GS3 Flashcards
I.Indian Economy-Government budgeting
FRBM ACT
Intro
2018=larger economy, more open
2003 passed
smaller economy, less open
present day economy more prone to recession
fiscal policy important during recessions. So in this context FRBM important
2003- rigid fiscal rules. fiscal policy aim reducing debt and countering recessions.
now advanced countries -fiscal activism-focus on countering recessions and less focus on debt.
we need some amount of discretion to counter recessions
NK Singh committee supported it .
Subtopic 2
NK singh committee
Debt to GDP ratio of 38.7 %
20 % for states
fiscal deficit of 2.5 % of GDP by 2022-23
rule based fiscal targets
but with escape clause
like wars, calamities, large structural reforms,recessions
lower growth means lower revenue , so to keep deficit target, reduce expenditure, worsen the recession
so government need some freedom, this freedom needed in FRBM modification.
creation of independent fiscal council to make targets and escape clause transparent.
target for the states -not fiscal deficit trajectory specifically for the states.
earlier it was average of all the states.
have specific target for each state reflecting
initial debt/gdp ratio
growth potential
politically sensitive issue . finance commission best to handle.
current
fiscal deficit rule in India has been honoured more in breach than in observance.
Twin balance sheet problem
India’s debt compared to GDP is lower than world average.
problem as corporate Debt when combined with banks debt becomes problem called twin balance sheet problem
Definition
Problematic balance of indian companies and banks -meaning both the lenders and borrowers are under stress
40% of the corporate debt was owed by companies which did not even generate enough income to repay interests on loans (Economic Survey 2016-17)(statistics)
such loans are called non-performing assets or NPAs.
as the banks key source of income is interest on loans, non payment of interest puts banks on stress
10 % of total loans in Indian banks are NPAs.
more than four-fifths of the non performing assets were in the public sector banks, where NPA ration had reached almost 12 %.
when PSBs under threat, issue with lending sector, they lend to PSLs.
TBS, on the other hand makes the corporate sector over-indebted. This will reduce the demand for investment spending. This will in turn reduce growth and employment.
reduce ability of banking sector to give loans and will reduce investment spending, affecting growth and employment
TBS will clog the economy.
But
TBS India moderate effect.
in US, Europe economic stagnation .
In India TBs existed with high rate of domestic demand and reasonably high rate of growth. economic survey says balance sheet syndrome with Indian characteristics
Reasons =India’s well regulated banking system responded to the financial crisis in a systematic way by allowing enough time to the companies to repay their principal at least in those cases where projects were expected to be viable in the near future.
however if the companies are not able to repay public sector banks will be under severe stress . Means they will have to cut back on new lending and this will certainly affect high investment and growth trajectory
To resolve this issue, the RBI encouraged the creation of Private Asset Reconstruction Companies (PARCs) which are expected to buy the bad loans from the public sector banks.
The PARCs would be specialists in bad loans and the public sector banks can go back to focusing on their regular lending functions. But, this has met with limited success.
2016-17 economic survey suggest the creation of a Public Sector Asset Rehabilitation Agency which is professionally run government backed agency.
Subtopic 3
d47-Need of India to have strong Trade Policy
Intro
Backlash against globalisation in the west-the Brexit and the US government’s restrictions in import of services from India
the economic surver 2017-18 : international trade is already decreasing and is likely to decline further in the future and this will be accentuated by the global economic slowdown after the 2008 recession
further more, momentous trade agreements like the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) have broken down due to global political developments
it is against this dire circumstances that India aims to increase its share of global trade from the current 2.1 percent to 3.5 percent and double its exports by 2020
what are the fundamental problems with India’s International trade policy ?
poorly developed manufacturing sector and lack of innovation and investment in sectors such as textiles , garments, and pharmaceuticals - a disadvantage in any trade agreement
Results from regional trade agreements were unsatisfactory mainly because they were poorly negotiated from our side. (in the pasr decade, India signed FTAs with the Association of South EAst Asian Nations (ASEAN) , the republic of Korea, Japan, and malaysia-but did not benefit significantly )
we have constrained relationship with some of our main trading partners like US and China
We have shied away from trade agreements and partnership;large ones in particular. it will affect the competitiveness of our products as we dont export most products to these extremely competitive markets.
