Nirmala Sitharaman on Economic Package: Reforms for agriculture, farmers, fishermen will provide employment opportunities
The agricultural sector has been subjected to a host of restrictions which are no longer relevant.
Finance Minister Nirmala Sitharaman on Wednesday announced the fourth tranche of COVID-19 relief package to revive and support business under the Rs 20 lakh crore stimulus package announced by Prime Minister Narendra Modi on Tuesday.
Experts weigh in with their comments
Vilas Tawde, MD & CEO, Essar Oil & Gas Exploration & Production
CBM-based initiatives will be a great salve to the environment in terms of clean energy. Rs 50000 cr in evacuation infrastructure would facilitate unlocking CBM potential in Coal India’s leased area, which is estimated to hold ~90 TCF of CBM gas (unrisked).
Arindam Guha, Partner, Leader–Government and Public Services
Saturday’s announcement on linking India’s start up eco-system to the nuclear sector through Technology Development cum Incubation Centers is welcome. However, the mechanism should address typical “valley of death” issues which hinder the lab to market journey. Similar experiences in other countries suggest that incentivizing market leading companies to join the R&D efforts may help.
Rajeev Singh, Director General, Indian Chamber of Commerce
The proposed amendment in Essential Commodities Act, enabling farmers to get the best price for their produce, be it local, national or global markets is a watershed in India’s Economic history as it removes disintermediation and takes the market to the farmer. The Rs 1 lakh crore Agro Infrastructure fund would have a beneficial effect on supply as well as demand. The provision of Rs 50,000 crore for Animal Husbandry and Fishery is a welcome step as it enhances the scope for alternate income avenues for rural population. The State Government have an important role to play since agriculture is a state subject. ICC would like to urge all the States to implement these reforms in the larger interest of farmers.
Sanjiv Puri, Chairman, ITC
It is heartening to see the reforms announced for the agri sector that provides livelihoods to about half of India’s work force. Amendments to the ECA, reforms in agricultural marketing and risk mitigation through predictable prices will empower farmers, strengthen agri-food processing linkages and enable demand-driven value added agriculture. The reforms will encourage investments in food processing and together with the infrastructure outlays will contribute in shaping a competitive agri value chain, reduce wastages and raise farmer incomes.
Ramanuj Kumar, Partner, Cyril Amarchand Mangaldas
Doing away with eligibilty criteria and introducing revenue share for commercial mining is expected to attract more players in coal mining and minimize India's dependence on imported thermal coal. However, getting investors for partially explored blocks may prove challenging.
Anurag Saxena, Global Head – Strategic Initiatives, MSC (MicroSave Consulting)
The coronavirus pandemic is a global public health emergency, and India has been taking all necessary steps to strengthen the healthcare infrastructure at various levels. There are many other consequences of this unprecedented situation, including the food security crisis, in the long term. Due to lockdown, farmers struggled to harvest and trade perishables due to a shortage of workforce, transportation, and limited activities in the market. With this background, there was no surprise that supply chain reforms found a place in the Government’s strategic plan to build a self-reliant India.
The 100,000 Crore Agri infrastructure fund announced as part of the stimulus package will help in strengthening the farm gate infrastructure for farmers. The Indian food economy is mainly urban and is dependent on rural-urban supply chains. The 10,000 crores scheme for the formalization of Micro Food Enterprises (MFE) and the cluster-based approach will help in building capacity at regional levels and better supply chain integration. Overall, the announcements will help in addressing supply chain issues. We need to wait to understand the impact of labour migration on the agriculture sector as close to 30% of farm labor is hired. Given the current state of the economy, we also need to monitor the system-wide effects such as food price inflation and related social unrest. If ignored, such results may undermine food supply chains and, thus, food security in the short term and productivity investments in the medium run.
