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OVERVIEW OF INDIA’S AGRICULTURAL ECONOMY

In the early 1950s, half of India’s GDP came from the agricultural sector. By 1995, that contribution was halved again to about 25 per cent. As would be expected of virtually all countries in the process of development, India’s agricultural sector’s share has declined consistently over time as seen in the table below.

Year 1951 1965 1976 1985 1991 1999 2011

Percentage share of GDP 52.2 43.6 37.4 32.8 28.3 24.4 14.6 In the last five decades, the Government’s objectives in agricultural policy and the instruments used to realize the objectives have changed from time to time, depending on both internal and external factors. Agricultural policies can be divided into supply side and demand side policies. The former include those relating to land reform and land use, development and diffusion of new technologies, public investment in irrigation and rural infrastructure and agricultural price supports. The demand side policies on the other hand, include state interventions in agricultural markets as well as operation of public distribution systems. Such policies also have macro effects in terms of their impact on government budgets.

Macro level policies include policies to strengthen agricultural and non-agricultural sector linkages and industrial policies that affect input supplies to agriculture and the supply of agricultural materials. During the pre-green revolution period, from independence to 1964-1965, the agricultural sector grew at annual average of 2.7 per cent. This period saw a major policy thrust towards land reform and the development of irrigation. With the green revolution period from the mid-1960s to 1991, the agricultural sector grew at 3.2 per cent during 1965-1966 to 1975-1976, and at 3.1 per cent during 1976-1977 to 1991-1992. The policy package for this period was substantial and consisted of:

a) introduction of high-yielding varieties of wheat and rice by strengthening agricultural research and extension services,

b) measures to increase the supply of agricultural inputs such as chemical fertilizers and pesticides,

c) expansion of major and minor irrigation facilities,

d) announcement of minimum support prices for major crops, government procurement of cereals for building buffer stocks and to meet public distribution needs, and

e) Provision of agricultural credit on a priority basis.

f) This period also witnessed a number of market intervention measures by the central and state Governments. The promotional measures relate to the development and regulation of primary markets in the nature of physical and institutional infrastructure at the first contact point for farmers to sell their surplus products. Crops, Production, Productivity, Inputs and Surpluses

CROP-SPECIFIC GROWTH

As per 2nd advance estimates for 2011-12, total food grains production is estimated at a record level of 250.42 million tonnes which is 5.64 million tonnes higher than that of the last year production. Production of rice is estimated at 102.75 million tonnes, Wheat is 88.31 million tonnes, coarse cereals 42.08 million tonnes and pulses 17.28 million tonnes. Oilseeds production during 2011-12 is estimated at 30.53 million tonnes, sugarcane production is estimated at 347.87 million tonnes and cotton production is estimated at 34.09 million bales (of 170 kg. each). Jute production has been estimated at 10.95 million bales (of 180 kg each).

Despite inconsistent climatic factors in some parts of the country, there has been a record production, surpassing the targeted production of 245 million tonnes of food grains by more than 5 million tonnes during 2011-12. Growth in the production of agricultural crops depends upon acreage and yield. Given the limitations in the expansion of acreage, the main source of long-term output growth is improvement in yields. In the case of wheat, the growth in area and yield have been marginal during 2000-01 to 2010-11 suggesting that the yield levels have plateaued for this crop. This suggests the need for renewed research to boost production and productivity. All the major coarse cereals display a negative growth in area during both the periods except for maize, which recorded an annual growth rate of 2.68 per cent in the 2000-01 to 2010-11 period. The production of maize has also increased by 7.12 percent in the latter Period. The biggest increase in the growth rates of yields in the two periods, however, is in groundnut and cotton. Cotton has experienced significant changes with the introduction of Bt cotton in 2002. By 2011-12, almost 90 percent of cotton area is covered under Bt. cotton, production has more than doubled (compared to 2002-03), yields have gone up by almost 70 percent, and export potential for more than Rs 10,000 crore worth of raw cotton per year has been created.

LAND REFORMS

Under the 1949 Indian constitution, states were granted the powers to enact (and implement) land reforms. This autonomy ensures that there has been significant variation across states and time in terms of the number and types of land reforms that have been enacted. We classify land reform acts into four main categories according to their main purpose.

1. The first category is acts related to tenancy reform. These include attempts to regulate tenancy contracts both via registration and stipulation of contractual terms, such as shares in share tenancy contracts, as well as attempts to abolish tenancy and transfer ownership to tenants.