why is India central to the solution to the crisis in International trade ?
size of economy-both in terms of GDP and purchasing power.
consistent growth rate of over 20 %
india now has potential to jump start the stagnating global economy and trade as china did more than a decade ago
to effect sich a change, India’s trade polcy needs to be bold and imaginative
what are the bold and imaginative measure to better our trade policy ?
our trade policy should focus on starting intensive and wide ranging consultations and kick start negotiations in the WTO, placing the onus on the developed countries to react to India’s proposals . Proposals have to deal with the thorny issues of agriculture, information technology, agreeement, government procurement, and dispute settlement
coonsultations with US : as India is the future human resource powrhouse of the world- focus on a partnership between American Capital and Innovation, and Indian Human resouce and entrepreneurship
(make in India, start up India- there needs to be a clear linkage of the initiatives with trade policy )
India was not a member in mega regional trade partnerships like the TPP and TTIP . as both these partnerships are stalled now, it has bought us some time. we can consider associating- improve competitiveness , because it would force Indian industry to adjust to international standards in technical barriers to trade and sanitary and phytosanitary restrictions- good in the long run.
India should negotiate its way ino the Asia Pacific Economic Cooperation and join its proposed Free Trade ARea of the Asia PAcific (FTAAP). We should use our negotiation advantage of our labour supply, size of market and investment opportunities here.
we should not shy away from the negotiations of Regional Comprehensive Economic Partnership (RCEP) of the ASEAN. (we are participating in negotiations , but with a lot of caution ). It will be beneficial for India because
Environmental and labor standards are not big issues in this agreement
the agreeement gives India an excellent opportunity to negotiate with CHina
less reliance on traditional trade partners in the West while increasing India’s trade and investment foot print in alternative markets , such as the african continent.
Instead of Intellectual Property Rights policy What India needs is an innovation incentivization policy, as intelletual property rights are the flip side of the innovation coin-promote and incentivize innozation and help release the creative potential and eenrgies of India’s yotuh
finally we need a batallion of trained trade negotiators and consultants who can design better negotiation strategies.
Demographic dividend
Demographic divide between states
between peninsular india (west bengal,kerala, karnataka, tamil nadu, andhra)
show a pattern that is similar to that of China and Korea where their demographic dividend will peak soon, ie in the early 2020s and decline thereafter
hinterland (madhya pradesh, rajasthan, UP,bihar)
remain young and dynamic for sometimetill middle of this century
demographically two indias
soon to begin ageing India where the lederly and their needs should be the focus
india needs a national integrated policy for the elderly that effectively integrates health care, insurance, pension, employment, housing, security and community living facilities for the elderly.
eg: Vietnam , good community living practices, old people associations.
young india where the focus must be providing education, skill and employment opportunities.
younger populations more entrepreneurial, hence along with creating job opportunities, policy should focus on promoting enterprise.
Make in India, Atal Innovation Mission (AIM), including Self Employment and Telent Utilization (SETU) and start up india flagship initiative
young tend to save more, so at policy level more opportunities and instruments to save must be created.
Conclusion
different age profiles in different geographies, india has advantage of addressing some of these concerns via greater labour mobility, which would in effect reduce this demographic imbalance. so prime concern of policy should be on a creative migration design which can best utilise our economic and demographic circumstances.
Employment
Services and agriculture
Before independence, 70 % GDP =agriculture. rest 30 %, industry and services.
today agriculture=17% GDP, services 54 %
there was transfer of GDP share but not transfer of employment
58 % indians primarily depend on agricultural incomes (2014 NSSO data )
decline in share of agriculture,and an increase in share of services is a universal pattern and occurs because of the fact that services is much HIGHER PRODUCTIVITY activity compared to agriculture
hence market value of services output is also much higher.
In addition, in India’s case , our services sector grew much faster than most other asian countries.
as we had a comparative advantage in services particularly in IT sector.
how a transfer of employment did not occur because services has low employment potential.