Vishwakumara Kayargadde, Co-Founder and COO, Saankhya Labs
By raising the FDI limit in defence manufacturing under the automatic route from 49 percent to 74 percent and by putting a ban on the import of certain defence equipment, Finance Minister Nirmala Sitharaman's announcements have provided a boost to Indian companies in providing indigenously designed and manufactured solutions. Another important step in the form of allocating a separate budget for defence procurement will see new investments in the sector and help high-tech companies such as Saankhya Labs an opportunity to develop next-gen indigenously designed, developed and manufactured (IDDM) communications solutions for the armed forces. Additionally, with the Government taking measures towards the indigenization of imported spares, we will see new technology-driven startups emerge in the defence sector and this will provide a major fillip to the sector.
Measures such as allowing private companies to use ISRO facilities and other relevant assets to improve their capacities will enhance corporate India's involvement in India's space sector journey. Additionally, with the Government allowing private organizations to be a part of future projects for planetary exploration and outer space travel, we will surely see the dynamics change in this technology-driven sector. These steps will boost the capability of private organizations to provide state-of-the-art technology solutions to this industry while providing a level playing field in sub-sectors such as satellites, launches and space-based services."
Puneet Chopra, Partner, MSC (MicroSave Consulting)
The package to support farm-gate infrastructure and the formalization of micro-food-enterprises is a much needed one. It will be very valuable for the small and marginal farmers. Sub-optimal farm-gate infrastructure is the weakest link in the agri value-chains in India. The majority of small and marginal farmers do not have the resources or wherewithal to take their produce to even nearby markets and dispose it off at their farm-gates or door-steps to anyone who is ready to buy it from there. Most value is therefore derived by the aggregators and larger farmers who pick up at the farm gate, aggregate and sell in the local markets or to processors.
Enhancing farm-gate infrastructure and adding more micro-food entrepreneurs will strengthen the overall agri-value chains and market ecosystem. It will enable value and incomes to be transferred in real terms to benefit poor farmers and landless cultivators.
Anuj Prasad, Partner & Head - Defence, Cyril Amarchand Mangaldas
A long awaited measure which has the potential to finally kick start production of advanced defence systems in India,. Control over technology and manufacturing quality were the big concerns of foreign OEMs which should stand substantially addressed with this move.
Chandrajit Banerjee, Director General, CII
In the third tranche of the package announced by the Hon’ble Finance Minister, focus was rightly laid on the agricultural sector. A combination of big-ticket reforms together with allocation of money for agricultural infrastructure and logistics is a welcome move to strengthen the sector that provides the highest share of employment in our country. The agricultural sector has been subjected to a host of restrictions which are no longer relevant. This has hindered the marketing and price realisation of agricultural products. In this context, the amendment of the Essential Commodities Act and the agricultural marketing reforms proposed by the Minister are indeed heartening. We hope that the states fall in line with these changes. What is also critical is that these changes are being supported by substantial allocation of funds including Rs 1 lakh crore for the development of agricultural and food processing infrastructure.
Ajay Sawhney, Partner, Cyril Amarchand Mangaldas
Satruday's announcement does breathe some life into the pandemic hit civil aviation sector, but no mention of bailouts on an immediate basis may attract mixed response from the industry. Though, easing curbs on airspace would certainly bring in long term efficiency and on an immediate basis some relief to the airlines, but a more meaningful intervention may be required if the aviation sector is not on the recovery path soon. The announcement on mixed use of MRO and rationalisation of tax regime for MRO ecosystem will be pivotal in incentivising the MRO business and unleashing its potential owing to India’s strategic location – great move.
DK Srivastava, Chief Policy Advisor, EY India
Agricultural reforms have been long overdue in India. A barrier-free genuine all-India market for agricultural produce should be welcomed as a key feature of India’s new normal. The focus on agriculture and allied sectors in this third tranche of the stimulus package may be justified due to its large share in employment. These reforms are both welfare-improving and efficiency-augmenting. One salient feature of this tranche is that the direct fiscal cost accounts for nearly 30% of the estimated benefit which is much higher than that in the earlier two tranches.
