Agriculture: More from less

Agriculture: More from less
Highlights

Agriculture is the mainstay for Indian economy, as 60 per cent of rural population still depends upon agriculture and its allied activities. As per NSS data average annual income of the median farmer net of production costs from cultivation is less than Rs 20,000 (average per capita income at current prices is about 98000 per annum in India)Post independence agricultural success Chronic food short

India lives in villages and agriculture is the soul of Indian economy Mahatma Gandhi Most of the world’s poor people earn their living from agriculture, so if we knew the economics of agriculture, we would know much of the economics of being poor Theodore Schultz, Nobel laureate.

Agriculture is the mainstay for Indian economy, as 60 per cent of rural population still depends upon agriculture and its allied activities. As per NSS data average annual income of the median farmer net of production costs from cultivation is less than Rs 20,000 (average per capita income at current prices is about 98000 per annum in India)Post independence agricultural success Chronic food shortages of 1960s, have given way to grain self-sufficiency (not nutrition self sufficiency) despite a two-and-a-half fold increase in population.

In 1966-67, Indian wheat and milk production were just about 1/3 of US output. Contrast it with recent figures shows that wheat output being 60per cent higher than America’s, while milk output being 50per cent higher. (Result of green and white revolution)Problems with Indian agriculture Indian agriculture has become cereal-centric (wheat and rice production to the neglect of pulses and oil seed production even though demand for protein based items is raising).

It is regionally biased (Punjab, Haryana, western UP cornering all agriculture subsidies) and input-intensive, consuming generous amounts of land, water, and fertilizer.

Input intensive cultivation means there is sharp decline in cultivable land available per capita as also much lower levels of water per capita.

Challenge of climate change – erratic monsoon, more frequent flood and droughtsChallenge of income- Average income of farmer from agriculture is just 20000 per annum.Some major issues with agricultureProductivity/ Yield- low productivity especially in pulses is the central challenge facing Indian agriculture.

As already stated, Indian agriculture has become cereal centric and input intensive and these two crops are grown on most fertile tracts with irrigation facilities and corner bulk of agriculture support available to all crops across country. When average yield of wheat and rice in India is compared with China, we find that

Average yields of wheat are 39per cent below China and in case of rice 46per cent below that of China’s.In wheat save for Punjab and Haryana, most states have yield lower than that of Bangladesh.In paddy even Punjab trails behind yield level of China while other states trail behind even Bangladesh.

Now, compare productivity in pulses of which India is topmost producer, consumer as well as importer, yield gaps are even starker.On an average, countries like Brazil, Nigeria, and Myanmar have higher yields even the key pulse producing state of M.P. has 60per cent yield of China’s.

Yield gap varies among states in India and we could make rapid gains in productivity through convergence within India For instance, in pulses, if all states were to attain even Bihar’s level of productivity, pulses production would increase by an estimated 41per cent on aggregate and we would be self sufficient in pulses.

Reasons for low productivity in pulsesMost of the land dedicated to growing pulses in each state is un-irrigated.National output of pulses comes redominantly from un-irrigated landIntensive use of water Although water is one of India’s most scarce natural resources, India uses 2 to 4 times more water to produce a unit of major food crop than does China and Brazil.

India invested in flood irrigation method (canal and tube wells) which is highly inefficient way of using water Also despite being water scarce, we are virtually exporting water by exporting water guzzling crops such as paddy, sugarcane, cotton also meat (not exactly crop)India now exports about 1 per cent of total available water every year (demand of 13m people)Reason for inefficient use of waterSubsidies on power and water for agriculture, as result water tables are declining at a rate of 0.3 meters for year and the solution is to shift to sprinkler and drip irrigation and rainwater harvesting.

Leverage MGNREGA labour to build rainwater harvesting structures. Accord infrastructure lending status for new technologies like drip irrigation etc, as infra lending status decreases the cost of borrowing to invest in these technologies.

However, convergence of various schemes implemented by GOI like PM Krishi Sinchai Yojana, will help in convergence of investments in irrigation form water source to distribution and end-use i.e at individual farm level.

