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26th Apr 2023

Agriculture

Context

Indian agricultural sector, though having some major achievements, face a number of challenges that impacts its productivity severely.
In this context, this edition of the Burning Issue will analyze the agricultural sector of India, its challenges, and relevant solutions.

Indian Agriculture: A backgrounder

While agriculture’s share in India’s economy has progressively declined to less than 15% due to the high growth rates of the industrial and services sectors, the sector’s importance in India’s economic and social fabric goes well beyond this indicator as:

Population dependency: Nearly three-quarters of India’s families depend on rural incomes.
Rural sector: The majority of India’s poor (some 770 million people or about 70 percent) are found in rural areas.
Food Security: India’s food security depends on producing cereal crops, as well as increasing its production of fruits, vegetables and milk.

Major Achievements of the Indian Agriculture Sector

Record Production of Food grains: Indian agriculture witnessed a distinct step up in the growth of output following the green revolution in the 1960s driven by the intensive use of inputs and technological advancement, which was sustained during the seventies and eighties.
Diversification towards Horticulture Crops: Horticulture production has outpaced food grains production since 2012-13 and it currently accounts for around 35 per cent of the total value of crop output in the agriculture sector.
Growing Importance of Allied Activities: The allied sector has steadily gained importance in the last decade led by strong growth in animal husbandry and fish production. Indian livestock sector attained a record growth of 6.6 per cent during the last decade (2010-19) with India emerging as a major producer of milk, egg and meat in the world.
Changing Dynamics of Agriculture Trade: As India has emerged as a leading producer of various agricultural commodities in the world, its share in the global trade of agricultural and allied sector products has doubled from 1.1 per cent in 2000 to 2.2 per cent in 2018.
However, despite all these achievements, the Indian agriculture sector is going through multiple challenges as well.

Challenges to Indian Agriculture Sector

(A) Small and Fragmented Land Holdings:

Small and scattered land holdings apply to a small plot of land that is uneconomical.
An agricultural farm must have a certain amount of land in order to be cost-effective in terms of purchasing and utilizing inputs, as well as harvesting.

(B) Inferior Quality seeds

The seed is a vital and essential input for the crop’s yields and for maintaining agricultural production growth.
The delivery of high-quality seeds is just as important as its processing.
Unfortunately, good superiority seeds are out of reach for the majority of the farmers, marginal farmers and particularly small, due to exorbitant seed rates.

(C) Manures, Fertilizers and Biocides

For hundreds of years, Indian soil was used to produce crops with no regard for replenishment. As a result, soils have been depleted and exhausted, leading to low productivity.
Almost all of the crop has among the lowermost average yields in the world.
It is a critical concern that can be resolved by increasing the use of fertilizers and manures.

(D) Irrigation challenges

Despite the fact that India is the world’s 2^nd largest moistened country after China, only one 3^rd of the crop production is irrigated.
In a rainy climate country like India, where rainfall is unpredictable, unreliable, and erratic, irrigation is the most significant agricultural input.
India will not be able to make sustainable development in agriculture until and unless much than half of the collected area is irrigated.

(E) Lack of Mechanization

Despite the large scales mechanization of agriculture in few parts of the world, most agricultural operations are still carried out manually.
Irrigating, sowing, thinning, plowing and pruning, harvesting threshing, weeding, and transporting the crops all make little or no use of machines.
This is particularly true for small and marginal farmers. It leads to a significant waste of labor and human labor yields per capita.

(F) Weak Marketing

In rural India, agricultural marketing is still in poor shape. Farmers have to rely on local traders and middlemen to dispose of their farm products, which are sold at a loss because there are no reliable marketing facilities.
Trading companies and middlemen predominate in the advertising and trading of agricultural products in the absence of a formalized marketing framework. The middlemen’s compensation increases the consumer’s burden for their services, but the farmers do not gain anything comparable.

(G) Poor Storage Infrastructure

Storage facilities are either non-existent or woefully inadequate in rural locations. In such circumstances, the farmers are obligated to sell their food as soon as it is harvested at the going market rates, which are invariably low.

