IGIDR-IFPRI - Indian Agriculture Issues and Challenges, Prof Mahendra Dev

Indian Agriculture: Issues and Policies

Prof. S.Mahendra Dev

Director and Vice Chancellor

IGIDR, Mumbai

Some good things on agricultureGood things and concerns. Good things first

Economic survey says 4.1% during 11th plan

period. Last year 4.7%

Total foodgrain production 264.4 mil.ton in 2013-14.

Pulses 19.6 mil tons. Exports rose. Terms of trade.

Both public and private investment in agri

increased. Total investment 21% of agri GDP

Large expenditures on programs like RKVY, NHM,

NFSM and ATMA

On technology, well known cotton, hybrid maize

Diversification to high value: Horticulture 30%, l

Recognition of climate change issues

High growth in rainfed. e.g. Gujarat etc.

States 1994/95 to

1999/00 SDP gr

2000/01 to

2004/05 SDP gr

2005/06 to

2011/12 SDP gr

All India agri

GDP

3.3 1.7 3.7

High irriga.

States

3.2 1.7 2.7

Medium irrig

state

1.8 3.1 4.2

Low irrig States 2.8 1.5 4.5

High prod.

States

2.9 2.5 2.1

Medium prod

state

2.4 2.1 3.7

Low prod States 2.6 2.5 5.1

Source: 12th Five year plan document

Low prod. and low irrigation states recorded high growth.

Challenges in Agriculture

Concerns and challenges in Agriculture

-- Long term growth is still 2.5 per cent per annum.

-- India Productivity levels are still low compared to other countries

-- 21% agri. investment led to only 3 to 3.5% growth now. High capital output ratio of 7:1 low efficiency

-- cost of cultivation increased. Profitability declined

--Green Revolution technology have less impact on dry land and rainfed areas. Also, yield growth plateaued in the irrigated areas.

-- Yield gap in known technologies. Technology fatigue

-- Food inflation still 8 to 9%. Changing consumption patterns. Shortage of non-cereals: pulses, oilseeds etc. Demand for livestock, fish, meat increasing.

Challenges in Indian agriculture

land degradation, water logging, soil quality problems.

Long term factors: Steeper decline in per capita land availability. Shrinking of farm size

In 2010-11, share in total holdings

-Marginal farmers 67.04%, Small farmers 17.93%

-- Small and marginal farmers together 85%

-- Medium 4.25%; Large 0.73%

Raising productivity of small farmers is a challenge

Slow reduction in share of employment (still 48%)

Marketing is the main problem for farmers particularly

for small farmers.

How to improve agriculture marketing is a challenge.

Climate change problems are emerging issues

Three Goals of Agricultural Development

1.Achieve 4% growth in agriculture and raise incomes. Increasing productivity (land, labor, total factor productivity), diversification to high value agri. and rural non-farm by maintaining food security. Higher growth has to come from non-cereals crops like fruits, vegetables and allied activities like dairy, meat and fish.

2.Second goal is inclusive growth and equity: focus on small and marginal farmers, lagging regions, women etc. Share of women is increasing in agri. On lagging regions, focus on Eastern India and other rainfed areas.

3. Third is to maintain sustainability of agri. by focusing on environmental concerns including climate change issues.

1. Macro level agricultural policiesNow I shift to the topics of the conference

Macro level agricultural policies are crucial for

agricultural development (e.g. investment

policy)

It would also be interesting to look at different

policy choices and impact on agri.

In analysing agri development, we examine

only agri policies.

Macro policies ,monetary, fiscal, trade,

industrial etc. are equally important for

agriculture.

For example, fiscal policy may decide how much

agricultural investments have to be made.

2. Transforming agricultureFirst one is how to transform low income agri to high

income agriculture

Second, how to link transforming agri. to industry

and services. Although

For example, take agro processing :India ranks first

or second in world production of fruits and

vegetables. Only 10% of this is processed as

against 30% in China, 78% in Phillippines

Parikh et al study looked at the changes in structure

of food consumption over 2007 to 2039 with CGE .

