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SBI's Economic Research Department has suggested 5 main agricultural reforms

November 22 2021: SBI Eco wrap, the Economic Research Department of the State Bank of India, has identified five critical agricultural changes that could operate as enablers even if they are not implemented. PM Modi made a surprising announcement on Friday, announcing that all three farm laws will be repealed and the constitutional process will be completed in the upcoming winter session of Parliament. SBI Eco wrap stated, "We feel the following 5 agriculture changes are important."

  1. First, rather than providing MSP as a price guarantee, the government should ensure a quantity guarantee provision for a minimum of 5 years, requiring procurement to production percentages of crops (now procured) to be at least equivalent to last year's percentages (with safeguards in exceptional events like droughts, floods etc.)

  2. Second, on the National Agriculture Market, translating the Minimum Support Price to the Auction Floor Price (eNAM). However, current data reveals that average modal prices in e-NAM mandis are lower than the MSP in all Kharif commodities, therefore this would not totally solve the problem (except Soybean).

  3. Third, the APMC market infrastructure must be strengthened. The monetary loss for grains owing to harvest and post-harvest losses, according to our calculations based on a government data, is almost 27,000 crores. Oilseeds and pulses have lost a total of tens of billions of rupees and five billion of rupees, respectively.

  4. Fourth, creating a Contract Farming Institution in India will provide the country exclusive control over contract farming price discovery. In many countries, contract farming has helped growers get access to supply chains with market and price stability, as well as technical assistance. According to Thailand's experience, market certainty (52 percent) and price stability (46 percent) were key factors in farmers' decision to engage in contract farming.

  5. Fifth, ensuring that procurement is symmetric among states. The procurement of cereals has remained uneven, with major paddy-producing states such as West Bengal (First) and Uttar Pradesh (Second) seeing low procurement while others such as Punjab and Haryana, which are not among the top producers, saw substantially bigger procurement.

According to the research, the Q2 Gross Value Added (GVA) is expected to be 7.1 percent, with the FY22 GDP growth rate expected to be between 9.3 and 9.6 percent.

-Gauri Naik

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