Archive for June 12th, 2007

A nice summary of Indian Agriculture’s woes

June 12, 2007

This is a short paper (18 pages) that summarises nicely the problems with India’s agriculture sector. (I had mentioned about this paper here)

The Planning Commission envisages a growth rate of 4% p.a. in the entire 11th plan period and the strategy paper says how it can be achieved. First, a few more disappointing surprises:

  •  The growth rate of agriculture GDP slipped from 3.62% during 1984-85 to 1995-96 to less than 2% in the period from 1995-96 to 2004-05. Further, state-wise trends indicate that the largest slump occurred in those areas/states that are predominantly rainfed.
  • Per capita annual production of cereals has declined from 192 kg in 1991/1995 to only 174 kg in 2004/2007 and of pulses from 15 kg to 12 kg. This means that per capita foodgrains production is now at 1970s levels.
  • National Horticultural Board data shows growth slowing from 5.5% per annum during the 1990s to 2.5% during 2000-01 to 2005-06, while National Accounts place 2000-06 growth at only 1.2% per annum.

What is the major source of concern?

1. Technology Generation and Dissemination. It says:

The research system has so far focused mainly on breeding varieties that increase the yield potential of individual crops by enabling more intensive use of inputs. This research worked earlier but now it does not seem to work. Analysis of new varieties released of major crops (rice, wheat, maize, groundnut, mustard and sugarcane) shows significant deceleration of the growth of yield potential, with negligible increase over the last decade.

At the same time, frontline trials of various research departments provide clear evidence of large gaps between what can be attained at the farmer’s field with adoption of technology as compared to what is obtained with existing practices.

Take a look at the box below. It says that we cannot achieve much higher yields in several crops in several regions by simply disseminating existing techinology.


 Wheat:     Punjab                  6%                   M.P.                    84%Maize:    Gujarat                 7%                  Assam                300%Jowar:     M.P.                     13%                   Karnataka          200%Mustard:  Haryana               5%                    Chattisgarh       150%Soybean:  Rajasthan           7%                    Karnataka        185%Sugarcane: A.P.                   16%                       M.P.                167%Rice:  Over 100% in Assam,            Bihar, Chattisgarh & UP

2. Another issue is that most of the resources have been deployed towards higher subsidies and low investments in general.

Budgetary subsidies to agriculture have increased from around 3% of agriculture GDP in 1976-1980 to about 7% in 2001-03. During the same period, public investment in agriculture declined from 3.4% of agriculture GDP to 1.9%. Most of the subsidies are on fertilizer, power and irrigation water and have actually contributed to the degradation of natural resources noted earlier.

3. Another reason is despite terms of trade of agriculture have fallen sharply even as as farm production decelerated. So that is the real reason for distress. The terms of trade ratio fell as Indian farm prices became more aligned with corresponding international prices at a time when world commodity prices were on the decline.

A long-run road map is required to decouple farm protection as envisaged in WTO, but in the short-run it would be much more economic to fully use the flexibility provided by our relatively high bound tariffs and devise MSP operations accordingly. However, we have neither used tariffs as flexibly as possible nor extended MSP operations adequately.

The document is disappointing though as it focusses only on agriculture. How about the other areas like rural roads which I pointed out earlier. The study by Gulati et al showed that eitherway – whether u want to increase growth rates in agri or want to reduce rural poverty, rural roads are important.

Why don’t we have comprehensive ways to look at things? Most of the policy documents I see made by India’s policymakers are either too focussed or are too vague and tend to ignore important aspects which could help make the resulting policy a lot better.

Another story on India’s agriculture in ET. After reading all this, why would someone want to be a farmer?


Assorted Links

June 12, 2007

1. A super map equating GDP of each state of US to a country.

 2. A nice article on Behavior Finance.

3. Amul becomes a USD 1 billion co-operative.

Thanks to MR for 1

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