Month: March 2023

Recently, Prime Minister Narendra Modi expressed his desire to double farmers’ incomes in the year when India celebrates 75 years of independence and enters Amrit Kaal. Now that we’ve arrived in Amrit Kaal, it’s time to revisit that dream and see if it’s been realised, and if not, how it can be improved. It was a noble dream because we could not sustain high GDP growth unless farmer incomes increased.

What exactly is the Doubling Farmers Income Scheme?

• The government of India set a target of doubling farmers’ income by 2022-23 in February 2016.
• To promote farmer welfare, alleviate agrarian distress, and achieve income equality between farmers and those working in non-agricultural professions.
• Doubling farmers’ income can have a direct positive impact on agriculture’s future.

A Noble Vision: Doubling Farmers’ Income

• Farm Machinery Improvements and Advanced Technologies: If a farmer’s income is doubled, he or she will have access to better farm machinery and advanced technologies, resulting in increased productivity, better seed quality, and improved farming techniques.
• Increased Agricultural Productivity: Doubling farmers’ income means increasing agricultural productivity, which is critical to meeting the country’s growing food demand.
• Improved Crop Quality: Increasing farmer income will not only increase agricultural production but will also improve crop quality, which is critical for ensuring food security and meeting export quality standards.
• Growth of the Indian Economy: Doubling farmers’ income will help the Indian economy grow by increasing rural demand for goods and services, creating jobs, and boosting overall economic growth.
• Reduced Farmer Suicides: One of the leading causes of farmer suicides in India is financial stress. Farmers’ income will be doubled, providing them with financial security, which will reduce farmer suicides and improve their overall well-being.

Government initiatives in this area

• Fertilizer subsidy: The budget for fertiliser subsidies has surpassed Rs 2 lakh crore. Even when global urea prices surpassed $1,000/metric tonne, the Indian urea price remained stable at around $70/tonne. This is possibly the world’s lowest price.
• PM-Kisan: For the fiscal year 2023-24, the government has allocated Rs 60,000 crore to its flagship PM Kisan Samman Nidhi Yojana. Anna Garib Kalyan Yojana: Furthermore, through the PM, many small and marginal farmers receive a free ration of at least 5 kg/person/month. Yojana Garib Kalyan Anna.
• Subsidies and crop insurance: There are also crop insurance, credit, and irrigation subsidies (drip). States also lavishly distribute power subsidies, particularly for irrigation. Many states even subsidise farm machinery for customs hiring centres.

Evaluation: The effect of all of these policies on farmer income and the environment

• Farmers’ Income Impacted by Input Subsidies and Output Trade Policies: While input subsidies help farmers earn more money by lowering the cost of inputs like seeds, fertiliser, and irrigation. Government output trade and marketing policies, such as the ban on wheat exports or the 20% export tax on rice, can reduce farmers’ incomes.The current policy approach is pro-consumer rather than pro-farmer, which is a fundamental flaw in our policy framework.
• Subsidized Inputs and Uncontrolled Procurement Policies Cause Severe Environmental Damage: Excessive subsidisation of inputs such as fertilisers and power, combined with uncontrolled procurement of paddy and wheat in certain states, is causing severe environmental damage. These policies are increasingly in need of rationalisation.

Way forward

• To understand where farmers stand, it is critical to assess the net impact of input subsidies and output trade policies on their income.
• Realign support policies with an eye towards environmental outcomes.
• Millets, pulses, oilseeds, and much of horticulture may be eligible for carbon credits to encourage their cultivation. They use less fertiliser and water. Subsidies and crop support must be crop-neutral.
• Adopting pro-farmer policies that promote their interests, support income growth, and boost overall economic growth is critical.
• Agriculture today requires technological, product, institutional, and policy innovations to support more diverse, high-value agriculture that is also environmentally friendly.

@the end

When it comes to doubling farmers’ income, we must recognise that it will take time. It is possible to achieve this by increasing productivity through better seeds and irrigation. It must be combined with unrestricted access to markets for their produce. Diversifying to high-value crops, as well as installing solar panels on farmers’ fields as a third crop, will be required. We can only double farmers’ incomes with such a concerted and sustained effort.

Source: http://www.ras.org.in/doubling_farmers__incomes

• Former Reserve Bank of India Governor Raghuram Rajan has warned that India is dangerously close to the Hindu rate of growth.

What is the Hindu Growth Rate?

