Agri Business

At the crossroads

G. Chandrashekhar | Updated on May 27, 2013 Published on May 27, 2013

Need for policy push: The farm sector and its growth are critical to the nation simply because even today over half the population ekes out a living from it.



Uzhuthundu vaazhvaare vaazhvaar, mattrellaam thozhudundu pin selbavar.

‘Those who farm lead a high life; the rest bow and follow them’ - — Saint Thirvalluvar, ancient Tamil poet-philosopher).

The couplet, written nearly two millennia ago, of the importance of agriculture to human existence, in general, and economic activity, in particular, succinctly captures one of the most eternal truths; it is as relevant today as ever.

Indian agriculture is a remarkable story of resilient bounce-back from the ‘ship-to-mouth’ existence of the 1960s to becoming a significant exporter of grains (rice, wheat, maize, etc) now – thanks to the initiation of a series of growth processes .

Inherited in a state of stagnancy way back in 1947, the agriculture sector has faced several constraints and challenges in feeding the rapidly growing population with a ravenous appetite. The economic liberalisation policies initiated in 1991 targeted the manufacturing sector and, subsequently, the services sector.

Although agriculture was always stated to be the focus of policymakers’ attention, the single-minded devotion that the sector deserved seldom materialised, despite it being the country’s largest private enterprise providing livelihood to the majority of the population.

No mean achievement

Yet, the resilience of the sector can be gauged from the remarkable progress in output growth despite the weather and price shocks of the past several years.

It is no mean achievement that the country is today the world’s largest producer of milk (128 million tonnes), the second largest producer of rice (over 100 mt), wheat (over 90 mt), sugar (25 mt), cotton (34 million bales) and fruits and vegetables (over 200 mt), and a significant producer of a variety of spices, plantation crops, poultry and fishery products, and many more.

The last 20 years have been a mixed bag, though. In the early 1990s, agriculture and allied activities accounted for a quarter of GDP, provided employment to about 65 per cent of the population and contributed a fifth to total exports; now it accounts for about 15 per cent of GDP, employs about 55 per cent of the workforce and contributes to around 10 per cent of total exports.

Clearly, the farm sector and its growth are critical to the nation simply because even today over half the population ekes out a living from it. Agriculture is the sector that can ensure ‘growth with equity’.

A series of constraints and challenges continues to stymie growth. Fragmented landholding (nearly 80 per cent of the 140 million farming families hold less than two acres of land); continued dependence on monsoon; inadequate irrigation facilities (only 40 percent of cultivable land is irrigated); vulnerability to pest and disease attacks; absence of pre- and post-harvest technology adoption; lack of rural infrastructure; falling public investment in agriculture; and failure to build capacity among farmers to face market risks and volatility are some of the important factors that stymie growth.

No wonder agriculture growth rates have fallen well below the target of 4 per cent over the last three Plan periods. While the Ninth Plan (1997-2002) recorded 2.5 per cent, the 10th Plan (2002-2007) recorded 2.4 per cent.

In the 11th Plan, thanks to a series of proactive measures including sharp increases in the minimum support price for a number of crops, high levels of procurement and some market reforms, farm growth rate rose to 3.6 per cent.

Robust demand

At the same time, a combination of rising incomes, low per capita availability and demographic pressure continues to generate robust demand for a variety of food and non-food crops.

With output growth trailing demand growth, availability has tightened and shortages have surfaced. Production costs have increased, compounded in recent years by a substantial hike in minimum support price for many crops.

Consumption of inputs - seeds, fertilisers, agro-chemicals, bank credit, water - has increased manifold, but without a commensurate increase in actual production.

This calls for serious introspection among all the stakeholders. For the Twelfth Plan, the growth target of 4 per cent has been retained without indication of a change of strategy. If the previous Plan programmes and schemes have delivered growth well below the target, it raises questions about the achievability of the same 4 per cent target without a change of strategy.

Farm subsidies have multiplied to nearly unsustainable levels in recent years. Food subsidy alone stands at nearly Rs 75,000 core (rising from Rs 25,000 crore in 2003-04), while fertiliser subsidy peaked at Rs 1,00,000 crore in 2008-09, and currently stands at about Rs 50,000 crore following partial decontrol of fertiliser prices in 2010.

In 2000, the government announced a new National Agriculture Policy with a focus on optimal use of land, water and genetic resources in a sustainable manner including leasing of land, consolidation of land and use of 80 million hectares of marginal and wastelands and community lands for agro-forestry as well as improvement of rural marketing infrastructure. The Policy was a statement of good intentions, but remained on paper.

Silver lining

A watershed for Indian agriculture came in 2002-03 when the country introduced the first — and so far the only — genetically modified crop, Bt Cotton. From the position of being a net importer, in a few years (by 2008-09) India became the world’s second largest producer and exporter of cotton, with output doubling to well over 30 million bales.

This surely is a silver lining in the nation’s agriculture story of the last 20 years. This period also coincided with a number of negative developments such as rapidly rising food prices and food inflation, agrarian crisis, mass migration of the rural population to urban areas in search of livelihood and worse, farmers’ suicides on an unprecedented scale.

The vulnerability of farmers to risks was thoroughly exposed - monsoon risk, production risk, quality risk, price risk.

‘Ill fares the land, to hastening ills a prey, Where wealth accumulates, and men decay: Princes and lords may flourish, or may fade; A breath can make them, as a breath has made; But a bold peasantry, their country's pride, When once destroyed, can never be supplied’

( The Deserted Village by Oliver Goldsmith)

In order to contain market volatility and price risk, the Government lifted the ban on futures trading in commodities, including farm goods, some time in 2003. However, in 2007-08, following serious shortages and high levels of food inflation, some agri-commodities were taken off the futures platform.

Today, the country’s farm sector is at a juncture where further reforms are necessary to achieve greater efficiency and productivity for sustainable growth. Indian yields are among the lowest in the world for many crops.

The declining share of agriculture and allied sectors in the country’s GDP is consistent with the normal development trajectory of any economy, but rapid agricultural growth remains vital for jobs, incomes and food security.

Need of the hour

We have to take cognisance of newer challenges like land constraints, water shortage and climate change. Vertical growth (higher productivity) rather than horizontal growth, scientific management of depleting water resources and R&D efforts to overcome the adverse consequences of global warming must visit any policy discourse. India has all it takes to be a farm superpower.

Not many countries are so well endowed with abundant sunshine (270 days a year), rainfall (900 millimetres a year), 8,000 km of coastline, varied agro-climatic zones, hundreds of criss-crossing rivers, extraordinary biodiversity and, of course, a strong labour force. What we need are growth-oriented policies that encourage investment, enterprise and technology infusion. De-risking Indian agriculture through a series of policy measures is imperative.

Such policies should be uniformly pursued across the country with regionally differentiated strategies taking into account local conditions. Faster, More Inclusive and Sustainable Growth is the theme of the Twelfth Plan and agriculture has what it takes to deliver such growth.

Published on May 27, 2013
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