GS 3- ECONOMY: Role of Agriculture in Indian Economy
Introduction
Agriculture plays a vital role in the Indian economy. Over 70 per cent of the rural households depend on agriculture and provides employment to over 60% of the population.
GDP Growth in Agriculture Sector:
Advantages in India:
- Robust Demand:Large population and rising income increases demand.
- Attractive Oppurtunities:Demand for agriculture inputs and allied sectors.(ware housing,cold storages etc)
- Policy Support:
- Doubling farmer’s income by 2022
- Agriculture Export Policy set a target-over $60 billion by 2022
- Competitive Advantage
- High proportion of agriculture land
- Diverse agro climatic conditions
Challenges:
- Unemployment:(among agricultural workers 9.5% in 1994 to 15.3% in 2005)
- Subsidies to farmers:Areas receiving highest subsidies regularly underperform those with lower subsidies)
- Farm Size:average 1.16 hectares/2.87 acres is half what it was in 40 years ago.
- Unsustainable Practices:Depleting Country’s aquifers.(35% efficiency in surface irrigation and 65% efficiency when pumping ground water.)
- India uses 13% of world’s extracted water(87% used for irrigation.
- 60% of agriculture land is at risk.
- Fertiliser misuse
- Poor cropping practises
- Soil nutrient deficiencies
- Declining rainfall during monsoon.(prime growing season for agriculture)
Current Scenario:
| Major Crops | Market Arrival |
| Paddy, Lentil, Tomato, Banana | 75% or more |
| Wheat, Barley, Potato, CauliFlower, Cabbage, Lady’s finger | Between 50% and 75% |
| Gram, Pigeon pea, Onion, Peas and Mango | Less than 50% |
- Procurement:Only 13.5%(paddy) and 16.2%(wheat) farmers sell their harvest to a procurement agency at an assured Minimum Support Price (MSP).(others at an lower price)
- Higher Kharif sowing
- Because of Lockdown
- loss of markets
- the disruption in supply chains
- closure of mandis
- a fall in consumer food demand
- losses in the milk, meat and poultry sectors(rs 25000 crore)
- Inflation in prices
- disruptions in supply chains
- rise in trader margins
- not accurately representative of prices for farmers
- Small and marginal farmers who are net buyers of food had to face the brunt of higher food prices.
- Many rural households may have returned to intensified farming for food,income-security.(Data as per Centre for Monitoring Indian Economy (CMIE)-Farmers in
- June 2019-11.2 crore
- June 2020-3 crore
Problems with Government package:
- Even if agriculture grows by 4%-contribute only 0.6 percentage points to GVA growth.(To contribute a full one% point to GVA growth, agriculture have to grow-6%)
- spending for agriculture is less than ₹5,000 crore.
- schemes are already included in the budget and some are routed through banks.
- No change in PM Kisan outlay was done.
Additional points:
- Inflation and prices:
- Higher rural inflation
- Reduced food purchases in rural
- consumer price indices are not representative of farmer’s prices.
- The claims that higher rural inflation benefited farmers: it was due to higher food demand, are misplaced.
- Indicators of distress, not prosperity:rural unemployment rates rose sharply in 2020-(22.8% (April), 21.1% (May) and 19.5% (June).
- Iin August 2020, rural unemployment rates were higher than in February 2020 or August 2019.
Way Forward
- Government should have set all MSPs at 150% of the C2 cost(comprehensive cost) of production.
- Instead of a moratorium,should have waived the interest on loans.
- A package of direct assistance for the crisis-ridden poultry and meat sectors(at least rs 20000 crores.)
- Instead of loan-based schemes to support private investment in dairy.(direct financial assistance to small milk producers)
- Instalments of PM-KISAN:the government should have doubled the payments to farmers from ₹6,000 a year to ₹12,000 a year.
Conclusion
- Agriculture has benefited from improved farming techniques but the growth is not equitable.The number of essential commodities should be reduced to absolute minimum especially the non food crops.
- This is not to deny a potential rise in demand from higher rabi procurement, higher kharif sowing and flow of cheap credit, which together appear to have resulted in higher purchase of tractors and fertilizers.
- The government should discard its role as a passive observer and decisively intervene in rural India with a substantial fiscal stimulus. The earlier the better as delays would only compound mistakes.