Doubling of Farmers’ Income by 2025: “New” Policy Reforms

The agricultural sector is considered to be the driving force of almost all economies across the world. It plays a prominent role in fulfilling the needs of mankind in terms of food supply and providing raw materials for industries. In the Indian context, it is the primary source of livelihood for rural people engaging 60% of its labour force. Although agriculture plays an instrumental role in the life of Indian citizens, its contribution to the economy is continuously declining and currently lingering around 15% of the GDP impacting both the farmers and the country. There are several reasons attributed to this paradox such as inadequate credit availability, inaccessible agri-inputs, lack of remunerative markets, low infrastructures, inadequate services and unintended consequences of government interventions in labour and land markets. Hence, reforming the agricultural sector is the only pathway to radically improve the lives of the citizens along with economic development.

The monthly expenditure of rural Indians on food has declined from Rs. 643 in 2011-12 to Rs. 580 in 2017-18. Similarly, rural spending on non-food items fell by 7.6 per cent between July 2017 and June 2018. These appalling figures display the gloomy side of the farmer’s situation, who are consuming less due to low farm income. Hence, the government in collaboration with different states have decided to work in a mission to double the farm income by 2025. But after reviewing the existing policy reforms along with literature and best practices across the world it is imperative to deconstruct the existing policy elements in a way that leads to a route of positive development in the favour of farmers. Following are some of the key policy recommendations that can ensure inclusivity and effectiveness in achieving the above-mentioned mission:

  1. Despite having several farmer welfare schemes and world-class institutions (ICAR, SFAC, NABARD, etc.) working in the interest of the farmers, it has failed to allay their problems. There is a mirage of safety nets created for the farmers to protect them from capitalists and money lenders. However, this safety net has increased the farmer’s problem instead of alleviating them via weak governance mechanisms and stringent regulations. Very little has been done to strengthen the systems, processes and models leading to effective governance. Hence, the development of a concrete governance structure is required to expedite the decision-making processes involving approvals for new technologies and effective farm practices which otherwise takes years to reach the grassroots making it obsolete.
  2. As per the World Census of Agriculture (WCA), the average landholding in India is around 1.1 hectare and that in China is 0.6 hectare. But still, the farmers in China have better income that is attributed to their liberal land reforms. On the contrary, the farmers in India face numerous challenges in selling or leasing their land, that further varies from state to state. Such regulations act as a barrier for farmers to exit from agriculture leading to the indefinite poverty trap. Thus, there is a need for India to liberalize land restriction laws. Furthermore, the exit from agriculture would not decline the GDP contribution. This is visible from China’s rapid growth with only 25.1 per cent of the workforce engaged in agriculture. The additional unproductive labour force could be engaged in secondary and tertiary activities leading to greater economic development. 
  3. When it comes to the credit market, it is heavily regulated and a ceiling on interest rates further reduces credit availability in the market. Thus, opening the farm credit market for digital wallets like Mobikwik, Phonepe, Paytm, etc. will increase the credit availability options for the farmers. Additionally, the credit cost will be reduced due to digital transactions leading to a win-win situation.
  4. The government has issued Minimum Support Price (MSP) to a large basket of commodities. However, it ensures guaranteed procurement of only rice and wheat at MSP thereby neglecting procurement of other commodities such as pulses leading to its uncertainty due to price cap. Hence, MSP should be applied only to crops that are procured by the government and letting the market decide upon the prices of other commodities leading to price equilibrium and better income to farmers.
  5. Whenever there is a price rise in any commodity, say onions, its export is banned thereby leaving the farmer to lose on extra income. This ban can be attributed to stocking, crop damage, rising oil prices, etc. Thus, the rising demand with dwindling supply prioritizes domestic demand over export which is less remunerative. Hence, the import/export trade barriers should be minimized to increase farm income.
  6. The farmers should be provided with a price discovery mechanism so that based on the future prices of commodities, they can make effective decisions leading to higher farm income.
  7. Several subsidies, cash transfer, input supply and credits are made available to the farmers every year. If all of the schemes are clubbed together and converted to cash that is directly transferred to the farmer’s account would yield a better result. But there are arguments that direct money transfer would lead farmers to use it in alcohol consumption. However, as per UNICEF’s working paper on cash transfers, this argument is flawed because the farmers, being a rational person, would utilize the money for education, health, agriculture & livelihood, etc.
  8. Countries like Israel have made a significant investment in R&D for highly advanced agricultural techniques leading them to outrank many of the developed and developing nations in quality farm production. A similar approach should be adopted by India to focus on agriculture R&D and mechanization that would provide higher benefits to the marginal farmers in the long-run thereby increasing their productivity and income.
  9. The farmers should be considered as a businessman who can start farmer-operated social enterprises contributing heavily to warehousing facilities that will increase the profit margin for everyone. Additionally, a measure on ease of doing business for farmers should be developed to record the growth in creating such an ecosystem.