Reason : services sector= skilled sectors with high productivity.
Technically , the employment elasticity of services is very low.
In contrast, agriculture= disguised unemployment.
Result :huge inequality and exclusionary issues.
only the rich and the affluent who were educated and skilled could make use of the opportunity offered by a burgeoning service sector.
most of the women members, the members of the scheduled tribes and scheduled castes who were mainly unskilled workers were excluded.
solution
service sector is neither expected to nor capable of absorbing the surplus labour from agriculture.
it is the manufacturing sector and the non-farm sector that has to absorb the surplus labour in agriculture.
the rural non-farm sector= supplementary employment small and marginal farmers who form the majority of farmers in India.
agro processing /food processing =vast scope for employment.
the rural non-farm sector=no distress migration
manufacturing sector= potential to employ millions of semi-skilled workers if not unskilled workers.
skills involved in manufacturing can be learned faster and at a lower cost than those in the service industry
both make in india and skill india are programmes of promising magnitudes towards solving this problem.
Current
unemployment today
population growth fell from 1990,, entrants to labour force fell
school education access rapidly, post-sarva shiksha abhiyan , children remained in school.
Fall in rate of investments in Indian economy
Intro ratio of investment 36 % of GDP-2007 peak 26 %-2017 unprecedented-neither during balance of payment crisis of 1991 or east asain crisis of 1997
economic survey 2017-18 most important reason- twin balance sheet syndrome (TBS) TBS refers to the financial distress faced simultaneously by both banks and the corporates following 2008 financial crisis, many businesses failed and were unable to pay back the loans. these loans became bad loans or non performing assets NPA problem 12 % of bad loans as banks rely primarily on interest rates for revenue, this affects banks ability to lend this eventually led to a sharp decline in rate of investment Interest rates in India were relatively high-limited investments at higher rate of interests only fewer projects will become profitable and hence investors will limit the number of project they invest in slow reo slow recovery from 2008 financial crisis solution conclusion the survey : investments declines from TBS challenges are the most difficult to recover from recapitalization plan of public sector banks through recapitalisation bonds and resolution of bad debts through Indradhanush plan Insolvency and Bankruptcy code which will help banks recover bad loans by liquidating the assets of the defaulting company more importantly, investor confidence is key in reviving investments=substantial infrastructure push + reforms to facilitate the ease of doing business
Backlash against globalization
In Uk,US, China
Brexit
recent US restrictions on import of services-visa
china-focus on domestic economy
accelerated since the 2008 financial crisis
in advanced economies globalisation has benefitted only the rich and caused massive job losses.
it has led to many financial crises (the easta asian crisis and 2008 financial crisis)
economic survey 2017-18 serious implications for growth
will reduce world trade. world trade to world gdp ratio has been already falling since 2011
will affect india’s ambitions to achieve a sustainable double-digit growth rate in exports
china and south korea-high exports=high growth
a low growth of exports=a low level of forex reserves available for imports
as india still imports many essentials including oil and essential machinery , our manufacturing will be seriously affected
service industry which is dependent on other countries
we do not have a large enough industrial base on which our services can depend on
indians, mostly service professionals working abroad might lose their job as part of nationalisation of employment
eg: Saudi nationalization scheme, nitaqat scheme
solution
inida is yet to tap inot the potential of its domestic market
we are home to 17% of world’s population, with a steadily rising per capita income
make in india progroamme can be creatively re-designed into a make for india programme as suggested by former RBO governor raghuram rajan
this would shift the focus from an over emphasis on exports to domestic market
at same time this will help widen the manufacturing base on which our services in future can fearlessly depend
d44-FDI not contributing to India though FDI inflow is high
Intro
FDI inflows to India increased 62 % since the launch of Make in India . India is now ranked amongst top 3 FDI destinations (world investment report ,2016, UNCTAD) .and ninth in FDI confidence index in 2016
Ironically, despite rising FDI inflows, the rate of capital formation in India as well as industrial capacity utilization have been declining in the recent years
Body
in principle , FDI is expected to bring in long term fixed investments technology and managerial expertise, along with foreign firms managerial control
However currently, FDI does not come from leading global producers of goods and services but mostly from private equity funds
Private equity funds do not have expertise in any manufacturing or service. PE funds account for about 60% of total foreign inflows , and top 3 recipients were flipkart, pay tm and snap deal (bain and co India private equity report 2016 “)
these funds are use to finance retail trade of mostly imported consumer goods to expand their market shares
this is why despite rising FDI inflows, domestic capital formation rate, or industrial capacity utilization , have declined in India
what is happening here is foreign capital financed import-led growth of consumption
this can neither augment domestic output in manufacturing or services or contribute towards meeting Make In India goals
there is also a significant outflow of FDI from India to other countries.