Arun Singh, Chief Economist, Dun and Bradstreet India
The government’s third tranche of stimulus measures targeted on agriculture and allied activities includes landmark initiatives such as amending the Essential Commodities Act and creating ‘One Market One Nation’ by giving choice to farmers to sell its produce through agriculture marketing reforms. However, since most of these initiatives announced are supply side oriented, it would take some time to implement them especially with regards to creating the infrastructure. It should be noted that once the liquidity allocated by the government flows from the institutions to the targeted segments, demand would also start reviving.
Jiger Saiya, Partner and Leader, Tax & Regulatory Services, BDO India
Mega disinvestment and opening sectors to PPP investments will not only help funding of the stimulus package but will also bring in advanced technology and global best practices to these industries. An announcement of tax reliefs on investments in specified disinvestment sectors would have made the government offer sweeter. Aatmanirbhar Bharat is not an isolated Bharat. FDI reforms in defence manufacturing coupled with import restrictions were definitely needed.
The government’s emphasis on empowerment rather than entitlement would help to firm-up the economic activities after the lockdown is being gradually withdrawn. The host of measures have covered a wider section of the agriculture and allied activities making the initiative much broad-based. It is important to support the micro and small firms and the people involved in the agriculture and allied sectors which in turn would provide employment opportunities and steady flow of income. Measures to strengthening supply side infrastructure was a much-needed initiative and would help to stabilize the fluctuations in the food inflation. Such a detailed and targeted initiative across different segments has not found mention in the stimulus measures undertaken by other countries.
Umesh Revankar, MD and CEO, Shriram Transport Finance
We appreciate and welcome the announcements done by the government that will help bring in liquidity into the system and life back in the economy which is in standstill. The government has tried to cover all sections of the society and help protecting the livelihood of the effected people. We are hopeful that the execution of the overall measures will be undertaken with speed and efficiency.
Mihir Vora, Director & Chief Investment Officer, Max Life Insurance
The announcements over the past 3 days have focused on increased availability of credit and liquidity to needy segments viz. MSME, NBFCs, migrant workers, farming, fisheries, animal husbandry, power sector and organized sector workers. The other thrust was to push through some reforms to ease execution and smoothen processes for disbursements. Total additional expenditure from the budget will be about 1% of GDP even adding the recent announcements before the past 3 days. The measures announced so far are marginally positive for the supply side of the economy but demand side will continue to struggle due to income/job losses. The balance sheet and income statements of businesses will not be supported by the announcements though the additional liquidity will help them sustain for a few months.
There are no specific announcements of support to the sectors most severely impacted by lockdown viz. airlines, travel & tourism, hotels, hospitality, malls and multiplexes, real estate etc.. Moreover, there are no announcements for the large employment segments like textiles, construction, gems & jewelry etc. These segments are also shut to a great extent with fixed costs and interest expenses. They will also feel the pinch of labor availability migrant workers returning back home.
Anand Ramanathan, Partner, Deloitte
The finance minister has used the opportunity to push some long term measures that will improve productivity, increase farmer realizations, benefit FPOs, attract investments in post harvest infrastructure and enhance competitiveness of the food and agribusiness value chain. The announcements will also give a boost to the make in India campaign for the food processing sector. Focus of infrastructure development at the farm gate, the removal of cereals from the essential commodities list and the development of localized clusters will also have a positive impact on the environment and signifies a structural shift from the centralized scale driven command agri economy of the green revolution to a farmer centric market driven approach to the agribusiness sector
Satyam Shivam Sundaram, Partner, Government and Public Sector, EY India
Deregulation of mandis is a very bold step and it was due for a long time. We will get to know more as we see the fine prints come out. When considered along with farm gate infrastructure and proposed investments in value chain, it would go a long way in helping farmers realize 25 to 30 percent higher income, depending on the produce. Farm gate infrastructure would not only save farmers from distress sale of produce but also help significantly reduce wastage particularly for fruits and vegetables. Cluster based approach enables economies across the production value chain and will make the micro food enterprises more competitive.