With the aforementioned recommendations, it is essential to even understand the roadblocks in achieving them.

  1. Consumer activism is ruling the market and influencing the market decisions in their favour.
  2. Agriculture and farmer issues is a political agenda in India that acts as a hindrance to developing an efficient ecosystem.
  3. There are only 75 universities (four central universities, four deemed universities and 67 state universities) engaged in Agricultural R&D. This is not sufficient to cater to the needs of such a dominant sector in the Indian economy.
  4. The Indian skilling and entrepreneurial ecosystem prefer non-farm sector over the farm sector making it tough for farmers to operate as agri-entrepreneurs.

The views expressed in the post are those of the author and in no way reflect those of Indian School of Public Policy. Images via open source.

About the Author

Abhishek Pandey is a policy scholar at the Indian School of Public Policy. He is a development professional with diverse grassroots experience and sound technical expertise. He has worked with corporates, NGOs and government administration on varied welfare schemes. As a dedicated professional, he has a deep interest in conducting research and has published a couple of papers on Entrepreneurship and Tribal Development (Journal of Adivasi and Indigenous Studies).

5 Books that you should read as a student of Public Policy

The importance of designing and implementing sustainable and feasible policy measures has never been more important than now, when the world grapples to survive a pandemic. The ability to circumnavigate the barriers to most viable and realistic policy measures is the key determinant which separates a good policymaker from a regular policymaker. While one would certainly learn about some of these barriers through practice, there is a vast amount of literature that forewarns about them and the erratic and fissile world of policymaking.

To broadly illustrate the main hurdles to optimum policy-making, I am sharing with you a list of 5 books which have greatly benefitted me by expanding the scope of my understanding of issues and making me aware of all the considerations required before even designing a policy.

Development as Freedom by Amartya Sen

This ageless classic is the introductory text to policy-making that an aspiring policymaker must feast upon. Beyond introducing the idea that development can be defined in more ways than just in monetary terms, the book strongly backs the argument that development which empowers the individual economically, politically and socially is the wholesome and yet complex to achieve objective that policies should strive for. In a world with ever rising support for that oxymoron, ‘authoritarian development’, this book is a pertinent call to understanding that development is an exercise in expanding freedoms and any development that subjugates the people may be growth – but it certainly isn’t development.

Why Nations Fail by Darron Açemoglu and James Robinson

Why Nations Fail introduces policymakers to an obvious but easy to miss necessity of good policymaking: the quality of institutions. Açemoglu and Robinson build upon their existing scholarship to argue that the most fundamental building block of economic development, and by extension policymaking, is the quality of the institution under whose auspices that policymaking happens. Open and inclusive intuitions (democratic), that allow for many people to participate in them, tend to have better economic outcomes than closed and extractive institutions (authoritarian) where few people have access to decision-making and engage in the exploitation of those who are not part of the inner clique. In the process, the book tries to dismiss a few other theories of development i.e. culture, geography et al. Of course, this does not imply that the book is a self-sufficient explanation of economic development. Readers are cautioned against relying entirely on the it’s explanations as it fails to take into account factors like the role of the bureaucratic politics that may affect developmental outcomes. Nonetheless, it is an excellent read that all policymakers must be aware of.

The Anti-Politics Machine by James Ferguson

The Anti-Politics Machine is an excellent complementary read to Why Nations Fail as it investigates the claim that technical solutions (such as policy-prescriptions and developmental projects) are, by themselves, a sufficient condition to improve developmental outcomes. Through a study of development projects of the 1970s and 1980s in Lesotho, the book presents a strong hypothesis of how experts often tend to look at developmental problems as technical problems while ignoring the cultural context and the vast gamut of socio-political and economic relations/issues within the local community that underlie the community’s development outcomes. In such cases, the implementation of apolitical solutions, which fail to account for these socio-political and economic realities, tends to not only fail but also have unintended consequences such as expanding the powers of the self-serving bureaucracy through vast resource allocations (read aid) which may never reach the concerned community.

