Economics agriculture project

MANAGERIAL
ECONOMICS

DAVAR’S COLLEGE
YEAR: - 2010-11

Group Members

DHRM STUDENTS:-
Anita Chopra
Ranjana Dungaria
Tanaz Bhesania
Prarthana Akmanchi

DFM STUDENTS:-
Mitali Shah
Manasi Jadhav

Agricultural and Rural Development in
India: A Rejoinder
Introduction:-
The primary focus of the present article is agricultural and rural development in India, as the
title suggests. The article has attempted to address issues related to agricultural development, food
security, poverty reduction and livelihoods generation. Keeping an area as huge as this at the center-
stage of policy debates and discussion is important since a vast majority derives their livelihoods from
agriculture, and they reside in rural India. The author has touched upon various issues related to
agricultural development, which include: a. Labour market in India; b. Political economy of Indian
agriculture; c. Indian agriculture before and after liberalization; d. The rural farm economy; e. Agrarian
crisis and ‗liberal‘ policies; f. Farmers‘ suicides and its causes; g. Sustainability of Indian agriculture;
h. Recent policy measures; i. Rural livelihoods and social audits; j. Agricultural R&D; k. Right to
development; and, l. PDS, poverty and hunger in India. A thorough discussion from a historical
context along with necessary data analysis has been done to understand the reality, as it exists. A
detailed review of literature has been deemed necessary to understand the problematic .

a. Labour Market in India:-
―…A free labour is one who is able to accept or reject the conditions and wages offered by the
employer. If he wishes, he may refrain altogether from working. Once having taken the job, he can decide to
give notice and quit. Economic stringency may indeed compel a free labour to agree temporarily to terms he
does not consider favourable. But his basic right to refuse work or to seek alternative employment remains
uncompromised…‖

―…An unfree, or bond(ed) labour, by contrast, is one whose bargaining power is virtually non-existent,
or has been surrendered. Such a labourer does not possess the right or has yielded the right to refuse to work
under the terms set by his master. Through customs, compulsions, or specific obligation, the bond(ed) labourer
is tied to his master‘s needs. He can neither quit not take up work for another master without first receiving
permission…‖
--Daniel Thorner (1962): Employer Labour Relationships in Agriculture, in Land and Labour in
India by Daniel and Alice Thorner.

Studies on the labour market institutions, on the dynamic relationship between market forces
and market institutions, show that transactions interlocking labour, credit, land lease etc. are common
instruments for not just reducing weather and market risks but also for land owners gaining market
control through exercise of extra-economic coercion. There are three different schools, namely-the
neo-classical school, the Marxian school and the neo-institutional school, who have their own
approaches towards understanding the formation of wage labour market, labour wages and formation
of other contractual arrangements involving labour. A chief phenomenon characterising exchange
that has been noted widely is what is termed as ‗interlinked markets‘ or interlocking of factor and
commodity markets. A dominant party conjointly exploits the weaker party in two or more markets by
interlinking the terms of contracts, according to the Marxian approach. The weaker party loses the
option to exercise in other markets, where his free entry is already pre-empted or terms of
participation pre-determined. The power of the dominant party to exploit in such interlinked markets is
much more than in markets taken separately.

PAGE 1

Agricultural labour constituted around 27% of the total number of workers (main plus marginal),
according to the Census 2001. Almost 12.86% pf agriculture labour originated from Andhra Pradesh.
Between 1964-65 and 1974-75, the flush period of India‘s Green Revolution, the number of primarily
wage-dependent rural households with little or no land nearly doubled from 18 million to 25 million.
The upsurge in ruralproletarianisation has arisen from a combination of three factors: a. rapid
population growth on a slower growing land-and-water base; b. agrarian structural changes
simultaneously with population growth; and c. the push and pull effects of the increasing regional
disparities, working through displacement and labour-market influx of the formerly self-employed.
Agricultural labour is not the creation of the British economic policies alone as it has been in
existence since the inception of the caste-system. British colonial policies aggravated the problem of
land alienation to such an extent that during their rule a noticeable class of proletarian labour was
formed, whose characteristics differed from the past. In almost all regions of the country, the lower
caste agricultural labourers operated within the framework of the jajmanisystem (NCRL, 1991)1. The
peasantry itself was highly stratified and some segments were subjected to various economic and
extra-economic constraints. Angus Maddison (1971)2 found that of the total labour force in Moghul
India, 72 percent was in the rural economy, and majority of them were landless labourers. IrfanHabib
(1984)3 found that the size of the labour force would have been 20-25 percent of the total rural
population. Dharma Kumar (1965)4, however, found that agricultural labour would have formed
roughly around 10-15% of the entire population and 17-25% of the agricultural population of the
Madras Presidency during 1800.
Tom Brass (1999)5 explains that during the period 1870-1940, landholders in the area of
United Punjab (which includes Haryana) utilized four kinds of labour, namely, sepidars, peasant
smallholders, sirisand casual workers. All these categories of labour suffered some degree of
economic unfreedom. During the 1970s and 1980s, there was immigration of cheap migrant labourers
from Bihar and Uttar Pradesh in Punjab. Labour contractors recruited tribals from North Bihar and
transported them to Punjab. Migration of rural labourers has been a feature of the Indian economy for
more than a 100 years; till Independence, the British economic policy and the process of uneven
development influenced its character and pattern. While better employment opportunities and higher
wages in economically developed regions (pull factors) attract labour, non-availability of employment
opportunities and consequent economic hardships in the underdeveloped regions act as push factors
in the migration process. Middlemen or jobbers (i.e. labour contractors) are called by different names
in the country, namely: ardas, mistry, mukddam, thekedars, lambardars etc. Workers in the
unorganized sector, including migrant labourers, are denied minimum wages and female workers get
lesser wages than male workers.
Rural labour constitutes the most marginalized section of the Indian society. It benefited the
least during the last 60 years of development, which happened under the Indian five years planning.
Dependence of rural agricultural labour on big landowners and moneylenders for consumption credit
quite often results in bondage. Bonded or forced labour are called by different names in various parts
of India, for e.g. gothi, vethi or bhagola in Andhra Pradesh, kamiyain Bihar, jeetha in Karnataka, hali
in Rajasthan, vet or beggar in Maharastra. Rural labour markets are segmented and segmentation
could be based on gender, race or caste. Such labour market segmentation leads to differential wage
rates and immobility of labour from one occupation into another (Lal, 1984) 6. The fragmentation of the

PAGE 2

Indian labour market is considerably reinforced by caste or community identity at the local level
(Rodgers, 1993)7.
Wage payment system is not the only system as there can be existence of alternative
contractual arrangements like sharecropping, attached laboour system and bonded labour system.
The issue of unfreedom has been expressed in the form of credit-labour linkage i.e. perpetual
indebtedness of the labourers. Under the neo-institutional economic framework, inter linkages (or
interlocking) arise as a result of imperfections like uncertainty, asymmetry of information, absent
markets or transaction cost. Within the Marxian framework,interlocked markets represent different
modes of exploitation. The existence of a certain type of contractual arrangement is within a historical
context, and not based merely on rational choice.

Young girls, below the age of 15 years, bear the brunt of poverty-induced child labour. Almost 86.4
per cent of employed Indian women live with their families on less than US$ 2 per person per day, as
compared to 81.4 per cent of employed men (ILO, 2009)8. According to the NCEUS (2007), Report
on Conditions of Work and Promotion of Livelihoods in the Unorganised Sector:

