Since independence, India has made considerable progress in agricultural development through increased crop production, productivity, technological advancements, and crop diversification. However, agricultural growth has seen periods of fluctuation over the past sixty years.
After initial enthusiasm during the First and part of the Second Five Year Plans, growth stagnated and declined. Growth accelerated again from the mid-1960s, gained momentum in the 1980s, but decelerated significantly during the 1990s and the following decade. This slowdown is particularly concerning for foodgrains production and food security.
The challenges include increasing un-remunerative and unsustainable agriculture, agrarian crisis, rural distress, farmer suicides, and rising import dependence on essential food products like pulses and edible oils.
Sustained and broad-based agricultural development is essential for:
Economic reforms in India cannot succeed without addressing the growth and challenges of agriculture.
Agriculture remains the primary livelihood for the majority of India’s population. Since independence, government policies and strategies have played a critical role in shaping agricultural trends.
Two distinct phases of agricultural strategies can be identified:
This period focused on land reforms and irrigation expansion. India abolished the Zamindari system, transferring occupancy rights to 20 million statutory tenants cultivating 40% of the land. This reform expanded owner-operated farms and helped modernize agriculture by removing key obstacles.
Efforts were also made to reduce exploitation by money lenders through government-supported cooperatives.
From the mid-1960s, emphasis shifted to technological improvements, driven by stagnant yields and limited cultivable land. India adopted High Yielding Varieties (HYV) of wheat and rice, initiating the Green Revolution.
This era saw rapid modernization and increased private investment in agriculture. The government introduced area-specific and target group-specific programs in the 1970s to overcome selectivity bias.
The establishment of the Food Corporation of India in 1965 secured the public sector’s role in food grain trade. Subsidies and government expenditure in agriculture increased significantly.
Indian agriculture achieved respectable progress over the last six decades. It recorded an annual growth rate of 3% in the pre-Green Revolution period and 2.7% in the subsequent period. Food grain production increased from 55 mt in 1950-51 to 152.4 mt in 1983-84, with an annual growth rate of 2.7%.
Irrigation was the most important source of this growth, accounting for between half and two-thirds of the increase in food grain production. Despite this, production of pulses, a major protein source, performed poorly, growing only at an annual rate of 1.27%, from 8.40 mt in 1950-51 to 12.89 mt in 1983-84.
Economic reforms were expected to boost agriculture, but the growth rates post-reform were modest: 2.5% in the Ninth Plan, 2.4% in the Tenth Plan, and estimated 3.4% in the Eleventh Plan. Growth was largely driven by yields, which also saw a slower pace post-reform than before.
Studies highlight key differences between the two periods:
Key points for policy formation:
There is growing recognition of regionalisation in agricultural planning based on agro-climatic features such as soil type, climate, rainfall variability, and water resources. The Planning Commission has started preparing agricultural strategies for 15 agro-climatic regions.
Concerns arise over a falling rate of capital formation in agriculture during the 1980s, raising doubts about sustaining even modest growth. Although absolute investment levels have not declined, the proportion of plan outlays to agriculture has decreased.
Gross capital formation in agriculture and allied sectors rose from 13.1% of agricultural GDP in 2004-05 to 20.1% in 2010-11.
The Reserve Bank of India observed that despite quantitative growth, the agricultural credit system suffers from four major weaknesses:
These weaknesses threaten the system’s sustainability without ongoing State support. Quality of credit has not improved despite increased flows. Credit is concentrated among few regions and wealthier rural farmers and businessmen.
Rural Financial Institutions (RFIs) including commercial banks report three key challenges:
The price policy aims to encourage higher investment and production while safeguarding the interest of consumers by ensuring remunerative prices to growers. It also seeks to evolve a balanced and integrated price structure considering the overall needs of the economy.
With this aim, the Government announces minimum support prices (MSPs) for major agricultural commodities each season and organizes purchase operations. However, supply response studies generally show that agricultural output is more responsive to availability of the right technology and inputs like irrigation and fertilizer than merely to price.
Thus, price policy plays a supportive role but is not the prime instrument. If the price regime is discouraging, technology adoption can be slow. In India, price incentives come from continuously increasing procurement prices aligned with changes in costs and terms of trade, along with subsidies on inputs such as fertilizer, credit, irrigation, and electricity.
There are no simple alternatives in terms of single choices like:
The complexities involve considerations of equity, efficiency, and environmental soundness. Alternatives may include subsidies for some groups versus for all.
Institutional failures are glaring: ground-level studies from across the country, especially in regions with rapidly increasing input use, suggest disproportionate input use on farms leading to increased liabilities for farmers. This is largely due to lack of technical know-how and inadequate support from extension institutions.
Currently, policy should focus on improving productivity of crops in dry regions and on small farms, mainly coarse cereals, pulses, and kharif oilseeds. Encouraging productivity in the dairy sector is equally important for these groups.
These regions have a comparative advantage in dairying through open grazing due to large areas of cultivable wasteland and goucher land, provided a massive land development program is undertaken. Small farmers should first reach self-sufficiency in traditional crops and enterprises before diversifying into input-intensive high-value crops.
The immediate task is to encourage self-provisioning rather than market exposure for small and marginal farmers.
The growth of agriculture and allied sectors remains critical, accounting for about 58% of employment in the country (as per the 2001 census). The sector supplies food, fodder, and raw materials for a large segment of industry, making it a necessary condition for ‘inclusive growth’.
Recently, the rural sector including agriculture is recognized as a potential source of domestic demand, influencing marketing strategies of entrepreneurs aiming to widen demand for goods and services.
The real challenge is to enhance capital investment in agriculture by both public and private sectors in a sustained manner. Sixty per cent of net sown area remains rainfed, and potential in rainfed areas is underutilized, so targeted development of these areas should be prioritized.
India’s 60-year quest for land reform remains incomplete. The long-held obsession with land ceilings should give way to methods aiding land consolidation. Without consolidation, supply will remain constrained and productivity and wages low.
Average farm size has shrunk to less than 1.2 hectares, with many holdings too small to be economically viable. Consolidating these minuscule holdings into viable units can spur investment in productivity-enhancing measures like irrigation, boosting overall farm production.
The focus should be on raising farm productivity with adequate emphasis on rainfed areas, and diversification from crop farming to livestock, fisheries, poultry, and horticulture, while addressing environmental concerns.
Higher investment levels are required not only to increase productivity but also to create infrastructure for transport, storage, and distribution of agricultural produce.
The continued lackluster performance of Indian agriculture is a concern. The foremost question is the next breakthrough in Indian agriculture, as lack of reform and paucity of investment since the 1990s remain significant barriers.
Marketing and other reforms are necessary to meet growing demands and to prepare agriculture for challenges posed by human and environmental factors. Modernizing agricultural markets and connecting them with essential infrastructure and institutions is urgently needed.