Indian Agriculture

 

  • Mainstay of Indian Economy
  • Since independence, undergone a change from being the sector contributing the highest share to the GDP to one contributing the lowest share.
  • Agriculture is a state subject.
  • GDP contribution (Agriculture and allied sector)
    • 5 pc in 1950-51
    • 7 pc in 2008-09 and 14.6 pc in 2009-10. It was 19 pc in 2004-05. (2004-05 prices)
    • Agricultural GDP grew by 0.4 pc in 2009-10 and -0.1 pc in 2008-09.
  • Employment
    • 9 pc in 1961
    • 9 pc in 1999-2000
    • 2 pc in 2008-09
    • 1999-2000: Number at 237.8 million
  • GCF
    • Share in total GCF 2009-10: 7.7 pc (2004-05 prices)
    • GCF as % of agricultural GDP: 2007-08 – 16.3, 2008-09(P) – 19.67, 2009-10(QE) – 20.3
    • GCF as % of total GDP: 2007-08 – 2.69, 2008-09P – 3.09, 2009-10QE – 2.97
  • Contributes to agricultural growth and industrial demand
  • Contributed 10.59 pc of total exports in 2009-10.
  • Due to the large number of workforce in this sector, the growth of agriculture is a necessary condition for inclusive growth.
  • Food grains production
    • Highest in 2008-09: 234. 47 mn t
    • 2009-10: 218.11 mn t

Agriculture and Industry

  • Agriculture as
    • Supplier of wage goods to the industrial sector
    • Provider of raw materials
    • Consumer of agricultural capital goods produced by industry
  • Stagnation in agriculture
    • Get data on CAGR

Land Reforms

  • Great scarcity and uneven distribution of land
  • Focus of agricultural policies in the initial years was on institutional changes through land reforms
  • Two objectives of land reforms in India
    • To remove the impediments to agriculture that arise due to the character of agrarian structure in rural areas
    • To reduce or eliminate the exploitation of tenants/small farmers
  • Four main areas of land reforms in India
    • Abolition of intermediaries (zamindars)
    • Tenancy reforms
    • Land ceilings
    • Consolidation of disparate land holdings
  • Economic arguments for land reforms
    • Equity
    • Small farms tend to be more productive than large farms
    • Owner cultivated plots of land tend to be more productive that those under sharecropped tenancy
  • Abolition of zamindari was successful while the other three areas of land reforms met with limited success
  • Operation Bargha. Also, LR in Kerala
  • Regional trends in LR
  • Effect of land reforms
    • On tenants
      • Absentee landlordism declined
      • Tenancy declined. In some cases, tenants were evacuated from the land.
      • In some cases there was a drift of tenants into landless
      • Where tenants had not been evicted, tenancy was pushed underground
    • On equity
    • On productivity
    • On agrarian power relations
  • The National Commission on Farmers has placed the unfinished agenda in land reform first in its list of five factors central overcome an agrarian crisis
  • Way forwards
    • Land reforms that make tenancy legal and give well defined rights to tenants, including women, are now necessary

 

Technology and Green Revolution

  • In the early 60s India faced several crises
    • It had to fight two wars: Pakistan and China
    • Severe drought in 1965 and 1966
    • US was using PL-480 food supply as a means to twist India’s arms to meet US interests
  • This called for an overhaul of the agricultural strategy and the need to be self-sufficient in food production
  • Three phases of green revolution
    • 1966-1972
    • 1973-1980
    • 1981-1990
  • 1966-1972
    • C Subramaniam and MSS
    • 1965: Agricultural Prices Commission and Food Corporation of India set up
    • Introduction of HYV seed of wheat from Mexico created by CIMMYT
    • Under the new agricultural policy, the spread of HYVs was supported by public investments in fertilisers, power, irrigation and credit
    • Food grain production shot up
      • 1966-67: 74 mt
      • 1971-72: 105 mt
    • India became nearly self-sufficient in food grains
    • What led to the increased production?
      • Favourable pricing policy led to adequate incentives
      • National research system proceeded to indigenise the new seeds to tackle their shortcomings
      • Availability of inputs including canal water, fertilisers, power and credit
      • Subsidies
      • Role of credit began to be important after 1969
    • 1973-1980
      • This phase saw many challenges
      • Consecutive droughts in 1972-73
      • Oil shock
      • Production fell. Imports began again.
      • Thereafter, government increased fertiliser subsidies
      • Groundwater irrigation increased in  importance
      • HYV technology extended from wheat to rice
    • 1981-1990
      • 1986
        • Rice prod: 63.8 mt (1964: 37)
        • Wheat prod: 47 mt (1964: 12 mt)
      • Even when the ‘worst drought of the century’ struck in 1987, food needs could be adequately met due to buffer stocks
      • HYV technology spread eastward to states like West Bengal and Bihar
      • The impact of HYV technology had started to plateau however
      • Input subsidies kept on increasing
      • 1991: Input subsidy was 7.2 pc of agricultural GDP
    • What was the impact of highly regulated policies on agriculture?
      • There were barriers on pricing, movement and private trading of agricultural produce
      • The external sector was burdened with various tariff and non-tariff barriers to agricultural trade flows
      • The overvalued rupee produced an anti-export environment for agriculture
      • High protection to industry produced high industrial prices and adverse terms of trade for agriculture, reducing the relative profitability of the primary sector
    • What was the aim of agricultural pricing in pre-reform era?
      • Ensure inexpensive food for consumers
      • Protect farmers’ incomes from price fluctuations
      • Keep the balance of payments in check
    • Agriculture in post-reform era
      • Impact: 1. Growth in PCI led to an increase in food demand and also diversification. Terms of trade between agricultural and industrial prices improved in favour of agriculture
      • Increased profitability has led to increase in private investments which are now double the public investment in agriculture.
      • Growth rates
        • 1980s: 3 pc
        • 1990s:
        • 2000s:
        • Tenth Plan: 2.47 pc (as against 7.77 pc of overall economic growth)
      • This has however not translated into reduction of poverty
      • There has been an increase in both urban and rural inequality
    • Deceleration in agricultural growth
      • Declined during 90s
      • Deceleration in the growth of area, production and yield
      • Food production of Rabi crops has off late equalled the Kharif crops. This has to an extent reduced the over dependence on monsoon and imparted some stability to agricultural production
      • Area-wise, the deceleration was more in case of the Indo-Gangetic region
    • The instability in agricultural growth is more in states with high percentage of rain-fed areas
    • Acreage: declining trend in most crops during the period 1995-96 to 2004-05
    • Productivity: sharp decline (1995-2005). Healthy performance of cotton and maize though

