Role of Agriculture in Indian Economy

 

Agriculture plays a vital role in the Indian economy.  Over 70 per cent of the rural households depend on agriculture. Agriculture is an important sector of Indian economy as it contributes about 17% to the total GDP and provides employment to around 58% of the population. Indian agriculture has registered impressive growth over last few decades.  The food grains production has increased from 51 million tonnes (MT) in 1950-51 to 250MT during 2011-12 highest ever since independence

The share of agriculture in GDP increased to 19.9 per cent in 2020-21 from 17.8 per cent in 2019-20. The last time the contribution of the agriculture sector in GDP was at 20 per cent was in 2003-04.

Basic Facts about agriculture

• India is the biggest exporter of cotton in the world.
• India is the largest producer of ginger, okra, potatoes, onions, brinjal, etc., amongst vegetables.
• Sikkim is the first state in the world that claimed 100% organic farming.
• India ranks 2nd in the world in agriculture production.
• India’s world rank in services and industry sector is 9th and 5th respectively.
• Indian agricultural production has increased from 87 USD bn to 459 USD bn in the past 15 years (12% annual growth).

Globally India ranks 9th for the agricultural exports.

Significance of Agriculture in Economy

Agricultural influence on national income:

• The contribution of agriculture during the first two decades towards the gross domestic product ranged between 48 and 60%. In the year 2001-2002, this contribution declined to only about 26%.

Agriculture plays vital role in generating employment:

• In India at least two-thirds of the working population earn their living through agricultural works. In India other sectors have failed generate much of employment opportunity the growing working populations.

Agriculture makes provision for food for the ever-increasing population:

• Due to the excessive pressure of population labour surplus economies like India and rapid increase in the demand for food, food production increases at a fast rate. The existing levels of food consumption in these countries are very low and with a little increase in the capita income, the demand for food rise steeply (in other words it can be stated that the income elasticity of demand for food is very high in developing countries).
• Therefore, unless agriculture is able to continuously increase it marketed surplus of food grains, a crisis is like to emerge. Many developing countries are passing through this phase and in a bid to ma the increasing food requirements agriculture has been developed.

 

Contribution to capital formation:

• There is general agreement on the necessity capital formation. Since agriculture happens be the largest industry in developing country like India, it can and must play an important role in pushing up the rate of capital formation. If it fails to do so, the whole process economic development will suffer a setback.

Supply of raw material to agro-based industries:

• Agriculture supplies raw materials to various agro-based industries like sugar, jute, cotton textile and Vanaspati industries. Food processing industries are similarly dependent on agriculture. Therefore, the development of these industries entirely is dependent on agriculture.

Market for industrial products:

• Increase in rural purchasing power is very necessary for industrial development as two- thirds of Indian population live in villages. After green revolution the purchasing power of the large farmers increased due to their enhanced income and negligible tax burden.

Influence on internal and external trade and commerce:

• Indian agriculture plays a vital role in internal and external trade of the country. Internal trade in food-grains and other agricultural products helps in the expansion of service sector.

Contribution in government budget:

• Right from the First Five Year Plan agriculture is considered as the prime revenue collecting sector for the both central and state budgets. However, the governments earn huge revenue from agriculture and its allied activities like cattle rearing, animal husbandry, poultry farming, fishing etc. Indian railway along with the state transport system also earn a handsome revenue as freight charges for agricultural products, both-semi finished and finished ones.

Need of labour force:

• A large number of skilled and unskilled labourers are required for the construction works and in other fields. This labour is supplied by Indian agriculture.

Greater competitive advantages:

• Indian agriculture has a cost advantage in several agricultural commodities in the export sector because of low labour costs and self- sufficiency in input supply.

Recent contribution of Agriculture to Indian Economy

• In 2019-20 total production of horticultural products in India was about 310 million tonnes.
• In 2019-20, India produced about 24 million tonnes of onion and exported about 2 million tonnes from it.
• The potato production in 2019-20 was about 51 million tonnes and tomato production stood at about 19 million tonnes.
• As per estimates, total fresh vegetables production was about 97 million tonnes and about 16 lakh tonnes of it was exported.
• Grape’s production in 2019-20 was about 1.9 lakh million tonnes, mangoes stood at about 49 thousand million tonnes (besides processed mango pulp adding another 85 thousand tonnes).
• As of 2019, India’s livestock population rose to around 530 million including cattle, buffaloes, goats, sheep, pigs and poultry.
• India is world’s largest milk producer and exports milk to countries like Bangladesh, Nepal, Bhutan, the UAE, and Afghanistan etc.
• In 2019-20 about 190 million tonnes of milk was produced. In 2019-20, poultry meat in India accounted for about 4 million tonnes and buffalo meat for about 1.5 million metric tonnes.
• India’s fish production in 2019-20 was approximately 13 thousand tonnes.
• In terms of export, India exported about 11 lakh million tonnes of buffalo meat, 14 thousand million tonnes of sheep/goat meat and 3.5 lakh million tonnes of poultry products in 2019-20.

