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Indian agriculture sector,trends
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Importance of Agriculture to the Indian Economy
“Everything else can wait but not agriculture” – Pt. Jawahar Lal Nehru
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
2008-09
2010-11
2012-130%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Services
Manufactu ring
Mining andQuarrying
Industry
Agri- culture
Composition of India’s GDP
Why has the contribution been declining ?
• More urbanization and employment opportunities in services sectors• Small land holdings- 1.16ha (2011,individuals and institutions) –which
inhibit large scale mechanization ,and are a less than optimum use of labor resulting in disguised unemployment .
• Less irrigated area -35.2%(2010)• Low cereal yield –for 2009-2013 ,it was 2.95 ton/ha ,as compared to 5.83
ton/ha (China) ,4.6 ton/ha (Brazil) , 1.86 ton/ha (Russia) ,and 3.65 ton/ha (South Africa)
• Lack of land reforms ,storage facilities work as disincentives .• Lack of infrastructure –access to markets• Government policies – MSP,power subsidies to wheat and rice have
distorted the diversification .
WPI –link to agriculture ?
Apr-05Jul-0
5
Oct-05Jan
-06
Apr-06Jul-0
6
Oct-06Jan
-07
Apr-07Jul-0
7
Oct-07Jan
-08
Apr-08Jul-0
8
Oct-08Jan
-09
Apr-09Jul-0
9
Oct-09Jan
-10
Apr-10Jul-1
0
Oct-10Jan
-11
Apr-11Jul-1
1
Oct-11Jan
-12
Apr-12Jul-1
2
Oct-12Jan
-13
Apr-13Jul-1
3
Oct-13
-5
0
5
10
15
20
25
All CommoditiesFood
Source :http://eaindustry.nic.in/Download_Data_0405.html
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
2008-09
2010-11
2012-13
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
Gross Fiscal Deficit & Revenue Deficit as % of GDP
Gross Fiscal DeficitRevenue Deficit
Fiscal Deficit
• High Fiscal deficit to decrease unemployment has increased inflation .• High prices oil are cascaded in the supply chain ,leading to price rise .• Hence ,increased borrowing crowds out the private sector investment .
Fiscal Deficit and Subsidies
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-2011
2011-120
20000
40000
60000
80000
100000
120000
Fertilizer Subsidies
Imported P+KUreaTotal
Year
Rs cr
ores
Source : http://www.thehindubusinessline.com/features/investment-world/macro-view/underestimating-subsidies/article3266293.ece
• Subsidies form a significant portion of government expenses .• Total subsidies increased from Rs 67,498 crore in 2007-08 to Rs 208,503 crore in 2011-12 .• Effective subsidies to farmers are 40 to 75 % for fertilizers and 70 to 90 % for irrigation and electricity.• Apart from overshooting budget estimates ,they also have unwanted effects like overutilization of inputs ,leading to environmental degradation .• India performs worst amongst BRICS countries .
Dependence on rainfall
• Monsoon plays an important role in agricultural productivity .• Dependence on rains results in switch to lower yielding crops like jowar, bajra ,pulses ,etc. • To produce mare water intensive crops ,groundwater resources get depleted ,which becomes a sustainibility issue .• Institutes like ICAR are pioneering low cost biotech products .
Rising input costs
• Gulati and Saini (2013) examined the trend of rising farm wages for ploughing, sowing, transplanting, weeding, and harvesting • From 1995-96 to 2011-2012 ,nominal farm wages increased @ 9.68% p.a. and real wages @ 3.5% p.a.• However ,from 2007-08 to 2011-12 ,nominal wages increased @17.5% p.a. and real wages increased @ 6.9% p.a.• This also results in increased minimum wages and cost push inflation .
Source: Gulati, Ashok, and Shweta Saini. Taming Food Inflation in India. No. 4. Discussion paper, 2013.
Trends of Indian Farm Wage Index: Base 2004-05= 100
Transmission of Global food inflation and Agri -Trade
• Share of agriculture in India's foreign trade increased from 5% of GDP (1990-91) to 18% of GDP (2011-12) .•Coupled with exchange rate depreciation ,it results in increased import costs for raw material ,which is again results in cost push inflation .• Uncertainty in agri-trade policies result in lost market opportunities .• AoA with WTO limits ,tariffs ,subsidies ,and import and export restrictions .
Soil Fertility Rate in India
Source: Soil Nutrient Balance sheets in India: Importance, Status, issues and concerns, 2007
Fertilizers are taking nutrients from the soil more than they are adding Productivity of fertilizers has plunged from 150 Kg of food grains per Kg of NPK in
1970 to 5 Kg of food grains per Kg of NPK in 2005 Consumption of Urea has increased over other fertilzers resulting in soil deterioration
due to subsidy on Urea
Green Revolution: India’s path to self-sufficiency
Green Revolution
Double cropping existing farmland
High yield seeds
Use of pesticides and fertilizers
Expansion of farming areas
The green revolution started around 1965 in India, especially in states of Punjab and Haryana
India became self-sufficient in food grains od grain production more than doubled to million tonnes in FY86 from 72.4
million tonnes in FY66 Dependence on monsoon decrease
FY66 FY71 FY76 FY81 FY860
40
80
120
160
Food grain production (mil-lion tonnes)
Food grain production (million tonnes)
Source: Handbook of Indian Statistics, Aranca Research
Extending Green Revolution The Bringing Green Revolution in India (BREI) started in 2011, with special focus on
production of rice and wheat The government used a clustered-based approach, private sector participation and strategic
interventions relating to crop production, water harvesting and recycling Rice production in Eastern states increased by about 20 percent to 487.6 lakh tonnes in FY12
from 403.2 lakh tonnes in FY10 As population increases, need for innovative schemes like contract farming needed
Companies provide R & D and agricultural
implements to farms
Regular and timely payments to farmers and
credit facilities
Reduces the price risk fluctuations and saves land investments for
companies
Lesser logistics cost for both, farmers and
companies
Stable and steady supply of quality farm output for
companies
Contract farming in India
Bringing green revolution to eastern India
Promotion of High yield varieties
Involvement of private sector
Ground and rain water utilization.
Cluster based approach
Source: Ministry of Agriculture, Aranca Research
Food Inflation and Growth
Consumer Inflation in India has returned to double digit of 10.09% compared with 9.84% a
month earlier
In response RBI has increased its policy lending rate by a quarter percentage each in Sep and Oct
Affected investment sentiments and growth
stalls
Surplus Food Production Wasted
•India produces around 250 million tonne of food grain in a year, against its annual consumption at 220 million to 225 million tonne, that means surplus
•Still more than 250 million people go to bed hungry each day
•61.3 million tonnes of coal storage requirement in the country against the present capacity of around 29 million tonnes
•Due to lack of adequate storage infrastructure, fruits, grains and vegetables worth Rs 44,000 crore goes waste every year
•FDI in retail expected to help in developing back-end cold storage infrastructure
National Food Security Bill• Currently spending Rs 67,310 crore on
food subsidies• National Food Security Bill will
increase this by Rs 30,000 crore, which is 4% of the corporate taxes
• The added expenditure will mean a subsidy of only Rs 3.25 per person per day
• At nearly Rs 1.31 lakh crore a year, it will raise spending on food aid by nearly a third or 31%
• India’s annual food subsidy burden could rise to an estimated 1-1.2% of GDP from 0.8% currently
Thank You