Agricultural labourers, estimated at 87 million in 2004-05, constituted 34 per cent of
about 253 million agricultural workers i.e., farmers and agricultural labourers.
The unemployment rate for agricultural labourers by the CDS (current daily status) is
quite high in rural areas by any standard; 16 per cent for males and 17 per cent for
females.
The underemployment of usual status agricultural labourers by CDS rates increased
during the decade 1993/94-2004/05. In fact, the CDS unemployment rate was
exceptionally high at 16 per cent in 2004-05.
Overall, wage levels of agricultural labourers have been very low and their growth rates
decelerated through the decade 1993/94-2004/05.
The Minimum Wages Act, 1948 is the only statutory legislation, which ensures minimum
wages to agricultural workers. In 2004-05, about 91 per cent of the agricultural
labourmandays received wage rates below the National Minimum Wage and about 64
per cent below the NCRL minimum wage norm in rural areas.
The total number of agricultural workers in India has been estimated at 259 million as of
2004-05. They form 57 per cent of the workers in the total workforce. About 249 million
of them are in rural areas and that works out to be 73 per cent of the total rural
workforce of 343 million. Their share in total rural unorganised sector employment is 96
per cent while in unorganized agricultural sector it is 98 per cent.
Nearly two-thirds of the agricultural workers (64 per cent) are self-employed, or farmers
as we call them, and the remaining, a little over one-third (36 per cent), wageworkers.
Almost all these wage workers (98 per cent) are casual labourers.
Agricultural workers constituted 56.6 per cent of the total workers in 2004-05, down from
68.6 per cent in 1983. In rural areas, agricultural workers constituted 72.6 per cent of
the total workers in 2004-05, down from 81.6 per cent in 1983.
Farmers form a major share within the agricultural workforce though there has been a
gradual decline in their percentage from 63.5 in 1983 to 57.8 in 1999-00. Between
1999-00 and 2004-05, the percentage of cultivators increased to 64.2, the highest level
achieved in 15 years
A comparison of employment growth rates between 1983/1993-94 and 1993-94/2004-
05 shows that the growth rate of agricultural employment decelerated sharply in the last
decade, from 1.4 to 0.8 per cent. Although the growth of total employment also declined

PAGE 3

from 2.1 per cent during 1983/1993-94 to 1.9 per cent during 1993-94/2004-05, this
deceleration was clearly not so sharp.
The proportion of households with no land possessed increased from 13 per cent in
1993-94 to 14.5 percent in 2004-05. The share of landlessness among the agricultural
labourers was 19.7 per cent in 2004-05. More than 60 per cent of the agricultural
labourers had sub-marginal holdings up to 0.4 hectares and that remained more or less
constant over the period. Landlessness or small size of holdings forces the workers to
engage as labourers to maintain their subsistence levels.

b. Political economy of Indian agriculture:-
Boudhayan Chattopadhyay (1991)9 finds: ―…In more than one sense, the depression and
deflation in 1929-33 was the overture to the funeral march of the Bengal peasant, fisherman and the
artisan, of which the denouement was inflationary war economy of the 1942-44, with its toll of the 3
million plus dead…‖
During the colonial rule until the First World War, surplus was extracted from agriculture, which
was partly transferred to the home economy, partly invested in the military and bureaucratic
machinery to sustain, and partly to strengthen the sources of revenue through public investments in
railways, canals etc (Patnaik, 1984)10. He explains that in an underdeveloped economy, the ‗potential
economic surplus‘ (using Paul Baran‘s concept) is used not for productive investment but for
conspicuous consumption, unproductive investment, or is simply siphoned off abroad as tribute,
dividends or remittances. The zamindari system adopted in some parts of Bengal gave rise to the
class of moneylenders, traders and absentee landlords, which prevented productive investment in
agriculture, unlike the case of ryotwariareas in Punjab. Commercialization of Indian agriculture during
the British rule, comprised of two different processes: a. a shift in the agrarian economy from
production for consumption to production for market; and b. land started acquiring the features of
commodity, which could be bought and sold. Demand for raw materials in order to sustain the
Industrial Revolution compelled the Indian peasantry to shift to crops that had better market value.
The process of de-industrialization started since the Indian goods manufactured by the artisans could
not compete with the cheap machine-made goods imported from England.
Prior to Independence, Indian agriculture suffered from what Daniel Thorner termed as ‗built-in
depressors‘. Big landlords used to extract huge rents during the days of zamindari. After
Independence, the Nehru-Mahalanobis Plan placed more emphasis on industrialization by treating
agriculture as ‗bargain basement‘. However, a decisive shift in agricultural policy happened after the
demise of Nehru. Agriculture became the focal point of State intervention under Agriculture Minister
Mr. C Subramaniam. The miracle technologies of Green Revolution, which was backed by input
subsidies helped the rich peasants at the expense of small and marginal farmers. The rich peasantry
class gained wealth and political powers overtime. Farmers‘ movements led by the rich farmers
attracted the small and marginal farmers. Such movements demanded for higher agricultural prices
and greater subsidies from the State. The HYV (high-yielding varieties) package necessitated more
expensive seeds, greater amount of controlled water (irrigation) and chemical fertilizers, and hence,
there was demand for more subsidies. Because of the presence of Mr. Charan Singh in power during
1977, farmers‘ voice directly entered the highest strata of policy formulation. The ‗new‘ agrarian
movement during the decades of 1970s and 1980s was not revolutionary but reformist in nature since
it relied more on pressuring the State for remunerative prices, loan waivers and a better rural-urban
balance in resource allocation instead of land and tenancy reforms in favour of small and marginal
farmers and landless labourers. Post Manda land Mandir, India saw divisions in the name of caste
and class among the farming community that affected farmers‘ movements. Presently, agrarian
interest is much more marginalized in the national policy agenda. Reforms of the 1990s and shift in
economic priorities of the Indian government led to stagnation in agriculture and more hardships for

PAGE 4

farmers (Posani 2009)11. According to Patnaik (2003)12, the decade of 1990s not only saw a steady
decline in the level of per capita food availability at the national-level, the absolute amount of per
capita food availability during the year 2002-03 was even lower than during the years of the Second
World War-years when the terrible Bengal famine took place.

c. Indian agriculture before and after liberalization:-
There are 4 ways in which better agricultural productivity and output can contribute to an
economy‘s development: a. by supplying foodstuffs and raw material to other expanding sectors of
the economy; b. by providing an ‗investible surplus‘ of savings and taxes to support investment in
other expanding sectors; c. by selling for cash a ‗marketable surplus‘ that will raise the demand of the
rural population for products of other expanding sectors; and d. by relaxing the foreign exchange
constraint by earning foreign exchange through exports or by saving foreign exchange through import
substitution.
Before the liberalization of the Indian economy, exports and imports were controlled through
licensing, quantitative restrictions and canalizing (by state trading boards). There were controls on
exports and imports: a. for maintaining stability in domestic prices; b. to help both producers and
consumers; c. to ensure food security; d. to maintain sound balance-of-payments; e. exportables and
importables acted as wage goods or inputs for wage goods. Since majority of the poors‘ income were
not index-linked, so it was necessary to keep the prices of the agricultural goods lower; and f. to
protect and become self-reliant in production of oilseeds and sugar during the 1980s. India went for
trade liberalization for a number of reasons: a. to move domestic prices closer to international prices;
b. due to comparative advantage in foodgrains production, India would gain; c. agriculture was net
taxed due to high effective rate of protection being given to the industrial sector; agricultural products
were not allowed to be exported; and, d. Indian currency was over-valued, which hampered exports
of agricultural commodities. It has been apprehended that free trade is likely to lead to greater price
inflexibility in the Indian domestic market and would lead to an increase in the relative domestic prices
of most crops, most importantly rice. World prices of rice and cotton would fall but their domestic
prices would rise. If cotton prices go up, then the domestic textile industry was likely to suffer. With
the cut in input subsidies, there would be decline in the profitability for growing sugarcane and
oilseeds. However, with the cut in input subsidies, poor rice growing regions would gain. Intellectual
property rights (IPRs) would not allow the newer varieties of seeds to be diffused to rural hinterlands.
Smaller farmers would not be able to pay higher prices for genetically modified (GM) seeds (Sen and
Nayyar, 1994)13. The member countries of World Trade Organisation (WTO) are committed to follow
a set of rules embodied in Agreement on Agriculture (AoA), which covers: (i) Domestic support; (ii)
Market access i.e., tariffs, and restrictions on imports and exports; and, (iii) Export subsidies. The
agreement required reduction in trade distorting domestic support like price interventions and
subsidies; reduction in export subsidies; replacing quantitative restrictions and quotas on trade with
tariffs, and reduction in tariffs to encourage more and freer trade. It was predicted that trade
liberalisation and implementation of AoA would result in positive gains to the developing countries like
India, through improved access to the developed countries‘ markets, increased trade and better
pricing structure for tropical and other products of interest to the developing countries (NAAS,
2006)14.
Most of the cultivable land in India was brought under cultivation by the mid-1960s. To the total
rise in agricultural production, the contribution of area increase was around 70% and the contribution
of yield increase was nearly 30%. India continued high production with the help of high pay-off inputs.
Government invested in R&D of seed technology but it was irrigation dependent. Expansion of area
happened through rise in population pressure, land reforms, implementation of community

