Economics agriculture project


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Economics agriculture project

  3. 3. Group MembersDHRM STUDENTS:-Anita ChopraRanjana DungariaTanaz BhesaniaPrarthana AkmanchiDFM STUDENTS:-Mitali ShahManasi Jadhav
  4. 4. Agricultural and Rural Development inIndia: A RejoinderIntroduction:- The primary focus of the present article is agricultural and rural development in India, as thetitle suggests. The article has attempted to address issues related to agricultural development, foodsecurity, poverty reduction and livelihoods generation. Keeping an area as huge as this at the center-stage of policy debates and discussion is important since a vast majority derives their livelihoods fromagriculture, and they reside in rural India. The author has touched upon various issues related toagricultural development, which include: a. Labour market in India; b. Political economy of Indianagriculture; c. Indian agriculture before and after liberalization; d. The rural farm economy; e. Agrariancrisis and ‗liberal‘ policies; f. Farmers‘ suicides and its causes; g. Sustainability of Indian agriculture;h. Recent policy measures; i. Rural livelihoods and social audits; j. Agricultural R&D; k. Right todevelopment; and, l. PDS, poverty and hunger in India. A thorough discussion from a historicalcontext along with necessary data analysis has been done to understand the reality, as it exists. Adetailed review of literature has been deemed necessary to understand the problematic .a. Labour Market in India:- ―…A free labour is one who is able to accept or reject the conditions and wages offered by theemployer. If he wishes, he may refrain altogether from working. Once having taken the job, he can decide togive notice and quit. Economic stringency may indeed compel a free labour to agree temporarily to terms hedoes not consider favourable. But his basic right to refuse work or to seek alternative employment remainsuncompromised…‖ ―…An unfree, or bond(ed) labour, by contrast, is one whose bargaining power is virtually non-existent,or has been surrendered. Such a labourer does not possess the right or has yielded the right to refuse to workunder the terms set by his master. Through customs, compulsions, or specific obligation, the bond(ed) laboureris tied to his master‘s needs. He can neither quit not take up work for another master without first receivingpermission…‖ --Daniel Thorner (1962): Employer Labour Relationships in Agriculture, in Land and Labour inIndia by Daniel and Alice Thorner. Studies on the labour market institutions, on the dynamic relationship between market forcesand market institutions, show that transactions interlocking labour, credit, land lease etc. are commoninstruments for not just reducing weather and market risks but also for land owners gaining marketcontrol through exercise of extra-economic coercion. There are three different schools, namely-theneo-classical school, the Marxian school and the neo-institutional school, who have their ownapproaches towards understanding the formation of wage labour market, labour wages and formationof other contractual arrangements involving labour. A chief phenomenon characterising exchangethat has been noted widely is what is termed as ‗interlinked markets‘ or interlocking of factor andcommodity markets. A dominant party conjointly exploits the weaker party in two or more markets byinterlinking the terms of contracts, according to the Marxian approach. The weaker party loses theoption to exercise in other markets, where his free entry is already pre-empted or terms ofparticipation pre-determined. The power of the dominant party to exploit in such interlinked markets ismuch more than in markets taken separately. PAGE 1
  5. 5. Agricultural labour constituted around 27% of the total number of workers (main plus marginal),according to the Census 2001. Almost 12.86% pf agriculture labour originated from Andhra Pradesh.Between 1964-65 and 1974-75, the flush period of India‘s Green Revolution, the number of primarilywage-dependent rural households with little or no land nearly doubled from 18 million to 25 million.The upsurge in ruralproletarianisation has arisen from a combination of three factors: a. rapidpopulation growth on a slower growing land-and-water base; b. agrarian structural changessimultaneously with population growth; and c. the push and pull effects of the increasing regionaldisparities, working through displacement and labour-market influx of the formerly self-employed.Agricultural labour is not the creation of the British economic policies alone as it has been inexistence since the inception of the caste-system. British colonial policies aggravated the problem ofland alienation to such an extent that during their rule a noticeable class of proletarian labour wasformed, whose characteristics differed from the past. In almost all regions of the country, the lowercaste agricultural labourers operated within the framework of the jajmanisystem (NCRL, 1991)1. Thepeasantry itself was highly stratified and some segments were subjected to various economic andextra-economic constraints. Angus Maddison (1971)2 found that of the total labour force in MoghulIndia, 72 percent was in the rural economy, and majority of them were landless labourers. IrfanHabib(1984)3 found that the size of the labour force would have been 20-25 percent of the total ruralpopulation. Dharma Kumar (1965)4, however, found that agricultural labour would have formedroughly around 10-15% of the entire population and 17-25% of the agricultural population of theMadras Presidency during 1800. Tom Brass (1999)5 explains that during the period 1870-1940, landholders in the area ofUnited Punjab (which includes Haryana) utilized four kinds of labour, namely, sepidars, peasantsmallholders, sirisand casual workers. All these categories of labour suffered some degree ofeconomic unfreedom. During the 1970s and 1980s, there was immigration of cheap migrant labourersfrom Bihar and Uttar Pradesh in Punjab. Labour contractors recruited tribals from North Bihar andtransported them to Punjab. Migration of rural labourers has been a feature of the Indian economy formore than a 100 years; till Independence, the British economic policy and the process of unevendevelopment influenced its character and pattern. While better employment opportunities and higherwages in economically developed regions (pull factors) attract labour, non-availability of employmentopportunities and consequent economic hardships in the underdeveloped regions act as push factorsin the migration process. Middlemen or jobbers (i.e. labour contractors) are called by different namesin the country, namely: ardas, mistry, mukddam, thekedars, lambardars etc. Workers in theunorganized sector, including migrant labourers, are denied minimum wages and female workers getlesser wages than male workers. Rural labour constitutes the most marginalized section of the Indian society. It benefited theleast during the last 60 years of development, which happened under the Indian five years planning.Dependence of rural agricultural labour on big landowners and moneylenders for consumption creditquite often results in bondage. Bonded or forced labour are called by different names in various partsof India, for e.g. gothi, vethi or bhagola in Andhra Pradesh, kamiyain Bihar, jeetha in Karnataka, haliin Rajasthan, vet or beggar in Maharastra. Rural labour markets are segmented and segmentationcould be based on gender, race or caste. Such labour market segmentation leads to differential wagerates and immobility of labour from one occupation into another (Lal, 1984) 6. The fragmentation of the PAGE 2
