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Agriculture in India
Adam Cagliarini and Anthony Rush*
This article discusses the key developments in the agricultural sector in India including
productivity gains and integration with global food markets, before discussing some of the
challenges for future development, which include land distribution policies, access to credit,
water management, and food distribution.
Introduction Background
Indias already large population is expected to India has a particularly large agricultural sector.
become the worlds largest in the next 20 years, While the sectors share of GDP has halved in the
while its economy will soon overtake Japans to past 30years to around 15 per cent, it still employs
become the worlds third largest. The resulting around half of Indias workforce and accounts for
increase in the demand for food will need to be much of the volatility in Indian GDP. India has the
met through higher agricultural productivity or by second largest area of arable land in the world and
increasing food imports. This article discusses some is a major producer of a number of agricultural
of the key areas of progress and challenges for Indias products (Table 1). Around the turn of the century,
agricultural sector, including: productivity, water India overtook the United States as the worlds
management, government policies and programs, largest producer of milk and is also a major producer
and food distribution and storage. of pulses, such as chickpeas and lentils, which are
major sources of protein in vegetarian diets.
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and global food prices. Since 2006, import duties but fell significantly in 2008/09, due mainly to a
on wheat, rice and pulses have gradually been reduction in tariffs on edible vegetable oils from
abolished to boost the domestic availability an average of almost 75 per cent to 7.5 per cent
of these commodities and to reduce domestic (Graph 3).
price pressures from rising global food prices.
The Government has also, on occasion, used Graph 3
India Average Tariff Rates on Imports
trade policy to ensure domestic supplies. For Indian financial years
example, in December 2010, the Government % %
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Rural Land Distribution and population has also contributed to smaller land
Access to Finance holdings, while the subdivision of original family
land holdings over generations has left many
A major institutional factor that has limited
families with land holdings too small to provide an
agricultural productivity in India is regulation
adequate stream of income.
of land holdings. In order to address the highly
concentrated ownership structure of land in India With small land holdings, farmers have limited
prior to independence, the Government instituted incentive to adopt capital-intensive farming
land reforms that placed ceilings on land holdings. techniques, as productivity gains from capital
As a result, agriculture in India is dominated by a through mechanisation and exploiting economies
large number of small-scale, owner-occupied farms. of scale are minimal. Larger land holdings would
The most recent estimates suggest that around also allow farmers to engage in multiple cropping,
100 million households were engaged in which would make them less susceptible to
agricultural production in 2002, roughly adverse weather conditions and help diversify their
70 per cent of all rural households and only income base.
marginally lower than the share of rural households Private investment in the agricultural sector has
engaged in agriculture in the early 1960s. also been limited by restricted access to credit and
Over the past 50 years, the share of farming insurance, although access has generally improved
households tending plots of land of less than over the past decade with credit to the agricultural
one hectare has increased from 60 per cent to sector growing, on average, by more than
just under 80 per cent and the average farm size 20percent annually over the period. Nevertheless,
has fallen to around 1 hectare, with only per cent credit extension remains predominately focused on
of households farming more than 10 hectares of assisting farmers through the annual cycle rather
land (Table 3). By the early 1990s, most Indian states than helping them to finance the building and
had enacted tenancy laws conferring ownership purchase of assets, such as tractors and pump-sets.
of land on tenants who were able to buy the land Government programs have been used to improve
they farmed at a fair price, which reinforced the access to credit for farmers through a number of
trend of increased fragmentation of land holdings channels, including: interest rate subsidies; debt
during that decade. Additionally, the increase in relief; collateral-free loans; improving administration;
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price) and the amount of food they can purchase 0.8 0.8
through the TPDS. According to the most recent Urea-based fertilisers
estimates, about one-third of the production of 0.6 0.6
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References
NSSO (National Sample Survey Organisation) (2006),
Livestock Ownership Across Operational Land Holding
Classes in India, 200203, NSS Report No 493.
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