11 Jul 2017
Brief: If accorded industry status, the sector will be institutionalized and provided the foundation to compete with other sectors; SMERA is with the view that co-operatization before corporatization will be paramount for the success of this endeavor.
Central government is exploring the advantage of giving industry status to the agriculture sector. SMERA believes that if accorded industry status, the sector will be institutionalized and provided the foundation to compete with other sectors. The strategy is in line with the 12th Five Year Plan, which first envisioned organization of the primary sector to increase sector efficiencies and provide dignity to rural labor. The AAJEEVIKA scheme, under which Joint Liability Groups as well as other forms of cooperatives were promoted, organizing agriculture was the principal concern. Taking examples of successful cooperatives such as GCMMF (AMUL) as well as LIJJAT, the move will result in the much anticipated corporatization of agriculture & allied. SMERA is with the view that co-operatization before corporatization will be paramount for the success of this endeavor.
Entities (unorganized cultivations, cooperatives and allied) will also make statistical organization’s collecting data more efficient. As a result, business activities can be monitored and analyzed more frequently and provide a true picture of the ground reality. This will lead to a focused government policy for the sector.
The status will allow landless peasants to form unions and to an extent, achieve social security via collective bargaining. Resultantly, they will be able to put their demands before the government and other stakeholders effectively. On the credit offtake side, lending to the sector will have an incremental effect on the entire industrial offtake, which is currently negative. Agricultural offtake has recorded 12.5% growth as compared to (-) 1.8% contraction in industry during FY17. Therefore, offtake of the industry will be faster with the inclusion of agricultural sector.
Having said this, the entire agriculture sector lending is part of priority sector (PSL) with a share of nearly 40%. Getting industry status would lead to revision of the priority sector category and therefore SMERA believes that the sector will have to evolve beyond its traditional way of functioning to remain competitive.
Sector Fundamentals Comparison
Credit Offtake Comparison in India