Essence of Decision by Graham T. Allison and Philip Zelikow

Albeit written in the context of the Cuban missile crisis and the US response, this book offers key insights into the myriad ways that a bureaucracy operates and tends to shape government decision-making. Given recurring developmental proclamations for institution building and technical solutions, this book refocuses attention to the internal politics that occurs within the bureaucracy during the decision-making stage. It analyses how governments arrive at decisions either based on departmental positions and standard operating procedures or through internal negotiations and bargaining between different departments based on policy positions. Overall, the book removes the aura that surrounds policymaking as a technical subject and reduces it to its base element of politics within the bureaucracy.

What the Economy Needs Now edited by Abhijit Banerjee, Gita Gopinath, Raghuram Rajan, and Mihir S. Sharma

To conclude this set, it would be important to recall that experts can fill the knowledge gap that exists between a bureaucrat’s perception of reality and reality as it exists. In that respect, this book aims to fill the massive hole in the area of policy expertise on Indian contemporary issues of economic importance. It offers concise chapter-wise insights into key policy areas by experts including top academics and government advisors. A key strength and weakness of this book lies in the fact that it does not delve into the nitty-gritties of political and economic considerations required for the implementation of the policies that it prescribes. Thus, this is an excellent beginner’s guide to aspiring policymakers looking for a succinct study of India’s economic woes with an introduction into possible courses of action.

The views expressed in the post are those of the author and in no way reflect those of Indian School of Public Policy. Images via open source.

Author: Dhruva Mathur

The Path to a 5 Trillion$ Economy

On 9th September, a few scholars from the ISPP attended an IGC panel discussion on ‘Financing Development in India.’ The panelists included Ms. Prachi Mishra from Goldman Sachs, Dr. Ananth Narayan, Faculty of Finance from SP Jain Institute of Management and Research, and Mr. Andy Mukherjee from Bloomberg. The discussion was moderated by Dr. Pronab Sen.

The discussions started with reflections from Minouche Shafik, Director LSE, on the presence of shadow banking (MFIs, IFCs, etc.) in India. In the context of the present economy, a way forward to deal with these was stated. It was advised that these institutions are kept away from depositors but closer to the central regulators. 

Given India’s aspirations to be a US$ 5 Trillion economy by 2025 as well as Citicorp’s estimates of India being the world’s largest economy ahead of US and China by 2050, the 2019 Economic survey emphasized the importance of investment for economic growth and suggests measures for the same. Investment in development is one of those measures. 

Ms. Mishra emphasized that the current economic slowdown has been the longest in the history of the Indian economy spanning over a period of 18 months. There are twin reasons for this slowdown: a consumption slowdown and a decline in investments. In fact, the current consumer sentiment as measured by the Current Activity Indicators (CAI) was also at its lowest. Since the 2008 global financial crisis. However, she did note that the slowdown in exports was not a significant concern since net trade (export-import) has remained the same.

Professor Narayan, slightly differed from Ms. Mishra’s stand and felt that the slowdown was an indicator of structural lacunae. The most significant reform, according to him, had to be land and labour reforms. These have been a major impediment in the implementation of PPP projects in the Infrastructure domain and has exacerbated the NPA situation in the Public Sector Banks. The absence of land and labour reforms complicates their entry of foreign firms in the economy which hinders the investment in manufacturing. Consequently, the investment cycle has come to a standstill. He attempted to highlight the need to change the discourse from a focus on stimulus measures such as repo rate and bank interest rate changes, and recapitalisation, to structural reforms as recommended by the PJ Nayak committee.

Professor Ananth also forewarned of a looming crisis that might find its genesis in the NPAs of NBFCs and the loans given under the MUDRA scheme. Despite all the good intentions of the government to dismiss the NPAs of the DISCOMs under the UDAY scheme, the DISCOM debt is back to pre-UDAY levels. Looking at the clouding crisis in the economy, he stressed on factor reforms. In his own words, he said, “Try to boil the ocean, do not look at short fixes.”

Author(s): Tushar Goel (ISPP Scholar, Class of 2020) and Himanshu Burad (ISPP Scholar, Class of 2020)

“On Freedom” – a public lecture by Dr. Cass R. Sunstein

On 8th August, 2019, ISPP Public Policy Scholars got the opportunity to listen and interact with renowned behaviour economist and Harvard Professor, Professor Cass Robert Sunstein. Professor Sunstein was on a trip to India to initiate the “Nudge‟ unit at NITI Aayog.

Put simply, a “nudge‟ is a subtle push for an individual to follow a certain set path. Such a concept is widely used in marketing and sales. For instance, the number of restaurants, coffee shops, cafes outside a theatre; the incentive of “cashback‟ used by digital payment companies such as Paytm and PhonePe; big cards announcing discounts on sales in shops – all edging the subject to buy in to something he/she doesn‟t necessarily require. The unit at the NITI Aayog is established with the motive of studying how behavioural economics can enhance the incentivization of government schemes/ programmes.