PAGE 5

development programmes, and investment in irrigation. Land reforms in India revolved around:
removal of landlordism, providing land to the tenants, putting ceilings on land, consolidation of land
and co-operative farming. India went for adoption of biochemical technology (since it was a land
scarce economy), which was a combination of high yielding varieties (HYVs), chemical fertilizers,
insecticides, pesticides and irrigation. The technology was prone to pest and insect attacks, and was
too much dependent on irrigation. The technology required a high working capital. Despite the
increase in cost of cultivation, increase in profit was manifold. Subsidization of agriculture has been a
major policy of the Government of India after the introduction of the new biochemical technology.
Subsidy was provided to ensure quick adoption of the new technology by the farmers and to reduce
uncertainties in production. Some have argued that subsidies disturbed efficient allocation of
resources. However, if subsidies were removed, then investment in agriculture would go down, small
and marginal farmers would get affected and the prices of agricultural commodities would shoot up.
Government‘s investment in agricultural R&D (i.e. biochemical technology) was dependent on
the market situation, and hence its response was endogenous and not exogenous. Economic
behaviors and decision-making of not only private but also public sector suppliers of scientific
knowledge and technology are treated as endogenous (induced)15 rather than exogenous to the
economic system, according to Hayami and Ruttan (1971)16. Inducement to develop a technology
depend on economic conditions i.e. the relative availability of labour and land, which in turn
determines the relative prices of labour and land. The sources of power in traditional agriculture are:
labour power, bullock/ horsepower. Mechanical technology means mechanization of irrigation,
mechanization of harvesting, tractors replacing labour and bullocks etc. If the supply of labour and
bullock power is higher than its demand then the traditional technology‘s cost is lower as compared to
the mechanical technology. Certain features of mechanical technology are: a. It is time saving; b. It
has a high fixed cost but low variable cost; c. It is labour displacing; and, d. Labour productivity goes
up when mechanical technology is used since it displaces labour. Mechanical technology is a
substitute for biological technology, which comprises of labour power and bullock power. Biological
sources of technology will be preferred over mechanical technology if its prices were lower compared
to the latter. Certain features of biochemical technology are: a. It increases yield; b. It absorbs labour;
c. The variable cost is high; and d. It is a substitute for land.
Latin America is characterized by the presence of latifundios(very large landholdings) and
minifundios(very small landholdings). There is high level of inequality in the distribution of land under
cultivation. Studies show that value of output per hectare under cultivation is higher in the minifundios
as compared to the latifundios, particularly in countries like Brazil, Argentina and Chile. As opposed to
Latin America, in the case of Asia, there exists too little land for too many people. Land ownership in
Asian countries like India, Pakistan and Bangladesh has been affected by European rule, introduction
of monetized transactions, rise in power of the moneylenders, and rapid growth of Asian populations
[Todaro and Smith, (2006)]17.

d. The rural farm economy:-
Rural livelihoods refer to the various sets of entitlements before an individual, which can help
him or her in order to live. For too long, Indian farmers have seen rise in prices of agricultural inputs
such as fertilizers, seeds, electricity, water etc. during the decade of 1990s and 2000s. Without a
corresponding rise in market prices or the minimum support prices, rise in input prices affected the
profitability of the farmers. As a result of this, farmers became interested either to leave agriculture in
order to move towards other professions or occupations, or they have fallen prey to money-lenders
and middle-men so as to get loans and credits at exorbitant rates of interests. The rising cost of
production has made the farmers depend on informal sources of credit since the transactions costs

PAGE 6

are too high to receive formal credit along with the problem of moral hazards. Rising input prices and
falling market prices have reduced the economic sustainability of Indian agriculture. Not enough
livelihoods are generated in the rural non-farm economy, which can be a ray of hope for the majority
dependent on agriculture.
According to de Haan and Zoomers (2005)18, ―in the household studies, increased attention
was paid to household strategies as a means of capturing the behaviour of low-income people. The
concentration on households was considered useful for its potential to bridge the gap between micro-
economics, with its focus on the atomistic behaviour of individuals, and historical structuralism, which
focused on the political economy oif development. The household also came into vogues in a more
practical sense; it was considered a convenient unit for the collection of empirical data‖.

Graph 1: Agricultural production in India (in million tones)

Rice
250.00
Wheat

Coarse Cereals
200.00
Cereals

Pulses

Foodgrains
Million tonnes

150.00

100.00

50.00

0.00
1980-81

1982-83

1984-85

1986-87

1988-89

1990-91

1992-93

1994-95

1996-97

1998-99

2000-01

2002-03

2004-05

2006-07

Years

Source: Handbook of Statistics on Indian Economy, RBI

Rates of growth of foodgrains and cereal production have increased from 2003-04 onwards, as
could be seen from the graph 1. However, there was stagnancy in the growth rates of production of
pulses and coarse cereals over the years.
Livelihood units such as the individuals, families or businesses change the composition of
livelihood ‗portfolios‘ to reflect changing opportunities, hazards, risks and constraints. Such behaviour
falls under the broad term of livelihood diversification. In the case of India, there was lesser
opportunity for such diversification. The increasingly urban nature of a national economy has turned
out to be at odds with the increasingly rural nature of a particular enterprise or family strategy. Unlike
the tied patron-client labour relationship during the olden days, many jobs nowadays are temporary in
nature. Livelihood diversification is considered to be both a coping and a thriving mechanism–thriving
where it is driven by a growing and more flexible economy. But the ‗coping‘ dimension usually
dominates where diversification is an enforced response to failing agriculture, recession and

PAGE 7

retrenchment. And, this is what has been happening in the case of India (Start and Johnson, 2004) 19.
Earlier, the report by the National Commission on Rural Labour (NCRL, 1991) suggested that
labourers and land-poor farmers have a high propensity to migrate as seasonal labourers. These
migrants are highly disadvantaged as they are poverty ridden with too little bargaining power.

Table 1: Trend growth rate during the past three decades
Trend growth rate per annum
1980-81 to 1989-90 1990-91 to 1999-2000 2000-01 to 2007-08
Rice 3.55 2.00 1.86
R square 0.65 0.81 0.23
Wheat 3.50 3.51 1.36
R square 0.73 0.92 0.34
Foodgrains 2.70 2.07 1.99
R square 0.67 0.82 0.34
Source: Ministry of Agriculture, Government of India
Note: The trend growth rate in the production of rice, wheat and food grains for separate periods
have been calculated by the author

From the table 1, one could make out that trend growth rate in rice production declined from
3.55 percent during the period 1980-81 to 1989-90 to 2.00 percent during the period 1990-91 to 1999-
2000, and further to 1.86 percent during the period 2000-01 to 2007-08. Trend growth rate in wheat
production increased marginally from 3.50 percent during the period 1980-81 to 1989-90 to 3.51
percent during the period 1990-91 to 1999-2000, but fell down sharply to 1.36 percent during the
period 2000-01 to 2007-08. Trend growth rate in foodgrains production declined from 2.70 percent
during the period 1980-81 to 1989-90 to 2.07 percent during the period 1990-91 to 1999-2000, and
further declined to 1.99 percent during the period 2000-01 to 2007-08.
Among other things, the sustainable-livelihoods literature identifies five types of capital assets
as the basis of household livelihoods: (i) financial capital (e.g. income from employment or self-
employment, pensions, credit, remittances from relatives abroad or in urban areas); (ii) human capital
(e.g. skills, knowledge); (iii) natural capital (e.g. land, forests, water, genetic resources); (iv) physical
capital (e.g. equipment); and (v) social capital (e.g. networks of social relations). Household
livelihoods depend on diverse and evolving combinations of these different assets.

e. Agrarian crisis and ‘liberal’ policies:-
It is increasingly felt that Indian agriculture is currently suffering from ―technology fatigue‖, due
to which the earlier gains made during the Green Revolution has withered away. Moreover, Green
Revolution itself has been criticized for being Euro-centric, environmentally unsustainable and being
apolitical (it never addressed the issues of land and tenancy reforms, and other related institutional
reforms). Green Revolution actually tried to improve yields and production, without taking into account
the needed change in rural and social institutions. Since it offered a high-valued package, so it helped
only the rich farmers (owning large landholdings) from assured irrigated areas. Areas where rainfed
irrigation takes place could not gain much from the Green Revolution. Green Revolution only
promoted production of certain crops, which are agro-climatically suitable for certain regions, which
some say have affected biodiversity. It relied excessively on major irrigations (instead of minor
irrigation and rainwater harvesting), chemical fertilizers and pesticides. In order to sustain Green
Revolution, huge subsidies were given on inputs (for producers of inputs—firms, and consumer of
inputs—farmers) like electricity, fertilizers etc, thus making the entire effort economically
unsustainable. It was the large farmers, which benefited from the subsidies provided at the cost of the
small and the marginal farmers. The Bollgard But cottonseed and other such seeds, which have

