Commercialisation alone will not transform agriculture: The participation of smallholder families is important

 I read this year's agricultural budget with mixed feelings because I grew up in a smallholder farming family in rural Nepal and spent my career studying smallholder agriculture in Asia and Africa. To be fair, the budget contains a few positive aspects. The government has increased budget allocation for fertilizer procurement and domestic production, continued support for agricultural insurance, expanded irrigation investments, promised farmer identification cards, and proposed reforms to improve agricultural extension and market services. 

These are significant investments that ought to be acknowledged. Also, the commitment to presenting an Agriculture Bill and the warehouse-receipt financing system is a welcome step.  But whether they will benefit smallholders entirely depends on how they will be integrated into their design and implementation.  What concerns me more is the broader vision of agricultural transformation underpinning the proposed budget. The budget emphasizes "commercial agriculture", attracting private investment, and transforming agriculture into a profitable enterprise.  Three specific provisions stand out. 

First, the government proposes incentive grants of up to 40 percent for agricultural investments of up to Rs 20 million.  Second, it encourages land banks, argon-pooling, and the consolidation of unused agricultural land into commercial operations.  Third, it explicitly signals a gradual phase-out of agricultural subsidies primarily going to smallholders.  These measures may improve efficiency and attract private investment, but they also raise important questions about whether smallholders will benefit.

 While none of these policies are inherently bad, a critical question emerges: where do Nepal's millions of smallholder farmers fit into this vision? Although smallholders are not intentionally excluded, there is a risk that commercialization will move faster than the institutions needed to make it inclusive and equitable.  This is significant because agriculture still accounts for more than 65% of our population. Small and scattered farms abound. Production systems are diverse and heavily influenced by geography.  Rural livelihoods depend not only on farming but also on livestock, wage labor, migration, and remittances.  These are the lessons I've learned from years of working with smallholder farmers in Asia and Africa through organizations like IFAD, the World Bank, and CGIAR. In Ethiopia, for instance, I worked on agricultural and land restoration programs where the government was trying to improve productivity while maintaining the livelihoods of smallholder farmers. 

We cannot simply copy agricultural models from countries with large-scale mechanized farming systems. One lesson is that farmers are much more willing to adopt new technologies and improved practices when agricultural investments are combined with social protection and risk management.  In a similar manner, farmers in Niger and Nigeria frequently were unable to benefit from commercialization efforts due to climate shocks, inadequate institutions, and restricted financial access. Building resilience and reducing risk was key. Lessons from our neighboring countries are equally important. 

In India, while working with vulnerable tribal communities, I saw that commercialization works best when farmers are organized, connected to markets, and supported by strong local institutions.  Rarely is market access sufficient on its own. When I was in Sri Lanka, I noticed that strengthening farmer organizations and value chains was frequently just as important as increasing production itself. One thing I learned from these countries is that successful agricultural transformation does not occur when governments encourage large-scale commercial agriculture. It happens because governments invest in helping smallholders become more productive, more resilient, and better connected to markets. This is where I think the budget falls short.  What I find particularly striking is what is missing from the budget.  There is very little discussion of women farmers, despite the fact that male out-migration has fundamentally transformed Nepal's agricultural sector.  There is little discussion of youth engagement in agriculture, climate adaptation, or strategies for channeling remittance into agricultural investment. Migration has become one of the defining features of rural Nepal.  

Migration has created labor shortages that are increasingly constraining agricultural production.  Any serious agricultural strategy must therefore invest in labor-saving technologies, farm mechanization, local capacity building, and programmers that help women and youth farmers succeed. Equally important, Nepal must prioritize building institutions before aggressively pushing commercialization. Commercial agriculture requires roads, irrigation systems, storage facilities, cold chains, aggregation center's, farmer organizations, extension services, affordable credit, insurance, and reliable buyers.  Without these foundations, commercialization can expose farmers to greater market risks while delivering few of the promised benefits.  

There is no clear plan for connecting millions of smallholder farmers to the promised "agricultural transformation" in the budget. Thus, commercialization alone will not transform Nepal's agriculture.  The real measure of success should not be how many commercial farms are established or how much private capital is mobilized.  It should be whether the millions of smallholder families who still form the backbone of Nepal's agriculture are able to participate in and benefit from the promised 'agricultural transformation'. The future of Nepal's agriculture does not lie in choosing between subsistence farming and large agribusiness.  It lies in helping millions of smallholders become productive market participants while maintaining resilience, food security, and rural livelihoods.  Commercialization should be a tool for empowering smallholders, not a pathway for replacing them.

 Dr Kafle is an Assistant Professor of Agricultural and Development Economics at Texas A&M University, USA