2. The second category of land reform acts are attempts to abolish intermediaries. These intermediaries who worked under feudal lords (Zamandari) to collect rent for the British were reputed to allow a larger share of the surplus from the land to be extracted from tenants. Most states had passed legislation to abolish intermediaries prior to 1958.

3. The third category of land reform acts concerned efforts to implement ceilings on land holdings, with a view to redistributing surplus land to the landless.

4. Finally, we have acts which attempted to allow consolidation of disparate land-holdings.' Though these reforms and in particular the latter were justified partly in terms of achieving efficiency gains in agriculture it is clear from the acts themselves and from the political manifestos supporting the acts that the main impetus driving the first three reforms was poverty reduction.

Existing assessments of the effectiveness of these different reforms are highly mixed. Though promoted by the centre in various Five Year Plans, the fact that land reforms were a state subject under the 1949 Constitution meant that enactment and implementation was dependent on the political will of state governments. The perceived oppressive character of the Zamandari and their close alliance with the British galvanized broad political support for the abolition intermediaries and led to widespread implementation of these reforms most of which were complete by the early 1960s. Centre-state alignment on the issue of tenancy reforms was much less pronounced. With many state legislatures controlled by the landlord class, reforms which harmed this class tended to be blocked, though where tenants had substantial political representation notable successes in implementation were recorded.

Despite the considerable publicity attached to their enactment, political failure to implement was most complete in the case of land ceiling legislation. Here ambivalence in the formulation of policy and numerous loopholes allowed the bulk of landowners to avoid expropriation by distributing surplus land to relations, friends and dependents. As a result of these problems, implementation of both tenancy reform and land ceiling legislation tended to lag well behind the targets set in the Five Year Plans. Land consolidation legislation was enacted less than the other reforms and, owing partly to the sparseness of land records, implementation has been considered to be both sporadic and patchy only affecting a few states in any significant way.

Village level studies also offer a very mixed assessment of the poverty impact of different land reforms. Similar reforms seemed to have produced different effects in different areas leaving overall impact indeterminate. There is some consensus that the abolition of intermediaries achieved a limited and variable success both in redistributing land towards the poor and increasing the security of smallholders.

For tenancy reform, however, whereas successes have been recorded, in particular, where tenants are well organized there has also been a range of documented cases of imminent legislation prompting landlords to engage in mass evictions of tenants and of the de jure banning of landlord-tenant relationships pushing tenancy under- ground and therefore, paradoxically, reducing tenurial security. Land ceiling legislation, in a variety of village studies, is also perceived to have had neutral or negative effects on poverty by inducing landowners from

joint families to evict their tenants and to separate their holdings into smaller proprietary units among family members as a means of avoiding expropriation. Land consolidation is also on the whole judged not to have been progressive in its redistributive impact given that richer farmers tend to use their power to obtain improved holdings. There is a considerable variation in overall land reform activity across states with states such as Uttar Pradesh, Kerala and Tamil Nadu having a lot of activity while Punjab and Rajasthan have very little.

POLICIES FOR AGRICULTURAL AND RURAL DEVELOPMENT: AN OVERVIEW

Important policy measures introduced in the rural sector in India during the period of planning are as follows:

 Technological measures: Initiation of measure to increase agricultural production substantially to meet the growing needs of the population and also to provide a base for industrial development. It included steps to increase both extensive cultivation and intensive cultivation. For the former, irrigation facilities were provided to a large area on an increasing basis and area hitherto unfit for cultivation was made fit for cultivation. For the latter, new agricultural strategy was introduced in the form of a package programme in selected regions of the country in 1966. To sustain and extend this programme to larger and larger areas of the country, steps were initiated to increase the production of high-yielding varieties of seeds, fertilisers and pesticides within the economy and supplement domestic production by imports whenever necessary. Food grains production which was merely 50.8 million tonnes in 1950-51 rose to the record level of 252.6 million tonnes in 2011-12.

 Land reforms: Land reform measures to abolish intermediary interests in land. Measures taken under this head included: (i) Abolition of intermediaries; (ii) Tenancy reforms to (a) regulate rents paid by tenants to landlords, (b) provide security of tenure to tenants, and (c) confer ownership rights on tenants; and (iii) Imposition of ceilings on holdings in a bid to procure land for distribution among landless labourers and marginal farmers.

 Cooperation and consolidation of holdings: In a bid to reorganise agriculture and prevent subdivision and fragmentation of holdings, the Indian agricultural policy introduced the programmes of co-operation and consolidation of holdings. The latter programme aimed at consolidating all plots of land owned by a particular farmer in different places of the village by sanctioning him land at one place equal in area (or value) to his plots of land.