PAGE 8

recently been introduced, have failed to cater the needs of the rural farming community who belong to
the lower income group (as well as socially backward groups), and possess small-sized farmlands
and cropping fields. In fact, there are allegations that due to the liberalization of the Indian economy,
multi-national corporations (MNCs) from the North got the opportunity of plundering the farmers of the
global South, by patenting and giving 'new names' to the indigenous varieties of plants (such as
turmeric, basmati rice) and animals (via genetic engineering) from the South, thus leading to bio-
piracy. Issues and debates surrounding bio-ethics, bio-piracy and violation of intellectual property
rights (IPRs) have come to the forefront during the recent years, which are still needed to be resolved
at international forums like World Trade Organisation (WTO).
The 59th round of the National Sample Survey states that agrarian distress is severe in Andhra
Pradesh, Karnataka, Maharashtra, Punjab and Rajasthan. High levels of indebtedness are also
reported from these states. The influence of moneylenders appears to be strong in Bihar and
Rajasthan in terms of extending informal credit to farmers. Traders also have extended loans to
indebted farmers (Ghosh and Chandrashekhar, 2005)20.
The Plant Variety Protection and Farmers' Rights Act (PVPFR) 2002, which was formulated
under the sui generis option of the WTO recognises farmers' rights to save, use, sow, exchange,
share or sell his farm products including the seed of a variety protected. The International Union for
the Protection of New Varieties of Plants (UPOV), on the other hand, which came into being in 1961,
has the scope and potential to restrict the age-old traditional right of the farmer to "plant back seeds"
in order to safeguard the vested interests of western seed manufacturing corporations. Hence, one
can say that UPOV and the PVPFR cannot co-exist in the Indian context (Krishnan, 2002)21. Many
have argued about the adverse impact of private seed manufacturing companies, which made their
inroads into the rural Indian economy, after the formulation of the National Seed Policies in 1988 and
2002. The National Seeds Bill, 2004 has been criticized by the All India Kisan Sabha (AIKS) and the
Bharat Krishak Samaj(Saggi, 2006).

PAGE 9

Graph 2: Yield in agriculture (kg per hectare)

3000

Rice

Wheat
2500
Coarse Cereals

Cereals

Pulses

Foodgrains
2000
kg per hectare

1500

1000

500

0
1950-51

1952-53

1954-55

1956-57

1958-59

1960-61

1962-63

1964-65

1966-67

1968-69

1970-71

1972-73

1974-75

1976-77

1978-79

1980-81

1982-83

1984-85

1986-87

1988-89

1990-91

1992-93

1994-95

1996-97

1998-99

2000-01

2002-03

2004-05

2006-07 AE
Years

Source: Handbook of Statistics on Indian Economy, RBI

Rate of growth of wheat yield has fallen down since 2001-02, as could be made out from the
graph 2. There was stagnancy in the rate of growth of pulses yield. Growth rate in rice yield has
increased marginally during the recent years.
Subsidies should be cut to step-up investments in irrigation and for increasing outlays on
poverty alleviation programmes, according to Rao (1995)22. Intensive use of inputs in limited pockets,
have led to lowering the productivity of inputs, reducing employment elasticity of output through
substitution of capital for labour, and environmental degradation such as water logging and salinity,
on one hand and lowering of water table, on the other hand.
The National Agricultural Policy (NAP) (2000) announced by the Government of India, sought
to give a prominent role to contract farming. However, it is said that contract farming has led to
'corporatization' of Indian agriculture, which has adversely affected the small and marginal farmers.
Contract farming has been criticized as being a tool for the agribusiness firms to exploit an unequal
power relationship with growers. However, advocates of contract farming view it as a way to create a
synergy between agribusiness firms and small farmers that benefit both without sacrificing the rights
of either. It is seen as a mechanism to modernize small peasant holders through transfer of
technology.

PAGE 10

Reducing Poverty and Hunger in India :
The Role of Agriculture
India‘s strategy for reducing poverty and hunger has always placed a great deal of importance on the
agricultural sector, reflecting the fact that 70 percent of the population live in rural areas and the
overwhelming majority of them depend upon agriculture as their primary source of income. The focus
of attention has of course changed over time.

Early Focus on Food Self Sufficiency:-
In the 1960s India was deficient in foodgrain production and dependent on imports of wheat, financed
by PL480 assistance from USA. Understandably, the focus of Indian policy in this period was to
increase foodgrain production with a view to ensuring food security. This objective was successfully
achieved by the spread of the Green Revolution in the 1970s, beginning with wheat and then
expanding to rice. This achievement must count as one of the major success stories in development,
considering that influential groups such as the Club of Rome, in the early 1970s, had despaired of
India being able to feed its growing population.

Agricultural Growth for Poverty Alleviation:-
In the 1980s, Indian policymakers shifted their focus from food self sufficiency to generating additional
income in rural areas as a means of tackling the problem of poverty, which was concentrated in rural
areas. Acceleration of agricultural growth, with a special focus on improving the position of small
farmers and extending the productivity revolution to non-irrigated areas was seen as a critical part of
the strategy for poverty alleviation. This effort was supplemented targeted anti poverty programs to
address the needs of vulnerable groups who may not benefit sufficiently from general agricultural
growth. India achieved considerable success with this approach in the 1980s. Growth of agricultural
gross domestic product (GDP) accelerated to about 4.7 percent in the 1980s, compared with only 1.4
percent in the 1970s. This, agricultural growth, together with the beginning of economic reforms in the
nonagricultural sector, pushed up the growth rate of overall GDP to around 5.8 percent in the period
1980-81 to 1989-90 compared with about 3 percent in the 1970s.

India‘s growth was disrupted at the start of the 1990s by a major balance of payments crisis which led
to the adoption of an extensive process of structural reforms. It took time to regain momentum and it
was only in 1993-94 that the economy got back on track, clocking an average growth rate of 6.8
percent in the three years 1993-94 to 1995-96. This acceleration in growth in the post reform period
led policymakers to set a more ambitious GDP growth target of 8 percent a year for the Ninth Plan
period (1997-98 to 2001-2002), to be supported by a growth rate of 4 percent a year in agriculture.

PAGE 11

The projected growth of 4 percent per year in agriculture was
clearly inline with the average growth of 3.8 percent achieved in the
period 1990-91 to 1996-97.

However, actual performance since the mid 1990s has
been disappointing. Agricultural growth slowed to 2 percent a year
in the Ninth Plan period, and overall economic growth was
only 5.5 percent, well below the 8 percent target. Since
agriculture accounted for about 25 percent of GDP, the shortfall of
more than 2 percentage points in agricultural GDP growth
compared with the target accounts directly for a shortfall of
about half a percentage point in GDP growth. If the indirect effects
of more rapid agricultural growth on other sectors are taken into
account, the total impact on GDP growth may have been as much
as one percentage point.

These shortfalls were known, when the Tenth
Plan (covering the period 2002-03 to 2006-07)
was formulated, but it was assumed that the
poor performance of agriculture was due to
temporary factors such as poor monsoons and
depressed agricultural commodity prices in
world markets following the East Asian
meltdown. The Tenth Plan therefore adopted
the same targets of 8 percent growth in GDP
and 4 percent growth in agriculture. Experience
in the first three years of the Tenth Plan period
has sounded some alarm bells. GDP growth has
averaged about 6.5 percent, but agricultural GDP in these years (2002-03 to 2004-05) has grown by
only 1.1 percent per year. The loss of dynamism in agriculture explains most of the shortfall in
aggregate GDP growth.

