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India is liberalizing the agricultural sector

In June 2020 were under the slogan One India, One Agriculture Market various reforms in the agricultural sector introduced by regulations. Many experts had rather expected short-term and immediate aid for agriculture and were surprised by the long-term and far-reaching measures. The reforms, which were welcomed by the majority of experts, essentially ensure a liberalization of the agricultural market by giving farmers more direct control over the marketing and sale of their products.

From now on, the movement of goods will be facilitated for many foods that are classified as essential. This includes important staple foods such as grain, legumes, potatoes, onions, oil seeds and edible oils. Due to one of the ordinances, the government can only intervene in production, supply and, in particular, warehousing in exceptional cases (including wars, famines, natural disasters and exceptionally strong price increases). So far, storage has been strictly regulated. Recently, however, possible export quantities have been factored out in advance when calculating the storage quantities. Farmers can thus dispose of their products more freely.

India becomes a market

Another reform allows farmers to freely choose where and to whom to sell their products - across India. So far they have been government regulated when selling toAgriculture Produce Market Committees bound to their respective production site. Not infrequently, this dependency led to a lack of transparency and corruption. The relevant regulation removes this requirement and enables farmers to sell their products where it is most advantageous for them.

Contract cultivation now possible

Another reform will allow farmers to contract directly with wholesalers, exporters, food groups and similar actors without the need for intermediaries. This paves the way for contract farming in India's fields. In the contracts, it should be clarified in advance which quantity will be purchased and at what price. The Indian Ministry of Agriculture (Ministry of Agriculture & Farmers' Welfare) wants to develop and publish appropriate contract templates.

Sector suffers from low productivity

The government hopes that the reforms will lead to increased productivity in agriculture, more scope for investment and increased prosperity for farmers. Many of them only have small plots and often only work just above the subsistence level. This makes the use of agricultural machinery considerably more difficult. In addition, only a small proportion of farmers can even invest in modern machines. This makes productivity low.

The agricultural sector also suffers from inadequate infrastructure, a lack of cooling capacities and insufficient packaging options. As a result, around 40 percent of the food produced is inedible or lost before it reaches the consumer, according to United Nations experts.

In addition, the sector is vulnerable to the effects of climate change, not least due to the lack of modern irrigation systems and the associated heavy dependence on annual rainfall during the monsoon months. The often low level of education in rural areas also creates problems. It often leads to improper use of fertilizers and modern seeds.

Agriculture remains important

The reforms are having an impact on the lives of many people. The majority of Indians still live in one of the 650,216 villages (2011 census) in the country. In 2019 it was around 858 million people, 66 percent of the total population, according to the World Bank.

According to the United Nations, although just over half of Indians will live in cities by 2050, the rural population and agriculture will remain relevant for India. Both play a major role in the collective memory of the country and are therefore of great emotional importance.

From an economic point of view, agriculture (including fisheries and forestry) has been losing weight for years. In 2019 it was only 16 percent of gross domestic product (GDP). Industry and especially the service sector contribute significantly more to economic output. Nevertheless, around 42 percent of all workers were recently employed in the agricultural sector.