1.
The average size of holdings has shown a steady declining trend over the last three decades.
What are the challenges faced by farmers due to fragmentation of land? What needs to be done
in this regard?
Approach:
Introduce briefly declining trend of land holding size as well as current scenario in this regards.
Mention the challenges faced by farmers due to fragmentation of land.
Provide some suggestions to resolve the given challenges.
Discuss some steps taken by government in conclusion.
Answer:
As per Agriculture Census 2015-16, the average size of operational holding has declined to 1.08
hectare in 2015-16 as compared to 1.15 hectare in 2010-11. The small and marginal holdings (<2 ha) now constitute 86%, while the large holdings (>10 ha) are merely 0.57% of the total land
holdings.
High population pressure, decline of joint family
system, increasing indebtedness and conversion of
agricultural land to other uses are some of the reasons
behind this fragmentation.
Challenges faced by farmers due to
fragmentation of land:Low productivity: Small
and fragmented landholdings are suitable for
subsistence agriculture, where farmers are forced
to use age-old labour-intensive techniques. This
decreases the productivity of land and in turn lack
of investment for increasing productivity.
Difficulties in modernisation: Use of improved
agricultural practices e.g. use of tractors, micro-irrigation techniques, etc. becomes
uneconomical in small landholdings.
Wastage of land: There is wastage of land in boundaries and fencing.
Indebtedness: As per Economic Survey-2016-17, there is an inverse relationship between
indebtedness and the size of land holding. In Bihar and West Bengal, more than 80% of
agricultural households with marginal landholdings are indebted.
Disputes over boundaries: Small fragmented lands become one of the major cause of
complaints related to boundary disputes.
Overall, it makes farmers prone to all sort of agricultural risks including Production risks, Climatic
risks, Price risks, Credit risks, Market risks, and Policy risks.Measures to resolve these issues:
Consolidation of land holdings: Land holdings can be consolidated by promoting land leasing
(to ensure security of tenure to tenants), land pooling of smaller lands.
Promoting collective farming: Small farmers can be nudged to undertake cooperative farming,
form Farmer Producer Organizations (FPOs) etc.
Economic viability of farms: The economic viability of smaller landholdings can be improved
by promoting mixed farming, cooperative farming and crop diversification through high value
crops.
Delineation of farms: To bring more clarity on farm boundaries and titles, digitization and
modernization of land records should be promoted.
Easing pressure on farmland: The land-man ratio of the landholdings can be improved by
providing alternate economic opportunities through urban growth to attract rural migrants,
promotion of non-farm activities etc.
Few steps like Model Contract Framing Act 2018, promotion of food processing industries, adoption
of low-cost farm technologies etc. have been taken keeping an eye on problems due to small land
holdings in India.
2.
Answer:
The price of one currency in terms of the other currencies is known as the exchange rate. There are
generally two types of regimes that determine exchange rates – fixed exchange rate system and
flexible exchange rate system.
The differences between the two are as follows:
A Fixed exchange rate is an exchange rate of the currency that is fixed at some level with
respect to some benchmarks like US dollar or gold and adjusted only infrequently. Whereas,
Flexible/floating exchange rate is an exchange rate which is determined by the forces of
demand and supply in the foreign exchange market.
A fixed rate is set by the government or Central Bank and is also maintained at that level. But,
in flexible system, the central banks do nothing to directly affect the level of the exchange
rate.
Fixed exchange rate regime is less susceptible to volatility and fluctuations and generally
depends on change in government policy, whereas currencies under flexible exchange rate
regime are susceptible to volatility and high fluctuations as it depends on day to day scenario
and market conditions.
Change in exchange rate in fixed regime is termed as devaluation or revaluation whereas in
flexible regime it is termed as depreciation or appreciation.
Determination of exchange rate under a flexible exchange rate system:
Let us understand how exchange rate is determined in a flexible exchange rate system, by taking a
two country model of say, India and USA:
Under a Flexible Exchange Rate system, the
equilibrium rate of exchange is determined by
forces of demand and supply of foreign exchange.
The demand of foreign currency arises to
import goods & services; to purchase financial
assets abroad; send gifts/grants etc. It varies
inversely with the exchange rate. This because,
at a high exchange rate, the amount of rupees
required per unit dollar would be high and vice
versa. The demand curve plotted against
exchange rate is therefore downward sloping.
Similarly, the supply of foreign currency arises
because of export of domestic goods; arrival of
foreign tourists; foreigners undertaking direct
investment; remittances etc. The supply of foreign currency varies directly with the exchange
rate. This is because a higher exchange rate gets more rupees per unit currency. This increases
the profitability of the exporters. The supply curve plotted against exchange rate is therefore
forward sloping.
The flexible exchange rate system autocorrects any disequilibrium in the balance of
payments. This means that any deficit or surplus in the BoP automatically triggers movement
in the exchange rate to an equilibrium value where the demand and supply of foreign exchange
becomes equal again.
For instance, if a deficit occurs in an economy i.e. increase in imports, there will be excess
demand of foreign currency. Such a demand will lead to the appreciation of the foreign
currency & depreciation of the domestic currency. Imports will become expensive and
exports more profitable. The quantity demanded of the foreign exchange will fall and quantity
supplied rise till the deficit is eliminated. This will be the new higher equilibrium value of the
exchange rate. Similarly, a surplus in the balance of payments leads to an appreciation of the
domestic currency. Hence, exports will fall while imports increase till the surplus is eliminated
at the new lower equilibrium value of the exchange rate.
