Government should focus on structural issues of agriculture sector: Report

NEW DELHI: There are no quick fixes for farmers' distress and the government should focus on structural issues instead of resorting to short-term policy measures like farm loan waiver schemes, says an UBS report.
Despite a bumper crop in the rabi season, farmers in many states are in distress because of sharp fall in prices in both domestic and global market.

Farmers in various parts of the country have been agitating, seeking higher support prices for their produce as well as waiver of loans. Uttar Pradesh, Punjab, Maharasthra and Karnataka have already announced loan waiver schemes.

According to the UBS report factors like sluggish global commodity prices, "interventionist" government policies like restrictions on exports of certain food items like pulses despite surplus supply, ban on futures trading and imposition of stockholding limits, among others are adding to farmers' distress despite bumper crop.

Moreover, limited storage and processing facilities available also makes the situation challenging for the farmers, the report authored by Tanvee Gupta Jain, Economist at UBS Securities India, said.

"The government should focus on supply-side reforms in the agriculture sector, including revamping supply chain management by encouraging private participation, reducing leakage, increasing public investment and improving marketing infrastructure (encouraging agri-commodities trading, developing efficient value chains)," the report said.

These initiatives would help improve productivity and farmers' returns on a sustainable basis as against spending on schemes like farm debt waiver that only provide a temporary respite, the report added.

In its base case, UBS expects agricultural growth to remain buoyant at 3.3 per cent year-on-year in 2017-18 following a bumper harvest last year (growth was up 4.9 per cent YoY in 2016-17).

The government has meanwhile said that there is no proposal under consideration with regard to farm loan write- off. However, a facility has been put in place for farmers to avail concessional debt.