Agriculture sector: Challenges & Reforms

The share of agriculture and allied sector in gross domestic product (GDP) declined to 15.2 per cent during the Eleventh Plan and further to 13.9% in 2013-14 (provisional estimates—PE). While it still accounts for about 54.6% of total employment (Census 2011), there has been a decline in the absolute number of cultivators, which is unprecedented, from 127.3 million (Census 2001) to 118.7 million (Census 2011).

According to the Economic Survey, growth rates of productivity in agriculture sector are far below global standards; productivity levels of rice and wheat have declined after the green revolution of the 1980s. Another issue is soil degradation due to declining fertilizer-use efficiency.

Also, the food subsidy has increased substantially in the past few years, which was Rs. 92,000 crore in 2013-14. With 60 per cent of the total foodgrains and oilseeds produced being grown in the kharif season, and with just about 35 per cent of arable area being irrigated, Indian agriculture is still dependent on rainfall. The second long-range forecast for the current year by the IMD for monsoon season indicates that the monsoon rainfall is likely to be 93 per cent of the LPA (model error ± 4 per cent), with 71 per cent probability of subnormal/deficit rainfall and 70 per cent occurrence of EL Nino. The government has put in place contingency measures in about 500 districts.

Currently, India is in an anomalous situation of being largely self-sufficient with large stocks of foodgrains on the one hand and registering high food inflation. On domestic and international marketing, the plethora of government interventions that were used to build a marketing set up have actually served as barriers to trade. Removing market distortions will create greater competition in markets, promote efficiency and growth and facilitate the creation of a national agricultural market.

For establishing a national common market, the Economic Survey 2013-14 has recommended the following reforms:

I. Examine the APMC Act, EC Act, Land Tenancy Act, and any such legally created structures whose provisions are restrictive and create barriers to free trade.

II. Rigorously pursue alternate marketing initiatives, like direct marketing and contract farming.

III. Examine inclusion of agriculture related taxes under the General Goods and Services Tax (GST)

IV. Establish stable trade policy based on tariff interventions instead of non-tariff trade barriers.

V. Develop and initiate competition in the agro-processing sector. Incentivize the private sector to scale up investments.

In this scenario of bumper production and stocks, a paradigm shift in the role of the government in all aspects of foodgrain production and distribution is necessary.