FDI And Its Benefits On Farming

Agriculture is the foundation of any nation. In the late 1950s and early 1960s, before the Green Revolution (which increased wheat and paddy production), agriculture in India could not sustain the country’s growing population and had to undergo significant alterations to achieve a self-sustaining agricultural system. Massive investments are required to maintain these developments and bring our agriculture up to world standards. Foreign direct investment (FDI) in agriculture has always been a top priority for the Government of India to improve this sector. This article discusses the benefit of FDI on farming, retail houses under the FDI scheme, and Contract Farming.

Farming in India

India’s agricultural sector urgently requires mass reformations. These require massive investments where a policy change like allowing FDI, and more, is necessary. 

India is the top agricultural producer in the world. It is the global leader in the production of milk, pulses, and spices. India also holds the distinction of having the largest cattle herd (buffaloes) globally and the maximum area under wheat, rice, and cotton. Cotton, rice, wheat, sugarcane, farmed fish, sheep and goat meat, fruit, vegetables, and tea are among the country’s top exports.

Agriculture in India is distinct in its natural topography, climate, and landscape. A large portion of the population is still reliant on agriculture as the primary source of income. Since its Independence, India has been at odds with its agricultural infrastructure, practices, and associated communities.

In India, the rising population, increasing average income, and effects of globalisation have resulted in increased demands in quantity and a wider variety of foods with better quality and nutrition values. As a result, there is increasing pressure on diminishing available cultivable land to produce more significant quantities and types of quality foods. Agricultural productivity is affected by several factors. These include the availability and quality of agricultural inputs such as land, water, seeds, and fertilisers. Other factors include access to agricultural credit and crop insurance, the assurance of remunerative prices for agricultural produce, and storage and marketing infrastructure.

Large scale investment and access to new markets are necessary for the agriculture sector to increase productivity. Foreign Direct Investment (FDI) will play an essential role in ensuring massive capital flow and global markets. Considering the benefits of FDI on farming, FDI in the agriculture sector in India has always been a top priority for every government.

Foreign Direct Investment (FDI) in Agriculture

Agricultural investment is classified as public, private, foreign, or domestic. It is an unavoidable fact that national savings are insufficient to meet the requirements, and therefore, foreign investment serves as a means to bridge the investment and savings gaps. Thus, FDI in the Indian Agricultural sector is necessary.  

The agriculture sector accounts for approximately 15% of the national economy. Additionally, there is ample opportunity in food processing, agriculture services, and infrastructure. The growth of FDI and agriculture have an inverse relationship, which means that a significant amount of FDI does not reach the agriculture sector. In other words, the benefits of FDI on farming are not going to the farmers.

Benefits of FDI on Farming

It is an unavoidable fact that FDI in agriculture is critical for promoting agriculture and, as a result, reducing poverty and hunger. Several studies have found that foreign investment in developing countries supports economic growth and development. In India, foreign investments are not well-established in most rural areas. Hence, FDI should reach rural areas so that the benefits of FDI on farming will reach everyone.

FDI is one of the most important tools for increasing job opportunities in agriculture through commercialisation and modernisation, as the sector employs 52% of the workforce. FDI will introduce concepts like contract farming, where agricultural production is carried out based on a contract between a buyer and farmers. The agreement establishes the terms for producing and marketing a farm product or products.

FDI is required to capitalise on modern scientific and technological advancements. As the world advances at breakneck speed, our farmers and the country’s farming capacity must keep up. FDI assists in gaining access to cutting-edge scientific research and agricultural technologies.

FDI will also help to boost exports. The infusion of foreign capital increases sector productivity and establishes the country as a leading exporter.

Challenges For FDI in Farming

The following are some challenges for FDI in farming.

• Inadequate awareness.
• Inadequate technology and knowledge.
• Loans and a lack of financial support.
• Lack of regulatory requirements.
• Inadequate coordination and alignment.

Conclusion

The future of agriculture is a critical issue for all stakeholders. The state and other institutions are attempting to handle the critical challenges of agriculture in India, such as small farmer holdings, primary and secondary processing, supply chain, infrastructure funding, efficient resource use, and marketing to reduce intermediaries in the market. 

Since the beginning of economic reforms in 1991, the Government of India has implemented numerous programmes to attract FDI inflows and improve the Indian economy. Almost every sector is open to FDI, such as retail houses under the FDI scheme. To initiate substantial growth in the agricultural sector, FDI is necessary.