Go for drip irrigation A type of micro irrigation method in which perforated pipes are placed either above or slightly below ground and drip water on the roots and stems of plants, directing water more precisely to crops that need it.

The advantage is it reduces consumption of fertiliser and water lost to evaporation, and higher yields than traditional flood irrigation .Problem in adoption of drip irrigation- high initial cost of purchase and the skill required for maintenance.

The Solution is to increase in yields and reduction in costs of power and fertilizer use can help farmers recover the fixed cost quickly. Hence, provision for credit to farmers to adopt this technology. But there are teething troubles in agriculture finance as mentioned in last year’s economic survey.

Problem of agriculture finance40 per cent of agriculture finance still by informal sector. 26 per cent by usurious moneylenders Share of long-term finance i.e. capital loans in overall credit going down over the years (70 per cent in 1991 to 40 per cent in 2011) Share of small loans decreasing (less than 2lakh rupee loan from 78 per cent of total in 2000 to 48 per cent in 2011 and 10 lakh and above from 8 per cent in 2000 to 28 per centin 2011) March rush (jan to march quarter) in loan disbursal i.e.loan in lean season to comply with PSLMore and more agriculture loans going to urban and metropolitan areasImplication of all this is that lending to agriculture is grossly mis-allocated, it is largely to farmers, as the capital formation is not developed in agriculture.

Minimum support Price (MSP) and ProcurementBeing cereal centric and regionally biased, the government announces MSP for 23 crops, effective MSP-linked procurement occurs mainly for wheat, rice and cotton and indirectly for sugarcane via sugar mills. Moreover, majority procurement is done by the GOI from Punjab, Haryana, Western UP, but less with other states.

Poor farmers of Rajasthan and Jharkhand are not even aware of any such MSP policy. As a result, regional disparities are exists between the States, excess stock of wheat and pulses and import and volatility in prices of pulses.

The Solution is reorienting agriculture price policies, such that MSPs are matched by public procurement efforts towards crops that better reflect the country’s natural resource scarcities i.e. provide higher MSP for those crops which we import such as pulses and oil seeds and at the same time procure these crops so that MSP policy is effective on the ground.

For example, the costs of producing cereals in Punjab and Haryana; declining water table, soil quality degradation, post harvest burning of stalks causing pollution, rich farmers getting benefits v/s benefits from pulses; nitrogen fixation, lower import dependency etc. For cereals a system of Price Deficiency payment can be instituted.

Under this system if the price in an APMC mandi fell below the MSP then the farmer would be entitled to a maximum of, say, 50 per cent of the difference between the MSP and the market price. This subsidy could be paid to the farmer via Direct Benefits Transfer (DBT).

For example, if say MSP for wheat is 100 rs per kg. In present scenario, government would procure it at 100 no matter if market demand is very low and prices some 10 rs per kg. Farmer has no incentive to switch to other crops to reflect market demand.

But in price deficiency payment, he will receive only 10 + (1/2*100-10) = 10 + 45 = 55 . It protects farmers while signaling him to produce crops reflecting market demand. Agriculture Research and extension


Agricultural extension is the application of scientific research and new knowledge to agricultural practices through farmer education. Basically educating farmers about the latest technologies being developed in the labs i.e. lab to land linkage. While Indian Council of Agricultural Research (ICAR) with agriculture research universities played a key role in the Green revolution. Of late agriculture research has been plagued by severe under investment and neglect.

Three key weaknesses Agriculture education is weak in states due to

  • (i)Resource crunch,
  • (ii)Difficulty in attracting
  • talented faculty,
  • (iii)limited linkages and collaborations with international counterparts,
  • (iv)weakening of the lab-to-land connect; and,
  • (v)Lack of innovation.


Low investment in public agricultural research in India. As share of agriculture GDP, it is even less than that of Bangladesh and Indonesia.Majority (63.5 per cent) of scientists have low to very low level of productivity Solution There is need of instituting performance indicators in universities.

Improve investment as a proportion of agri GDPsecuring participation from the private sector(The writer is Deputy Statistical Officer, Planning Department, Telangana State)

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