India’s Economy: Agriculture Sector

India’s Economy: Agriculture Sector

Indian economy is in a bad state.  Agriculture sector and farmers are the worst off. Agriculture sector’s growth is essential for India’s growth. More than 49% of the population is engaged in it. If the economic condition of this rural population is not improved India cannot progress, because it keeps the domestic demand for goods and services low and thus adversely impacts the GDP. In this blog the major problem areas of the agriculture sector have been highlighted. In the next blog we shall analyze the actions initiated by the government to understand as to whether the actions would help to improve the situation.

Indian Agriculture: Understanding Vital Facts and Major Problems

  • Large Population Dependence. Agriculture engages more than 49% of the population and contributes only 17% to the GDP. The growth has been highly stagnant. The rural population is facing acute poverty. Two consecutive droughts have aggravated the situation further.
  • Poverty & Suicides. There were 3,228 cases of farmer suicides reported in 2015. Availability of cheap and easy credit, particularly to the small farmers is a big problem. Non availability of crop insurance is another big problem.
  • State Subject. Agriculture is a state subject, hence the onus on resolving the problems is primarily of the states and not the centre.
  • Plenty of Land. At 157.35 million hectares, India holds the second largest agricultural land globally. The land is more than adequate to support India’s population. Some reduction in the farmland will not have any adverse impact on production.
  • Small Land Holdings. The average farm land holding is 1.5 hectares. It is likely to reduce further with newer generations inheriting lesser land. The problem of small and fragmented holdings is more serious in densely populated and intensively cultivated states like Kerala, West Bengal, Bihar and Eastern part of Uttar Pradesh where the average size of land holdings is less than one hectare and in certain parts it is less than even 0.5 hectare.
  • Monsoon Dependence. India depends upon monsoon rains for 60% of the sown area. 99 districts of the country are classified as drought prone. An area of about 40 million hectares is prone to recurring floods. Thus agriculture losses occur due to drought as well as floods.
  • Low Yield. Crop yields in India are quite low. Crops yield per hectare in India when compared with China are:
    • Rice: 3.5 tons against 6.9 tons in China.
    • Wheat: 1.6 tons against China’s 4.8 tons.
    • Coarse grains: 1.5 tons against 5.4 tons in China.
    • Pulses: 0.7 tons compared to China’s 1.5 tons.
    • Sugarcane yield per hectare in India is 100 tons and compares favourably with Brazil, the highest sugar producer in the world. 10 to 15% loss occurs due to the time lag between cutting of cane and crushing.
  • Food Imports. India is a major importer of the following food items. This increases the current account deficit.
    • Edible oil: Approximately 15 million tons.
    • Pulses: Approximately 17 million tons.
  • Losses.
    • India loses 10% of food grains, amounting to Rs 10,000 crores due to poor storage and transportation. India’s shortfall in agri-warehousing storage is 35 million metric tons.
    • About 30% of the fruits and vegetables grown in India, amounting to Rs 78,000 crores get wasted annually due to gaps in the cold chain such as poor infrastructure, insufficient cold storage capacity, unavailability of cold storages in close proximity to farms, poor transportation infrastructure, etc.The shortfall in India’s cold storage capacity for fruits and vegetables is 225 metric tons.

Agriculture Sector: Resolution of Problems

The problems are large and most of them cannot be solved quickly. A major problem of disguised unemployment in the sector needs to be solved by creating more employment, rather than directly improving the state of the agriculture sector. In the next blog we shall analyse the measures being taken by the government to improve the agriculture sector to assess  their effectiveness in the current year and subsequent years.

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