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Agriculture Sector in India: Trends, Issues and Challenges Essay


Agriculture is a critical sector of the Indian economy. Though manufacturing and service sector industries gained attention during the last couple of decades, agriculture remains to be the most important contributor of growth in India. Nearly two-thirds of India’s population depends directly on agriculture for its livelihood. It meets the food requirements of the people and produces several raw materials for industries.

From agricultural point of view, India has vast expanse of level land, wild climatic variations suited for various types of crops, rich soils, abundant sunshine and a long harvesting season (rabi and kharif). Approximately, 140-145 million hectares of land is under agriculture. Post Independence, large areas in India have been brought under irrigation but only one-third of the cropped area is actually irrigated. There are many reasons responsible for the low productivity of agriculture. Farming depends mainly upon monsoon rain and farmers own small pieces of land and grow crops primarily for consumption. Another reason for low productivity of agriculture is insufficient storage facilities for crop yield.

About one-third of land holdings are very small and less than one hectare in size. Due to small size of land holdings, modern way of cultivation cannot be used. Even today the farmers are using very old methods, tools and implements for farming. Artificial ways of cultivation are not implemented in India. Because of various reasons like lack of awareness, most farmers do not use better quality of seeds, fertilizers and pesticides. There is lot of exploitation of marginal farmers. There is also low productivity because of increasing pressure on land and absence of bank credit.

Agriculture contributes in foreign exchange of our country. India exports agricultural products and earns foreign currency. Agricultural exports have helped India in earning valuable foreign exchange and thereby improving economic development.


India is an emerging market and the objective of this project is to study the important role that the agricultural sector will play in the economic growth in India. Though more than 70% of the population depends on the Indian agriculture, the productivity has decreased post independence area. Lot of emphasis is given on the service sector which has shown tremendous growth in the last few years. It’s time now that policies are introduced to take care of the different issues and challenges in the Agricultural sector.

Performance of agriculture sector in india

The agriculture sector in India has undergone significant changes in the form of decrease in share of GDP from 30 percent in 1990-91 to 14.5 percent in 2010-11 indicating a shift from the traditional agrarian economy towards a service dominated one. The same is reflected from the below Figure 1. This decrease in agriculture’s contribution to GDP has not been accompanied by a matching reduction in the share of agriculture in employment. About 52% of the total workforce is still employed by the farm sector which makes more than half of the Indian population dependant on agriculture for sustenance. However, non-farm activities also contributed to the growth from rural economy.

Source: CSO
Figure 1: Sectoral Composition of GDP

“The average size of operational holdings in India has diminished progressively from 2.28 ha in 1970-71 to 1.55 ha in 1990-91 to 1.23 ha in 2005-06 (Figure 2). As per Agriculture Census 2005-06, the proportion of marginal holdings (area less than 1 ha) has increased from 61.6 percent in 1995-96 to 64.8 percent in 2005-06. This is followed by about 18 percent small holdings (1-2 ha.), about 16 percent medium holdings (more than 2 to less than 10 ha.) and less than 1 percent large holdings (10 ha. and above).”(Reference #3)

Source: Department of Agriculture and Cooperation, Agricultural Census Division, Ministry of Agriculture. Figure 2: Average size (ha) of holdings as per different Agriculture Census Because of increasing population, land fragmentation is increasing which is reducing availability of cultivated land area per household. Added to this, because increasing challenges in agriculture sector, this remains to be least contributor of employment opportunities in rural areas. Because of this additional employment opportunities in the non-farm and manufacturing sector (especially in agro based rural industries) have to be created. Because of this, people have to enhance their skills in corresponding sectors to gain employment. This way, more and more employment opportunities can be created which will be useful in making agriculture practical in a sustainable manner.

Figure 3: Farms in rural India. Most farms in India are small plots such as in this image. “The growth performance of the agriculture sector has been fluctuating across the plan periods (Fig 4). It witnessed a growth rate of 4.8 per cent during the Eighth plan period (1992–97). However, the agrarian situation saw a downturn towards the beginning of the Ninth plan period (1997–2002) and the Tenth plan period (2002–07), when the agricultural growth rate came down to 2.5 percent and 2.4 percent respectively.

This crippling growth rate of 2.4 percent in agriculture as against a robust annual average overall growth rate of 7.6 per cent for the economy during the tenth plan period was clearly a cause for concern. The trend rate of growth during the period 1992-93 to 2010-11 is 2.8 percent while the average annual rate of growth in agriculture & allied sectors-GDP during the same period is 3.2 percent.”(Reference 3).

Source: CSO
Figure 4: Growth Rates: GDP (overall) and GDP (Agriculture & Allied Sectors)

Note: Figures are at 2004-05 prices.
Source: CSO.

