Industry Status to Agriculture Sector

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.

Impact: Positive

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

 

Australia

India

Israel

US

Agro Expenditure (% of total outlay)

NA

6.5

NA

0.6

Cropping Intensity Ratio

0.1

1.7

3

0.8

Area Harvested (mln ha)

36

341

1

437

Percent Area Equipped for Irrigation

NA

93.9

80.7

86

Employment in agriculture & Allied (Mn)

3.3

47.2

1.7

1.6

Value Added per Worker ($)

52701

689

333400

69457

Food Production Value ($ Mn)

25035

236540

2834

215750

Value Added to GDP (%)

3

17

1

 

Credit Offtake Comparison in India

 

 

Agriculture

Industry

Priority Sector

FY09

22.99

22.84

24.65

FY10

22.76

24.38

17.13

FY11

15.61

22.35

15.59

FY12

13.73

20.74

12.56

FY13

7.92

15.12

8.36

FY14

12.89

12.84

18.83

FY15

15.00

5.61

9.87

FY16

15.28

2.75

10.72

FY17

12.40

-1.85

9.42


 

Our exciting journey started in 2005 with rating of bank borrowers most of whom were small and medium enterprises. At that time, credit rating was a concept known only to large issuers of capital market instruments. Since then, like a caterpillar transforms itself into a beautiful butterfly, we transformed to rate bonds, bank facilities of large corporates and issuers across industries. Along came many achievements - SEBI Registration in 2011, RBI accreditation in 2012, 50,000 ratings in 2018, 5,000 Bond and Bank Loan Ratings in 2017, launch of India's first Android and iPhone app to disseminate rating, tamper-proof QR-code-enabled rating rationales, and SMERA Terminal to name a few.

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