this outflow is also in principle expected to bring technology and expertise along with capacity building in the domestic industry and services
this is best illustrated by Tata’s acquisition of luxury car maker, jaguar land rover
however recent studies show that even this outflow is towards less technologically intensive areas recently.
according to experts, inward and outward FDI flows in India are highly correlated . This may apparently represent channeling of global capital via india to make advantage of tax concessions (called “ treaty shopping “)
Conclusion
hence, the recent FDI flows have contributed little by way of augmenting domestic capabilities, output and employment growth
what is needed is to use FDI to bring long term investment to areas in need of global technology like Artificial Intelligence, Machine learning, big data analytics, block chains, expert systems,contexual learning etc
FDI is also much needed in areas where India already has a comparative advantage like automobiles, food processing and pharmaceuticals
what is needed is a change of focus from quantity of FDI to quality of FDI
Effects of liberalization on Indian economy
d45-Inequality between states, has liberalisation accentutaed this dichotomy
Intro
as far as economic development in India is concerned, there always existed a dichotomy which is reflected in high HDI in some states and low HDI in others.
HDI is a summary measure of economic development which factors in the most important elements in human development like health, education and per capita income (between 0 and 1)
HDI of states : now and then
this dichotomy has existed in India for decades
In the early 1980s , Madhya Pradesh ,Bhar and present day Chhatiisgarh andJharkhand had a very low HDI of less than 0.25 , keala and goa had a high HDI of about 0.5
By the early 1990s, states with very low HDI managed to improve their HDI to about 0.3. However, by that time, Tamil Nady ,MAharashtra, and Punjab had crossed 0.45 , kerala crossed 0.55
Since liberalisation in 1991, many states like Tamil Nadu , Maharashtra, and most of the north eastern states as well as northern states like Punjab, Haryana, and Himachal PRadesh managed to reach the high development category along with KErala.
However,low HDI states like Madhya Pradesh, Rajasthan, Uttar PRadesh,Bihar, Jharkhand, and Orissa , have lagged behind.
hence, though there was some development for all the states after liberalisation .low HDI did not progress as much as high HDI states.
why some states benefitted
states like gujarat and maharashtra who were industrially driven and export oriented benefitted significantly from liberalisation -also true for Tamil NAdu
States like Punjab and Haryana that already had well developed agriculture and infrastructure like irrigation in place also benefitted.
Karnataka had developed an independent growth engine based on consulting in finance and IT for international market and hence benefitted from liberaliation and globaliation.
when the economy became liberalised , states with better infrastructure attracted FDI and these four or five states cornered most of the FDI in the last 25 years.
FDI boosted growth in tgese states and improved incomes of their residents
State’ revenue increased and public spending on health and education increased. this led to development in HDI
why other states did not benefit ?
most low HDI states like Madhya PRadesh, Rajasthan, Uttar PRadesh, Bihar, Jharkhand , and Orissa had grown by only less than 5 % in the90s. This is against close to 8 % growth achieved by states like Gujarat and Maharashtra
Most of the low HDI states, already burdened by high population could not garner the resources needed to kick start industry, attract FDI or for public spending on social welfare
Hence,since liberalisation there is clear widening of the Welfare Gap between states.
will the gap widen ?