Their study shows that high value products

constitute almost two-thirds of the total food

consumption exp. by 2039 with right policies

Milk products alone will have 31% share.

Transforming agriculture (contd.)Need for growth in non-agriculture also for

transformation of agriculture.

Some say (like T.N. Srinivasan) solution for agriculture lies in growth of non-agriculture in order to absorb labour

Poverty can not be removed with 48% of workers in agri. promote labour intensive manufacture and rural non-farm

Even in 2011-12, around 78 per cent of rural female, 56 per cent of rural males, 47 per cent of urban females and 30 per cent of urban males are either illiterate or have been educated uptoprimary level.

Need for higher education and skills

Changing Face of Rural India

Significant changes in rural areas.

Increased connectivity, rise in public employment,

increase in expenditure on social protection like

MGNREGA, panchayat raj as power centres (Vyas,

2013), education, migration and remittances.

Significant rise in rural occupational diversification

Male Female

93/94 2011/12 93/94 2012/12

Agri 74.0 59.4 86.2 74.9

Manufa 7.0 8.2 7.1 9.8

Constru 3.2 13.0 0.8 6.6

Services 14.8 18.3 5.6 8.3

Importance Non-agri. income in rural areas:

Bihar village study (%) (Alakh & Gerry)Caste Own

agri.

prod.

Wage

in agri

All

agri

incom

e

Non-

agri

own

prod

Casua

l wage

in

non-

agri

Regul

ar

emplo

incom

e

Other

incom

e

remitt

ances

Brahmi

n/kaya

32.7 0.2 33.0 10.5 0.5 13.1 23.0 20.0

Bhumi

har/ka

24.8 0.1 24.9 6.1 0.3 19.6 13.7 35.4

Kurmi 19.0 1.9 20.8 12.8 1.9 27.3 25.1 12.0

Yadav 45.4 2.2 47.6 8.4 2.4 10.0 14.0 17.6

Koeri 13.1 0.6 13.7 50.3 0.2 3.1 6.2 26.5

OBCII 14.2 1.3 15.5 32.0 9.9 14.4 10.9 17.4

OBCI 20.5 7.7 28.3 9.7 10.1 7.0 11.8 33.1

SC/ST 11.8 9.2 21.0 4.3 18.0 6.9 16.7 33.0

Muslim 18.8 3.9 22.7 4.4 15.8 7.6 16.9 32.5

Total 22.3 4.2 26.5 10.7 8.2 10.6 16.0 28.0

3. Ensuring Sustainable Food Production

Sustainability issue is becoming important. Even

at global level sustainability development goals.

A crucial step is to provide farmers with a policy

environment that will make agricultural growth

more sustainable.

It also includes review of water, energy and

fertilizer subsidies that encourage unsustainable

resource use.

Particularly important encouraging agricultural

producers to adopt specific technologies that

increase agri productivity and enhance

environment sustainability.

Ensuring Sustainable Food ProductionIn India also we have to look at issues such as

energy, environment and natural resources.

For example, recent high growth during 11 th Five

Year Plan is due to high intensity of inputs. This is

not sustainable. We have to improve food

production with less intensive inputs and less

natural resources including organic farming.

Soil quality improvement is one of the major

issues; Many state governments have recognized

the need for improvement in soil health; similarly

water management.

We should have institutions, policies and

innovations that can improve sustainability.

4. Markets and TradeOver regulation of domestic trade, agro processing, enterprise size, and land and credit market can discourage private investment.

There is a need for consistent policies regarding

domestic and international trade.

There is need for long term policy on exports

and futures markets. Frequent export bans.