 Institutions involving people's participation in planning: Bringing small and marginal farmers together to cultivate jointly is only half of the story. It was precisely with this end in view that the Programme of Community Development was initiated in 1952 in this country. Another programme designed to encourage the participation of masses in the planning process (and political decision- making) was the programme of democratic decentralisation, often known as Panchayati Raj.

 Institutional credit: A National Bank for Agriculture and Rural Development (NABARD) was also set up. As a result of the expansion of institutional credit facilities to farmers, the

importance of moneylenders has declined steeply and so has the exploitation of farmers at the hands of moneylenders.

 Procurement and support prices: To provide remunerative prices to the farmers

 Input subsidies to agriculture: The government has provided massive subsidies to farmers on agricultural inputs like irrigation, fertilisers and power.

 Food security system: In a bid to provide food grains and other essential goods to consumers at cheap and subsidised rates, the Government of India has built up an elaborate food security system in the form of Public Distribution System (PDS) during the planning period.

 Rural employment programmes: The government introduced various poverty alleviation programmes particularly from Fourth Plan onwards like Small Farmers Development Agency (SFDA), Marginal Farmers and Agricultural Labour Development Agency (MFAL), National Rural Employment Programme (NREP), Rural Landless Employment Guarantee Programme (RLEGP), Jawahar Rojgar Yojana (JRY) , Jawahar Gram Samridhi Yojana (JGSY), Sampoorna Grameen Rozgar Yojana (SGRY), National Food for Work Programme (NFFWP), Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), etc.

 Rashtriya Krishi Vikas Yojana (RKVY): The RKVY was launched in 2007-08 with an outlay of Rs. 25,000 crore in the Eleventh Plan for incentivising States to enhance public investment to achieve 4 per cent growth rate in agriculture and allied sectors during the Eleventh Five Year Plan period. The RKVY format permits taking up national priorities as sub-schemes, allowing the States flexibility in project selection and implementation. The sub- schemes include: Bringing Green Revolution to Eastern India (BGREI); Integrated Development of 60,000 pulses villages in Rain fed Areas; Promotion of Oil Palm; Initiative on Vegetable Clusters; Nutri-cereals; National Mission for Protein Supplements; Accelerated Fodder Development Programme; and Saffron Mission.

 National Food Security Mission (NFSM). The NFSM is a crop development scheme of the Government of India that aims at restoring soil health and achieving additional production of 10, 8 and 2 million tonnes of rice wheat and pulses, respectively by the end of 2011-12.

It was launched in August 2007 with an approved outlay of Rs. 4,883 crore for the period 2007-08 to 2011-12. The Mission has focused on the Districts with productivity of wheat/rice below the State average.

 Macro Management of Agriculture. Macro Management of Agriculture (MMA) is one of the centrally sponsored scheme formulated in 2000-01 with the objective to ensure that Central assistance is spent through focused and specific interventions for development of agriculture in States. To begin with, the scheme initially consisted of 27 Centrally sponsored schemes relating to Cooperative Crop Production Programmes (for rice, wheat, coarse cereals, jute, sugarcane), Watershed Development Programme (National Watershed Development Project for Rain fed Areas, River Valley Projects/Flood Prone Rivers),

Horticulture Fertiliser, Mechanisation and Seed Production Programmes. With the launching of National Horticulture Mission (NHM) in 2005-06, 10 schemes pertaining to horticulture development were taken out of purview of this scheme. In the year 2008-09, Macro Management of Agriculture Scheme was revised to improve its efficacy in supplementing/complementing efforts of States towards enhancement of agricultural production and productivity

 In an effort to extend green revolution to the Eastern Region of the country and develop dry land areas, the Seventh Five Year Plan introduced two specific programmes:

 Special Rice Production Programme, and

 National Watershed Development Programme for Rain fed Agriculture.

 To increase the production of oil seeds to reduce imports and achieve self-sufficiency in edible oils, the Technology Mission on oilseeds was launched by the Central government in 1986. Subsequently, pulses, oil palm and maize were brought within purview of the Mission in 1990- 91, 1992 and 1995-96, respectively.

 An Accelerated Irrigation Benefit Programme (AIBP) was launched during 1996-97 to give loan assistance to the States to help them complete some of the incomplete projects. Rs.

50,381 crore had been released under AIBP as Central Loan Assistance/grant during 1996-97 to November 31, 2011.