The farmers lose their rightful income as a result of these distressed sales. The Parse Committee calculated that 9.3% of post-harvest losses were attributable to poor storage conditions alone, accounting for approximately 6.6 per cent of those losses. Hence, it is crucial to use efficient storage to prevent losses and benefit both consumers and producers.

(H) Low Capital Infusion

Agriculture is a significant industry; much like other industries, it needs money to operate. With the development of agricultural technology, the importance of capital input is growing.

The agriculturalist must borrow money to increase the pace of agricultural output because his capital is tied up in his lands and stocks. Even now, the money lenders, traders, and commission agents that charge exorbitant interest rates and buy agricultural products at extremely low prices are the main funding sources for farmers in rural areas.

Consequences of the above challenges

Highest number of farmers suicides: The National Crime Records Bureau of India reported that a total of 296,438 Indian farmers had committed suicide between 1995-2014. High debt burden and crop failure remain the major reasons for it.

High wastage of agricultural products: A rough estimated figure by the Food and Agricultural Organisation (FAO) – Approximately 40% of the food produced in India is wasted every year due to fragmented food and inefficacious supply chain system. The irony is that loss occurs even before the food reaches the consumer

Low income of farmers: a report released by the National Statistical Office in 2021 reveals the pathetic income level of Indian farmers. The average monthly income from different sources per agricultural household from July 2018 to June 2019 comes to only ₹10,218, where a net receipt is obtained considering the ‘paid out expenses’ approach. This amount of income further reduces to ₹8,337 when net receipt is obtained considering both the paid-out and imputed expenses.

High Disguised Unemployment: As per Census statistics, the rural population in India stands at 833 million, constituting almost 68 per cent of the total. While the agriculture sector engages 49 per cent of the total labour force in the country, its contribution to overall GVA is only 17 per cent which shows the overdependence of the Indian labour force on agriculture resulting in significant hidden or disguised unemployment in the sector and thus lower labour productivity.

Increasing chemical and pesticide usage: since the availability of agricultural land is decreasing in India, the pressure on existing agricultural land is increasing to produce more food. In this quest, chemicals and pesticide usage is increasing in India. 275 pesticides were registered for use in India, of which about 255 are chemical poisons. In total pesticide consumption, insecticides occupy the highest share in India. However, India shares only 1% of the global pesticide use.

High dependence on government and MSP: As agricultural production in India is still heavily dependent on rainfall and its spatial distribution, adverse climatic conditions like drought, flood and market factors, Indian farmers are highly dependent on government support schemes and policies such as MSP during every stage of growing a crop.

Low private participation: due to price uncertainties, low confidence of farmers in private players and weak supply chains in the agriculture sector, the private sector is largely uninterested in investing in the agriculture sector, which leads to low capital formation, poor technologies penetration and high dependence on government.

Some solutions to tackle these challenges

(A) Promoting new technologies and reforming agricultural research and extension:

Major reform and strengthening of India’s agricultural research and extension systems is one of the most important needs for agricultural growth.

These services have declined over time due to chronic underfunding of infrastructure and operations, no replacement of aging researchers, or broad access to state-of-the-art technologies.

Research now has little to provide beyond the time-worn packages of the past.

(B) Improving Water Resources and Irrigation

Agriculture is India’s largest user of water.

However, increasing competition for water between industry, domestic use and agriculture has highlighted the need to plan and manage water on a river basin and multi-sectoral basis.

As urban and other demands multiply, less water is likely to be available for irrigation. Ways to radically enhance the productivity of irrigation (“more crop per drop”) need to be found.

Piped conveyance, better on-farm management of water, and the use of more efficient delivery mechanisms such as drip irrigation are among the actions that could be taken.

(C) Facilitating crop diversification to higher-value commodities

Encouraging farmers to diversify to higher-value commodities will be a significant factor for higher agricultural growth, particularly in rain-fed areas where poverty is high.

Moreover, considerable potential exists for expanding agro-processing and building competitive value chains from producers to urban centers and export markets.