this gapis likely to widen in the near future because the nature of globalisation is changing with an increased focus on digital technology
in the 1990s, when India liberalised, the focus of globalisation was on FDI, and international trade in manufacturing goods and services in general
for example, Uber penetrated more than 80 countries in just 6 years.Net flix expanded to more than 190 countries in less than seven years. The augmented reality game Pokemon Go was being played in over 125 countries and generated nearly $1 billion in revenue just six months after its launch.
this means that states like Karnataka with an advantage in IT and digital technology had a head start
conclusion
However the success of IT parks across India has demonstrated that IT infrastructure can be created anywhere in a relatively shorter time span.
at the same time advanced digital manufacturing systems, for example 3d printing technology is cchanging the highly centralised nature of manufacturing in large plants
this means that manufacturing of the future like IT can be decentralised
this is where digital India , make in India and the start up India programmes come into play
Taxation as a means to reduce inequality
Intro
According to renowned economist, Thomas Piketty, the current inequality levels in India is at its highest since 1922. At the same time, a recent report by Oxfam India says that a wealth tax of merely 1.5 percent on the richest 65 individuals in India would potentially lift 90 million people out of poverty, Such is the potential of taxation in reducing inequality
However at 16.9 percent of GDP in 2015-16, India’s tax rate is one of the lowest amongst emerging economies including major BRICS countries china (18.5 percent ) and Brazil (33 percent ). on the other hand , according to a recent OECD report, India suffers higher inequality levels than brazil and china.
Body
Taxation can reduce inequality primarily in two ways :
1. By taxing the richer sections more by means of direct income tax, indirect tax, property tax or wealth tax, a natural redistribution of income occurs in favour of the poorer sections.
2.By taxing the richer sections more, the government can raise revenue which can be spent for developmental activities which will benefit the poorer sections.
Direct Income Tax is generally considered to be very efficient in reducing inequality if they are progressive,ie if the rate of tax increases progressively with income
however, in India at present, only 5.6 percent of population pay personal income tax which is a very low proportion by international standards
in other words, the tax base in India is too low for the redistributive effects of income tax to work.Hence widening the tax base and improving administrative efficiency in collecting income tax can go a long way in reducing inequality in India
this can also help generate sufficient revenue for developmental purposes.
However
in the Indian context income tax shouldn’t be highly progressive with extra ordinarily high tax rate for the high income sections. this will encourage tax evasion and exacerbate the problem of black money
In addition to have a true impact on reducing inequality agricultural income which is exempt from income tax should be brought under the income tax net as majority agricultural incomes is cornered by rich farmers in India
Indirect taxes are generally considered regressive in India as the major proceeds from indirect tax comes from commodities of mass consumption like cotton textiles,sugar, tea, tobacco, petroleum products, matchbox etc. a distinctly high tax rate for luxury products and a rleatiely lower tax rate for goods for mass consumption in the goods and services tax solves this problem to an extent
however, petroleum products are not under GST and they still have a relatively higher tax rate which is regressive.
property tax and wealth tax are progressive in nature and will reduce inequality, however , while property tax has a deplorable compliance record the wealth tax was abolished altogether recently.
moreover , India should practice more accommodative business taxation to promote investment and counter tax evasion. the statutory corporate income tax (CIT) rate of about 35 percent for resident companies , is high by international standards
better compliance by corporates will improve government finances and thus help reduce inequality.
conclusion
modern redistribution is based on the principle of giving people equal access to certain basic needs of life rather than actually redistributing income. we can follow the models of countries like Germany, France or Sweden that have significantly high tax to GDP ratio and the majority of this tax revenues goes into health, education and other social sectors.
2.Agriculture-Agriculture subsidy
Bad politics over sound economics creating problem
Recent WTO data =total subsidy on a per-farmer basis for India is only a fraction of what the rich countries like US, EU and Japan with lesser farmer population spend.it is even less than that of china and indonesia
It is not the size of the farm subsidy but the manner and purpose of spending them creates problem.
when political considerations dominate sound economics in giving farm subsidies, they essentially become distorting in nature.
distortions like
Inclusion error (wrong people benefitting ) and exclusion error (deserving people left out )
onyl better-off farmers have good water pumps =inclusion and exclusion error
at the same time farmers have no incentive to use energy efficient pumps as electricity is very cheap.
reckless exploitation of ground water .eg: in andhra pradesh, borewells are dug to extraordinary depths to feed water intensive crops like paddy.