 To meet the demand for bringing in more crops into the purview of crop insurance, extending its scope to cover all farmers (both loanee and non-loanee) and lowering the unit area of insurance, the government introduced 'National Agriculture Insurance Scheme (NAIS), in the country from Rabi 1999-2000. The scheme envisages coverage of all the food crops (cereals and pulses), oilseeds and annual horticultural/commercial crops, in respect of which yield data are available for adequate number of years. With the aim of further improving crop insurance schemes, the modified NAIS (MNAIS) is under implementation on pilot basis in 50 districts in the country from Rabi 2010-11 seasons. Some of the major improvements made in the MNAIS are - actuarial premium with subsidy in premium at different rates; all claims liability to be on the insurer; unit area of insurance reduced to village panchayat level for major crops; indemnity for prevented/sowing/ planting risk and for post harvest losses due to cyclone; on account payment of up to 25 per cent advance of likely claims as immediate relief; more proficient basis for calculation of threshold yield; and allowing private sector insurers with adequate infrastructure.

 To facilitate access to short-term credit by farmers, a Kisan Credit Card (KCC) scheme was introduced in 1998-99. The scheme has gained popularity and its implementation has been taken up by 27 commercial banks, 378 District Central Cooperative Banks/State Cooperative Banks and 196 Regional Rural Banks throughout the country.

 The access to credit for the poor from conventional banking is often constrained by lack of collaterals, information asymmetry and high transaction costs associated with small

borrowal accounts. To bring these people within the purview of the organised financial sector, microfinance schemes are assuming increasing importance. Based on the model of the Grameena Bank developed originally in Bangladesh, National Bank for Agriculture and Rural Development (NABARD) in India has been engaged in the task of linking up of self-help groups (SHGs) with the formal credit agencies since 1991-92

 In view of the critical importance of rural infrastructure and the lacklustre growth in agricultural investment in the past, concerns were raised about the country's ability to increase production. Consequently, an initiative for setting up of an independent fund called the Rural Infrastructure Development Fund (RIDF) within National Bank for Agriculture and Rural Development (NABARD) was taken in the Union Budget of 1995-96.

The corpus of RIDF-I was kept at Rs. 2,000 crore. The successive Budgets have continued with the RIDF scheme.

 In addition to RIDF, another important initiative for building up rural infrastructure was the announcement of the Bharat Nirman Programme in 2005. This programme covers six components of infrastructure: irrigation, rural roads, rural housing, rural water supply, rural electrification and rural telephony. The targets are as under: (a) irrigation - to create 10 million hectares of additional irrigation capacity; (b) rural roads - to connect all 'habitations (66,802) with population above 1,000 (500 in hilly/tribal areas) with all weather roads; (c) rural housing - to construct 60 lakh houses for rural poor; (d) rural water supply - to provide potable water to all uncovered habitations (55,067) and also address slipped back and water quality affected habitations; (e) rural electrification - to provide electricity to all un-electrified villages (1,25,000) and to connect 23 million households below the poverty line; and (f) rural telephones - to connect all remaining villages (66,822) with a public telephone.

AGRICULTURE: TRENDS IN INVESTMENT

As the economy of a backward country develops, the GDP share in primary sector declines.

Accordingly, the contribution of agriculture to GDP declines. This is borne out by Indian data also as the share of agriculture and allied activities in GDP at factor cost has registered a fall from 55.3 per cent in 1950-51 (at 1999-2000 prices) to only 14.4 per cent in 2010-11 (at 2004-05 prices). While in 1951, 69.5 per cent of the working population was engaged in agriculture, now approximately 52 per cent of the working population is engaged in agriculture. Less investment in agriculture would mean less growth of infra structural facilities like irrigation, rural roads, market, power, cold storage, etc., and this would, in turn, affect agricultural growth adversely.

1. Total investment in agriculture was Rs. 14,836 crore in 1990-91 which rose to Rs.

17,304 crore in 1999-2000 (at 1993-94 prices). At 2004-05 prices, total investment in agriculture was Rs. 76,096 crore in 2004-05 and Rs. 1, 33, 377 crore in 2009-10.

2. As far as public sector investment in agriculture is concerned, it was Rs. 4,395 crore in 1990-91 and Rs. 4,221 crore in 1999-2000 (at 1993-94 prices). In percentage terms, this meant a fall in the share of public investment in total investment in agriculture from about 30 per cent to less than 25 per cent.

2. As far as public sector investment in agriculture is concerned, it was Rs. 4,395 crore in 1990-91 and Rs. 4,221 crore in 1999-2000 (at 1993-94 prices). In percentage terms, this meant a fall in the share of public investment in total investment in agriculture from about 30 per cent to less than 25 per cent.