologies has the potential to revolutionise the sector.

Imagine an integrated digital platform that caters to end-to-end agricultural activities. Such an initiative can potentially raise productivity, reduce input costs, improve access to reasonable credit, especially for small and marginal farmers, and ensure fair produce prices.

Among other farmer concerns, our agriculture is primarily dependent on the monsoons, which are unpredictable. While a drought year increases the cost of irrigation, other inputs including seeds, fertilisers, pesticides, and farm equipment become costlier if there is an above-normal monsoon. Digital modules geared to enable farmers to share farm equipment will not only reduce their input costs but also enhance their collective productivity. This can also be facilitated through farmer communities such as FPOs.

For lack of access to formal sources of credit, farmers are often pushed into the clutches of money lenders and loan sharks. Clearly, the potential for farm loans has not been explored to its capacity by the formal banking sector. Once again, technology can rise to the occasion and provide a window to farmers’ business operations, making it more attractive for banks to lend.

Additionally, digitising farmers’ bank inflows and outflows will ensure complete digital financial inclusion. To achieve a cashless transaction economy in the truest sense, it is imperative to create access points for bank accounts in villages. Currently, there are only limited cash-out points in rural India. A 2016 RBI report places the number of bank mitras (assisting cash-out in villages) at about 1.25 lakh, while, according to a more recent report (September 2017), the number of rural ATMs is around 40,000.

Together, this is insufficient to address requirements of over 600,000 villages, and pushing farmers to banks may only add to frustration. Neither is the position going to improve in a hurry, considering the inherent non-viability of small-value withdrawals in villages. The only way forward is the cashless way, given the latest waiver on minimum discount rate on debit cards/BHIM UPI/AePS for transaction value up to ₹2,000.

Digitisation of agriculture requires creating a cashless economy around the farmer. Indian farmers need to be empowered to spend their income in a cashless manner.

Therefore, it is important to work towards the creation of a community of farmers integrated through a digital platform that helps them procure inputs at a lower cost, gives them better access to credit and better rates for their produce.

The writer is Executive Director, Centre for Digital Financial Inclusion, New Delhi