Major factors affecting growth potential

  • Lack of long term policy perspective
    • No long term strategy for agricultural development
    • National Agricultural Policy was announced only in the year 2000
    • Sectoral priority to industry from the second FYP
    • Weaknesses of policies followed for agricultural development
      • Policies provided little incentives for the farmers as the prices were depressed and the sector was disprotected vis a vis other sectors of the economy
      • Inward-looking policies
      • Excessive price based focus than non-price factors like water, infrastructure, R&D, extension services etc
    • Investment in Agriculture and Subsidies
      • There have been cutbacks in agricultural investment and extension, but not in subsidies
      • Agricultural subsidy as pc of GDP:
      • Public investment in agriculture declined from 4 pc of agriculture GDP in 1976-1980 to
      • Subsidies on fertiliser, power and irrigation have contributed to soil degradation
      • It is important to reduce subsidies and increase public investment in crucial areas such as soil amelioration, watershed development, groundwater recharge, surface irrigation and other infrastructure
      • Public Sector GCF in agriculture stood at less than Rs 50 bn at 1993-94 prices
      • It is imperative to reduce these subsidies for stepping up public investment in agriculture
      • After 2003, the investments have started to increase. In  2006-07 public sector GCF was 3.7 pc of agricultural GDP and  total GCF was 12.5 pc of agricultural GDP
      • Three areas should get priority in public investments
        • Rural roads
        • Electricity
        • Irrigation projects
        • <all three of them are under Bharat Nirman project>
      • Complimentarity between public and private sector capital formation in agricultural sector. Public sector can create infrastructure while the private investment is essential for short term asset building mainly in the areas of mechanisation, ground levelling, private irrigation etc
    • Lagging research and development efforts
      • After the green revolution, there has been no major breakthrough in agricultural research. GM is a promising area but its safety has not yet been conclusively established.
      • Poor productivity in India compared to other countries and even compared to world average
      • India, however, has the largest public agricultural research establishment in the world. ICAR and agricultural universities
      • India spends only 0.3 pc of agricultural GDP for research as compared to 0.7 pc in other developing countries and 2-3 pc in case of developed countries.
      • There is hardly any scope for expansion of area. Hence, productivity must increase to keep up with the increasing demand. R&D has a lot of role to play here
      • New varieties of seeds need to be developed suited to different regions of the country
      • The research system should be responsive to the changing needs and circumstances
    • Technology generation and dissemination
      • Fixed land. Hence technology
      • Focus on yield as well as sustainable use of land
      • Focus should be on specific requirements of each agro-climatic region
      • Ned to develop much stronger linkages between extension and farmers
    • Rising soil degradation and over-exploitation of groundwater
      • Around 40 pc of Indian’s total geographical area are officially estimated as degraded
      • Soil health is deteriorating in Punjab and Haryana
    • Degradation of natural resources
    • Subsidies vis-a-vis investments and farm support systems
    • Agriculture’s terms of trade and farm price volatility
      • Ensure rapid development of backward farm linkages
    • Summary: Need to correct the policy bias against agriculture, make higher investments, develop new varieties of seeds, conserve natural resources like land and water and provide incentives to the farmers to adopt modernisation

 

Some Issues in Indian Agriculture

  • Low public investment
  • Halt in the modernization of agriculture
  • Agricultural indebtedness
  • Farmer suicides
  • Agricultural imports and future markets

Subsidies

  • Talk about bringing urea under the Nutrient Based Subsidy (NBS) system and decontrolling its prices
  • Downsides
    • Fertilizer subsidy touched almost 1 lakh crore in 2008-09
    • Promotes overuse of fertiliser and thereby catalysing soil degradation
    • As a result, agricultural production in the bread baskets of the country has stagnated, posing a threat to the food security of the country
    • Drylands do not receive the benefit of crores of subsidy given in fertilizers

 

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