• The “Hindu Rate of Growth” is a term used to describe the Indian economy’s slow growth rate between the 1950s and the 1980s.
• Raj Krishna, an Indian economist, coined the phrase in the 1970s.
• During this time, the Indian economy grew at a much slower rate than that of other developing countries such as South Korea, Taiwan, and Hong Kong.
• The term is debatable because it implies that the slow growth rate was caused by cultural or religious factors rather than economic policies and structural issues.
• However, the term is still used in academic and policy discussions to refer to the Indian economy’s slow growth during this time period.

Characteristics of the Hindu Rate of Growth

• Low GDP growth rate: The term refers to the period from the 1950s to the 1980s when India’s economy grew at an average rate of around 3.5% per year, which was significantly lower than that of other developing countries.
• Slow Industrialization: The industrial sector was dominated by a few public-sector firms, while the private sector was heavily regulated.
• Agriculture Stagnant: There was little investment in agriculture, and the sector was not given much priority in government policies.
• License Raj: India had a socialist economic model with extensive government regulation. The License Raj system required businesses to obtain permits and licences, resulting in a bureaucratic and corrupt system that hampered innovation and entrepreneurship.
• Import Substitution: India pursued an import substitution policy in which the government attempted to develop domestic industries by shielding them from foreign competition. This resulted in a lack of competition, low product quality, and high prices.
• Inefficient Public Sector: Although the public sector dominated the economy, it was inefficient, unproductive, and corrupt. Government agencies were frequently overstaffed and poorly managed, resulting in low productivity.
• Lack of Foreign Investment: During this period, India was unappealing to foreign investors, and there was little foreign investment in the economy. The government imposed strict controls on foreign investment, and the regulatory environment was unfavourable.

Concerns flagged by Rajan

Rajan Rajan expressed concern that India’s economic growth rate had been declining even before the COVID-19 pandemic hit the country.

(a) Decline in GDP growth rate

• Before the pandemic hit in early 2020, India’s economic growth rate had fallen to 4.5% in the September quarter of 2019.
• During the pandemic, the Indian economy contracted dramatically, with GDP falling by 7.7% in the fiscal year 2020-21.
• The economy has begun to recover, with the IMF forecasting 9.5% GDP growth for the current fiscal year.

(b) Lower growth potential than hyped

• However, Rajan cautioned that India’s potential growth rate is likely to be lower than in the past due to factors such as an ageing population, a decline in the working-age population, and slow investment.
• He also cited the country’s poor performance on human development indicators like education and health as a growth constraint.

Important recommendations

• Rajan advocated for measures to address the structural factors impeding growth, such as infrastructure and education investment, as well as improving the ease of doing business in India.
• He also emphasised the importance of maintaining macroeconomic stability and fiscal discipline in order to avoid inflation and currency depreciation.
• He also advocated for measures to combat inequality, such as better targeting of subsidies to those in greatest need.

@the end

Overall, Rajan’s comments imply that India faces significant challenges in maintaining high levels of economic growth, and that structural reforms will be required to address these challenges.

Source: https://thewire.in/economy/india-dangerously-close-to-the-hindu-rate-of-growth-raghuram-rajan

In February, India’s Purchasing Managers Index (PMI) for the services sector increased to 55.3. The PMI in the services sector has reached its highest level in 12 years, owing to an increase in new business orders and employment.

Purchasing Managers’ Index

• The PMI is a measure of business activity in both the manufacturing and service sectors.
• S&P Global compiles the S&P Global India Services PMI from questionnaire responses from a panel of approximately 400 service sector companies.
• It is a survey-based metric that asks respondents about changes in their perception of certain key business variables from the previous month.
• It is calculated separately for the manufacturing and services sectors before being combined to create a composite index.

How is the PMI calculated?

• The PMI is calculated using a series of qualitative questions.
• Executives from a large sample of hundreds of firms are asked to rate whether key indicators such as output, new orders, business expectations, and employment were stronger than the previous month.

How should the PMI be read?

• A figure greater than 50 indicates an increase in business activity. Anything less than 50 indicates contraction.
• The greater the deviation from this midpoint, the greater the expansion or contraction. The rate of expansion can also be determined by comparing the PMI to the previous month’s data.
• If the figure is higher than the previous month’s, the economy is growing faster. It is growing at a slower rate if it is lower than the previous month.

Recent Service PMI Trends

• The headline figure was above the neutral 50 mark for the 19th month in a row, indicating expansion.
• Cost pressures eased significantly, with input prices rising at the slowest rate in nearly two and a half years and output charge inflation falling to a 12-month low.
• Nonetheless, capacity pressures remained mild, and job growth was only marginal.