Slower growth in agriculture also has direct implications for poverty reduction in rural areas. Official
figures suggest that the incidence of poverty fell from 36 percent in 1993-94 to 26 percent in 1999-
2000. The comparability of these numbers has been questioned because of recent changes
(ostensibly improvements) in the methods for measuring consumption in household surveys, but
there is a broad consensus that if corrections are made to ensure comparability, the percentage of
the population in poverty has declined significantly, though less than in the official figures. However,
even the official figures show less decline than what had been targeted, and this is undoubtedly a
reflection of the slowdown in agricultural growth. Slow growth in agriculture is also at the root of
growing evidence of distress in the farming community. Surveys show that a large percentage of
farmers want to leave farming because they find it is no longer sufficiently profitable. The uncertainty
associated with farming has also increased and farmers lack effective means of insuring against such
risks. There are larger market uncertainties associated with new crops and poultry because of greater
vulnerability because of falling ground water levels. There is evidence of increased indebtedness
arising from the inability to cope with risks.

PAGE 12

Recognizing these problems, the Government has undertaken a comprehensive review of the
strategy for agriculture in order to come up with a new deal for agriculture and the rural economy in
general. Remedial action will be needed on several fronts including increased public investment in
irrigation and rural roads, better management of existing irrigation systems and of water resources in
dry land areas, a strengthened agricultural research system and more effective extension,
improvements in the production and distribution of certified seeds, improvements in the credit delivery
system, and innovative steps in marketing and
contract farming to support the diversification
of Indian agriculture.

Irrigation:-
Water is a critical constraint on raising
agricultural productivity and much of the success of
the Green Revolution came from improved
productivity in areas of assured irrigation
provided through canals or (much more
significant) through ground water utilization. The
scope for expanding irrigation through large
and medium scale projects has yet to be fully
exploited. Out of the total of 59 million hectares that could be irrigated through such projects only 40
million hectares have been irrigated. The slow pace of exploitation of irrigation potential is due to lack
of resources in state governments and the tendency to spread available resources thinly over too
many projects. Additional public investments in this area are therefore essential for early utilization of
the potential.
Effective maintenance of the existing system of canal irrigation also suffers because the irrigation
departments of the states lack resources. This in turn is because water charges are kept too low,
covering only 20-25% of the operations and maintenance cost of the system in most states. Poor
maintenance leads to loss of water through seepage, with the result that water use efficiency is very
low – around 25 to 40 percent instead of 65 percent that should be attainable. Low water charges
also encourage highly water intensive crops at the upper end of the canal network, leaving tail-end
portions starved of water.
The solution lies in rationalization of water rates to ensure adequate financial resources to cover
maintenance and resort to participatory irrigation management to give farmers a stake in the
operation and maintenance of the system. Some interesting experiments in these have promise.
Maharasthra has recently established a Water Regulatory Authority to set water charges in a non-
political manner. Several states are also experimenting with involving water user associations
(WUAs) in the operation of the canal systems. Ideally the WUAs should be empowered to collect
water charges and to retain a portion of the collection to maintain the portion of the distribution
network operating in their area.
Ground water utilization played a major role in expanding irrigation in the 1980s but uncontrolled
exploitation of groundwater has led to serious depletion of the water table in many parts of the
country. Overexploitation is encouraged by the policy of massive under pricing of electricity for
agricultural use, with a few states having made electricity for farmers completely free. Even where it is
not free, the charge for electricity is a fraction of the average cost, and is not based on metered use.
Instead there is a fixed charge for presumed usage, based on the capacity of the pump, an
arrangement which implies that the marginal cost of electricity for pumping ground water is zero.
Under pricing canal water and electricity are clearly highly distortionary, given the need to conserve
water use. They are also distributionally unfair because the benefits of under priced water accrue
disproportionately to upper end farmers whereas under priced power enables those able to afford
larger pumps to lower the water table denying water to farmers who can only afford shallow wells.
PAGE 13

The investment requirements of irrigation are massive. Completion of all unfinished projects alone is
estimated to cost approximately US$ 20 billion. In addition, provision must be made for new irrigation
projects (large, medium and small), which together will require about US$ 45 billion. The total
requirement is therefore about US$ 65 billion.

Water Management in Rainfed Areas:-
About 60 percent of India‘s cultivable area will remain dependent on dry land farming even after all
irrigation potential is fully exploited. Productivity growth in these areas is obviously critical for rural
income growth and poverty alleviation, and it depends critically upon better moisture conservation
and the development of varieties suited to dealing with moisture stress.
Schemes for water retention, moisture conservation and groundwater recharge have been
implemented for many years in India but with mixed results. Experience suggests some pointers for
the future. Greater use of technology inputs can help a great deal. Satellite mapping by the Indian
Space Research Organisation (ISRO) has been particularly helpful in planning watershed
management schemes to achieve optimal results. It is also important to adopt a holistic approach. For
example, if deforestation problems upstream are not tackled, water retention structures downstream
will quickly silt up. Community participation is critical to impart ownership and ensure an acceptable
distributional outcome. In the past, these multiple factors were not effectively integrated into
watershed development schemes. Now a National Rainfed Area Authority has been proposed to help
coordinate the work of different implementing agencies.
The cost of treating rainfed areas to ensure optimum use of available water is approximately
Rs.10,000 per hectare and the untreated area is about 80 million hectares, yielding a total cost of
approximately US$20 billion. If this amount is added to the cost of irrigation development and the
target to be achieved over a 10-year period it would require a doubling of public investment in
irrigation.

Other Inputs:-
Increasing agricultural productivity also depends on the efficient delivery of several other inputs. The
quality of seeds and planting material needs to be greatly improved, and this calls for strengthening
the research effort to make it more effective. Two expert committees have recently reported on how
to restructure the agricultural research system to make it more results oriented and their
recommendations are under consideration. The system for producing and marketing certified seeds
of existing varieties at reasonable prices also needs to be improved. Seed replacement rates in most
parts of the country are only one-third to one-half of what they should be, a situation which reflects
partly a lack of knowledge of the importance of seed replacement and partly also a lack of availability
of reliable seeds.
There is evidence that the use of fertilizers is at present highly imbalanced suggesting that scientific
application of fertilizers holds potential for raising productivity. Nitrogen fertilizers are oversubsidized
compared with phosphorus and potassium fertilizer. The structure of fertilizer subsidies should be
rationalized to avoid excessive and wasteful use of nitrogen fertilizers. Lack of knowledge of
micronutrient deficiency in the soil is also a serious problem. There is need for much more extensive
soil testing to encourage balanced application of nutrients needs. Underlying these problems is the
deterioration of the extension services, which makes it difficult to disseminate best farming practices.
Strengthening the extension system therefore needs special attention.

PAGE 14

The government has also identified credit to farmers as a critical area for corrective action. The public
sector commercial banks are being pushed to provide credit to agriculture and have responded
commendably. However, the cooperative credit system which was meant to be the backbone of
agricultural credit, has become financially weak. Part of the problem has been the politicization of
cooperative institutions as a consequence of interference by state governments. The central
government is considering ways of reviving the cooperative credit system by recapitalizing the
cooperative banks provided state governments agree to changes in the system of governance that
would ensure professional management of cooperative banks without state government interference.

Agricultural Diversification:-
India‘s future agricultural strategy must also be oriented to
the need for agricultural diversification. India‘s
foodgrain production capacity has increased significantly
over the years and there is evidence that household
consumption patterns are changing away from foodgrain
towards higher value crops such as vegetables,
fruits, milk, eggs, etc. Future growth in agriculture
must come from diversification into these non-food grain
areas and this will pose a special challenge because
marketing these perishable products is much more
complicated than marketing food grains.

Horticulture development is currently constrained by
poor marketing arrangements. The gap between prices
received by the farmers and those paid by urban consumers is large, reflecting inefficient marketing
arrangements. Horticultural produce is typically collected from farmers by market agents, who sell it
organised markets established under the Agricultural Produce Marketing Acts. Unfortunately these
markets are controlled by a few traders and operate on highly non transparent basis. Facilities for
grading and handling are poor and methods of price discovery in the markets are nontransparent.
Wastage is high owing to poor logistics and the absence of cold chains. The net result is much lower
realisation by the farmer.

It is necessary to amend outdated laws restricting the establishment of markets to allow cooperatives
and private entrepreneurs to set up modern markets with grading facilities, cold storages and
transparent auction procedures. Half a dozen states have already amended their existing laws on
agricultural marketing to allow such markets to be established and a dozen others are in the process
of doing so. These changes are being resisted by those who control the existing structure but this
opposition will weaken over time.

