The Union finance minister has announced as part of the stimulus package a number of schemes and reforms for the agricultural sector and allied activities. There are three broad sets of intervention. First, liquidity enhancement schemes have been announced for farmers. The availability of relatively cheap loans may trigger a loan dependency that can backfire as non-performing assets for banks. The second set pertains to schemes that will promote agricultural infrastructure and facilitate micro-food enterprises, fishing and herbal plant cultivation. The details are not available for these schemes. It is not clear which scheme is publicly funded and which one is loan based. These will take time to deliver results. These two sets of intervention are unlikely to improve productivity in agriculture. Instead, they might increase indebtedness of farmers as they will require consumption loans not only for themselves but also for the returning migrant members of their households. This year, despite a reasonably good rabi crop and adequate harvesting, prices have been lower than usual. Farmers’ incomes had been falling before the lockdown; it may fall further.

The third and, arguably, the most important set of intervention announced for agriculture has nothing to do with the stimulus. However, they will have long-term effects. The first reform was to announce an amendment of the Essential Commodities Act. This is a good measure as it will, if effectively implemented, reduce hoarding of agricultural goods in short supply. The second step aims at allowing unhindered interstate trade in agricultural products. This is a good idea in itself. However, it will have to be complemented by a very efficient transport system, effective cold chains and an assurance that the farmers get a better price than what is offered locally. The government has to ensure that there is enough competition in this type of trading; or else, it will tend to become monopolized by a few large houses. Finally, e-trading and forward contracts through which farmers can mitigate post-harvest risks are being mooted. Once again, these systems work only when farmers are well aware of the technology platforms being used. They must not degenerate into contract farming where farmers tend to get tied to one company. These reforms should have been introduced much earlier, during better times, and not when the government is firefighting a pandemic of unprecedented magnitude.