7 Agricultural Markets

Roughly 60% of India’s households depend on agriculture.

Any reform which improves efficiency and liquidity of the agricultural commodities markets will improve the lives of the largest chunk of Indian populations.

Since the Sixties, the agri commodity markets have had a very high level of Government intervention. While the intentions of some of these actions might have been honorable and good, (and at other times populist), they have failed to achieve the desired goals. Agriculture today is the most repressed sector of Indian economy, burdened by the red-tape and restrictions at every level. A large number of farmers have been committing suicide recently.

Restrictions and ceiling on land ownerships have resulted in very small and unsustainable farms. Additionally, lack of an efficient distribution system, and transport infrastructure means that farmers are compelled to grow basic foodgrains to feed their families, even when inefficient, rather than perhaps growing a cash crop and then buying the foodgrains, had they been cheaply available in the remote villages.

How can we change things?
0. Improve water management (see Item 6) - too many farmers in India are dependent upon the monsoon.
1. Reduce the role of the government.
2. Liberalise the markets fully, encouraging various derivative products to reduce risks. This will also encourage more investments in storage facilities, to benefit from the calendar spreads of spot and future prices, thus reducing the large amount of wastage.
3. Government should merely play the role of a regulator in the market, keeping a tab on bad market practices.
4. Use IT/Telecom solutions to provide maximum information and price transparency to the farmers.
5. Encourage private investment in retail sector - this shall promote more efficiency in the supply chain.