Contract farming is another innovation that has been introduced in many states and could accelerate
diversification. India‘s laws on agricultural land do not allow corporate bodies to purchase land and
operate large-scale farms – a national policy to prevent displacement of a large number of small
farmers. – but corporate buyers who know what is needed in export markets, in high end domestic
markets or in agro-processing, can engage in contract farming to procure high quality produce.
Buyers select areas suitable for the crops they are interested in and organize farmers to produce
these crops under contract, while providing planting material of the right quality and technical
supervisory. The process enables the farmer to eliminate marketing risk while allowing the corporate
buyer to ensure quality supplies by selecting planting material, and provide access to scientific advice
on disease and other types of stress.

PAGE 15

The development of agro-processing will be a spur agricultural diversification and the government is
paying special attention to this area. At present, the proportion of India‘s agricultural output that is
processed is very small compared with that in most developing countries and the demand for
processed food is bound to increase as incomes rise. There are several obstacles to the more rapid
development of food processing. Taxation structures often discriminate against food processing
because processed food is the first stage for application of indirect taxes and the absence of tax
rebate on taxes paid on inputs means the effective tax on value added is very high. Another
impediment is the reservation of certain categories of products for small scale production. The
absence of a modern food processing law has meant that this sector is governed by multiple laws,
making it difficult to operate effectively. An Integrated Food Processing Law has been introduced in
Parliament to replace and the passage expected in the current year will make a qualitative difference
to the operating environment.

Targeted anti-Poverty Programs:-
While efforts to increase
agricultural productivity and
thereby increase farm
incomes and employment
are a major instrument for
poverty alleviation, they
will need to be supplemented
by special targeted
program aimed at improving the
welfare of vulnerable
groups in rural areas.
Employment programs in
rural areas have been the most important of these anti poverty programs
and India has a long history of such programs. Building on this tradition, a
Rural Employment Guarantee Act has been enacted which provides assurance of up to 100 days of
employment at the minimum wage to each household in rural areas wishing to make use of it. The
employment would be provided on projects chosen by the elected village councils and the guidelines
specify that top priority should be given to irrigation and water management schemes. Unlike earlier
employment programs, this scheme includes a guarantee in the sense that if employment cannot be
provided, unemployment compensation will be provided at least 25 percent of the wage. Although the
program open to each household, actual demand for employment is expected to be limited to
households below the poverty line. The coverage of the Act will initially be implemented to 200 of the
most backward districts (about one-third of the total districts in the country). Together with other
special programs relating to provision of housing for the poor, old age insurance, and schemes for
supporting self employment, this program will provide an element of social security that should help to
reduce poverty.

PAGE 16

The Role of Public Investment:-
An important implication of the new agricultural strategy is that it involves a substantial increase in
public investment. This is an area where past trends need to be reversed. Public investment in
agriculture began to decline in the 1980s, but initially the decline was offset by the fact that private
investment in agriculture was increasing. Since the mid 1990s private investment in agriculture has
stagnated while public investment has continued to decline. It is essential to reverse these trends,
especially for public investment in irrigation and water resource management. It is also essential to
increase public investment in rural roads and rural electrification. Success in these areas will
stimulate private investment and contribute to a revival of growth momentum in agriculture.

NATIONAL AGRICULTURAL POLICY
2000
INTRODUCTION :-
The Government of India announced a National Agricultural Policy on 28 th July, 2000, with the
objectives of establishing an appropriate and ideal environment to achieve a higher growth rate. The
policy seeks to tap the vast potential of Indian agriculture, strengthen rural infrastructure, ensure food
and nutrition to the country‘s billion people, accelerate the growth of agro-based industries by
ensuring regular supply of raw materials, create employment in rural areas and secure fair
remuneration to the farming community.
Thus, the NAP aims to achieve the following objectives :
1) A growth rate of over 4% per annum in agriculture.
2) Efficient use of resources that conserves our soil, water and biodiversity.
3) Growth with equity, i.e. growth which is wide spread across regions and farmers.
4) Growth that is demand driven and caters to domestic market.
5) Maximize benefits from exports of agricultural goods.
6) Encourage investments in agriculture – both public & private.
7) Growth that is sustainable technologically, environmentally and economically.

FEATURES OF NAP 2000 :-

1) Sustainable Agriculture :
To promote sustainable agriculture, the following measures are suggested :
(a) To reduce the pressure of population on land.
(b) To control unnecessary diversion of land for non-agricultural uses.
(c) To use wastelands for agriculture and afforestation.

PAGE 17

(d) To increase cropping intensity through multiple cropping and inter-cropping.
(e) To follow a long term policy of rain fed agriculture through water shed approach.
(f) To rationalize the use of surface and groundwater and also to popularize drip and sprinkler
irrigation.
(g) To involve farmers and labourers in development of pastures, forestry programmes.

2) Food & Nutritional Security :
Special efforts will be made to raise productivity of crops to meet the demand for food. New
crop varieties with higher nutritional values will be given special attention.

A major thrust will be given to development of rain fed irrigation, horticulture, floriculture,
roots & tubers, plantation crops, aromatic & medicinal plants, bee keeping and sericulture.

Development of animal husbandry, poultry, dairying and aquaculture will receive high
priority. Efforts to increase animal protein availability in food basket will be increased.

Cultivation of fodder crops and fodder trees will be encouraged to meet the growing need for
feed and fodder requirements.

3) Generation & Transfer of Technology :
The Government will promote application of biotechnology, pre and post harvest technologies,
energy saving technology and technology for environment protection. Private sector
investment is also to be encouraged in agricultural research, human resource development
and post harvest management and marketing.

4) Credit Facilities :
The policy provides for easy availability of credit to the sector. It seeks progressive
institutionalization of rural and farm credit to ensure timely and adequate credit to farmers.
Credit should be made available on the pledge of farmer‘s produce.

5) Incentives For Agriculture :
The government will make efforts to get better prices for agricultural raw materials. At the
same time the farm sector machines and equipments will be made available at lower rates.
The taxes on food grains and other crops will be removed. The Agriculture Minister
promised to keep agriculture outside the purview of taxes. The present regime of agriculture
subsidies will be continued. The excise duty on equipments, farm machinery and fertilizers will
be rationalized.

6) Investment In Agriculture :
Public investment will be stepped up for narrowing regional imbalances and accelerating
development of agricultural infrastructure.

PAGE 18

7) Land Reforms :
(a) Consolidation of holdings all over the country.
(b) Redistribution of surplus lands and waste lands among the landless farmers and
unemployed youth.
(c) Speeding up tenancy reforms to recognize the rights of tenants and share croppers.
(d) Updating and improvement of land records and issue of land pass books to farmers.

LIMITATIONS OF NAP 2000 :-

1) Impossible Target of Growth Rate :
It must be emphasized that the aim of achieving a rate of 4% for a period of 20 years is
almost impossible. During the 1990s the growth rate of agricultural production averaged 2.1%
and that of food grains production, 1.8% per annum. This is almost equal to the rate of growth
of population in the country.

2) Fails to Identify States :
The policy talks of growth with equity covering all regions. But it has failed to identify the
states which have lagged behind in the utilization of their agricultural potential.

3) Private Sector Involvement :
There is no doubt that private investment in the form of tube wells, agricultural implements,
human resource development are very helpful, but the small farmers who constitute the bulk of
Indian farming community are unable to undertake private investment in a major way. They
need the support of public investment in the form of water shed facilities, irrigation facilities,
storage and warehousing etc.

4) Problems of Contract Farming :
The policy seeks to involve the corporate sector through contract farming by land leasing
arrangements. This will definitely increase production but will result in contraction of
employment.

5) Lack of Machinery for Implementation :
The policy has not outlined any machinery for the implementation of the various
suggestions. Agriculture is a state subject and the role of state governments is very critical in
implementing the various projects and programmes. If the centre intends the states to
implement it, it must provide for schemes of sharing programmes between the centre and the
state governments.

To sum up, the policy is very appropriate in several aspects but it is also wanting in some important
ways.

PAGE 19

CRITICAL EVALUATION OF NAP 2000 :-

1) Laudable Aims :
The policy with a time frame of two decades has set before itself tasks that are necessary
to be achieved. The aims of a high rate of growth of agriculture (over 4%), a strengthened
infrastructure, large value additions in production, faster growth of agro business, more
employment, better standard of living for cultivators and facing challenges of globalization and
liberalization are very commendable.

