Indian Agriculture system: Major issues and problems

Recently, farmer agitation and protests regarding agricultural loan waiver have sparked a political debate all over the country. All this happened after UP's CM Mr. Yogi announced to waive off agricultural loans worth 36,359 crores.
The phenomenon of farmer's distress and agitation is not new, to understand this we must have knowledge about features of agriculture system--

Here we provide salient features and problems associated with Indian agriculture and production --

1. India ranks second world wide in farm output or production, obviously number one is China.
2. India holds second largest agricultural land in world, first one being USA.
3. Agriculture along with forestry and fisheries contribute around 17% of India's GDP.
4. 49% of Indian workforce is indulged in agricultural works, in other words we can say it provides employment to half working population of India.
5. India is one of the largest exporter of agricultural/horticultural and processed foods. Products are exported to more than 120 countries. India is world's largest producer of milk, major spices, jute etc. Also one of rhe largest producer of rice and wheat.
6. India also produces a lage number of organic agricultural products. Actually organic methods of farming leads back to indus valley civilization and even before that.
7. Indian agriculture is diverse. This diversity is present due to complex demogrphy and diverse ecosystem of India.

Apart from these India's  agricultural sector suffers from various drawbacks as listed here--

1. In our country around 49% people are associated with agricultural activities, yet this sector contributes only around 13 to 14% of total GDP.Now this should clear doubts about why per capita income in agriculture sector is low as compared to other fields.
2. India has one of the largest agricultural land but due to population density most of the land is fragmented, or we can say it is divided into small parts which leads to inefficiency of production.
3. Indian production (agricultural)  is neither market driven nor fully government controlled, hence wages of farmers are always uncertain.
4. Lack of suitable marketing system and inefficient chain of traders further contribute to lower prices for farm products.
5. Lack of infrastructure like cold storage, transpot etc. is responsible for world's highest crop spoilage rates in India.
6. India is way behind from developed countries technologically, in pacaging, processing and farming productivity. And this leads to income loss to producers.
7. Lack of proper irrigation system increses our dependability on nature and monsoons. It increses risks and losses of input cost to the farming.
8. Cases of farmer's suicide are not new in India. And it haapens mostly due to agrarian crisis( concept of agrarian crisis is explained in next article).

All these factors have resulted in lower economic status of people associated with farming work. Mainly small scale & medium scale farmers are victim of it.

Almost half of India's population is indulged in agricultural works and most of them are below poverty line, means that agricultural work is not yielding benefits to them economically. Less income results in poverty and less consumer capacity, which is harmful for economy and society.

For more details regarding all possible solutions to this problem & initiatives taken by government, check out our next article. 

GST tax system: Pros and Cons

GST stands for goods and services tax. It is indirect tax lavied by the government on various goods and services.

Salient features of GST system -

1. The GST taxation laws will put an end to multiple taxes like excise duty, CST(central sale tax), VAT, service, luxury and entertainment tax among others.
2. GST is an inclusive tax and will replace a number of other indirect taxes currently applicable in India.
3. The GST has two components

• Central GST(CGST) -which will be lavied by central government
• State GST(SGST) - which will be lavied by state government
• Apart from them IGST(the integrated goods and services tax) is charged on interstate transfer of goods.

How does it work(GST)?

• It is single tax on the supply of goods and services right from the manufacturer to consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition. Ita means that GST is a tax only on value addition at each stage.
• Let’s assume, when Manufacturer “A” sells his goods from Gujarat to Haryana, he is liable to collect both Excise Duty and Central Sales Tax at the rate of 12.5% and 2% respectively, being an inter-state sale. Further, Dealer “B” will not get any credit of this Excise Duty and CST. Dealer “B” in turn sells it to Dealer “C” in Gurgaon and charges VAT on such sale. Dealer “C” sells it to Dealer “D” in Delhi and collects CST, and finally Dealer “D” sells these goods to the end consumer in Delhi, collecting VAT.

Pic credit: cleartax.in

From this diagram the difference between previous tax system and GST tax system is clearly understood.

Benefits of GST

For industry/businesses

1. Easy compliance - Transperency in taxation system and online availability of taxpayer services and will help in easy compliance of this system .
2. Uniformity in tax rates and structure -This will ensure that tax rates are consistent across the country. This will increse ease of doing business and remove hidden taxes.
3. Removal of cascading effect is another major factor associated with this system-A product on which excise duty is paid can also be liable for VAT. Suppose a product A is manufactured in a factory. As soon as it releases from factory, excise duty has to be paid to central government. When that product A is sold in same state then VAT has to be paid to state government. Also no credit on excise duty paid can be taken against output VAT. This is termed as cascading effect since double tax is levied on same product. 
4. Possible reduction in cost of utilities -Due to reduced cost of logistics and distribution prices may come down for some goods.

For government

1. Simple and easy to administer tax system as compared to previous system. 
2. Better control on leakages of tax money.
3. Higher revenue efficiency -This system will decrese the cost of collection of revenues and hence incres the efficiency of revenue collection

For consumer

1. Single and transparent taxation system
2. No hidden taxes

Now negatives of the GST system are

1. GST is being referred as a single taxation system but in reality it is a dual tax in which state and centre both collects separate tax on a single transaction of sale and service.
2. GST taxation system limits the power of state government in terms of revenue collection. It is estimated that due to implementation of GST system a large revenue will be transferred to centre instead of states. This can further create disharmony in federal system of India.
3. There is a lot of confusion about new tax system, even after so many days of GST implementation. Some business owner are also opposing it for it may result in extra burden on their pockets.