Agriculture and Indian Economy

Sri Manik CS Bordoloi

Agriculture is the mainstay of Indian economy and hence the primary sector, providing employment to more than 50 per cent of the workforce; and enriched the country in food grain production. Now, the government has much stressed on “Doubling Farm Income” and it has been one of the major selling points of the present day government. The budgetary allocation of the agriculture and farmers welfare ministry for 2018-19 has been kept at Rs. 58,080 crore as against Rs. 51,576 crore for 2017-18, for the emancipation of the sector this year, but there are many wings of this sole bird called : Agriculture. The various sectors of the economy directly or indirectly are dependent on each other. Its various fronts are : Infrastructure, Pricing (MSP), Market, Machinery Automobiles, Horticulture, Dairy & Fisheries, Organic Farming, Allied Sectors, & MSME, Operation Green, and Rural India & Women Emancipation.
To spend this huge fund in these fields, sound planning and systematic implementation are must, for which projects are proposed. Initially a funding proposal is used to request funds by providing a compelling case for the proposed project. The main aspect is the focus on the goals and objectives of the project, feeding into a set of measures for evaluation of project success. Normally, benefit cost ratio (BCR) is used to get a rough idea about the viability of a project, and how much the internal rate of return (IRR) exceeds the discount rate, which is the organisation’s weighted average cost of capital (WACC)- the opportunity cost of the capital. Thus, benefit-cost ratio is an indicator, used in cost-benefit analysis, that attempts to summarize the overall value for money of a project or proposal. A BCR is the ratio of the benefits of a project or proposal, expressed in monetary terms, relative to its costs, also expressed in monetary terms. We can interprete BCR as if a project has a BCR that is greater than 1, the project will deliver a positive net present value (NPV) and will have an IRR above the discount rate used in the DCF calcultions. This suggests that NPV of the project’s cash flows outweighs the NPV of the costs, and the project should be considered. If the BCR is equal to 1, the ratio indicates that the NPV of the expected profits equal the costs. If the project’s BCR is less than 1, the project’s costs outweigh the benefits and it should not be considered.
Jules Dupuit, an engineer from France, first introduced the concept of BCR in 1848. Alfred Marshall, a British economist further enhancedthe formula that became the basis for BCR. Its formalised development occurred, when the Federal Navigation Act of 1936 was introduced by which it was required that projects must have a higher benefit to the general public than the total investments in the projects. Now, manpower recruitment projects are also being analyzed for its costs and benefits in recruiting persons to meet its needs. It is about deciding, quantitatively, whether to go ahead to hire a new team member to get releived from increased workload.
Clearly, the benefits of hiring a new person need to significantly outweigh the associated costs.This is where Cost-Benefit Analysis is useful.The results of the analysis are often expressed as a payback period – this is the time it takes for benefits to repay costs. Many people who use it look for payback in less than a specific period – for example, three years. However, bear in mind that it is best for making quick and simple financial decisions.
These steps are followed to do a Cost-Benefit Analysis :
Step One: Brainstorm Costs and Benefits
First, we are to take time to brainstorm all of the costs associated with the project, and make a list of these. Then, we do the same for all of the benefits of the project. Can we think of any unexpected costs? And are there benefits that we may not initially have anticipated?
When we come up with the costs and benefits, let us think about the lifetime of the project. What are the costs and benefits likely to be over time?
Step Two: Assign a Monetary Value to the Costs
Costs include the costs of physical resources needed, as well as the cost of the human effort involved in all phases of a project. Costs are often relatively easy to estimate (compared with revenues).
It’s important that we think about as many related costs as wr can. For example, what will any training cost? Will there be a decrease in productivity while people are learning a new system or technology, and how much will this cost?
We should remember to think about costs that will continue to be incurred once the project is finished. For example, we are to consider whether we will need additional staff, if our team will need ongoing training, or if we’ll have increased overheads.
Step Three: Assign a Monetary Value to the Benefits
This step is less straightforward than step two. Firstly, it’s often very difficult to predict revenues accurately, especially for new products. Secondly, along with the financial benefits that we anticipate, there are often intangible, or soft, benefits that are important outcomes of the project.
For instance, what is the impact on the environment, employee satisfaction, or health and safety? What is the monetary value of that impact?
Step Four: Compare Costs and Benefits
Finally, let us compare the value of our costs to the value of our benefits, and use this analysis to decide our course of action.
To do this, we are to calculate our total costs and our total benefits, and compare the two values to determine whether our benefits outweigh our costs. At this stage it’s important to consider the payback time, to find out how long it will take for us to reach the break even point – the point in time at which the benefits have just repaid the costs.
For simple examples, where the same benefits are received each period, we can calculate the payback period by dividing the projected total cost of the project by the projected total revenues:Total cost / total revenue (or benefits) = length of time (payback period).
But in case of a recruitment project in hiring new employees, it should be remembered that besides remuneration employees need proper infrastructure facilities and work environment in the workplace so that optimum if not maximum benefits can be derived from the employees by the recruiting organisation for its continuous growth. Over and above, what is of utmost important is a visionary leader to effectively guide and supervize the recruited manpower.
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