Issues and Concerns of Indian Agriculture

Issues and Concerns of Indian Agriculture

• Some Aspects of Agricultural Issues and Concerns

  • Agricultural production, productivity, and value of output have decelerated.
  • Growth of the agriculture sector has been lower than that of the overall economy, with a worrying deceleration in the 1990s compared to the 1980s, leading to the agrarian crisis.
  • The state has been withdrawing instead of facilitating risk-taking farmers.
  • Decline in public investment in irrigation and related infrastructure.
  • Tragedy of the commons exemplified by declining water tables.
  • Inadequate access to formal credit sources, resulting in greater interest burden on farmers.
  • Waning link between research and extension services.
  • Increased reliance on input providers for advice, leading to supplier-induced demand.
  • Farmers face multiple risks including weather vagaries, price shocks, and spurious inputs, compounding already low returns.

• Implications of Poor Agricultural Performance

  The poor performance of agriculture, despite overall economic growth, has serious implications:

  • It causes widening income disparities between agriculture and non-agriculture sectors.
  • More than 50% of the workforce depends on agriculture, and slow agricultural growth puts this population in distress.
  • Declining area under food grains has constrained growth in the 1990s and must be reversed for future growth.
  • Increased irrigation coverage may support growth in gross cropped area but there may be limits to expansion due to ultimate irrigation potential.

• Productivity Growth

  During the planning era, Indian agriculture made significant strides but continues to face:

  • Structural limitations causing crop and regional imbalances.
  • Aggregate supply response remains poor, risking persistent and accentuated demand-supply gaps for some crops.
  • Urgent need for growth in crop area is limited by scope for expansion; hence, future growth depends on crop productivity growth.
  • Productivity growth largely depends on scientific research and technology diffusion.
  • Even without breakthroughs, yield levels can be raised by more balanced dissemination of know-how.

• Investment in Agriculture

  Investment is critical for expanding gross cropped area and boosting productivity:

  • Key question: public vs private investment and their complementarity.
  • While private investment trends are encouraging, private sector alone cannot meet all investment needs, especially in large irrigation projects, R&D, and support systems.
  • Development of irrigation is essential for increasing cropped area and spreading yield-raising technology.
  • Higher agricultural growth depends on vigorous R & D efforts.
  • Policies must focus on upgrading research and extension quality, improving rural energy sustainability, infrastructure, dryland agriculture technologies, and policies to control water and land degradation.
  • Existing public capital assets are deteriorating due to inadequate funds for operation and maintenance, which must be reversed urgently.
  • Public investment in irrigation, rural communication, land and water degradation control, reforestation, and related infrastructure should increase.
  • Reducing subsidies on water, electricity, and fertilizers is key to freeing resources for productive public investments.
  • The pattern of public expenditure must shift radically from input subsidies (often benefiting better-off farmers) to durable and productive investments with adequate O&M provisions.

Decline in Area and Institutional Weaknesses in Indian Agriculture

• Decline in Area under Food Grains

  • There has been an alarming decline in area under food grains.
  • Policy makers must examine whether the decline is due to land shifting to alternative uses or due to lack of profitability making lands go unused.
  • Although overall demand conditions for agriculture may seem favorable, certain crops and regions face specific challenges due to agro-climatic conditions.
  • Economic reforms of the 1990s failed to benefit the Indian peasantry.
  • The deceleration of agricultural growth in the 1990s highlights the urgent need for public investment in rural infrastructure.

• Institutional Weaknesses

  • Institutional measures must be taken to help small and marginal farmers share in the gains from growth and agricultural exports.
  • A proactive policy is needed to involve:
    • Small and marginal farmers,
    • Landless laborers, through innovative structures such as:
    • Integrated cooperatives (e.g., Mother Dairy),
    • Service cooperatives,
    • Contract farming.
  • Small and marginal farmers are the majority of Indian farmers and represent the bulk of the rural poor.
  • The agricultural credit system is gravely weakened due to:
    • Subsidized interest rates,
    • Poor loan recovery,
    • High intermediation costs of cooperatives and banks,
    • Debt write-offs.
  • Timely availability of credit is critical, but the current system fails to ensure this.
  • Land reform agendas remain incomplete in many states, and tenancy regimes need urgent reform.
  • Problems include:
    • High incidence of oral and concealed tenancy,
    • Insecurity among tenants,
    • Ineffective tenancy reform efforts.
  • Key focus areas to boost productivity and income of small farmers:
    • Land and tenancy reform,
    • Irrigation and infrastructure services,
    • Revival of rural credit systems.
  • Special efforts must be made to develop and transfer new farming technologies to small farmers to encourage diversification into high-value and export commodities.
  • Complementary institutional support is necessary:
    • Trading houses,
    • Market intelligence services,
    • National and international price information networks.
  • Infrastructure for processing, marketing, and grading must be developed.
  • Investment in information infrastructure via market committees will ensure information reaches local levels.