Characteristics and features of Indian Agriculture

• Source of livelihood: Agriculture is the main occupation. It provides employment to nearly 61% persons of total population. It contributes 25% to national income.
• Dependence on monsoon: Agriculture in India mainly depends on monsoon. If monsoon is good, the production will be more and if monsoon is less than average then the crops fail. Sometimes floods play havoc with our crops. As irrigation facilities are quite inadequate, the agriculture depends on monsoon.
• Labour intensive cultivation: Due is increase in population the pressure on land holding increased. Land holdings get fragmentated and subdivided and become uneconomical. Machinery and equipment can not be used on such farms.
• Under employment: Due to inadequate irrigation facilities and uncertain rainfall, the production of agriculture is less, farmers find work a few months in the year. Their capacity of work cannot be properly utilised. In agriculture there is under employment as well as disguised unemployment.
• Small size of holdings: Due to large scale sub-division and fragmentation of holdings, land holding size is quite small. Average size of land holding was 2.3 hectares in India while in Australia it was 1993 hectares and in USA it was 158 hectares.
• Traditional methods of production: In India methods of production of agriculture along with equipment are traditional. It is due is poverty and illiteracy of people. Traditional technology is the main cause of low production.
• Low Agricultural production: Agricultural production is low in India. India produces 27 Qtls. wheat per hectare. France produces 71.2 Qtls per hectare and Britain 80 Qtls per hectare. Average annual productivity of an agricultural labourer is 162 dollars in India, 973 dollars in Norway and 2408 dollars in USA.
• Dominance of food crops: 75% of the cultivated area is under food crops like Wheat, Rice and Bajra, while 25% of cultivated area is under commercial crops. This pattern is cause of backward agriculture.

Challenges of Indian Agriculture

• Instability: Agriculture in India is largely depends on monsoon. As a result, production of food-grains fluctuates year after year. A year of abun­dant output of cereals is often followed by a year of acute shortage.
• Cropping Pattern: The crops that are grown in India are divided into two broad catego­ries: food crops and non-food crops. While the former comprise food-grains, sugarcane and other beverages, the latter includes different kinds of fibres and oilseeds.
• Land Ownership: Although the owner­ship of agricultural land in India is fairly widely distributed, there is some degree of concentration of land holding. Inequality in land distribution is also due to the fact that there are frequent changes in land ownership in India. It is believed that large parcels of land in India are owned by a- relatively small section of the rich farmers, landlords and money-lenders, while the vast majority of farmers own very little amount of land, or no land at all.
• Sub-Division and Fragmentation of Hold­ing: Due to the growth of population and break­down of the joint family system, there has occurred continuous sub-division of agricultural land into smaller and smaller plots. At times small farmers are forced to sell a portion of their land to repay their debt. This creates further sub-division of land.
• Land Tenure: The land tenure system of India is also far from perfect. In the pre-independence period, most tenants suffered from insecurity of tenancy. They could be evicted any time. How­ever, various steps have been taken after Independ­ence to provide security of tenancy.
• Conditions of Agricultural Labourers: The conditions of most agricultural labourers in India are far from satisfactory. There is also the problem of surplus labour or disguised unemploy­ment. This pushes the wage rates below the sub­sistence levels.
• Manures, Fertilizers and Biocides: Indian soils have been used for growing crops over thousands of years without caring much for replenishing. This has led to depletion and exhaustion of soils resulting in their low productivity. The average yields of almost all the crops are among t e lowest in the world. This is a serious problem which can be solved by using more manures and fertilizers.
• Irrigation: Although India is the second largest irrigated country of the world after China, only one-third of the cropped area is under irrigation. Irrigation is the most important agricultural input in a tropical monsoon country like India where rainfall is uncertain, unreliable and erratic India cannot achieve sustained progress in agriculture unless and until more than half of the cropped area is brought under assured irrigation.
• Lack of mechanization: In spite of the large-scale mechanization of agriculture in some parts of the country, most of the agricultural operations in larger parts are carried on by human hand using simple and conventional tools and implements like wooden plough, sickle, etc. Little or no use of machines is made in ploughing, sowing, irrigating, thinning and pruning, weeding, harvesting threshing and transporting the crops.
• Agricultural Marketing: Agricultural marketing still continues to be in a bad shape in rural India. In the absence of sound marketing facilities, the farmers have to depend upon local traders and middlemen for the disposal of their farm produce which is sold at throw-away price.
• Inadequate transport: One of the main handicaps with Indian agriculture is the lack of cheap and efficient means of transportation. Even at present there are lakhs of villages which are not well connected with main roads or with market centres.