Such a specialised office was first set up by Britain (Behavioural Insights Team; estd. 2010), after which United States, Australia, Canada, Netherlands and Germany followed suit. Soon, global financial institutions such as the World Bank and the IMF apart from Indonesia, Peru, India, Singapore started exploring the concept further.

Professor Sunstein enthralled the audience by commencing his talk with a famous quote by Mahatama Gandhi,

In a gentle way, you can shake the world.

Nudge units facilitate change and when it comes to the topic of change, we can find a plethora of opinions, each no less important than the other. In the book “Nudge‟ co-authored by Professor Sunstein and Richard Thaler, the authors guide us through a distinct process to induce change in the society, using a
behaviour centric approach.

Something that always affects our actions is what Professor Sunstien called “present bias”. He engaged the audience with a thought experiment, in which he asked the audience to imagine themselves in their favorite place, a month from now. Once we had formed an image in our mind, he asked us to further clear our minds, and imagine ourselves a year from now. He identified that the people who could not imagine themselves after such a period of time tend to have a “present bias”, i.e. a disposition to be focused on the short-term pleasures, without paying heed to any long-term risks of the same.

Professor Sunstein claimed that people also tend to be “unrealistically optimistic”. Elaborating the same, he mentioned that 90% of drivers believe that they are safer than the average driver; smokers tend to have an accurate sense of statistical risks but they themselves believe that they are less likely to suffer from lung cancer than the average non-smoker – they know the statistics, but they think “that’s statistics, that’s not me!” Such ignorance germinates from individuals and infects the masses and the society at large. This ignorance can also be found not only in our vision of our future selves, but also in our perception of different classes of society.

As members of the privileged class of the society, we often hear the irritant rhetoric – why don‟t the poor do something to change their condition? Professor Sunstein brought this inequality to attention by echoing Esther Duflo from her book Poor Economics

If we do nothing, then we are on the right track and if they do nothing, they are on the wrong track.

It is no doubt that compared to the lower strata of the society, the upper and middle class need to put relatively much less efforts to reach a similar result. Keeping this in mind, people need to be guided towards certain pathways for their own benefit. This is the concept of “navigability“, as introduced by Professor Sunstein.

He claims that we can all agree with two statements, namely:
“1. It is not a lot of fun to be lost
2. It is really nice to be able to get where you need to go.”

Expanding on this, he emphasized on the need for “steering people in the right direction“. Navigability involves small interjections, which guides people towards their desired way, while still preserving their freedom of choice (On Freedom, Cass R. Sunstein).

The Robert Walmsley University Professor referred to the right and wrong tracks as being part of the human condition generally. The two paths culminate and tell us about what it means to be unfree. To explain this, he engaged the audience in yet another thought experiment inspired from Daniel Kahneman‟s book Thinking Fast and Slow. The purpose of this experiment was to illustrate to the audience the two very different systems of thought processing, namely – System 1 and System 2.

System 1 thinking is usually instinctive and emotional whereas,
System 2 is slower, more deliberative and logical. Analysing these two systems of thought processes, he (and Thaler) have crafted the concept of “choice architecture”.

Choice architecture, a juxtaposition of words choice and architecture (as highlighted by Mrs. Malabika Sarkar), is a concept of designing different ways in which choices are presented to people. This in turn impacts how people make decisions. Choices made by humans, complex and dispersed as they are, govern almost all aspects of our life. And it is through these choices – Professor Sunstein completed the beautiful, consistent arch of his talk – by reiterating that we can actually, gently, shake the world.

Author(s): Arindam, Vagisha, and Shefali

The power of communication in bringing about change

David Grossman reported in “The Cost of Poor Communications” that a survey of 400 companies with 100,000 employees each cited an average loss per company of $62.4 million per year because of inadequate communication to and between employees. Debra Hamilton asserted, in her article “Top Ten Email Blunders that Cost Companies Money,” that miscommunication cost even smaller companies of 100 employees an average of $420,000 per year1

The basis for the art and science of communication lies in a ‘mantra’: communicate more in less – easier said than done. Almost all professions rely heavily on communication. A domain like public policy, where a professional is expected to serve as a bridge between domains and sectors, delves into the nuances of communication – verbal and on-verbal.