Maharashtra, a state which often faces droughts,is a major producer of sugacane which is ironically water insensitive
Punjab uses more than twice the water that waterlogged West Bengal does for cultivating rice.
overexploitation of resources like water and electricity
water and electricity =extremely subsidised=politically sensitive
Imbalance in fertiliser consumption
Urea, being very popular among many farmers is excessively subsidised. they cause massive imbalance in usage(NPK ratio changed) and consequent reduction in fertility of the soil.
Undesirable changes in cropping pattern.
Conclusion
Important to bring back sound economics=productivity back to agricultural subsidies.
productive subsidies are the subsidies that encourage farmers to invest in efficieny, innovation,and sustainability.the focus should be on physical achievements and not on financial disbursements.
Subsidies should be made temporary as a one-time help for a specific purpose.
eg: removal of farm subisides in New Zealand gave birth to a vibrant, diverisfied and growing rural economy.
Agriculture and climate change (d25)
Intro
economic survey 2017-18 : effects of climate change on agriculture will be visible only in the extremes
ie only during events of extreme precipitation, extreme temperatures, and extreme number of dry days during monsoons
crucial because most climate change models including that of the IPCC predicts extreme climatic events
the impact of climate change will be felt more in unirrigated areas thatirrigated areas , where the impact on agricultural yielads and incomes would be almost double that of irrigated areas
the loss of agricultural income could be upto 25 % of present income in unirrigated areas
Measures
the most important measure-irrigation cover
mihir shah committee report : drip irrigation or sprinkler irrigation realising more crop for every drop
current budget : about 50 % of total allocation of Pradhan Mantru Krishi Sinchayee Yojana ha been given for micro irrigation projects, which is a welcome move
unirrigated : to parts of Karnataka, Maharashtra, Madhya Pradesh, Rajasthan, Chattisgarh and Jharkhand
power subsidy needs to be replaced by Direct Benefit Transfers. as power is irrationally subsidised, groundwater is over exploited
research to further the cause of climate smart agriculture. denotes the development and application of technology to make agriculture climate change resilient
for example , development of drought resistant varieties of crops, or an efficient irrigation technology
as Suggested by M.S Swaminathan anticipatory research be undertaken to pre-empt the adverse impact of climate change
research will be especially important for crops such as pulses and soyabean that are most vulnerable.
Subtopic 10
d31-Farming As A Service
Indian agriculture :archaic technology and low productivity
farmers have only limited access to markets= severe farmer distress in India
on the other hand , high demand for food and a change in consumption pattern that favour value added foods like processed food.
hence, farming as a service can play a major role in improving the efficiency and productivity of agriculture + better access to a fast developing market
farming as a service (FaaS) offers innovative, professional solutions for agricultural and allied services, via a subscription or pay per use model= central to success of agriculture in advanced economies
generally categorised in to 3 areas of service
Farm management solutions
services related to information sharing, analytics and precision farming tools. this involves information management between farmers, government , corporates, financial institutions and advisory bodies. Big data analytics :to analyse factors like weather reports and market demand
Production assistance
providing on-farm resources to aid production =equipment rental, providing labour and other utility services (companies like EM3 Agri services)
Access to markets
creating platforms connecting farmers with suppliers of seeds and agrochemicals and consumers of their farm produce
FaaS is a much more competent industry in advanced economies and is able to attract investment
given the role of technology and innovation in Faas, Start up companies can play an important role.