Government initiatives, policies and measures

Nowadays Government of India is giving more priority for the welfare of farmers. In this regard it is implementing several farmers welfare schemes to re-vitalize agriculture sector and to improve their economic conditions.  Therefore, the government has rolled out new initiatives, schemes, programmes and plans to benefit all the farmers.

 

National Agriculture Market (eNAM)

National Agriculture Market (eNAM) is a pan-India electronic trading portal which networks the existing APMC mandis to create a unified national market for agricultural commodities.

Small Farmers Agribusiness Consortium (SFAC) is the lead agency for implementing eNAM under the aegis of Ministry of Agriculture and Farmers’ Welfare, Government of India.

Vision

• To promote uniformity in agriculture marketing by streamlining of procedures across the integrated markets,
• Removing information asymmetry between buyers and sellers promoting real time price discovery based on actual demand and supply.

National Mission for Sustainable Agriculture (NMSA)

National Mission for Sustainable Agriculture (NMSA) has been formulated for enhancing agricultural productivity especially in rainfed areas focusing on integrated farming, water use efficiency, soil health management and synergizing resource conservation.

Schemes under NMSA

• Rainfed Area Development (RAD): RAD is being implemented by RFS Division
• Soil Health Management (SHM): SHM is being implemented by INM Division
• Sub Mission on Agro Forestry (SMAF): SMAF is being implemented by NRM Division
• Paramparagat Krishi Vikas Yojana (PKVY): PKVY is being implemented by INM Division
• Soil and Land Use Survey of India (SLUSI): Being implemented by RFS Division
• National Rainfed Area Authority (NRAA): Being implemented by RFS Division
• Mission Organic Value Chain Development in North Eastern Region (MOVCDNER): Being implemented by INM Division
• National Centre of Organic Farming (NCOF): Being implemented by INM Division
• Central Fertilizer Quality Control and Training Institute (CFQC&TI): implemented by INM division

Pradhan Mantri Krishi Sinchai Yojana (PMKSY)

Har Khet ko Pani “Prime Minister Krishi Sinchayee Yojana”

 Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) has been formulated with the vision of extending the coverage of irrigation ‘Har Khet ko pani’ and improving water use efficiency ‘More crop per drop’ in a focused manner with end-to-end solution on source creation, distribution, management, field application and extension activities.

Objectives:

• Achieve convergence of investments in irrigation at the field level (preparation of district level and, if required, sub district level water use plans).
• Enhance the physical access of water on the farm and expand cultivable area under assured irrigation (Har Khet ko pani).
• Integration of water source, distribution and its efficient use, to make best use of water through appropriate technologies and practices.
• Improve on – farm water use efficiency to reduce wastage and increase availability both in duration and extent.
• Enhance the adoption of precision – irrigation and other water saving technologies (More crop per drop).
• Enhance recharge of aquifers and introduce sustainable water conservation practices.

Paramparagat Krishi Vikas Yojana (PKVY)

The Paramparagat Krishi Vikas Yojana (PKVY), an initiative to promote organic farming in the country, was launched by the NDA government in 2015.

According to the scheme, farmers will be encouraged to form groups or clusters and take to organic farming methods over large areas in the country.

Objectives:

• Promotion of commercial organic production through certified organic farming.
• The produce will be pesticide residue free and will contribute to improve the health of consumer.
• It will raise farmer’s income and create potential market for traders.
• It will motivate the farmers for natural resource mobilization for input production.

Pradhan Mantri Fasal Bima Yojana (PMFBY)

Pradhan Mantri Fasal Bima Yojana (PMFBY) is the government sponsored crop insurance scheme that integrates multiple stakeholders on a single platform.

 Objectives

• To provide insurance coverage and financial support to the farmers in the event of failure of any of the notified crop as a result of natural calamities, pests & diseases.
• To stabilise the income of farmers to ensure their continuance in farming.
• To encourage farmers to adopt innovative and modern agricultural practices.
• To ensure flow of credit to the agriculture sector.