Source: https://economictimes.indiatimes.com/news/economy/indicators/services-activity-hits-12-year-high-in-february/articleshow/98398362.cms

Women in rural India are embracing clean energy-based livelihood technologies to help them grow their businesses. Distributed renewable energy (DRE) is transforming women’s livelihoods at the grassroots level, from solar refrigerators to silk-reeling machines and biomass-based cold storage to bulk milk chillers.

What is DRE (Distributed Renewable Energy)?

• DRE is the generation and distribution of electricity via small-scale, decentralised systems using renewable energy sources such as solar, wind, hydro, geothermal, and biomass.
• These systems are frequently installed in remote or rural areas where connecting to a centralised power grid is difficult or expensive.
• Individual rooftop solar panels to small-scale wind turbines, mini-hydro systems, and biomass generators are examples of DRE systems.
• Rather than a large urban or industrial centre, they are typically designed to serve a single household or community.
• DRE systems, also known as off-grid or mini-grid systems, can operate independently or in conjunction with a larger power grid.

Recent Figures

• Over 80% are female: According to a recent Council on Energy, Environment, and Water (CEEW) study, more than 80% of the 13,000 early adopters of clean tech livelihood appliances are women.
• Projection for the future: India is expected to have 30 million women-owned micro, small, and medium enterprises (MSMEs) employing approximately 150 million people by 2030. DRE livelihood technologies have the potential to transform rural livelihoods, with women at the forefront of this transition, with a $50 billion market opportunity in India alone.

DRE systems have several advantages

• Including being more resilient to natural disasters and grid failures, lowering energy costs for communities and households, and increasing energy access in areas not served by the main power grid.
• Reduce carbon emissions: DRE systems can also help to reduce carbon emissions and mitigate the effects of climate change.
• Women benefit from DRE in the following ways: DRE-powered technologies give women farmers and microentrepreneurs an added advantage by increasing income opportunities through mechanisation. They also liberate women from several laborious gender-assigned manual tasks.

Steps to scale up this impact

• Leverage the experience of early female adopters: Technology providers must encourage early adopters to share their experiences with potential customers, transforming them into demo champions/sales agents to market these products based on their first-hand product experience and local credibility.
• As an example: Kissan Dharmbir, a manufacturer of energy-efficient food processors, chose Neetu Tandan, an Agra-based microentrepreneur who uses the processor to make fruit squashes and jams, as a demo champion. Sales leads are being generated by her demonstrations.
• Organize hyperlocal events and demos: These events provide opportunities for women to network, learn about the product, and connect with people who can assist them in acquiring, financing, and using these machines.
• For example, more than 200 women booked seven appliances on the spot at an event in Hamirpur, Uttar Pradesh, including solar sewing machines and multi-purpose food processors.
• Allow for simple financing of product purchases: The limited financing options for these clean technology products continue to be a bottleneck. Financiers who assist women farmers and microentrepreneurs should consider the technologies themselves as collateral, while also making the loan application process easier.
• For example, Samunnati Finance, an agri-value chain financier, provided an 80% first-loan default guarantee to six women-led FPOs in Andhra Pradesh that purchased 100-kg solar dryers.
• Support for backward and forward market linkages: In some cases, simply providing technology is insufficient. Many rural products have a wider market. Finding and connecting producers to consumption hubs in urban areas is thus equally important for increasing income.
• Ensure adequate after-sales services and buybacks: Technology manufacturers and promoters must also provide adequate after-sales services and buybacks. To instill confidence in financiers, evidence of these technologies’ economic viability should be shared, and promoters should offer partial default guarantees.
• Enable policy convergence: Because no private sector entity has the reach and scale that government institutions do, leveraging their reach is critical to exponentially scaling up. State rural livelihood missions, horticulture and agriculture departments, the Ministry of Micro, Small and Medium Enterprises, and the Ministry of Textiles are all working to promote women’s livelihoods. They must embrace clean energy solutions in order to advance their respective programmes and outcomes.

What are the difficulties that women face?

• High risk perception: The high starting price and newness of DRE appliances can create a high risk perception, particularly among female users who may have a lower risk appetite due to socioeconomic factors.
• Low belief: Because women’s access to new information has historically been limited, people prefer to physically touch and see high-tech, high-priced DRE products before believing in their ability and promised benefits.
• Women frequently struggle with established market links due to their limited mobility and networks outside of their villages.

@the end

Scaling the impact of clean energy solutions on women’s livelihoods requires a village of policymakers, investors, financiers, technology promoters, and other ecosystem enablers, much like raising a child. Only then will we be able to truly unleash the potential of rural women and clean technologies at the same time.

Source: https://www.teriin.org/article/distributed-renewable-energy-transforms-womens-lives-rural-bihar