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The Big Picture – State of Agriculture and Rural Economy

The Big Picture – State of Agriculture and Rural Economy



While the government is hopeful of the country being on the road to witness 4% agricultural growth, the challenges are manifold. While the agriculture remains the main occupational sector, rural demand has witnessed a slowdown leading many to point over the simmering agrarian crisis. Agriculture growth rate in India has not crossed 3% in the last two years. However, West Asia has been a star performer in this region with 6% growth rate. It should be noted here that Half of India’s labour is in agriculture. But, there is no suitable agriculture policy yet. Hence, according to experts, the present state of Indian agriculture is largely due to policy paralysis. Unlike most of the western and European countries, more than two crops a year can be grown in India.

Agriculture plays a vital role in India’s economy. Over 58% of the rural households depend on agriculture as their principal means of livelihood. Agriculture, along with fisheries and forestry, is one of the largest contributors to the Gross Domestic Product (GDP). Agriculture is a state subject. As per estimates by the Central Statistics Office (CSO), the share of agriculture and allied sectors (including agriculture, livestock, forestry and fishery) was 16.1% of the Gross Value Added (GVA) during 2014–15 at 2011–12 prices. During quarter one of 2016, agriculture and allied sectors grew 1.9% year-on-year and contributed 14.2% of GVA. India is the largest producer, consumer and exporter of spices and spice products. It ranks third in farm and agriculture outputs. Agricultural export constitutes 10% of the country’s exports and is the fourth-largest exported principal commodity. The agro industry in India is divided into several sub segments such as canned, dairy, processed, frozen food to fisheries, meat, poultry, and food grains.

Farm crisis in India is deepening, mainly due to back-to-back monsoon failures and falling crop prices. One indicator of the growing agrarian distress is farmer suicides. The current year has seen farmers even in states like Karnataka, Odisha and Madhya Pradesh take their lives. The primary factor behind this distress is the weather. Last year’s kharif production was affected by a deficient monsoon, while the standing rabi crop suffered damage from unseasonal rain and hailstorms. The monsoon has been poor this year as well. Many states have declared themselves as drought hit and this would qualify them for Central assistance. However, there is delay in visits by central teams to assess the extent of crop damage and release compensation money.

Over the recent past, multiple factors have worked together to maintain growth in the agriculture sector in India. These include growth in household income and consumption, expansion in the food processing sector and increase in agricultural exports. Rising private participation in Indian agriculture, growing organic farming and use of information technology are some of the key trends in the agriculture industry. Several players have invested in the agricultural sector in India, mainly driven by the government’s initiatives and schemes. According to the Department of Industrial Policy and Promotion (DIPP), the Indian agricultural services and agricultural machinery sectors have cumulatively attracted foreign direct investment (FDI) equity inflow of about US$ 2,182 million from April 2000 to June 2015.

Given the importance of the agriculture sector, the Government of India, in its Budget 2015–16, planned several steps for the sustainable development of agriculture. The government has already taken steps to address two major factors (soil and water) critical to improve agriculture production. Steps have been taken to improve soil fertility on a sustainable basis through the soil health card scheme and to support the organic farming scheme ‘Paramparagat Krishi Vikas Yojana’. Other steps include improved access to irrigation through ‘Pradhanmantri Gram Sinchai Yojana’; enhanced water efficiency through `Per Drop More Crop’; continued support to Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and the creation of a unified national agriculture market to boost the incomes of farmers.

The Government of India recognises the importance of microirrigation, watershed development and ‘Pradhan Mantri Krishi Sinchai Yojana’; thus, it allocated a sum of Rs 5,300 crore (US$ 815 million) for it. It urged the states to focus on this key sector. The state governments are compelled to allocate adequate funds to develop the agriculture sector, take measures to achieve the targeted agricultural growth rate and address the problems of farmers.

The Department of Agriculture and Cooperation under the Ministry of Agriculture has inked MOUs/agreements with 52 countries including the US. In addition, the Department of Agriculture Research & Education (DARE) and the Department of Animal Husbandry, Dairying & Fisheries (DAHD&F) under the Ministry of Agriculture have signed MOUs/agreements with other countries, taking the number of partnerships with other countries to 63. These agreements would provide better agricultural facilities in areas such as research and development, capacity building, germ-plasm exchange, post-harvest management, value addition/food processing, plant protection, animal husbandry, dairy and fisheries. The agreements could help enhance bilateral trade as well.

The agriculture sector in India is expected to generate better momentum in the next few years due to increased investments in agricultural infrastructure such as irrigation facilities, warehousing and cold storage. Factors such as reduced transaction costs and time, improved port gate management and better fiscal incentives would contribute to the sector’s growth. Furthermore, the growing use of genetically modified crops will likely improve the yield for Indian farmers.