  6. 6. Indian labour market is considerably reinforced by caste or community identity at the local level(Rodgers, 1993)7. Wage payment system is not the only system as there can be existence of alternativecontractual arrangements like sharecropping, attached laboour system and bonded labour system.The issue of unfreedom has been expressed in the form of credit-labour linkage i.e. perpetualindebtedness of the labourers. Under the neo-institutional economic framework, inter linkages (orinterlocking) arise as a result of imperfections like uncertainty, asymmetry of information, absentmarkets or transaction cost. Within the Marxian framework,interlocked markets represent differentmodes of exploitation. The existence of a certain type of contractual arrangement is within a historicalcontext, and not based merely on rational choice.Young girls, below the age of 15 years, bear the brunt of poverty-induced child labour. Almost 86.4per cent of employed Indian women live with their families on less than US$ 2 per person per day, ascompared to 81.4 per cent of employed men (ILO, 2009)8. According to the NCEUS (2007), Reporton Conditions of Work and Promotion of Livelihoods in the Unorganised Sector: Agricultural labourers, estimated at 87 million in 2004-05, constituted 34 per cent of about 253 million agricultural workers i.e., farmers and agricultural labourers. The unemployment rate for agricultural labourers by the CDS (current daily status) is quite high in rural areas by any standard; 16 per cent for males and 17 per cent for females. The underemployment of usual status agricultural labourers by CDS rates increased during the decade 1993/94-2004/05. In fact, the CDS unemployment rate was exceptionally high at 16 per cent in 2004-05. Overall, wage levels of agricultural labourers have been very low and their growth rates decelerated through the decade 1993/94-2004/05. The Minimum Wages Act, 1948 is the only statutory legislation, which ensures minimum wages to agricultural workers. In 2004-05, about 91 per cent of the agricultural labourmandays received wage rates below the National Minimum Wage and about 64 per cent below the NCRL minimum wage norm in rural areas. The total number of agricultural workers in India has been estimated at 259 million as of 2004-05. They form 57 per cent of the workers in the total workforce. About 249 million of them are in rural areas and that works out to be 73 per cent of the total rural workforce of 343 million. Their share in total rural unorganised sector employment is 96 per cent while in unorganized agricultural sector it is 98 per cent. Nearly two-thirds of the agricultural workers (64 per cent) are self-employed, or farmers as we call them, and the remaining, a little over one-third (36 per cent), wageworkers. Almost all these wage workers (98 per cent) are casual labourers. Agricultural workers constituted 56.6 per cent of the total workers in 2004-05, down from 68.6 per cent in 1983. In rural areas, agricultural workers constituted 72.6 per cent of the total workers in 2004-05, down from 81.6 per cent in 1983. Farmers form a major share within the agricultural workforce though there has been a gradual decline in their percentage from 63.5 in 1983 to 57.8 in 1999-00. Between 1999-00 and 2004-05, the percentage of cultivators increased to 64.2, the highest level achieved in 15 years A comparison of employment growth rates between 1983/1993-94 and 1993-94/2004- 05 shows that the growth rate of agricultural employment decelerated sharply in the last decade, from 1.4 to 0.8 per cent. Although the growth of total employment also declined PAGE 3
  7. 7. from 2.1 per cent during 1983/1993-94 to 1.9 per cent during 1993-94/2004-05, this deceleration was clearly not so sharp. The proportion of households with no land possessed increased from 13 per cent in 1993-94 to 14.5 percent in 2004-05. The share of landlessness among the agricultural labourers was 19.7 per cent in 2004-05. More than 60 per cent of the agricultural labourers had sub-marginal holdings up to 0.4 hectares and that remained more or less constant over the period. Landlessness or small size of holdings forces the workers to engage as labourers to maintain their subsistence levels.b. Political economy of Indian agriculture:- Boudhayan Chattopadhyay (1991)9 finds: ―…In more than one sense, the depression anddeflation in 1929-33 was the overture to the funeral march of the Bengal peasant, fisherman and theartisan, of which the denouement was inflationary war economy of the 1942-44, with its toll of the 3million plus dead…‖ During the colonial rule until the First World War, surplus was extracted from agriculture, whichwas partly transferred to the home economy, partly invested in the military and bureaucraticmachinery to sustain, and partly to strengthen the sources of revenue through public investments inrailways, canals etc (Patnaik, 1984)10. He explains that in an underdeveloped economy, the ‗potentialeconomic surplus‘ (using Paul Baran‘s concept) is used not for productive investment but forconspicuous consumption, unproductive investment, or is simply siphoned off abroad as tribute,dividends or remittances. The zamindari system adopted in some parts of Bengal gave rise to theclass of moneylenders, traders and absentee landlords, which prevented productive investment inagriculture, unlike the case of ryotwariareas in Punjab. Commercialization of Indian agriculture duringthe British rule, comprised of two different processes: a. a shift in the agrarian economy fromproduction for consumption to production for market; and b. land started acquiring the features ofcommodity, which could be bought and sold. Demand for raw materials in order to sustain theIndustrial Revolution compelled the Indian peasantry to shift to crops that had better market value.The process of de-industrialization started since the Indian goods manufactured by the artisans couldnot compete with the cheap machine-made goods imported from England. Prior to Independence, Indian agriculture suffered from what Daniel Thorner termed as ‗built-indepressors‘. Big landlords used to extract huge rents during the days of zamindari. AfterIndependence, the Nehru-Mahalanobis Plan placed more emphasis on industrialization by treatingagriculture as ‗bargain basement‘. However, a decisive shift in agricultural policy happened after thedemise of Nehru. Agriculture became the focal point of State intervention under Agriculture MinisterMr. C Subramaniam. The miracle technologies of Green Revolution, which was backed by inputsubsidies helped the rich peasants at the expense of small and marginal farmers. The rich peasantryclass gained wealth and political powers overtime. Farmers‘ movements led by the rich farmersattracted the small and marginal farmers. Such movements demanded for higher agricultural pricesand greater subsidies from the State. The HYV (high-yielding varieties) package necessitated moreexpensive seeds, greater amount of controlled water (irrigation) and chemical fertilizers, and hence,there was demand for more subsidies. Because of the presence of Mr. Charan Singh in power during1977, farmers‘ voice directly entered the highest strata of policy formulation. The ‗new‘ agrarianmovement during the decades of 1970s and 1980s was not revolutionary but reformist in nature sinceit relied more on pressuring the State for remunerative prices, loan waivers and a better rural-urbanbalance in resource allocation instead of land and tenancy reforms in favour of small and marginalfarmers and landless labourers. Post Manda land Mandir, India saw divisions in the name of casteand class among the farming community that affected farmers‘ movements. Presently, agrarianinterest is much more marginalized in the national policy agenda. Reforms of the 1990s and shift ineconomic priorities of the Indian government led to stagnation in agriculture and more hardships for PAGE 4