Gramin Bhandaran Yojana

Gramin Bhandaran Yojana, or Rural Godown Scheme, is an Indian government initiative to offer subsidies to individuals or organizations which build or repair rural godowns.

Objective of this Scheme:

• Create scientific storage capacity with allied facilities in rural areas.
• To meet the requirements of farmers for storing farm produce, processed farm produce and agricultural inputs.
• Promotion of grading, standardization and quality control of agricultural produce to improve their marketability.
• Prevent distress sale immediately after harvest by providing the facility of pledge financing and marketing credit by strengthening agricultural marketing infrastructure in the country.

Livestock insurance Scheme

This scheme aims to provide protection mechanism to the farmers and cattle rearers against any eventual loss of their animals due to death and to demonstrate the benefit of the insurance of livestock to the people and popularize it with the ultimate goal of attaining qualitative improvement in livestock and their products.

Benefits:

• The rural insurance policy is designed to offer insurance cover to indigenous cattle owned by farmers, cooperative societies, dairy farms and the like.
• Security in case of death of cattle shall be provided for the following: –
• Natural accidents. (Flood, famine, earthquake, etc.)
• Unpredictable circumstances. (Accidental in Origin.)
• Surgical Operations.
• Terrorist Act.
• Strikes and Riots
• Civil Commotion risk

 

Micro Irrigation Fund (MIF)

The government approved a dedicated Rs5,000 crore fund to bring more land area under micro-irrigation as part of its objective to boost agriculture production and farmers income.

The fund has been set up under NABARD, which will provide this amount to states on concessional rate of interest to promote micro-irrigation, which currently has a coverage of only 10 million hectares as against the potential of 70 million hectares.

 

Soil Health Card Scheme

 

• Launched in 2015
• the scheme has been introduced to assist State Governments to issue Soil Health Cards to all farmers in the country.
• The Soil Health Cards provide information to farmers on nutrient status of their soil along with recommendation on appropriate dosage of nutrients to be applied for improving soil health and its fertility.

Neem Coated Urea (NCU)

• This scheme is initiated to regulate use of urea, enhance availability of nitrogen to the crop and reduce cost of fertilizer application.
• NCU slows down the release of fertilizer and makes it available to the crop in an effective manner.
• The entire quantity of domestically manufactured and imported urea is now neem coated.
• It reduces the cost of cultivation and improves soil health management.

Rainfed Area Development Program (RADP)

Rainfed Area Development Program (RADP) was implemented as a sub-scheme under Rashtriya Krishi Vikas Yojana (RKVY).

 Aim

• To improve quality of life of farmers’ especially, small and marginal farmers by offering a complete package of activities to maximize farm returns.
• Increasing agricultural productivity of rainfed areas in a sustainable manner by adopting appropriate farming system based approaches.
• To minimize the adverse impact of possible crop failure due to drought, flood or un-even rainfall distribution through diversified and composite farming system.
• Restoration of confidence in rainfed agriculture by creating sustained employment opportunities through improved on-farm technologies and cultivation practices
• Enhancement of farmer’s income and livelihood support for reduction of poverty in rainfed areas.

National Watershed Development Project for Rainfed Areas (NWDPRA)

The scheme of National Watershed Development Project for Rainfed Areas (NWDPRA) was launched in 1990-91 based on twin concepts of integrated watershed management and sustainable farming systems.

 Aims:

• Conservation, development and sustainable management of natural resources.
• Enhancement of agricultural production and productivity in a sustainable manner.
• Restoration of ecological balance in the degraded and fragile rainfed eco-systems by greening these areas through appropriate mix of trees, shrubs and grasses.
• Reduction in regional disparity between irrigated and rainfed areas and;
• Creation of sustained employment opportunities for the rural community including the landless.

 

Farm Bills (Repeal)

Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020

• expands the scope of trade areas of farmers’ produce from select areas to “any place of production, collection, aggregation”.
• allows electronic trading and e-commerce of scheduled farmers’ produce.
• prohibits state governments from levying any market fee, cess, or levy on farmers, traders, and electronic trading platforms for the trade of farmers’ produce conducted in an ‘outside trade area’.

Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020

• provides a legal framework for farmers to enter into pre-arranged contracts with buyers including mention of pricing.
• defines a dispute resolution mechanism.

Essential Commodities (Amendment) Act, 2020

• removes foodstuff such as cereals, pulses, potato, onions, edible oilseeds, and oils, from the list of essential commodities, removing stockholding limits on agricultural items produced by Horticulture techniques except under “extraordinary circumstances”

requires that imposition of any stock limit on agricultural produce only occur if there is a steep price rise.

 

Source: Insights IAS