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This File was last Updated/Modified: April 04 2014 17:38:19.

Agriculture and Allied Sector

Agriculture and Allied Sector

Currently the level of agriculture production and overall availability of foodgrains is satisfactory which is testified by the fact that the foodgrains stock available with Government are about 42.25 million tonnes while the required level for country's Public Distribution System (PDS) is only 24.30 million tonnes.

Production of foodgrains during 1949-50 to 1998-99 increased at the rate of 2.5% per annum (p.a.) leading to not only self-sufficiency but also some surplus for export. However, compared to eighties, there has been deceleration in the growth rate of production of foodgrain and non-foodgrain crops during nineties, from 3.54% to 1.8% and from 4.02% to 3.17% p.a. respectively.

Growth rate of milk production, though has declined slightly from eighties (5.39% p.a.), it has remained healthy at 4.78.% p.a. during nineties. Similarly, growth rate of fish production has been a robust 4.7% p.a. during nineties. India has emerged as the largest milk producer in the world with production of 74.7 million tonnes. The country is also the second largest producer of wheat, rice and fruits and vegetables.

The policy approach to agriculture, particularly in the 1990s, has been to secure increased production through subsidies in inputs such as power, water and fertilizer, rather than through building new capital assets in irrigation and power. This eats into public sector investments in agriculture, besides inducing inefficient use of scarce resources, leading to low public investment in irrigation and poor maintenance of rural infrastructure, specially canals and roads, decline in investments in rural electrification and demand constraints. This further aggravates environmental problems leading to loss of soil fertility or groundwater, which reduces returns to capital. Farmers therefore demand further subsidies to maintain the same level of production. Government is then compelled to give higher MSP, which further reduces investible plan funds. The net result has been that the pace and pattern of technological change in agriculture has become sluggish and TFP (total factor productivity) has gone down. The equity, efficiency, and sustainability of the current approach becomes doubtful.

Only about 37% of Net Sown Area (NSA) is under irrigation and the remaining 67% is still rainfed. Most of the increased production in agriculture has come from the green revolution areas which have assured means of irrigation. The rainfed areas are still having very low yield per hectare and irony is that most of the rural poor live in these rainfed areas. Therefore, special urgent attention has to be paid for increasing productivity in the rainfed areas through ground water development and watershed management.

Exploitation of ground water potential, especially in Eastern Region, where vast potential remains untapped, is sub-optimal. Procedural delays and heavy transaction costs have inhibited the pump schemes operated by the State Governments that leave little real subsidy for the farmers.

Seed Replacement Rate (SRR) for the major crops like rice and wheat remained below 10% against the desired rate of 20%. Availability of location specific High Yielding Variety (HYV) seeds has been a problem; increase in seed production needs immediate attention.

Besides the imbalanced use of fertilizers with NP and K ratio of 8.5:3.1:1.0 against the desired ratio of 4:2:1, the deficiency of micro-nutrients has increased especially in high productivity areas, whereas fertilizer use continues to be low in low productivity high risk prone areas largely dependent on rainfall.

There has been plateauing of yields in high productivity areas and the extension has not only become outmoded but totally ineffective. In addition to State extension machineries, 314 KVKs (Krishi Vigyan Kendras) have been established for transfer of technology. But there is hardly any interaction between the Department of Agriculture and KVKs. The present Village Level Worker (VLW) and Community Development Block based manual extension system, which has become outmoded, should be replaced with a more modern and vibrant system.

Gross Capital Formation in Agriculture (GCFA) as a percentage of total Domestic Gross Capital Formation (DGCF) has declined sharply to 9.4% in 1996-97 from 19.1% in 1979-80, at 1980-81 prices. At 1993-94 prices, the GCFA has come down from 6.3% in 1996-97 to 5.5% in 1998-99. The GCFA in public sector has registered a decline from 15.3% in 1980-81 to 4.9% in 1998-99. These declines are far too sharp.

The contribution of agriculture in country’s export has remained quite significant though it has marginally come down from 20.4% in 1996-97 to 18.5% in 1998-99.

Trade in agriculture is besieged with a plethora of restrictions that continue to hamper its health and competitive potential. These, in turn, adversely affect the efforts of raising production and productivity. Therefore, all restrictions on movement, stocking, trading, credit by financial institutions, monopoly buying, processing and exports have to be removed to enable the farmers to take advantage of free market.

Although the departments under the Ministry of Agriculture have consistently been demanding higher allocations than made, the actual utilization has been 83%, 68% and 89% only of allocations during the first three years of the Ninth Plan i.e. 1997-98, 1998-99 and 1999-2000 respectively.

Some of the major reforms and structural issues like rationalization of subsidies on inputs, institutional reforms relating to rural credit, opening of lease market in land, popularization of Integrated Pest Management (IPM) and Integrated Nutrient Management (INM), strengthening of post harvest handling processing, storage/cold storage and marketing facilities, strengthening of Dairy Cooperatives, review of policy on deep sea fishing etc. need to be addressed.

Sugarcane production follows a cycle of highs and lows putting the sugarcane based industries into uncertainty. Sugar industry though de-licensed, still continues with lot of regulations and controls, including the levy on sugar, release of free sale sugar quotas, distribution and pricing of molasses, etc. Natural growth of Khandsari has also been blocked by unimaginative and unfavourable production policies which are neither in the interest of farmers nor even consumers. All these controls should be done away with as they have been hampering the growth of industry. The era of chronic shortages of sugar being over and the emergence of free trade regime under WTO make it more imperative than ever before that the industry is allowed to develop its own strength in terms of efficient production having competitive costs, quality and value addition, if it has to survive.

Application of frontier sciences like bio-technology, remote sensing technology, post harvest management and processing technologies, energy saving technologies and technology for environment protection, need to be encouraged in the national research system as well as proprietary research.