Figure 5: Comparative Performance of Growth of GDP and Agri-GDP Government policies in agriculture sector

The Indian government has employed several steps to improve the situation of agriculture sector in the country.

Land Reforms:

Land reforms were introduced. The government has encouraged consolidation of land holdings to promote use of modern farm machines. The government took lands of big land owners away and redistributed to landless laborers. The government abolished the Zamindari System.

Public investment:

Modern methods of cultivation were introduced in the country. The government has improved on providing infrastructure facilities such as irrigation, electricity and transportation. Agricultural equipment such as pesticides, pump harvesters, tractors, fertilizers were made available to farmers. Constructing irrigation reservoirs has helped in supplying water for irrigation in the areas of water scarcity. To ensure a significant growth in this sector, the government is taking steps to provide the necessary infrastructure in terms of cold storage, food grain storage, food processing, refrigerated transported as the industry is estimated to be losing 20% of its produce due to poor storage facilities. The governments have allowed foreign equity participation of up to 51% in cold chain projects.

Major policies

* The government has introduced significant changes in Incentive policies and Input subsidies. Getting finance from banks was made easier for the farmers. * The crop insurance was another step to protect the farmers against losses caused by crop failure on account of natural calamities like flood cyclone, drought etc. * High-yielding varieties of seeds, fertilizers and irrigation gave birth to Green Revolution. All these led to tremendous increase in the production of crops.

Output subsidies
* Procurement-cum-distribution policies
* Minimum support prices announced by Commission for Agricultural Costs & Prices
* (CACP) during sowing
* Food Corporation of India (FCI) buys all the grains offered for sale at these prices

(Above points are from class PPTs)

suggestions–new policy measure to help agriculture sector

* The Eleventh Five Year Plan has highlighted such a holistic framework and suggested the following strategy to raise agricultural output. * Rate of growth of irrigated area has to be doubled

* Water management, watershed development and rain water harvesting has to be improved * Degraded land to be reclaimed and focusing on soil quality * Reducing the knowledge gap by organizing awareness camps * Diversification of high value outputs like fruits, vegetables, flowers but with adequate measures to ensure food security * Animal husbandry and fishery to be promoted

* Reforms in improving the incentive structure and functioning of markets * Provide easy access to credit at affordable rates

* Agriculture can impact poverty alleviation and rural development with far reaching ability. There are several areas of importance for the agriculture sector growth. These include, increasing public sector investment in research, effective transfer of technology along with institutional reforms in the research set up to make it more accountable and geared towards conservation of land, water and biological resources, the development of rain fed agriculture, delivery, the development of minor irrigation, timely and adequate availability of inputs, support for marketing infrastructure, an increase in flow of credit particularly to the small and marginal farmers.

* Achievement of food and nutrition security and alleviation of poverty and unemployment on a sustainable basis depend on the efficient and judicious use of natural resources (land/soil, water, agri-biodiversity and climate). Inefficient use and mismanagement of productive resources, especially land, water, energy and agro-chemicals has vastly reduced fertility and damaged to the physical, chemical and biological properties of the soil. The limitation on availability of agricultural land has already reached. We have continuous failed to utilize the non-renewable natural resources and this will have serious implications.

* Three fourths of total investments in agriculture are by private investments. These are the primary drivers of transition from traditional to high value agriculture. To ensure smooth transition from traditional to high value agriculture, government should support private investments by way of providing greater investments in R&D, public irrigation, roads and other infrastructural facilities. * A strategic vision for agriculture must factor in three important elements: (a) India’s comparative advantage; (b) efficient markets at home and freer trade; and (c) environmental sustainability. There is a lot of scope for major reforms, from marketing to investment and institutional change, especially in water management, new technologies, land markets and creation of efficient value chains.


The country on an average has enough in stock to meet the food requirements of its citizens. There is a significant increase in the productivity of the land through the years, but there is still a huge gap between the current productivity and international productivity levels. Indian agriculture is quite diversified into various sectors and contributes largely to the nation’s economy. But the coming years pose a lot of challenge in this area with an estimated outburst of population that would reach to approximately 1500million. This would require a huge amount of food grains along with non-food grains. India has to use its vast potential of agriculture in a systematic and planned manner along with reforms in export and import policies of agricultural products.

Indian agriculture sector remains to be one of the most interested subjects for academicians around the world. Nobel Memorial prize winner, Prof. Gunar Myrdal of Stockholm University, has rightly remarked, “It is the agricultural sector that the battle for long term economic development of India will be won or lost.” In fact the prosperity of agriculture is the prosperity of Indian economy. We should not build industries at the cost of agricultural land.

2. Reserve Bank Of India – 3.

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