  8. 8. farmers (Posani 2009)11. According to Patnaik (2003)12, the decade of 1990s not only saw a steadydecline in the level of per capita food availability at the national-level, the absolute amount of percapita food availability during the year 2002-03 was even lower than during the years of the SecondWorld War-years when the terrible Bengal famine took place.c. Indian agriculture before and after liberalization:- There are 4 ways in which better agricultural productivity and output can contribute to aneconomy‘s development: a. by supplying foodstuffs and raw material to other expanding sectors ofthe economy; b. by providing an ‗investible surplus‘ of savings and taxes to support investment inother expanding sectors; c. by selling for cash a ‗marketable surplus‘ that will raise the demand of therural population for products of other expanding sectors; and d. by relaxing the foreign exchangeconstraint by earning foreign exchange through exports or by saving foreign exchange through importsubstitution. Before the liberalization of the Indian economy, exports and imports were controlled throughlicensing, quantitative restrictions and canalizing (by state trading boards). There were controls onexports and imports: a. for maintaining stability in domestic prices; b. to help both producers andconsumers; c. to ensure food security; d. to maintain sound balance-of-payments; e. exportables andimportables acted as wage goods or inputs for wage goods. Since majority of the poors‘ income werenot index-linked, so it was necessary to keep the prices of the agricultural goods lower; and f. toprotect and become self-reliant in production of oilseeds and sugar during the 1980s. India went fortrade liberalization for a number of reasons: a. to move domestic prices closer to international prices;b. due to comparative advantage in foodgrains production, India would gain; c. agriculture was nettaxed due to high effective rate of protection being given to the industrial sector; agricultural productswere not allowed to be exported; and, d. Indian currency was over-valued, which hampered exportsof agricultural commodities. It has been apprehended that free trade is likely to lead to greater priceinflexibility in the Indian domestic market and would lead to an increase in the relative domestic pricesof most crops, most importantly rice. World prices of rice and cotton would fall but their domesticprices would rise. If cotton prices go up, then the domestic textile industry was likely to suffer. Withthe cut in input subsidies, there would be decline in the profitability for growing sugarcane andoilseeds. However, with the cut in input subsidies, poor rice growing regions would gain. Intellectualproperty rights (IPRs) would not allow the newer varieties of seeds to be diffused to rural hinterlands.Smaller farmers would not be able to pay higher prices for genetically modified (GM) seeds (Sen andNayyar, 1994)13. The member countries of World Trade Organisation (WTO) are committed to followa set of rules embodied in Agreement on Agriculture (AoA), which covers: (i) Domestic support; (ii)Market access i.e., tariffs, and restrictions on imports and exports; and, (iii) Export subsidies. Theagreement required reduction in trade distorting domestic support like price interventions andsubsidies; reduction in export subsidies; replacing quantitative restrictions and quotas on trade withtariffs, and reduction in tariffs to encourage more and freer trade. It was predicted that tradeliberalisation and implementation of AoA would result in positive gains to the developing countries likeIndia, through improved access to the developed countries‘ markets, increased trade and betterpricing structure for tropical and other products of interest to the developing countries (NAAS,2006)14. Most of the cultivable land in India was brought under cultivation by the mid-1960s. To the totalrise in agricultural production, the contribution of area increase was around 70% and the contributionof yield increase was nearly 30%. India continued high production with the help of high pay-off inputs.Government invested in R&D of seed technology but it was irrigation dependent. Expansion of areahappened through rise in population pressure, land reforms, implementation of community PAGE 5
  9. 9. development programmes, and investment in irrigation. Land reforms in India revolved around:removal of landlordism, providing land to the tenants, putting ceilings on land, consolidation of landand co-operative farming. India went for adoption of biochemical technology (since it was a landscarce economy), which was a combination of high yielding varieties (HYVs), chemical fertilizers,insecticides, pesticides and irrigation. The technology was prone to pest and insect attacks, and wastoo much dependent on irrigation. The technology required a high working capital. Despite theincrease in cost of cultivation, increase in profit was manifold. Subsidization of agriculture has been amajor policy of the Government of India after the introduction of the new biochemical technology.Subsidy was provided to ensure quick adoption of the new technology by the farmers and to reduceuncertainties in production. Some have argued that subsidies disturbed efficient allocation ofresources. However, if subsidies were removed, then investment in agriculture would go down, smalland marginal farmers would get affected and the prices of agricultural commodities would shoot up. Government‘s investment in agricultural R&D (i.e. biochemical technology) was dependent onthe market situation, and hence its response was endogenous and not exogenous. Economicbehaviors and decision-making of not only private but also public sector suppliers of scientificknowledge and technology are treated as endogenous (induced)15 rather than exogenous to theeconomic system, according to Hayami and Ruttan (1971)16. Inducement to develop a technologydepend on economic conditions i.e. the relative availability of labour and land, which in turndetermines the relative prices of labour and land. The sources of power in traditional agriculture are:labour power, bullock/ horsepower. Mechanical technology means mechanization of irrigation,mechanization of harvesting, tractors replacing labour and bullocks etc. If the supply of labour andbullock power is higher than its demand then the traditional technology‘s cost is lower as compared tothe mechanical technology. Certain features of mechanical technology are: a. It is time saving; b. Ithas a high fixed cost but low variable cost; c. It is labour displacing; and, d. Labour productivity goesup when mechanical technology is used since it displaces labour. Mechanical technology is asubstitute for biological technology, which comprises of labour power and bullock power. Biologicalsources of technology will be preferred over mechanical technology if its prices were lower comparedto the latter. Certain features of biochemical technology are: a. It increases yield; b. It absorbs labour;c. The variable cost is high; and d. It is a substitute for land. Latin America is characterized by the presence of latifundios(very large landholdings) andminifundios(very small landholdings). There is high level of inequality in the distribution of land undercultivation. Studies show that value of output per hectare under cultivation is higher in the minifundiosas compared to the latifundios, particularly in countries like Brazil, Argentina and Chile. As opposed toLatin America, in the case of Asia, there exists too little land for too many people. Land ownership inAsian countries like India, Pakistan and Bangladesh has been affected by European rule, introductionof monetized transactions, rise in power of the moneylenders, and rapid growth of Asian populations[Todaro and Smith, (2006)]17.d. The rural farm economy:- Rural livelihoods refer to the various sets of entitlements before an individual, which can helphim or her in order to live. For too long, Indian farmers have seen rise in prices of agricultural inputssuch as fertilizers, seeds, electricity, water etc. during the decade of 1990s and 2000s. Without acorresponding rise in market prices or the minimum support prices, rise in input prices affected theprofitability of the farmers. As a result of this, farmers became interested either to leave agriculture inorder to move towards other professions or occupations, or they have fallen prey to money-lendersand middle-men so as to get loans and credits at exorbitant rates of interests. The rising cost ofproduction has made the farmers depend on informal sources of credit since the transactions costs PAGE 6