While diversification initiatives should be left to farmers and entrepreneurs, the Government can, first and foremost, liberalize constraints to marketing, transport, export and processing.

(D) Promoting high-growth commodities

Some agricultural sub-sectors have a particularly high potential for expansion, notably dairy.

The livestock sector, primarily due to dairy, contributes over a quarter of agricultural GDP and is a source of income for 70% of India’s rural families, mostly those who are poor and headed by women.

Growth in milk production, at about 4% per annum, has been brisk, but future domestic demand is expected to grow by at least 5% per annum.

Milk production is constrained, however, by the poor genetic quality of cows, inadequate nutrients, inaccessible veterinary care, and other factors.

(E) Developing markets, agricultural credit and public expenditures

India’s legacy of extensive government involvement in agricultural marketing has created restrictions in internal and external trade.

Even so, private sector investment in marketing, value chains and agro-processing is growing, but much slower than potential.

While some restrictions are being lifted, considerably more needs to be done to enable diversification and minimize consumer prices.

Improving access to rural finance for farmers is another need as it remains difficult for farmers to get credit.

(F) Climate change mitigation

More extreme events – droughts, floods, erratic rains – are expected and would have the greatest impact in rain-fed areas.

The watershed program, allied with initiatives from agricultural research and extension, maybe the most suited agricultural program for promoting new varieties of crops and improved farm practices.

(I) Marketing reforms

In the absence of a properly organized market and sufficient transportation facilities, Indian farmers face the problem of low incomes from their vendible surplus crops.

As a result, farmers have fallen prey to distributors for the fast discarding of their crops at the lower price and uneconomic.

Price fluctuations in agricultural products are also a significant threat to Indian agriculture.

Price stability is important not only for farmers, but also for buyers, exporters, and agro-based industries.

The price movements of agricultural products in India are neither smooth nor uniform, resulting in a fluctuating pattern.

(J) Minimizing Post-Harvest Losses

Wastage of food products due to inefficient postharvest practices is one of the important factors behind high food inflation in India. Wastages take place at all levels of the food value chain – starting from the level of farmers to the levels of transporters.

Agricultural economists have recognized that there is tremendous potential to increase the availability of agricultural produce, particularly horticultural crops like fruits and vegetables, by reducing wastage through the build-up of cold storage, warehousing, packaging and cold transport chain infrastructure.

(K) Developing Food Processing Industry

Food processing is a sunrise industry and the demand for processed food in India is likely to increase steadily with rapid urbanization, rising per capita income and more women joining the workforce.

Despite having huge growth potential, the food processing industry in India is currently at a nascent stage – accounting for less than 10 per cent of the total food produced in the country

Steps taken by the government in this regard

The Government of India has taken several steps which include:

Improvement in soil fertility through the Soil Health Card scheme.

Providing improved access to irrigation and enhanced water efficiency through Pradhan Mantri Krishi Sinchai Yojana (PMKSY).

Supporting organic farming through Paramparagat Krishi Vikas Yojana (PKVY).

Support for the creation of a unified national agriculture market to boost the income of farmers.

Pradhan Mantri Fasal Bima Yojana (PMFBY) has been launched to mitigate the risk of crop loss in the agriculture sector.

Launch of e-NAM portal for online trading in agricultural products.

Ashok Dalwai committee was formed to suggest measures to double income of Indian farmers.

Government accepted the recommendations of the MS Swaminathan commission to provide MSP at 1.5 times the cost of production of the crop.

Multiple schemes have been launched for the allied agriculture activities like Matsya sampada yojna for fisheries, Rashtriya Gokul mission for livestock sector etc so as double income of farmers.

Conclusion

Indian agriculture scaled new heights with record production of various food grains, commercial and horticultural crops, exhibiting resilience and ensuring food security during the COVID period. The sector, however, confronted various challenges, mitigation of which requires a holistic policy approach.

Addressing these challenges would require a second green revolution focussed on the agriculture water-energy nexus, making agriculture more climate resistant and environmentally sustainable.