Answer

Agriculture, the backbone of India’s economy, faces structural challenges such as fragmented landholdings, inadequate credit access, and market inefficiencies. The recent Budget introduced initiatives like the Prime Minister Dhan-Dhaanya Krishi Yojana and enhancements in the Kisan Credit Card (KCC) loan limit to boost farmers’ financial resilience. Their success will determine progress in overcoming inefficiencies in agricultural markets.

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Initiatives Introduced in the Recent Budget to Strengthen the Agricultural Sector

• Prime Minister Dhan-Dhaanya Krishi Yojana: This initiative aims to enhance agricultural productivity and climate resilience, ensuring food security through improved farming practices and sustainable techniques.
  For example: Precision farming techniques like drip irrigation and AI-driven soil analysis under similar schemes have boosted productivity in states like Maharashtra and Karnataka.
• Increase in Kisan Credit Card (KCC) Loan Limit: The loan limit has been raised from ₹3 lakh to ₹5 lakh, allowing farmers greater financial flexibility to invest in seeds, fertilizers, and modern farming equipment.
  For example: In Punjab and Haryana, higher credit limits have enabled small farmers to adopt mechanized tools, reducing dependency on manual labor and improving efficiency.
• Targeted Interventions in Low-Productivity Districts: The Budget focuses on 100 low-productivity districts, providing region-specific solutions such as improved irrigation facilities, high-yield seeds, and better storage infrastructure to enhance yield and profitability.
  For example: A similar district-focused approach in Gujarat’s Saurashtra region led to a significant increase in cotton yield through better irrigation and soil management.
• Emphasis on High-Yielding Seeds: A National Mission on High-Yielding Seeds is introduced to improve seed quality and reduce crop failures due to unpredictable weather patterns and soil degradation.
  For example: The introduction of climate-resilient wheat varieties in Uttar Pradesh has helped mitigate yield losses during extreme temperature fluctuations in recent years.
• Shift from Blanket Subsidies to Precision Support: The Budget prioritizes financial support over direct subsidies, ensuring that farmers receive customized assistance based on regional and crop-specific needs, rather than generic subsidies.
  For example: In Telangana, targeted support for paddy farmers through soil health monitoring and digital advisory services has resulted in higher crop yields and better market prices.

Potential Impact of These Measures

• Enhanced Productivity through High-Yielding Seeds: The focus on high-yielding seeds and better irrigation will increase per-acre output, ensuring higher farmer incomes and improved national food security.
  For example: The adoption of hybrid maize varieties in Madhya Pradesh under a similar program led to an increase in production within three years.
• Improved Financial Access for Small Farmers: The enhanced KCC loan limit allows small and marginal farmers to access larger credit amounts, reducing dependency on informal moneylenders who charge exorbitant interest rates.
• Greater Climate Resilience: The Dhan-Dhaanya Krishi Yojana promotes sustainable agriculture, ensuring farmers adopt water-efficient and climate-smart farming practices, reducing risks posed by unpredictable monsoons and climate change.
  For example: In Rajasthan, the promotion of drought-resistant millet varieties has helped farmers sustain production despite declining rainfall trends.
• Higher Farmer Incomes and Rural Prosperity: With increased access to credit and better infrastructure, farmers can invest in modern technology, reducing post-harvest losses and securing better market prices.
• Reduced Farm Distress and Debt Trap: The focus on credit enhancement and targeted interventions in struggling districts will help alleviate financial distress, reducing the incidence of farmer suicides due to debt burdens.
  For example: In Vidarbha, Maharashtra, a loan restructuring scheme helped farmers stabilize incomes, leading to a decline in debt-related distress cases over time.

