Agriculture in Indian Economy – Economics Study Material & Notes

These trivia about role of agriculture in Indian Economy is from Economic Survey 2013-14, so the data given below is latest from government sources and hence, relevant. We have compiled it for benefit of fellow aspirants. This will especially prove useful for civil services mains paper IV.

The share of agriculture in GDP has been constantly declining over the years. This was highlighted yet again in this years Economic Survey 2013-14, In eight years from 2000 to 2008 it has declined 6.4 percent.

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Since agricultural market provides thebackward linkage to Agro-based industries, it has to beviewed holistically as a seamless farm-to-fork value chain,comprising farming, wholesaling, warehousing, logistics, processing,and retailing including exports.

State of Agriculture in Economy

  • About 60 per cent of the total foodgrains and oilseedsproduction occurs in the kharif season.
  • Just about 35per cent of arable area being irrigated, Indian agriculture is stilllargely dependent on rainfall.
  • The south-west monsoon (from Juneto September) accounts for nearly 75 per cent of total annual rainfall in India.
  • Horticulture productionis estimated at 265 million tonnes in 2013 and for the first timehas exceeded the production of foodgrains and oilseeds.
  • An increase of 40 lakh hain overall area coverage under foodgrains in 2013 as compared to previous year.Andrecord foodgrains production of 264.4 million tonnes isestimated in 2013-14. This increase is due to : A) expansion in area, B) increase in MSPs of select foodcrops gave incentive to cultivation.

Role of agriculture in GDP growth at Factor Cost at Constant (2004-05) Prices

Concerns regarding Agriculture:

  • Productivitylevels in Indian agriculture are still much lower than the globalstandards. Productivity levels of rice and wheat have not risensignificantly after the 1980s. Though cotton yields have takentremendous leap over the last decade, due toBt cotton.
  • Soil degradation because of declining efficiency of fertilizer use.
  • Alarming reduction in thewater table, especially in states of Punjab and Haryana due to their inefficient croppingpattern.
  • The nutrient based subsidy (NBS) policy, does not have “urea” under its purview which is used more than the others, so subsidy benefit is not reaching right beneficiary.
  • The predominanceof marginal and fragmented farms in India’s agriculture, with limitedcapital availability, hampers progress of farm mechanization.
  • Domestic and international marketing of agriculturalcommodities needs immediate attention but past interventions of government
    for building marketing set up have in fact created morebarriers to trade. So, there is a need to reduce these market distortions.

Steps to be taken, as suggested by the Economic Survey document:

  • Recommendation of the Task Force for Direct Transfer ofSubsidy (headed byNandan Nilekani)to shift todirect transfer of fertilizer subsidyto farmers in a phased manner needs to be considered.
  • TheCropDiversification Schemehas been introduced in the Punjab andHaryana region toencourage farmers to choose crop alternatives and is also expected to promote technological innovations.
  • There is need to facilitate aNational CommonMarketfor agricultural commoditieswithuniform taxesin thedomestic market, and to foster along-term stable trade policyforagricultural products.
  • Need to expand the decentralizedsystem of procurement for the PDS from present 11 states andUTs to all the states. This would help in- A) savingtransport costs, B) reduce transit losses and other leakages, C) increasefood availability, D) reduce food prices in the open market and E)ultimately rein in food subsidy.

Food Inflation:

In 2013-14 ithas been aresult of structural and seasonal factors with different items causing it at different times. Initially- cereals and proteins, then- vegetables esp. onions. Also, inflation increased for Protein- based items due to rising income levels and subsequent increase in consumption.

Three broad reasons for food inflation:

  1. Wastage of food in the supply chain due to inefficiencies in distributionchannels of government.
  2. APMC Acts of state governments hamper creation ofcompetitive conditions in distribution of commodities. No competition leads to ineffectiveness. This has preventedcreation of a national market for agricultural commodities.
  3. Multiplelayers of intermediaries in distribution of food articles havepushed up prices for consumers.

Solutions suggested in survey:

  1. Focus should be on reducing food wastage in the supply chain of distribution channels.
  2. Increased investment in marketinginfrastructure, including modern warehouses, cold storages,reefer vans(refrigerated vans), scientific packaging and handling tostrengthen distribution channels.
  3. State governments will have to removerestrictive provisions in the APMCAct and promote alternative trading options forfarmers.

These snippets will be useful for Essay paper also. We will keep updating the data as new statistics release.