Reducing inflation: Some of the measures

needed are : (a) reducing cereal stocks; (b)

diversification (c) marketing reforms (d) post-

harvest handling (e) fiscal and monetary policies

(f) opening trade (g) better information system

Markets and TradeMarketing: Look at farm-to-fork value chain. Higher

prices for farmers and low prices for consumers

The Economic Survey indicates the following

reforms needed for a national common market

--Examine the APMC Act, EC Act, Land Tenancy Act

which are restrictive and barriers to free trade

--Pursue direct marketing and contract farming

-- Examine inclusion of agri related taxes under GST

-- Establish stable trade policy based on tariff

interventions instead of non-tariff trade barriers

-- Develop and initiate competition in the agro

processing sector. Incentivize the private sector to

scale up investment

5. Building Resilience Resilience is becoming is an important area for

research and policy. Recently, IFPRI organized

2020 conference on resilience at Addis Ababa

Natural disasters, conflicts, financial crisis, volatile

food prices have hit poor people hard in several

countries in the last decade including India.

We will have increasing shocks in future. Risk and

vulnerability is rising in agriculture

Resilience means recovery and improve well

being and not just recovery.

We have to identify policies and instruments for

managing risk and building resilience for

individuals, communities, states, regions and

ecosystems.

Building ResilienceE.g. Agricultural insurance. It has not worked

effectively in India. Better methods are required

Climate smart agriculture: Emerging area of research

and policy

There is some improvement in resilience of countries.

For example, Bangladesh, India, Ethiopia.

The 1991 cyclone in Bangladesh killed 138,000

people. 2007 cyclone killed 2000 lives

In Ethiopia severe droughts. 2011 had worst drought

in 60 years. The drought effect is mitigated by Ethiopia

Productive Safety net program

Some improvement in India. Better in 2009 and 2012

droughts compared to 2003

But, long way to go for resilience many parts of India

6. Healthy Food SystemsFood safety is becoming an important issue for

countries like India.

In other countries too: e.g. Food safety was

headlines in China in 2013 with reports Of

China’s rice supplies containing excessive levels

of cadmium which could induce multiple organ

damage.

How to make food safer and nutritious along the

value chain?

More nutritious foods like animal sources, fruits

and vegetables have more food safety

problems. Others: Maize, groundnut, sorghum

aflatoxin problems.

Healthy Food systemsNotwithstanding the focus on market-based

solutions, it is likely that specific, well-targeted

interventions will be required to support poor

people on food safety

The targeting should consider opportunities for

groups of poor people to benefit (including

comparative advantage for certain foods such as

dairy or vegetables

Livestock sector should also be focused to help

the poor regarding food safety.

Also look at water, sanitation and hygiene etc.

Agriculture, nutrition, health linkages are

becoming important for research and policy.

7. Institutions and Governance

Political economy of agricultural policy making

Subsidies vs. investments

Food subsidies and grain management

Fertilizer subsidies

Collective action for managing natural resources

and water management

Institutions and governance for effective delivery

systems in public services

Governance is important for all policies of

agricultural sector.

Institutions for Small farmers

One of the example is the need for institutions for

viability and sustainability of small farmers.

Small farmers have difficulties to access inputs,

credit and extension or to market their output.

Many institutional innovations are coming up to link

small farmers to high value agriculture and help

increasing their productivity and marketing.

ICT revolution in India is also helping small farmers

with information, input supplies and marketing

12th plan focuses on Farmer producer organizations

Unless we increase their incomes, agri will not be

sustainable for them.

ConclusionAmong the three goals of agriculture (growth, sharing

growth and sustainability), Sustainability and climate

change issues are going to be important in future. Role

of women crucial in all the three goals.

High productivity can be achieved but not with high input

intensity in agriculture.

Similarly viability of small holdings particularly marginal

holdings forming nearly 70% (with size of 0.39 ha) have

to be improved.

To face the challenges of achieving three goals of agri-

development, and covering the seven topics of the

conference, sensible policies are needed. Agriculture is

a state subject. State policies crucial.

The Indian farmer and Indian agriculture has never

let down a sensible policy regime

THANK YOU