This can be made a priority in the Start up -india action plan,whereby more industry-academia partnership and incubation centres can be started in this area.
eg: IIM Ahmedabad is already running an incubation centre for early stage start-ups in this area.
it is very important for the government to take leadership and form active partnerships with the private sector in developing FaaS in India . If the sector is completely left to the private sector costs could be high
schemes and projects like
Custom hiring centres (CHC) of various state governments where they rent farm machinery (under PPP model ) to small farmers
Soil Health card scheme - they provide soil nutrient status to farmers and advice on fertiliser dosage
eNam which is a Pan-India electronic trading portal which networks the existing APMC mandis to create a unified national market for agricultural commodities
all can go a long way in promoting FaaS
d28-land reforms, and shrinkages and agricultural productivity
Intro
agricultural censuses :average size of land holdings has been steadily declining in India since 1970’s
as much as 67 % of India’s farmland is held by the marginal farmers with holdings below one hectare
only 1 percent in large holdings of 10 hectares and above.
however land reforms cannot be considered as a significant reason for fragmentation of land
reasons
pressure of population, decline of joint family system and practice of crop sharing where by land owners lease out their land to a number of tenants to escape land reform laws
land reforms in India in fact provided a mechanism for consolidation of agricultural holdings
eg: if farmer has 3 different plots in 3 different locations, the state will make arrangements to provide her an equivalent area of land consolidated in a single location
most states stopped doing it after a few years
however, growing body of research shows that small farms can actually be more productive than large farms
western countries : large farms were more productive=mechanisation
however in asia smaller holdings are more productive
china has a smaller land holding size than India, but has one of highest agricultural productivity levels in world
reason : both technology and cropping pattern Asia are different
In India, farm productivity depends on the use of yield enhancing inputs like fertiliser, access to irrigation, technology, crop intensity and choice of crops. all of them decline with an increase in farm size
whereas, small farms practice mixed cropping as against monoculture in larger farms and use of organic fertilisers- long run productivity.
but smallholders earn an abysmally low amount of income from agriculture due to adverse land-person ratio
however chinese experience - that a sufficient increase in agricultural productivity amounting about to a 4-5 % annual growth rate in agricultural sector-will solve this problem
when a larger farm size seems necessary- revitalise the process of consolidation of holdings and explore possibility of contract farming
NITI Aayog’s model land leasing law can be effectively used to consolidate holdings or increase farm size by leasing the nearby land
the law assures a sold legal framework for leasing land so that land owners now need not worry about losing the land to tenant in future due to land reforms.
d34-food processing industry
Intro
The Indian Food processing industry : one third of country’s total food market -one of largest industries
already being considered as next sunrise industry
however we are processing only 10 % of agricultural output- actual potential is many times this
Prospects
connects farmers with their consumers, adding value on the way
huge employment potential even in rural areas as food processing can be started as a rural non-farm enterprise
as many of skills associated with this sector can be easily learned this can be potentially shift significant population dependent on agriculture currently.
RTE(ready to eat ) and RTH (ready to heat )=growing urban population with changing lifestyles and more number of working women
rising disposable income =willing to pay the premium price for convenience
online food ordering business in india -exponential growth =foodpanda, zomato, tinyowl , and swiggy doing well
amazon is planning to enter indian food retailing sector in a big way in next five years
challenges
need more innovative technology for easier cooking and extended shelf life
need innovative protocols and techniques for superior retention of flavours, better product integrity, and better nutrition benefits
need to achieve value addition through new concepts like nanotechnology, intelligent packaging etc.
main export destinations-middle east and south east asia, we have to expand it to europe and north america and rest of world- an increased focus on food safety, quality assurance and hygiene norms
lack of trained professionals and guidance for entrepreneurs.
government initiatives, solutions, conclusion
CFTRI instrumental in providing technologies to many entrepreneurs and industries in improving technology, introducing new concepts like nano technology and assuring quality and hygiene to match global standards
significant fund allocation for the Indian Institue of Food Processing Technology (IIFPT) and National Institute of Food Processing Entrepreneurship and Management (NIFTEM) in the current budget will help accelerate this process
budget 2017-18:allocation to sector doubled and a dairy processing infra fund worth rs. 8,000 crore
mega food parks in Karnataka -great precedent for public private partnerships =the private sector invests in infrastructure, government brings in technology and knowledge
ministry of food processing industries (MoFPI) can focus on joint ventures, (JV),foreing collaborations, and 100 % export oriented units
MoFPI’s scheme for Human Resource Development (HRD) in the sector-important step =can create professionals in this area and encourage entrepreneurship.