  10. 10. are too high to receive formal credit along with the problem of moral hazards. Rising input prices andfalling market prices have reduced the economic sustainability of Indian agriculture. Not enoughlivelihoods are generated in the rural non-farm economy, which can be a ray of hope for the majoritydependent on agriculture. According to de Haan and Zoomers (2005)18, ―in the household studies, increased attentionwas paid to household strategies as a means of capturing the behaviour of low-income people. Theconcentration on households was considered useful for its potential to bridge the gap between micro-economics, with its focus on the atomistic behaviour of individuals, and historical structuralism, whichfocused on the political economy oif development. The household also came into vogues in a morepractical sense; it was considered a convenient unit for the collection of empirical data‖.Graph 1: Agricultural production in India (in million tones) Rice 250.00 Wheat Coarse Cereals 200.00 Cereals Pulses Foodgrains Million tonnes 150.00 100.00 50.00 0.00 1980-81 1982-83 1984-85 1986-87 1988-89 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 2006-07 YearsSource: Handbook of Statistics on Indian Economy, RBI Rates of growth of foodgrains and cereal production have increased from 2003-04 onwards, ascould be seen from the graph 1. However, there was stagnancy in the growth rates of production ofpulses and coarse cereals over the years. Livelihood units such as the individuals, families or businesses change the composition oflivelihood ‗portfolios‘ to reflect changing opportunities, hazards, risks and constraints. Such behaviourfalls under the broad term of livelihood diversification. In the case of India, there was lesseropportunity for such diversification. The increasingly urban nature of a national economy has turnedout to be at odds with the increasingly rural nature of a particular enterprise or family strategy. Unlikethe tied patron-client labour relationship during the olden days, many jobs nowadays are temporary innature. Livelihood diversification is considered to be both a coping and a thriving mechanism–thrivingwhere it is driven by a growing and more flexible economy. But the ‗coping‘ dimension usuallydominates where diversification is an enforced response to failing agriculture, recession and PAGE 7
  11. 11. retrenchment. And, this is what has been happening in the case of India (Start and Johnson, 2004) 19.Earlier, the report by the National Commission on Rural Labour (NCRL, 1991) suggested thatlabourers and land-poor farmers have a high propensity to migrate as seasonal labourers. Thesemigrants are highly disadvantaged as they are poverty ridden with too little bargaining power. Table 1: Trend growth rate during the past three decades Trend growth rate per annum 1980-81 to 1989-90 1990-91 to 1999-2000 2000-01 to 2007-08Rice 3.55 2.00 1.86R square 0.65 0.81 0.23Wheat 3.50 3.51 1.36R square 0.73 0.92 0.34Foodgrains 2.70 2.07 1.99R square 0.67 0.82 0.34Source: Ministry of Agriculture, Government of IndiaNote: The trend growth rate in the production of rice, wheat and food grains for separate periodshave been calculated by the author From the table 1, one could make out that trend growth rate in rice production declined from3.55 percent during the period 1980-81 to 1989-90 to 2.00 percent during the period 1990-91 to 1999-2000, and further to 1.86 percent during the period 2000-01 to 2007-08. Trend growth rate in wheatproduction increased marginally from 3.50 percent during the period 1980-81 to 1989-90 to 3.51percent during the period 1990-91 to 1999-2000, but fell down sharply to 1.36 percent during theperiod 2000-01 to 2007-08. Trend growth rate in foodgrains production declined from 2.70 percentduring the period 1980-81 to 1989-90 to 2.07 percent during the period 1990-91 to 1999-2000, andfurther declined to 1.99 percent during the period 2000-01 to 2007-08. Among other things, the sustainable-livelihoods literature identifies five types of capital assetsas the basis of household livelihoods: (i) financial capital (e.g. income from employment or self-employment, pensions, credit, remittances from relatives abroad or in urban areas); (ii) human capital(e.g. skills, knowledge); (iii) natural capital (e.g. land, forests, water, genetic resources); (iv) physicalcapital (e.g. equipment); and (v) social capital (e.g. networks of social relations). Householdlivelihoods depend on diverse and evolving combinations of these different assets.e. Agrarian crisis and ‘liberal’ policies:- It is increasingly felt that Indian agriculture is currently suffering from ―technology fatigue‖, dueto which the earlier gains made during the Green Revolution has withered away. Moreover, GreenRevolution itself has been criticized for being Euro-centric, environmentally unsustainable and beingapolitical (it never addressed the issues of land and tenancy reforms, and other related institutionalreforms). Green Revolution actually tried to improve yields and production, without taking into accountthe needed change in rural and social institutions. Since it offered a high-valued package, so it helpedonly the rich farmers (owning large landholdings) from assured irrigated areas. Areas where rainfedirrigation takes place could not gain much from the Green Revolution. Green Revolution onlypromoted production of certain crops, which are agro-climatically suitable for certain regions, whichsome say have affected biodiversity. It relied excessively on major irrigations (instead of minorirrigation and rainwater harvesting), chemical fertilizers and pesticides. In order to sustain GreenRevolution, huge subsidies were given on inputs (for producers of inputs—firms, and consumer ofinputs—farmers) like electricity, fertilizers etc, thus making the entire effort economicallyunsustainable. It was the large farmers, which benefited from the subsidies provided at the cost of thesmall and the marginal farmers. The Bollgard But cottonseed and other such seeds, which have PAGE 8
  12. 12. recently been introduced, have failed to cater the needs of the rural farming community who belong tothe lower income group (as well as socially backward groups), and possess small-sized farmlandsand cropping fields. In fact, there are allegations that due to the liberalization of the Indian economy,multi-national corporations (MNCs) from the North got the opportunity of plundering the farmers of theglobal South, by patenting and giving new names to the indigenous varieties of plants (such asturmeric, basmati rice) and animals (via genetic engineering) from the South, thus leading to bio-piracy. Issues and debates surrounding bio-ethics, bio-piracy and violation of intellectual propertyrights (IPRs) have come to the forefront during the recent years, which are still needed to be resolvedat international forums like World Trade Organisation (WTO). The 59th round of the National Sample Survey states that agrarian distress is severe in AndhraPradesh, Karnataka, Maharashtra, Punjab and Rajasthan. High levels of indebtedness are alsoreported from these states. The influence of moneylenders appears to be strong in Bihar andRajasthan in terms of extending informal credit to farmers. Traders also have extended loans toindebted farmers (Ghosh and Chandrashekhar, 2005)20. The Plant Variety Protection and Farmers Rights Act (PVPFR) 2002, which was formulatedunder the sui generis option of the WTO recognises farmers rights to save, use, sow, exchange,share or sell his farm products including the seed of a variety protected. The International Union forthe Protection of New Varieties of Plants (UPOV), on the other hand, which came into being in 1961,has the scope and potential to restrict the age-old traditional right of the farmer to "plant back seeds"in order to safeguard the vested interests of western seed manufacturing corporations. Hence, onecan say that UPOV and the PVPFR cannot co-exist in the Indian context (Krishnan, 2002)21. Manyhave argued about the adverse impact of private seed manufacturing companies, which made theirinroads into the rural Indian economy, after the formulation of the National Seed Policies in 1988 and2002. The National Seeds Bill, 2004 has been criticized by the All India Kisan Sabha (AIKS) and theBharat Krishak Samaj(Saggi, 2006). PAGE 9
  13. 13. Graph 2: Yield in agriculture (kg per hectare) 3000 Rice Wheat 2500 Coarse Cereals Cereals Pulses Foodgrains 2000 kg per hectare 1500 1000 500 0 1950-51 1952-53 1954-55 1956-57 1958-59 1960-61 1962-63 1964-65 1966-67 1968-69 1970-71 1972-73 1974-75 1976-77 1978-79 1980-81 1982-83 1984-85 1986-87 1988-89 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 2006-07 AE YearsSource: Handbook of Statistics on Indian Economy, RBI Rate of growth of wheat yield has fallen down since 2001-02, as could be made out from thegraph 2. There was stagnancy in the rate of growth of pulses yield. Growth rate in rice yield hasincreased marginally during the recent years. Subsidies should be cut to step-up investments in irrigation and for increasing outlays onpoverty alleviation programmes, according to Rao (1995)22. Intensive use of inputs in limited pockets,have led to lowering the productivity of inputs, reducing employment elasticity of output throughsubstitution of capital for labour, and environmental degradation such as water logging and salinity,on one hand and lowering of water table, on the other hand. The National Agricultural Policy (NAP) (2000) announced by the Government of India, soughtto give a prominent role to contract farming. However, it is said that contract farming has led tocorporatization of Indian agriculture, which has adversely affected the small and marginal farmers.Contract farming has been criticized as being a tool for the agribusiness firms to exploit an unequalpower relationship with growers. However, advocates of contract farming view it as a way to create asynergy between agribusiness firms and small farmers that benefit both without sacrificing the rightsof either. It is seen as a mechanism to modernize small peasant holders through transfer oftechnology. PAGE 10