2) Reform Oriented :
The policy provides for the much needed reforms in the agricultural sector. Removal of
controls and regulations and restriction on the movement of agricultural goods are good signs.
The private sector participation in the agricultural sector can also help in improving the
conditions. They can bring in the much needed capital for investment in research and
technology, skill formation and extension services like agricultural clinics.

3) Very Comprehensive :
The policy covers almost all the aspects which need to be attended. It covers farming, animal
husbandry and agro business activities. The crucial aspects of better credit and speedier land
reforms have been covered.

New Agriculture Policy

Agriculture is a way of life, a tradition, which, for centuries, has shaped the thought, the outlook, the
culture and the economic life of the people of India. Agriculture, therefore, is and will continue to be
central to all strategies for planned socio-economic development of the country. Rapid growth of
agriculture is essential not only to achieve self-reliance at national level but also for household food
security and to bring about equity in distribution of income and wealth resulting in rapid reduction in
poverty levels.

PAGE 20

Indian agriculture has, since Independence, made rapid strides. In taking the annual foodgrains
production from 51 million tonnes in early fifties to 206 million tonnes at the turn of the century, it has
contributed significantly in achieving self-sufficiency in food and in avoiding food shortages.

Over 200 million Indian farmers and farm workers have been the backbone of India‘s agriculture.
Despite having achieved national food security the well being of the farming community continues to
be a matter of grave concern for planners and policy makers. The establishment of an agrarian
economy which ensures food and nutrition to India‘s billion people, rawmaterials for its expanding
industrial base and surpluses for exports, and a fair and equitable reward system for the farming
community for the services they provide to the society, will be the mainstay of reforms in the
agriculture sector.

The National Policy on Agriculture seeks to actualise the vast untapped growth potential of Indian
agriculture, strengthen rural infrastructure to support faster agricultural development, promote value
addition, accelerate the growth of agro business, create employment in rural areas, secure a fair
standard of living for the farmers and agricultural workers and their families, discourage migration to
urban areas and face the challenges arising out of economic liberalization and globalisation. Over the
next two decades, it aims to attain:

The salient features of the new agricultural policy are:
 Over 4 per cent annual growth rate aimed over next two decades..
 Greater private sector participation through contract farming.
 Price protection for farmers.
 National agricultural insurance scheme to be launched.
 Dismantling of restrictions on movement of agricultural commodities throughout the country.
 Rational utilization of country's water resources for optimum use of irrigation potential.
 High priority to development of animal husbandry, poultry, dairy and aquaculture.
 Capital inflow and assured markets for crop production.
 Exemption from payment of capital gains tax on compulsory acquisition of agricultural land.
 Minimize fluctuations in commodity prices.
 Continuous monitoring of international prices.
 Plant varieties to be protected through legislation.
 Adequate and timely supply of quality inputs to farmers.
 High priority to rural electrification.
 Setting up of agro-processing units and creation of off-farm employment in rural areas.

Sustainable Agriculture
The policy will seek to promote technically sound, economically viable, environmentally non-
degrading, and socially acceptable use of country‘s natural resources – land, water and genetic
endowment to promote sustainable development of agriculture. Measures will be taken to contain
biotic pressures on land and to control indiscriminate diversion of agricultural lands for non-
agricultural purposes. The unutilized wastelands will be put to use for agriculture and afforestation.
Particular attention will be given for increasing cropping intensity through multiple-cropping and inter-
cropping.

PAGE 21

Rational utilization and conservation of the country‘s abundant water resources will be promoted.
Conjunctive use of surface and ground water will receive highest priority. Special attention will be
focused on water quality and the problem of receding ground-water levels in certain areas as a result
of over-exploitation of underground aquifers. Proper on-farm management of water resources for the
optimum use of irrigation potential will be promoted.

Erosion and narrowing of the base of India‘s plant and animal genetic resources in the last few
decades has been affecting the food security of the country. Survey and evaluation of genetic
resources and safe conservation of both indigenous and exogenously introduced genetic variability in
crop plants, animals and their wild relatives will receive particular attention. The use of bio-
technologies will be promoted for evolving plants which consume less water, are drought resistant,
pest resistant, contain more nutrition, give higher yields and are environmentally safe. Conservation
of bio-resources through their ex situ preservation in Gene Banks, as also in situ conservation in their
natural habitats through bio-diversity parks, etc., will receive a high priority to prevent their extinction.
Specificmeasures will also be taken to conserve indigenous breeds facing extinction. There will be a
time bound programme to list, catalogue and classify country‘s vast agro bio-diversity.

Sensitization of the farming community with the environmental concerns will receive high priority.
Balanced and conjunctive use of bio-mass, organic and inorganic fertilizers and controlled use of agro
chemicals through integrated nutrients and pest management (INM & IPM) will be promoted to
achieve the sustainable increases in agricultural production. A nation-wide programme for utilization
of rural and urban garbage, farm residues and organic waste for organic matter repletion and
pollution control will be worked out.

Agro-forestry and social forestry are prime requisites for maintenance of ecological balance and
augmentation of bio-mass production in agricultural systems. Agro-forestry will receive a major thrust
for efficient nutrient cycling, nitrogen fixation, organic matter addition and for improving drainage.
Farmers will be encouraged to take up farm/agro-forestry for higher income generation by evolving
technology, extension and credit support packages and removing constraints to development of agro
and farm forestry. Involvement of farmers and landless labourers will be sought in the development of
pastures/forestry programmes on public wastelands by giving financial incentives and entitlements to
the usufructs of trees and pastures.

The history and traditional knowledge of agriculture, particularly of tribal communities, relating to
organic farming and preservation and processing of food for nutritional and medicinal purposes is one
of the oldest in the world. Concerted efforts will be made to pool, distil and evaluate traditional
practices, knowledge and wisdom and to harness them for sustainable agricultural growth.

Food and Nutritional Security
Special efforts will be made to raise the productivity and production of crops to meet the increasing
demand for food generated by unabated demographic pressures and raw materials for expanding
agro-based industries. A regionally differentiated strategy will be pursued, taking into account the
agronomic, climatic and environmental conditions to realize the full growth potential of every region.
Special attention will be given to development of new crop varieties, particularly of food crops, with
higher nutritional value through adoption of bio-technology particularly genetic modification, while
addressing bio-safety concerns.

PAGE 22

A major thrust will be given to development of rainfed and irrigated horticulture, floriculture, roots and
tubers, plantation crops, aromatic and medicinal plants, bee-keeping and sericulture, for augmenting
food supply, exports and generating employment in rural areas. Availability of hybrid seeds and
disease-free planting materials of improved varieties, supported by a network of regional nurseries,
tissue culture laboratories, seed farms will be promoted to support systematic development of
horticulture having emphasis on increased production, post-harvest management, precision farming,
bio-control of pests and quality regulation mechanism and exports.

Animal husbandry and fisheries also generate wealth and employment in agriculture sector.
Development of animal husbandry, poultry, dairying and aqua-culture will receive a high priority in the
efforts for diversifying agriculture, increasing animal protein availability in the food basket and for
generating exportable surpluses. A national livestock breeding strategy will be evolved to meet the
requirements of milk, meat, egg and livestock products and to enhance the role of draught animals as
a source of energy for farming operations and transport. Major thrust will be on genetic upgradation of
indigenous/native cattle and buffaloes using proven semen and high quality pedigreed bulls and by
expanding artificial insemination network to provide services at the farmer‘s doorstep.

Generation and dissemination of appropriate technologies in the field of animal production as also
health care to enhance production and productivity levels will be given greater attention. Cultivation of
fodder crops and fodder trees will be encouraged to meet the feed and fodder requirements and to
improve animal nutrition and welfare. Priority will also be given to improve the processing, marketing
and transport facilities, with emphasis on modernization of abattoirs, carcass utilization and value
addition thereon. Since animal disease eradication and quarantine is critical to exports, animal health
system will be strengthened and disease-free zones created. The involvement of cooperatives and
private sector will be encouraged for development of animal husbandry, poultry and dairy. Incentives
for livestock and fisheries production activities will be brought at par with incentives for crop
production.