Effectiveness in Tackling Structural Challenges

• Improving Access to Credit for Farmers: The increase in the KCC loan limit provides greater financial flexibility to farmers, reducing their reliance on informal moneylenders.
  For example: Small and marginal farmers, who form nearly 86% of India’s farming community, often struggle to obtain formal credit. This measure can help them invest in quality seeds and machinery.
• Enhancing Productivity and Climate Resilience: The Dhan-Dhaanya Krishi Yojana promotes high-yielding seeds and climate-resilient farming, which are crucial for sustaining food security amid climate change.
  For example: In states like Punjab and Haryana, where erratic monsoons impact yields, access to high-yielding and drought-resistant seeds can stabilize output.
• Reducing Overdependence on Subsidies: The focus on targeted credit support instead of blanket subsidies aims to encourage more efficient resource allocation and reduce wasteful expenditure.
  For example: Direct cash transfers under PM-KISAN have improved income security for farmers without distorting the input market like excessive fertilizer subsidies do.
• Strengthening Farm Mechanization and Input Usage: Increased credit availability allows farmers to invest in modern equipment, irrigation systems, and storage facilities, reducing post-harvest losses and improving productivity.
• Supporting Marginal and Small Farmers: Enhanced financial aid empowers marginal farmers, enabling them to adopt better technologies and transition towards sustainable farming practices.
  For example: Odisha’s Millet Mission, which supports small farmers in millet production, shows how targeted credit can boost production of climate-resilient crops.

Ineffectiveness in Tackling Structural Challenges

• Failure to Address Price Volatility: While credit access is improved, farmers still lack assured pricing mechanisms, making them vulnerable to market fluctuations.
  For example: Tomato farmers in Karnataka suffered heavy losses in 2023 despite bumper yields, as prices crashed due to oversupply.
• No Structural Reform in Agricultural Markets: Credit support alone does not fix inefficiencies in agricultural marketing and supply chains, which result in farmers getting low prices for their produce.
  For example: APMC market restrictions prevent farmers from directly selling to buyers at competitive prices.
• Dependence on Short-Term Debt: Increasing credit limits without improving income diversification risks trapping farmers in a cycle of debt, especially in regions prone to climate shocks.
  For example: Vidarbha farmers take short-term loans for inputs but struggle with repayments due to unpredictable monsoons, leading to rising indebtedness.
• Lack of Focus on Agricultural Exports: The measures do not address India’s low agricultural exports (2-3% of World agriculture trade),  limiting opportunities for farmers to access global markets and premium pricing.
  For example: India leads in millet production, but without strong export policies, farmers struggle to sell at competitive prices internationally.
• Ignoring the Role of Post-Harvest Infrastructure: Increased credit may help farmers produce more, but without storage and processing facilities, they suffer from post-harvest losses.

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Way Ahead

• Strengthening Market Linkages and Price Stability: The government must expand MSP coverage and promote contract farming to ensure better price realization for farmers.
  For example: The success of AMUL’s dairy model in Gujarat shows how cooperative farming and assured pricing can improve farmer income.
• Developing Robust Post-Harvest Infrastructure: Investments in cold storage, warehousing, and food processing units can reduce post-harvest losses and stabilize prices.
  For example: Maharashtra’s cold storage network for mangoes has helped farmers extend the shelf life of produce and fetch better prices in export markets.
• Encouraging Crop Diversification and Sustainable Farming: Farmers should be incentivized to grow high-value and climate-resilient crops instead of being dependent on water-intensive crops.
  For example: Telangana’s push for oilseed cultivation has helped farmers shift from water-intensive paddy to more sustainable alternatives.
• Facilitating Agricultural Export Growth: Policies should focus on enhancing agricultural exports by improving quality standards and market access.
• Implementing Digital Agricultural Reforms: Adoption of AI-driven precision farming, digital land records, and real-time price discovery platforms can reduce inefficiencies in the agricultural value chain.
  For example: E-NAM (Electronic National Agriculture Market) has helped farmers access better prices by connecting them directly with buyers across India.

Strengthening the agricultural sector requires focused efforts on financial inclusion, market access, and technology integration. Measures like the Prime Minister Dhan-Dhaanya Krishi Yojana and enhanced KCC limits can drive immediate relief, but addressing structural market challenges will need a more comprehensive approach, including sustainable farming practices and improved infrastructure.

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