  14. 14. Reducing Poverty and Hunger in India : The Role of AgricultureIndia‘s strategy for reducing poverty and hunger has always placed a great deal of importance on theagricultural sector, reflecting the fact that 70 percent of the population live in rural areas and theoverwhelming majority of them depend upon agriculture as their primary source of income. The focusof attention has of course changed over time.Early Focus on Food Self Sufficiency:-In the 1960s India was deficient in foodgrain production and dependent on imports of wheat, financedby PL480 assistance from USA. Understandably, the focus of Indian policy in this period was toincrease foodgrain production with a view to ensuring food security. This objective was successfullyachieved by the spread of the Green Revolution in the 1970s, beginning with wheat and thenexpanding to rice. This achievement must count as one of the major success stories in development,considering that influential groups such as the Club of Rome, in the early 1970s, had despaired ofIndia being able to feed its growing population.Agricultural Growth for Poverty Alleviation:-In the 1980s, Indian policymakers shifted their focus from food self sufficiency to generating additionalincome in rural areas as a means of tackling the problem of poverty, which was concentrated in ruralareas. Acceleration of agricultural growth, with a special focus on improving the position of smallfarmers and extending the productivity revolution to non-irrigated areas was seen as a critical part ofthe strategy for poverty alleviation. This effort was supplemented targeted anti poverty programs toaddress the needs of vulnerable groups who may not benefit sufficiently from general agriculturalgrowth. India achieved considerable success with this approach in the 1980s. Growth of agriculturalgross domestic product (GDP) accelerated to about 4.7 percent in the 1980s, compared with only 1.4percent in the 1970s. This, agricultural growth, together with the beginning of economic reforms in thenonagricultural sector, pushed up the growth rate of overall GDP to around 5.8 percent in the period1980-81 to 1989-90 compared with about 3 percent in the 1970s.India‘s growth was disrupted at the start of the 1990s by a major balance of payments crisis which ledto the adoption of an extensive process of structural reforms. It took time to regain momentum and itwas only in 1993-94 that the economy got back on track, clocking an average growth rate of 6.8percent in the three years 1993-94 to 1995-96. This acceleration in growth in the post reform periodled policymakers to set a more ambitious GDP growth target of 8 percent a year for the Ninth Planperiod (1997-98 to 2001-2002), to be supported by a growth rate of 4 percent a year in agriculture. PAGE 11
  15. 15. The projected growth of 4 percent per year in agriculture wasclearly inline with the average growth of 3.8 percent achieved in theperiod 1990-91 to 1996-97.However, actual performance since the mid 1990s hasbeen disappointing. Agricultural growth slowed to 2 percent a yearin the Ninth Plan period, and overall economic growth wasonly 5.5 percent, well below the 8 percent target. Sinceagriculture accounted for about 25 percent of GDP, the shortfall ofmore than 2 percentage points in agricultural GDP growthcompared with the target accounts directly for a shortfall ofabout half a percentage point in GDP growth. If the indirect effectsof more rapid agricultural growth on other sectors are taken intoaccount, the total impact on GDP growth may have been as muchas one percentage point. These shortfalls were known, when the Tenth Plan (covering the period 2002-03 to 2006-07) was formulated, but it was assumed that the poor performance of agriculture was due to temporary factors such as poor monsoons and depressed agricultural commodity prices in world markets following the East Asian meltdown. The Tenth Plan therefore adopted the same targets of 8 percent growth in GDP and 4 percent growth in agriculture. Experience in the first three years of the Tenth Plan period has sounded some alarm bells. GDP growth hasaveraged about 6.5 percent, but agricultural GDP in these years (2002-03 to 2004-05) has grown byonly 1.1 percent per year. The loss of dynamism in agriculture explains most of the shortfall inaggregate GDP growth.Slower growth in agriculture also has direct implications for poverty reduction in rural areas. Officialfigures suggest that the incidence of poverty fell from 36 percent in 1993-94 to 26 percent in 1999-2000. The comparability of these numbers has been questioned because of recent changes(ostensibly improvements) in the methods for measuring consumption in household surveys, butthere is a broad consensus that if corrections are made to ensure comparability, the percentage ofthe population in poverty has declined significantly, though less than in the official figures. However,even the official figures show less decline than what had been targeted, and this is undoubtedly areflection of the slowdown in agricultural growth. Slow growth in agriculture is also at the root ofgrowing evidence of distress in the farming community. Surveys show that a large percentage offarmers want to leave farming because they find it is no longer sufficiently profitable. The uncertaintyassociated with farming has also increased and farmers lack effective means of insuring against suchrisks. There are larger market uncertainties associated with new crops and poultry because of greatervulnerability because of falling ground water levels. There is evidence of increased indebtednessarising from the inability to cope with risks. PAGE 12
  16. 16. Recognizing these problems, the Government has undertaken a comprehensive review of thestrategy for agriculture in order to come up with a new deal for agriculture and the rural economy ingeneral. Remedial action will be needed on several fronts including increased public investment inirrigation and rural roads, better management of existing irrigation systems and of water resources indry land areas, a strengthened agricultural research system and more effective extension,improvements in the production and distribution of certified seeds, improvements in the credit deliverysystem, and innovative steps in marketing andcontract farming to support the diversificationof Indian agriculture.Irrigation:-Water is a critical constraint on raisingagricultural productivity and much of the success ofthe Green Revolution came from improvedproductivity in areas of assured irrigationprovided through canals or (much moresignificant) through ground water utilization. Thescope for expanding irrigation through largeand medium scale projects has yet to be fullyexploited. Out of the total of 59 million hectares that could be irrigated through such projects only 40million hectares have been irrigated. The slow pace of exploitation of irrigation potential is due to lackof resources in state governments and the tendency to spread available resources thinly over toomany projects. Additional public investments in this area are therefore essential for early utilization ofthe potential.Effective maintenance of the existing system of canal irrigation also suffers because the irrigationdepartments of the states lack resources. This in turn is because water charges are kept too low,covering only 20-25% of the operations and maintenance cost of the system in most states. Poormaintenance leads to loss of water through seepage, with the result that water use efficiency is verylow – around 25 to 40 percent instead of 65 percent that should be attainable. Low water chargesalso encourage highly water intensive crops at the upper end of the canal network, leaving tail-endportions starved of