An integrated approach to marine and inland fisheries, designed to promote sustainable aquaculture
practices, will be adopted. Biotechnological application in the field of genetics and breeding, harmonal
applications, immunology and disease control will receive particular attention for increased
aquaculture production. Development of sustainable technologies for fin and shell fish culture as also
pearl-culture, their yield optimization, harvest and post-harvest operations, mechanization of fishing
boats, strengthening of infrastructure for production of fish seed, berthing and landing facilities for
fishing vessels and development of marketing infrastructure will be accorded high priority. Deep sea
fishing industry will be developed to take advantage of the vast potential of country‘s exclusive
economic zone.

PAGE 23

Generation and Transfer of Technology
A very high priority will be accorded to evolving new location-specific and economically viable
improved varieties of agricultural and horticultural crops, livestock species and aquaculture as also
conservation and judicious use of germplasm and other bio-diversity resources. The regionalization of
agricultural research, based on identified agro-climatic zones, will be accorded high priority.
Application of frontier sciences like bio-technology, remote sensing technologies, pre and post-
harvest technologies, energy saving technologies, technology for environmental protection through
national research system as well as proprietary research will be encouraged. The endeavour will be
to build a well organized, efficient and result-oriented agriculture research and education system to
introduce technological change in Indian agriculture. Upgradation of agricultural education and its
orientation towards uniformity in education standards, women empowerment, user-orientation,
vocationalization and promotion of excellence will be the hallmark of the new policy.

The research and extension linkages will be strengthened to improve quality and effectiveness of
research and extension system. The extension system will be broad-based and revitalized. Innovative
and decentralized institutional changes will be introduced to make the extension system farmer-
responsible and farmer-accountable. Role of Krishi Vigyan Kendras (KVKs), Non-Governmental
Organizations (NGOs), Farmers Organizations, Cooperatives, corporate sector and para-technicians
in agricultural extension will be encouraged for organizing demand-driven production systems.
Development of human resources through capacity building and skill upgradation of public extension
functionaries and other extension functionaries will be accorded a high priority. The Government will
endeavour to move towards a regime of financial sustainability of extension services through effecting
in a phased manner, a more realistic cost recovery of extension services and inputs, while
simultaneously safeguarding the interests of the poor and the vulnerable groups.

Mainstreaming gender concerns in agriculture will receive particular attention. Appropriate structural,
functional and institutional measures will be initiated to empower women and build their capabilities
and improve their access to inputs, technology and other farming resources.

Inputs Management
Adequate and timely supply of quality inputs such as seeds, fertilizers, plant protection chemicals,
bio-pesticides, agricultural machinery and credit at reasonable rates to farmers will be the endeavour
of the Government. Soil testing and quality testing of fertilisers and seeds will be ensured and supply
of spurious inputs will be checked. Balanced and optimum use of fertilizers will be promoted together
with use of organic manures and bio-fertilizers to optimize the efficiency of nutrient use.

Development, production and distribution of improved varieties of seeds and planting materials and
strengthening and expansion of seed and plant certification system with private sector participation
will receive a high priority. A National Seed Grid will be established to ensure supply of seeds
especially to areas affected by natural calamities. The National Seeds Corporation (NSC) and State
Farms Corporation of India (SFCI) will be restructured for efficient utilization of investment and
manpower.

PAGE 24

Protection to plant varieties through a sui generis legislation, will be granted to encourage research
and breeding of new varieties particularly in the private sector in line with India‘s obligations under
TRIPS Agreement. The farmers will, however, be allowed their traditional rights to save, use,
exchange, share and sell their farm saved seeds except as branded seeds of protected varieties for
commercial purpose. The interests of the researchers will also be safeguarded in carrying out
research on proprietary varieties to develop new varieties.

Integrated pest management and use of biotic agents in order to minimize the indiscriminate and
injudicious use of chemical pesticides will be the cardinal principle covering plant protection. Selective
and eco-friendly farm mechanization through appropriate technology will be promoted, with special
reference to rainfed farming to reduce arduous work and to make agriculture efficient and competitive
as also to increase crop productivity.

Incentives for Agriculture
The Government will endeavour to create a favourable economic environment for increasing capital
formation and farmer‘s own investments by removal of distortions in the incentive regime for
agriculture, improving the terms of trade with manufacturing sectors and bringing about external and
domestic market reforms backed by rationalization of domestic tax structure. It will seek to bestow on
the agriculture sector in as many respects as possible benefits similar to those obtaining in the
manufacturing sector, such as easy availability of credit and other inputs, and infrastructure facilities
for development of agri-business industries and development of effective delivery systems and freed
movement of agro produce.

Consequent upon dismantling of Quantitative Restrictions on imports as per WTO Agreement on
Agriculture, commodity-wise strategies and arrangements for protecting the grower from adverse
impact of undue price fluctuations in world markets and for promoting exports will be formulated.
Apart from price competition, other aspects of marketing such as quality, choice, health and bio-
safety will be promoted. Exports of horticultural produce and marine products will receive particular
emphasis. A two-fold long term strategy of diversification of agricultural produce and value addition
enabling the production system to respond to external environment and creating export demand for
the commodities produced in the country will be evolved with a view to providing the farmers
incremental income from export earnings. A favourable economic environment and supportive public
managementsystem will be created for promotion of agricultural exports. Quarantine, both of exports
and imports, will be given particular attention so that Indian agriculture is protected from the ingress of
exotic pests and diseases.

In order to protect the interest of farmers in context of removal of Quantitative Restrictions,
continuous monitoring of international prices will be undertaken and appropriate tariffs protection will
be provided. Import duties on manufactured commodities used in agriculture will be rationalized. The
domestic agricultural market will be liberalized and all controls and regulations hindering increase in
farmers‘ income will be reviewed and abolished to ensure that agriculturists receive prices
commensurate with their efforts, investment. Restrictions on the movement of agricultural
commodities throughout the country will be progressively dismantled.

PAGE 25

The structure of taxes on foodgrains and other commercial crops will be reviewed and rationalized.
Similarly, the excise duty on materials such as farm machinery and implements, fertilizers, etc., used
as inputs in agricultural production, post harvest storage and processing will be reviewed. Appropriate
measures will be adopted to ensure that agriculturists by and large remain outside the regulatory and
tax collection systems. Farmers will be exempted from payment of capital gains tax on compulsory
acquisition of agricultural land.

Investments in Agriculture
The agriculture sector has been starved of capital. There has been a decline in the public sector
investment in the agriculture sector. Public investment for narrowing regional imbalances,
accelerating development of supportive infrastructure for agriculture and rural development
particularly rural connectivity will be stepped up. A time-bound strategy for rationalisation and
transparent pricing of inputs will be formulated to encourage judicious input use and to generate
resources for agriculture. Input subsidy reforms will be pursued as a combination of price and
institutional reforms to cut down costs of these inputs for agriculture. Resource allocation regime will
be reviewed with a view to rechannelizing the available resources from support measures towards
assets formation in rural sector.

A conducive climate will be created through a favourable price and trade regime to promote farmers‘
own investments as also investments by industries producing inputs for agriculture and agro-based
industries. Private sector investments in agriculture will also be encouraged more particularly in areas
like agricultural research, human resource development, post-harvest management and marketing.

Rural electrification will be given a high priority as the prime mover for agricultural development. The
quality and availability of electricity supply will be improved and the demand of the agriculture sector
will be met adequately in a reliable and cost effective manner. The use of new and renewable
sources of energy for irrigation and other agricultural purposes will also be encouraged.

Bridging the gap between irrigation potential created and utilized, completion of all on-going projects,
restoration and modernization of irrigation infrastructure including drainage, evolving and
implementing an integrated plan of augmentation and management of national water resources will
receive special attention for augmenting the availability and use of irrigation water.

Emphasis will be laid on development of marketing infrastructure and techniques of preservation,
storage and transportation with a view to reducing post-harvest losses and ensuring a better return to
the grower. The weekly periodic markets under the direct control of Panchayat Raj institutions will be
upgraded and strengthened. Direct marketing and pledge financing will be promoted. Producers
markets on the lines of Ryatu Bazars will be encouraged throughout the width and breadth of the
country. Storage facilities for different kinds of agriculturalproducts will be created in the production
areas or nearby places particularly in the rural areas so that the farmers can transport their produce
to these places immediately after harvest in shortest possible time. The establishment of cold chains,
provision of pre-cooling facilities to farmers as a service and cold storage in the terminal markets and
improving the retail marketing arrangements in urban areas, will be given priority. Upgradation and
dissemination of market intelligence will receive particular attention.

PAGE 26

Economics agriculture project

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