Attention is needed for cultivation of fodder crops and fodder trees to improve animal nutrition. An integrated approach for regeneration of the grazing lands needs to be evolved. A back up of technological innovations to evolve new varieties of grass/fodder would help to give a fillip to overcome fodder shortage.

The Department of Agriculture and Cooperation has 182 attached/subordinate/ autonomous offices with a huge staff. This is notwithstanding the fact that Agriculture is a state subject. The Department runs 131 schemes with the total 9th Plan outlay of Rs.9154 crore. A number of schemes are being implemented from early 1960s/70s without having any evaluation done to know their shortcomings, impact etc.

Crop oriented schemes need to be organised on cropping systems based approach instead of crop specific approach to avoid overlapping in their contents and even differing subsidy patterns.

Diversification of agriculture has to be undertaken in a big way. The emphasis so far has been on specific crops, which has now to shift to evolving not only integrated cropping systems but integrated farming systems including development of animal husbandry and dairying, horticulture, fish, sericulture and apiculture etc.

India has one of the largest Agricultural Research System in the world. With Indian Council of Agricultural Research (ICAR) at the top we have 30 State Agriculture Universities (SAUs), 46 Institutes including 4 Deemed Universities, 4 National Bureau, 9 Project Directorates, 31 National Research Centres, 158 Regional Stations and 80 All India Coordinated Research Projects (AICRPs). Our research system has made a commendable contribution to increasing agriculture production and productivity. Development of high yielding and disease resistant varieties has been the major hall mark. However, the research system now having such a huge manpower and infrastructure is being perceived to be having a very weak transfer of technology programme. The research mandate and curricula have also to undergo a change to meet the second generation problems including the one thrown up by the liberalized WTO System.

Irrigation Flood Control and Command Area Development

  • Continued tendency to start more and more new major and medium irrigation projects resulting in proliferation, thin spreading of resources and consequent time and cost over runs.
  • Concerted efforts to be made for completion of all ongoing projects, at least those which were started during pre-5th Plan period as a time bound programme.
  • To plan conjunctive use of surface and ground water resources, right from the initial stage of a water resource development project.
  • To Improve water use efficiency through renovation and modernization of existing systems.
  • Water rates to be raised and water use to be rationalized to foster the motivation for economy in water use.
  • Farmers to be involved in the management of irrigation systems in a phased manner.
  • Development and utilization of ground water potential particularly in the Eastern region to be promoted with reference to technical, environmental and economic considerations through beneficiary-farmers’ direct participation in investment, implementation and management.
  • To promote adaptive research and development to ensure more cost effective and efficient execution and management of irrigation
  • To take steps for greater flow of institutional finance in the implementation of minor irrigation schemes.
  • To bridge the gap in potential created and utilization by strengthening the Command Area Development programme.
  • In flood management more and more area to be provided with reasonable degree of flood protection with more focus on non-structural measures.
  • Need for a higher level of funding for flood protection works by the States.
  • To encourage private sector participation in irrigation sector.

Industrial Development

Performance of The Industrial Sector:

  • Industrial growth revived slightly to 6.6 percent in 1997-98 from 5.6 percent in 1996-97, but faltered in 1998-99, resulting in a shortfall from the projected average annual growth rate of 8.2 per cent for the Ninth Plan,
  • Revival of Industrial growth started in the 1999-2000 with the overall growth of 8.3 percent in Index of Industrial Production during 1999-2000.
  • Revival of the capital market coupled with the return of small investor to the primary market due to improvement in the investment climate and
  • Industrial sector would need to grow at around 10 percent to make up for the shortfall in the remaining period of Ninth Plan to achieve the Ninth Plan target.

Reasons for Slowdown in Industrial Growth

  • Slackening in aggregate demand coupled with decline in rural demand owing to low agricultural output in 1997-98,
  • Slow down in general investment climate,
  • Erosion of competitive advantage of Indian exports due to steep depreciation of South-East Asian currencies, and
  • Persistence of infrastructure bottlenecks,

Industrial Reforms Initiatives

  • Delicensing of coal and lignite and petroleum (other than crude oil),
  • Amendment of Mines and Minerals (Regulation and Development) Act,
  • Special package for revival of exports growth,
  • Repeal of Urban Land Ceiling Regulation Act,
  • Buy back of shares and liberalization of technology imports,
  • Enhancement in the ceiling for plant and machinery for tiny units from Rs.5 lakh to 25 lakh and for small from Rs.60 lakh to Rs.300 lakh in 1997 which was subsequently reduced to Rs.100 lakh in 1999,
  • Credit upto 60 percent under priority sector lending to SSI sector marked for the tiny sector,
  • Gradual enhancement of excise duty exemption limit for the small scale sector including tiny units from Rs.50 lakh as on 1.4.1997 to Rs.100 lakh in August, 1999 and
  • Amendment of Small Scale and Ancillary Industrial Undertakings Act to ensure timely payments to the small scale industrial units for supplies made by these units to large industrial units.

Areas Requiring Attention

  • Disinvestment of Public Sector Enterprises (PSEs),
  • Closure of non-viable sick PSEs,
  • Review and revamping of BIFR,
  • Review of feedstock and pricing policy for fertilizers
  • Concerted efforts at national and international levels to face the challenge and reap the benefits of WTO commitments and
  • Stregthening and creating competitive and dynamic industry-R and D linkages.

Problems Facing the Indian Industry

  • Inadequacy of infrastructure and lack of investment,
  • High cost of finance and investment,
  • High cost of power, freights, port charges and congestion of ports,
  • Anti dumping duties imposed by developed Countries against Indian exports.
  • Non-tariff barriers imposed by developed countries and
  • The Inspector Raj on small industries.