water.The solution lies in rationalization of water rates to ensure adequate financial resources to covermaintenance and resort to participatory irrigation management to give farmers a stake in theoperation and maintenance of the system. Some interesting experiments in these have promise.Maharasthra has recently established a Water Regulatory Authority to set water charges in a non-political manner. Several states are also experimenting with involving water user associations(WUAs) in the operation of the canal systems. Ideally the WUAs should be empowered to collectwater charges and to retain a portion of the collection to maintain the portion of the distributionnetwork operating in their area.Ground water utilization played a major role in expanding irrigation in the 1980s but uncontrolledexploitation of groundwater has led to serious depletion of the water table in many parts of thecountry. Overexploitation is encouraged by the policy of massive under pricing of electricity foragricultural use, with a few states having made electricity for farmers completely free. Even where it isnot free, the charge for electricity is a fraction of the average cost, and is not based on metered use.Instead there is a fixed charge for presumed usage, based on the capacity of the pump, anarrangement which implies that the marginal cost of electricity for pumping ground water is zero.Under pricing canal water and electricity are clearly highly distortionary, given the need to conservewater use. They are also distributionally unfair because the benefits of under priced water accruedisproportionately to upper end farmers whereas under priced power enables those able to affordlarger pumps to lower the water table denying water to farmers who can only afford shallow wells. PAGE 13
  17. 17. The investment requirements of irrigation are massive. Completion of all unfinished projects alone isestimated to cost approximately US$ 20 billion. In addition, provision must be made for new irrigationprojects (large, medium and small), which together will require about US$ 45 billion. The totalrequirement is therefore about US$ 65 billion.Water Management in Rainfed Areas:-About 60 percent of India‘s cultivable area will remain dependent on dry land farming even after allirrigation potential is fully exploited. Productivity growth in these areas is obviously critical for ruralincome growth and poverty alleviation, and it depends critically upon better moisture conservationand the development of varieties suited to dealing with moisture stress.Schemes for water retention, moisture conservation and groundwater recharge have beenimplemented for many years in India but with mixed results. Experience suggests some pointers forthe future. Greater use of technology inputs can help a great deal. Satellite mapping by the IndianSpace Research Organisation (ISRO) has been particularly helpful in planning watershedmanagement schemes to achieve optimal results. It is also important to adopt a holistic approach. Forexample, if deforestation problems upstream are not tackled, water retention structures downstreamwill quickly silt up. Community participation is critical to impart ownership and ensure an acceptabledistributional outcome. In the past, these multiple factors were not effectively integrated intowatershed development schemes. Now a National Rainfed Area Authority has been proposed to helpcoordinate the work of different implementing agencies.The cost of treating rainfed areas to ensure optimum use of available water is approximatelyRs.10,000 per hectare and the untreated area is about 80 million hectares, yielding a total cost ofapproximately US$20 billion. If this amount is added to the cost of irrigation development and thetarget to be achieved over a 10-year period it would require a doubling of public investment inirrigation.Other Inputs:-Increasing agricultural productivity also depends on the efficient delivery of several other inputs. Thequality of seeds and planting material needs to be greatly improved, and this calls for strengtheningthe research effort to make it more effective. Two expert committees have recently reported on howto restructure the agricultural research system to make it more results oriented and theirrecommendations are under consideration. The system for producing and marketing certified seedsof existing varieties at reasonable prices also needs to be improved. Seed replacement rates in mostparts of the country are only one-third to one-half of what they should be, a situation which reflectspartly a lack of knowledge of the importance of seed replacement and partly also a lack of availabilityof reliable seeds.There is evidence that the use of fertilizers is at present highly imbalanced suggesting that scientificapplication of fertilizers holds potential for raising productivity. Nitrogen fertilizers are oversubsidizedcompared with phosphorus and potassium fertilizer. The structure of fertilizer subsidies should berationalized to avoid excessive and wasteful use of nitrogen fertilizers. Lack of knowledge ofmicronutrient deficiency in the soil is also a serious problem. There is need for much more extensivesoil testing to encourage balanced application of nutrients needs. Underlying these problems is thedeterioration of the extension services, which makes it difficult to disseminate best farming practices.Strengthening the extension system therefore needs special attention. PAGE 14
  18. 18. The government has also identified credit to farmers as a critical area for corrective action. The publicsector commercial banks are being pushed to provide credit to agriculture and have respondedcommendably. However, the cooperative credit system which was meant to be the backbone ofagricultural credit, has become financially weak. Part of the problem has been the politicization ofcooperative institutions as a consequence of interference by state governments. The centralgovernment is considering ways of reviving the cooperative credit system by recapitalizing thecooperative banks provided state governments agree to changes in the system of governance thatwould ensure professional management of cooperative banks without state government interference.Agricultural Diversification:-India‘s future agricultural strategy must also be oriented tothe need for agricultural diversification. India‘sfoodgrain production capacity has increased significantlyover the years and there is evidence that householdconsumption patterns are changing away from foodgraintowards higher value crops such as vegetables,fruits, milk, eggs, etc. Future growth in agriculturemust come from diversification into these non-food grainareas and this will pose a special challenge becausemarketing these perishable products is much morecomplicated than marketing food grains.Horticulture development is currently constrained bypoor marketing arrangements. The gap between pricesreceived by the farmers and those paid by urban consumers is large, reflecting inefficient marketingarrangements. Horticultural produce is typically collected from farmers by market agents, who sell itorganised markets established under the Agricultural Produce Marketing Acts. Unfortunately thesemarkets are controlled by a few traders and operate on highly non transparent basis. Facilities forgrading and handling are poor and methods of price discovery in the markets are nontransparent.Wastage is high owing to poor logistics and the absence of cold chains. The net result is much lowerrealisation by the farmer.It is necessary to amend outdated laws restricting the establishment of markets to allow cooperativesand private entrepreneurs to set up modern markets with grading facilities, cold storages andtransparent auction procedures. Half a dozen states have already amended their existing laws onagricultural marketing to allow such markets to be established and a dozen others are in the processof doing so. These changes are being resisted by those who control the existing structure but thisopposition will weaken over time.Contract farming is another innovation that has been introduced in many states and could acceleratediversification. India‘s laws on agricultural land do not allow corporate bodies to purchase land andoperate large-scale farms – a national policy to prevent displacement of a large number of smallfarmers. – but corporate buyers who know what is needed in export markets, in high end domesticmarkets or in agro-processing, can engage in contract farming to procure high quality produce.Buyers select areas suitable for the crops they are interested in and organize farmers to producethese crops under contract, while providing planting material of the right quality and technicalsupervisory. The process enables the farmer to eliminate marketing risk while allowing the corporatebuyer to ensure quality supplies by selecting planting material, and provide access to scientific adviceon disease and other types of stress. PAGE 15