Announcement for medicinal plants corridor along the river Ganga will further strengthen the soft power of India apart from adding income to one of the most vulnerable farmer group. The fund allocation for Matysaya Sampada Yojana will help realize higher price in the international market. The realized price may be nearly 50% to 100% higher once adequate infrastructure is created. Micro Food Enterprise Fund through cluster-based approach would help farmgate processing adding to the farmers’ income. The changes to Essential Commodities Act will ensure that food processing sector gets an impetus to enhance production lines and will encourage value added processing. This will also ensure that farmers will now have more institutional buyers.
Niranjan Hiranandani, National President– NAREDCO
Unveiling the third leg of the COVID-19 economic package as part of the 20-lakh crore Atmanirbhar Bharat Abhiyan (Self-reliant India Campaign), Union Finance Minister Nirmala Sitharaman announced 11 measures, relating to agriculture and allied activities. From real estate, as an industry perspective, measures relating to strengthening infrastructure, logistics, and storage provide opportunities in the form of new facilities being set-up in green-field and brown-field segments, to tackle supply chain issues, especially perishable fruits and vegetables, as also dairy products and fisheries.
In commercial real estate, warehousing and logistics is a growing segment; the cold chain aspect is a sub-segment which also offers immense potential. The measures announced by the Finance Minister create an opportunity for warehousing, logistics as also a cold chain to grow and provide the necessary support to Indian agriculture to store produce safely and also reach the same to markets, including global markets. Post the reforms announced by the Finance Minister today, Fisheries, to give an example, is expected to contribute Rs. 1 lakh crore to India's exports. The commercial real estate sector has the opportunity to help create better harbors and cold chain/ warehousing and logistics, this is something that needs to be followed up properly.
Sanjay Kumar, CEO & MD, Elior India
The steps taken by the government in order to empower the marine and agriculture sectors is appreciated. In order to go local to global, the stimulus and capital funds should be used for bringing in value addition for fishery and agricultural products to gain advantage in international markets and boost exports. However, with regards to price assurance for farmers, there is a need for an assured demand for consumption.
Hence, we look forward to an announcement regarding reduction in tax on consumption and GST rate that will in-turn drive consumption. Also, we hope that input tax credit is restored as this will help ensure the success of the finance minister's initiative in streamlining and supporting the development of infrastructure in the food supply chain.
Amith Agarwal, Co-Founder & CEO, AgriBazaar
The Finance Minister Nirmala Sitharaman's announcement of Rs 1 lakh crore agri-infrastructure Fund for farm-gate infrastructure. This measure will significantly contribute towards mitigating post-harvest losses and wastage by giving a fillip to scientific storage facilities and also, help the small farmers earn additional income by way of value-added agri-produce. The long-term investments will help India build quality, world-class agri-assets and infrastructure that will benefit small farmers in the long time.
The focus on aggregation points will help young Indian start-ups, private players and agri-preneurs to build digital and agri-tech driven platforms and solutions so that the small farmer can sell his produce with minimum hassle and maximum profits. Alongside farmgate infrastructure, which will be the hardware, aggregators will provide the software to drive efficiency both in terms of price and wastage losses. In the immediate term, it will provide an impetus for the agri-sector to come out of the COVID19 shock while in the long run it will secure India's food security and supply chain in a self-sufficient manner.
B Gopkumar, MD & CEO, Axis Securities
Friday's announcements pertaining to the agriculture sector and fisheries are intended to strengthen the value chain and infrastructure. The government's thinking is long-term in improving the economic fundamentals in providing key support which can improve the supply chain, reduce wastage, and better price realisations. This will help in the creation of employment and lead to long term demand creation. We do not foresee any major immediate benefits of the measures announced today but the long-term thinking of the government is clear. The impact on equity markets of today's announcements is likely to be limited as benefits are back-ended.
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