Policy makers have to bring with them a gamut of skills, one of the most important of which is communication. For public policy professionals, one of the biggest challenges lies in condensing and filtering huge amounts of information to make it easily understandable and comprehensible for decisions to be driven in the right direction. This also involves the delivery of concise summaries (with logical conclusions, drawn from reliable data) at the ‘right’ time to the ‘right’ person in the ‘right’ format, wherein ‘right’ can have innumerable connotations.

Another pre-requisite that also facilitates the above is the ability to navigate across vertical silos of disciplines. Public policy issues are like river water basins, lying across state boundaries, and therefore needing – just like water disputes do – a ‘smart’ way of engineering communication. It requires an amalgamated understanding of contexts, and the scientific understanding of evidence. This also encourages the creation of customized solutions to complex challenges, as after all policy making has to be pragmatic.

Besides the above, and with the world becoming a global family, intercultural intelligence is becoming an important subject – the ability to not only to understand cultures across the world, while doing business, but also to understand local cultures that form a diverse country like India. This intelligence hinges on communication too.

Many times, public policy decisions are rooted in certain value system that a society takes up, rather than evidence. This makes the need for an effective communication, all the more important. People do not share ethical standpoints. For them to be able to come across a table and agree to certain propositions relies crucially on how the proposition is made. It is not a battle. Words become important.

References: =

Author(s): Sarah Berry

The emerging career – public policy

Democracy seeks active participation by the citizenry; this enables individuals, communities and societies to be a part of significant, forward moving and positive change. Policy is an important aspect of this journey.

It is also important to draw attention to a new found desire, especially amongst the youth, to create sustainable and effective policy impact on the world. This warrants future decision makers to be equipped with a strong understanding of public policy. At the same time, governments are becoming increasingly open to draw fresh talent, ideas and designs from outside the bureaucratic ranks. The need is urgent and agreed upon. And so, young minds nourishing policy space is an idea whose time has come.

From the career perspective too, this is an exciting time to be a public policy professional in India. The domain helps an individual embark on an unfathomable career, and make a resounding impact. A career in public policy opens doors for work in a plethora of organizations, across domains, at the national and international level, public and private sectors.

In India, the public policy domain has grown manifold over the past few years. Public policy and public administration used to be seen as courses taken up by mid-career bureaucrats. However, today more so than ever before, the Indian government has been hiring individuals from outside the civil services to help carry forward India’s governance through the challenges of the 21st century. Both the Central and State Governments are increasingly seeking professional assistance from consultancy firms, non-governmental organisations and individual experts. In recent years, private and non-profit organisations increasingly require greater engagement with government regulators and thus, there is a greater demand for professionals skilled in public policy to take up these roles. Political parties and even individual politicians seek professional assistance in policy matters as part of their larger strategy to build a brand image among the electorate. Besides, public policy opens up many options for students in the area of research and development, teaching, career in think tanks and independent research centres. Some of the many roles in which individuals can see themselves after completion of a course in public policy are as policy advisors, programme officers, policy analysts, political strategists, public policy consultants, et cetera.

Author(s): Yugank Goyal

Life’s policy: observe and learn

‘Observing’ is a luxury in today’s fast paced times – a luxury, like many other taken-for-granted tasks we partook-in some years back. The momentum of today’s age has left the observers in oblivion; well, that is to say, by and largely.

To add to the above, it is not every day that one is offered an opportunity to observe an interview – an interesting prospect, I must say. So, recently, when Dr. Parth J. Shah, the president of Centre for Civil Society, and founder of the Indian School of Public Policy was being interviewed on “Education in India – challenges, milestones, policies, and all”, I took the opportunity to learn from mere observation of the interviewee and the interviewer – the communication, and its nuances, whether verbal or non-verbal.

How is the ice broken initially? What impact do facial expressions, body language, gestures, and others have? Is non-verbal communication a more powerful medium than its verbose counterpart? How is the element of ‘silence’ that we, humans, usually, shy away from in a conversation dealt with? What happens to ‘tricky’ questions? The list just goes on.

Besides, questions on the correlation of education, election and manifestos; or the delivery of education in India; or, for that matter, the role of mere individuals in bringing about change, aspects invite food-for-thought and deliberation.

In addition, the chance to see individuals interact, respond, question and ‘agree to disagree’ is a live platform to learn the fundamentals of communication, and life from.

I still recall a question posed by the journalist: “So, why the Indian School of Public  Policy?” The reply, a candid: “Change is the future, and future is the change.” Communication is all about “more in less.” We seem to have lost that in translation. Or perhaps not? Food-for-thought and deliberation?

Author(s): Sarah Berry

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