  19. 19. The development of agro-processing will be a spur agricultural diversification and the government ispaying special attention to this area. At present, the proportion of India‘s agricultural output that isprocessed is very small compared with that in most developing countries and the demand forprocessed food is bound to increase as incomes rise. There are several obstacles to the more rapiddevelopment of food processing. Taxation structures often discriminate against food processingbecause processed food is the first stage for application of indirect taxes and the absence of taxrebate on taxes paid on inputs means the effective tax on value added is very high. Anotherimpediment is the reservation of certain categories of products for small scale production. Theabsence of a modern food processing law has meant that this sector is governed by multiple laws,making it difficult to operate effectively. An Integrated Food Processing Law has been introduced inParliament to replace and the passage expected in the current year will make a qualitative differenceto the operating environment.Targeted anti-Poverty Programs:- While efforts to increase agricultural productivity and thereby increase farm incomes and employment are a major instrument for poverty alleviation, they will need to be supplemented by special targeted program aimed at improving the welfare of vulnerable groups in rural areas. Employment programs in rural areas have been the most important of these anti poverty programs and India has a long history of such programs. Building on this tradition, aRural Employment Guarantee Act has been enacted which provides assurance of up to 100 days ofemployment at the minimum wage to each household in rural areas wishing to make use of it. Theemployment would be provided on projects chosen by the elected village councils and the guidelinesspecify that top priority should be given to irrigation and water management schemes. Unlike earlieremployment programs, this scheme includes a guarantee in the sense that if employment cannot beprovided, unemployment compensation will be provided at least 25 percent of the wage. Although theprogram open to each household, actual demand for employment is expected to be limited tohouseholds below the poverty line. The coverage of the Act will initially be implemented to 200 of themost backward districts (about one-third of the total districts in the country). Together with otherspecial programs relating to provision of housing for the poor, old age insurance, and schemes forsupporting self employment, this program will provide an element of social security that should help toreduce poverty. PAGE 16
  20. 20. The Role of Public Investment:-An important implication of the new agricultural strategy is that it involves a substantial increase inpublic investment. This is an area where past trends need to be reversed. Public investment inagriculture began to decline in the 1980s, but initially the decline was offset by the fact that privateinvestment in agriculture was increasing. Since the mid 1990s private investment in agriculture hasstagnated while public investment has continued to decline. It is essential to reverse these trends,especially for public investment in irrigation and water resource management. It is also essential toincrease public investment in rural roads and rural electrification. Success in these areas willstimulate private investment and contribute to a revival of growth momentum in agriculture. NATIONAL AGRICULTURAL POLICY 2000INTRODUCTION :-The Government of India announced a National Agricultural Policy on 28 th July, 2000, with theobjectives of establishing an appropriate and ideal environment to achieve a higher growth rate. Thepolicy seeks to tap the vast potential of Indian agriculture, strengthen rural infrastructure, ensure foodand nutrition to the country‘s billion people, accelerate the growth of agro-based industries byensuring regular supply of raw materials, create employment in rural areas and secure fairremuneration to the farming community. Thus, the NAP aims to achieve the following objectives : 1) A growth rate of over 4% per annum in agriculture. 2) Efficient use of resources that conserves our soil, water and biodiversity. 3) Growth with equity, i.e. growth which is wide spread across regions and farmers. 4) Growth that is demand driven and caters to domestic market. 5) Maximize benefits from exports of agricultural goods. 6) Encourage investments in agriculture – both public & private. 7) Growth that is sustainable technologically, environmentally and economically.FEATURES OF NAP 2000 :- 1) Sustainable Agriculture : To promote sustainable agriculture, the following measures are suggested : (a) To reduce the pressure of population on land. (b) To control unnecessary diversion of land for non-agricultural uses. (c) To use wastelands for agriculture and afforestation. PAGE 17
  21. 21. (d) To increase cropping intensity through multiple cropping and inter-cropping. (e) To follow a long term policy of rain fed agriculture through water shed approach. (f) To rationalize the use of surface and groundwater and also to popularize drip and sprinkler irrigation. (g) To involve farmers and labourers in development of pastures, forestry programmes. 2) Food & Nutritional Security : Special efforts will be made to raise productivity of crops to meet the demand for food. New crop varieties with higher nutritional values will be given special attention. A major thrust will be given to development of rain fed irrigation, horticulture, floriculture, roots & tubers, plantation crops, aromatic & medicinal plants, bee keeping and sericulture. Development of animal husbandry, poultry, dairying and aquaculture will receive high priority. Efforts to increase animal protein availability in food basket will be increased. Cultivation of fodder crops and fodder trees will be encouraged to meet the growing need for feed and fodder requirements.3) Generation & Transfer of Technology : The Government will promote application of biotechnology, pre and post harvest technologies, energy saving technology and technology for environment protection. Private sector investment is also to be encouraged in agricultural research, human resource development and post harvest management and marketing.4) Credit Facilities : The policy provides for easy availability of credit to the sector. It seeks progressive institutionalization of rural and farm credit to ensure timely and adequate credit to farmers. Credit should be made available on the pledge of farmer‘s produce.5) Incentives For Agriculture : The government will make efforts to get better prices for agricultural raw materials. At the same time the farm sector machines and equipments will be made available at lower rates. The taxes on food grains and other crops will be removed. The Agriculture Minister promised to keep agriculture outside the purview of taxes. The present regime of agriculture subsidies will be continued. The excise duty on equipments, farm machinery and fertilizers will be rationalized.6) Investment In Agriculture : Public investment will be stepped up for narrowing regional imbalances and accelerating development of agricultural infrastructure. PAGE 18
