Agricultural and allied sector in India grew at an annual average rate of 1.7% pa between 2012-13 and 2015-16 (at 2011-12 prices). In this context the Union Budget’s target to double farmers’ incomes by 100% in 6 years will require multi-faceted reforms impacting the sector. To double agriculture incomes by 2022, income will have to grow at an annual average rate of just over 12%. This imperative for an unprecedented rate growth rates will require reforms covering all facets of the agricultural sector.
Agricultural Growth and Overall growth- Swim and sink together
Growth rate of agriculture and allied sectors in India has historically tracked the movement of the overall income growth in the country quite closely.This is partly because governmental presence in the sector-via- procurement operations, subsidised fertilisers and farm loans, impact the value-added and hence income in the sector. Where growth sags the agricultural sector also suffers. 
The Gross Value Added at factor cost in the agricultural and allied sector, which is a first approximation to the income generated in the sectorhas shown a growth rate in excess of 10% only for 4 years between (1950-51 and 2011-12) measured in constant 2004-05 prices. All these supra-10 pa growth rates came on the back of negative growth rates ranging from -1.1% (1987-88) to -11.1% (1979-80) pa. Without attributing causality to the overall income growth in the economy and recognising the problem of endogeneity of the components of growth we see in the above figure that the growth rate of the total factor cost and the growth rate of agriculture and allied sectors have a high correlation (0.83). Of all the subsectors in the economy between the above years the correlation between value-added in the agri and allied sectors and the overall income is the highest (Trade, Hotels and communications come a close second at 0.72). This strong correlation also translates into a near-perfect linear fit with a high R2 , showing that nearly 68% of the variation in agricultural and allied income growth rates can be explained by the variations in growth rates in gross value added at factor cost. The task of improving growth rates in the agricultural sector in a growing economy is easier than in a stagnant one. It seems that the dictum of swimming and sinking together is as much applicable to the economy as to the polity.
Silver Lining
The silver lining in the cloud is the steady trajectory that agri and allied income has shown in the economy. The agricultural and allied sector has shown a steady increase in income as seen in the graph below.
The near straight line graph implies that the growth rate of agriculture over the years has been roughly constant (y-axis in logs). As the Budget rightly points out achieving this growth requires action on multiple fronts including irrigation, soil, traditional farming, fertilisers, extension activities and marketing. I focus on the agricultural marketing sector in the section below to give a flavour of the variegated nature of the challenge. 
Reforming agricultural markets
Reforming agricultural markets in the country is a project that requires serious effort and concerted action. As the Economic Survey 2014-15 pointed out India has 2477 principal regulated primary agricultural markets in the country. These markets governed by APMC Acts create segmentation and lead to inefficiencies in price discovery. There are often complaints of vested interests of commission agents (arhatiyas) and other middle-men posing causing a wedge between the farmers and the traders (who are the buyers of the crops). Government of India launched the National Agricultural Market Scheme in July 2015 in 585 markets and plans to start e-trading on the platform on 14th April 2016.
A similar experiment, the Rashtriya electronic Market Scheme (ReMS) was launched in Karnataka in February 2014. By December 2015, 100 principal markets were unified by the above e-platform. The reforms in the state have succeeded to the extent that an autonomous body, the ReMS is in charge of the entire process of unification and is proceeding according to a definite plan. Since marketing of agricultural produce affects farmers, commission agents, traders, APMCs and the government any reform will have to address all these stakeholders.For example, the commission agents (‘dalals’) in these markets fear that unification will throw them out of business. This creates a very potent backstop against the forward movement of reforms. Commission agents (arhatiyas or dalals) are the pet whipping boys for agricultural economists searching for efficiency and unified prices. However, these ‘middle-men’ provide real and substantive services like credit facilities, crop loans to farmers in a timely manner. The dependence is mutually beneficial to a degree but may not be without elements of rent extraction. Like all things in life we hit a grey area even in agricultural marketing.
The experience of Karnataka has shown the need for taking all stakeholders along for deepening of reforms. Reforms that rely only on technical solutions may not give the desired effect. If implementing unification within a state is a slow affair with frequent stoppages, one can only imagine the difficulties that unification can cause for an inter-state reform measure.
NAM and Nagaland
This is also a great time for our state to tap the opportunities presented by the new market integration policy of the Government of India. Integrating agricultural markets will provide increased returns to farmers and their incomes and provide a firm basis to our state’s efforts at effecting transformation. Farmers in our state can gain substantially improving the overall profitability of the farm sector. The face of agricultural sector in our state is already changing with the commercial crops gaining in importance. The latter accounts for only 9% of area but they represent about 39% of total agricultural production.
This will help farmers who cultivate fruits, vegetables and spices. Increased efficiency because of better marketing can increase the contribution of agriculture to our state GSDP and make our villages more sustainable.
(The above article is a longer version of a piece that appeared in the Indian Express. The author is an IAS officer of Nagaland cadre.)
