Harvesting wealth: Role of agriculture in economic revival

Agriculture remains the dominant marker of the country’s development trajectory. Every great country has passed through an agricultural revolution to its present greatness. Take our neighbors India and China, for example, which took about 30 and 50 years each to achieve agricultural reforms. The underlying principle is that if a country can grow its staple crops enough, it reduces their need for imports on the snow. Consequently, any agricultural surplus can be exported, creating a trade surplus.

In the 1980s, agriculture had a major impact on Nepal’s economy, representing about 60 percent of GDP and 75 percent of exports. Although 20 percent of the total land area could only be cultivated, it was the main livelihood of more than 90 percent of the Nepali population. In the same year, when agriculture accounted for three-fifths of Nepal’s GDP, India faced the imminent threat of a food crisis similar to the one it faced in 1970. The lack of growth in food grain production made India an importer of 10m tons of rice, potentially driving up prices. However, the Green Revolution in Indian agriculture brought about a transformation, embracing modern technological practices such as high yielding varieties, intensive agricultural research and technology, mechanization of agricultural implements and irrigation crop-based improvement India Export Competitive by 2021. By standing as ninth largest exporter in the world, specializing in agriculture related products.

Among varieties of foodgrains. Rice, however, has always been the main export of India, which contributes to more than 19 percent of the total agricultural export as of 2021/22. The prominence of agricultural surplus, especially rice surplus from terai also has been crucial in maintaining the viability of the Nepali economy. In 1965, an estimated 348,000 metric tons of rice was exported to India from Tarai, making Nepal the fifth-largest rice exporter in the word that year. Similarly, in the same year the GDP per capita of Nepal was $65.87, while $11.90 was that of India. Apart from rice, Tarai also produced exportable surpluses of jute, tobacco, mustard oilseed, sugarcane, spices, and many other agricultural commodities in similar quantities. Nonetheless, not only was Tarai an exporter to India, but the food-deficit Hilly region of Nepal also depended upon the food surplus of Tarai. However, a dramatic change has now taken place. The arable land increased by an appreciable 28.7 percent, but the proportion of people engaged in agriculture decreased to 66 percent as a result, agriculture now contributes only one-third of the country’s GDP. This decline can be attributed to the dominant use of subsistence agriculture, which leads to lower yields and limited agricultural production, as FAO emphasizes.

The agricultural sector of Nepal faces many challenges due to the lack of a comprehensive land use policy, resulting in sudden urbanization and encroachment on arable land, which reduces farmland and leads to food insecurity endanger Fertility loss and yield reduction due to irregular land use with flat and fractured soils is severe. Their introduction for sustainable soil management is important. Environmental and resource overexploitation leads to further degradation of land, water and ecosystems. Despite environmental protection laws and environmental assessments, the role under the Ministry of Agricultural Development (MOAD) is limited. Organic agriculture offers a sustainable alternative but faces certification and logistical challenges. A review of policies to support organic agriculture, including research and support to address limitations in initial production, is needed. MOAD offices in 378 extensions serve more than 11,000 farmers per office, and one technician per 1,500 farmers, far from developed country standards of one technician to 400 farmers, which cannot meet the needs of farming communities in condition species and in the agricultural environment.

The 21st century has been a whirlwind of change and it has affected each part of our lives spanning from culture to technology and reshaping our world giving a platform for our future. Gone are the days of being tied down by wires; now, space travel and interstellar exploration are within reach, while the value of money has expanded beyond paper and metal. In this rapidly evolving landscape, where data and information hold unprecedented power, the traditional measure of national income based solely on physical exports seems outdated. This begs the question: should countries like Nepal, instead of following the well-trodden paths of developed nations, return to their roots and embrace traditional methods of income generation that have sustained communities for thousands of years? Yet, amidst these debates on progress and tradition, there's a fundamental question: is agriculture still the biggest hurdle for developing countries to overcome in the age of innovation and technology?

The crux of the debate always remained the access to resources for the functioning of various industries. It should be noted that the IT sector requires highly skilled workers, whereas the agricultural sector requires a large amount of physical labor, in addition to good farming practices and irrigation techniques. Revitalizing the agricultural sector could address concerns regarding job insecurity and unemployment in the labor market. Considering Nepal’s fertile land, significant agricultural workforce, and potential for raw material production, investing in agricultural research, literacy, and technology becomes crucial to achieve surplus production. This surplus could then be utilized domestically at lower costs or traded internationally for profit, aligning with the principles of comparative advantage theory.

One of Nepal’s significant agricultural exports that demands attention is jute. Nepal is the third-largest exporter of jute woven fabric in the world. According to the latest statistical data from the fiscal year 2022, the procurement price of jute in India is InRs 4,425 per quintal, whereas the average cost of jute production in Nepal is Rs 1,563 per quintal, which translates to approximately InRs 2,500 per quintal.

Nepal’s production cost per kilogram of jute is InRs 25, implying that the selling price for 1.12 quintals of jute should be InRs 2,800. If India buys 1.12 quintals of jute at InRs 3,500 per quintal, Nepal would make a profit of InRs 700 per 1.12 quintals of jute, ceteris paribus. Statistical reports indicate that India imported around 300 thousand bales of raw jute, each weighing 180 kilograms, in 2022.

If the demand for Nepalese jute in the Indian market rises, which is plausible given India’s large population, Nepal’s profit margins could significantly outstrip production costs in a short time. This scenario underscores the lucrative potential of Nepal’s jute exports, fostering economic growth and reinforcing its status as a leading player in the global jute market.