Agriculture in a country like India plays multiple roles, all critical. It ensures food security for the most populous nation-state in the world. It employs millions of workers productively and provides a source of livelihood and identity for them. Furthermore, India’s unique and incomplete structural transformation that leapfrogged from agriculture to services while only partially expanding its manufacturing sector has subdued labour movement out of agriculture. This, apart from straining the sector, also has implications for how fast India can graduate its citizens from poverty. Despite this crucial place agriculture occupies in the cultural, social and economic canvas of the country, there is a pressing need for first-principles-based research that tries to understand the sector through its people, their lives and occupations, and the systemic architecture that supports it. This paper is an attempt to set the stage for such enquiry with a specific focus on finance.
In the introductory section of the paper, we delve into the enterprise of a typical small-holder farmer in India, the operational considerations, market challenges, and systemic gaps that this farmer will have to contend with to make a living from farming. While there is nothing groundbreaking in covering these aspects that get talked about quite extensively in agriculture policy spheres, the intent here is to highlight the constraints in order to delineate the space available to such farmers for optimising their enterprise. After ascertaining this relatively narrow space of influence available to farmers, we then attempt to understand the cultural and social milieu that makes living and working with these constraints possible. This is a relatively newer ground for agriculture finance. The intent here is to develop an appreciation for the varied ways in which agricultural households manage their enterprise and finances, make meaning out of life, and highlight intrinsic features about their lives that modern economics (and, therefore, finance) usually brushes aside.
The second section seeks to paint a picture of the landscape of agriculture finance in India, albeit with a broad brush. A brief history is first presented to understand the socio-political path that has led agriculture finance to its current framework. We then touch upon the various sources of finance available to examine their scope and utility for the agricultural enterprises and households that we had described earlier in the first section of the paper. This juxtaposing of agriculture finance with its context expectedly leads to newer kinds of questions about making finance relevant, suitable and meaningful for agricultural households.
The third section of the paper identifies four themes under agriculture finance that warrant further exploration. It lays out the significance of each of those research themes in understanding the role that finance can play in this sector. Some preliminary research ideas of interest are listed under each theme to showcase some context-informed questions that are yet to be answered and have much scope for rigorous and actionable research.
The final concluding section seeks to set the larger vision for what finance can do for agriculture and identify its particular role. The paper shies away from making any policy recommendations but calls attention to its central premise that agriculture finance in India needs to be studied from varied perspectives to undertake the slow, steady, but difficult task of incremental policy tinkering. It also offers a lens and a framework to embark on such an undertaking.
Importantly, the paper does not call itself a primer for sustainable agriculture finance despite its vision for impactful finance to make agriculture sustainable and planet-friendly. Instead, the paper seeks to review the landscape of agriculture finance in India from an implicit sustainability standpoint to pose the pivotal question – How can finance be designed and structured for agriculture, farmers, agricultural households, agrarian communities and the larger economy so as to ensure economic equity, social well-being, and environmental sustainability?
Read the full paper here.