  22. 22. 7) Land Reforms : (a) Consolidation of holdings all over the country. (b) Redistribution of surplus lands and waste lands among the landless farmers and unemployed youth. (c) Speeding up tenancy reforms to recognize the rights of tenants and share croppers. (d) Updating and improvement of land records and issue of land pass books to farmers.LIMITATIONS OF NAP 2000 :-1) Impossible Target of Growth Rate : It must be emphasized that the aim of achieving a rate of 4% for a period of 20 years is almost impossible. During the 1990s the growth rate of agricultural production averaged 2.1% and that of food grains production, 1.8% per annum. This is almost equal to the rate of growth of population in the country.2) Fails to Identify States : The policy talks of growth with equity covering all regions. But it has failed to identify the states which have lagged behind in the utilization of their agricultural potential.3) Private Sector Involvement : There is no doubt that private investment in the form of tube wells, agricultural implements, human resource development are very helpful, but the small farmers who constitute the bulk of Indian farming community are unable to undertake private investment in a major way. They need the support of public investment in the form of water shed facilities, irrigation facilities, storage and warehousing etc.4) Problems of Contract Farming : The policy seeks to involve the corporate sector through contract farming by land leasing arrangements. This will definitely increase production but will result in contraction of employment.5) Lack of Machinery for Implementation : The policy has not outlined any machinery for the implementation of the various suggestions. Agriculture is a state subject and the role of state governments is very critical in implementing the various projects and programmes. If the centre intends the states to implement it, it must provide for schemes of sharing programmes between the centre and the state governments.To sum up, the policy is very appropriate in several aspects but it is also wanting in some importantways. PAGE 19
  23. 23. CRITICAL EVALUATION OF NAP 2000 :- 1) Laudable Aims : The policy with a time frame of two decades has set before itself tasks that are necessary to be achieved. The aims of a high rate of growth of agriculture (over 4%), a strengthened infrastructure, large value additions in production, faster growth of agro business, more employment, better standard of living for cultivators and facing challenges of globalization and liberalization are very commendable. 2) Reform Oriented : The policy provides for the much needed reforms in the agricultural sector. Removal of controls and regulations and restriction on the movement of agricultural goods are good signs. The private sector participation in the agricultural sector can also help in improving the conditions. They can bring in the much needed capital for investment in research and technology, skill formation and extension services like agricultural clinics. 3) Very Comprehensive : The policy covers almost all the aspects which need to be attended. It covers farming, animal husbandry and agro business activities. The crucial aspects of better credit and speedier land reforms have been covered. New Agriculture PolicyAgriculture is a way of life, a tradition, which, for centuries, has shaped the thought, the outlook, theculture and the economic life of the people of India. Agriculture, therefore, is and will continue to becentral to all strategies for planned socio-economic development of the country. Rapid growth ofagriculture is essential not only to achieve self-reliance at national level but also for household foodsecurity and to bring about equity in distribution of income and wealth resulting in rapid reduction inpoverty levels. PAGE 20
  24. 24. Indian agriculture has, since Independence, made rapid strides. In taking the annual foodgrainsproduction from 51 million tonnes in early fifties to 206 million tonnes at the turn of the century, it hascontributed significantly in achieving self-sufficiency in food and in avoiding food shortages.Over 200 million Indian farmers and farm workers have been the backbone of India‘s agriculture.Despite having achieved national food security the well being of the farming community continues tobe a matter of grave concern for planners and policy makers. The establishment of an agrarianeconomy which ensures food and nutrition to India‘s billion people, rawmaterials for its expandingindustrial base and surpluses for exports, and a fair and equitable reward system for the farmingcommunity for the services they provide to the society, will be the mainstay of reforms in theagriculture sector.The National Policy on Agriculture seeks to actualise the vast untapped growth potential of Indianagriculture, strengthen rural infrastructure to support faster agricultural development, promote valueaddition, accelerate the growth of agro business, create employment in rural areas, secure a fairstandard of living for the farmers and agricultural workers and their families, discourage migration tourban areas and face the challenges arising out of economic liberalization and globalisation. Over thenext two decades, it aims to attain:The salient features of the new agricultural policy are:  Over 4 per cent annual growth rate aimed over next two decades..  Greater private sector participation through contract farming.  Price protection for farmers.  National agricultural insurance scheme to be launched.  Dismantling of restrictions on movement of agricultural commodities throughout the country.  Rational utilization of countrys water resources for optimum use of irrigation potential.  High priority to development of animal husbandry, poultry, dairy and aquaculture.  Capital inflow and assured markets for crop production.  Exemption from payment of capital gains tax on compulsory acquisition of agricultural land.  Minimize fluctuations in commodity prices.  Continuous monitoring of international prices.  Plant varieties to be protected through legislation.  Adequate and timely supply of quality inputs to farmers.  High priority to rural electrification.  Setting up of agro-processing units and creation of off-farm employment in rural areas.Sustainable AgricultureThe policy will seek to promote technically sound, economically viable, environmentally non-degrading, and socially acceptable use of country‘s natural resources – land, water and geneticendowment to promote sustainable development of agriculture. Measures will be taken to containbiotic pressures on land and to control indiscriminate diversion of agricultural lands for non-agricultural purposes. The unutilized wastelands will be put to use for agriculture and afforestation.Particular attention will be given for increasing cropping intensity through multiple-cropping and inter-cropping. PAGE 21
  25. 25. Rational utilization and conservation of the country‘s abundant water resources will be promoted.Conjunctive use of surface and ground water will receive highest priority. Special attention will befocused on water quality and the problem of receding ground-water levels in certain areas as a resultof over-exploitation of underground aquifers. Proper on-farm management of water resources for theoptimum use of irrigation potential will be promoted.Erosion and narrowing of the base of India‘s plant and animal genetic resources in the last fewdecades has been affecting the food security of the country. Survey and evaluation of geneticresources and safe conservation of both indigenous and exogenously introduced genetic variability incrop plants, animals and their wild relatives will receive particular attention. The use of bio-technologies will be promoted for evolving plants which consume less water, are drought resistant,pest resistant, contain more nutrition, give higher yields and are environmentally safe. Conservationof bio-resources through their ex situ preservation in Gene Banks, as also in situ conservation in theirnatural habitats through bio-diversity parks, etc., will receive a high priority to prevent their extinction.Specificmeasures will also be taken to conserve indigenous breeds facing extinction. There will be atime bound programme to list, catalogue and classify country‘s vast agro bio-diversity.Sensitization of the farming community with the environmental concerns will receive high priority.Balanced and conjunctive use of bio-mass, organic and inorganic fertilizers and controlled use of agrochemicals through integrated nutrients and pest management (INM & IPM) will be promoted toachieve the sustainable increases in agricultural production. A nation-wide programme for utilizationof rural and urban garbage, farm residues and organic waste for organic matter repletion andpollution control will be worked out.Agro-forestry and social forestry are prime requisites for maintenance of ecological balance andaugmentation of bio-mass production in agricultural systems. Agro-forestry will receive a major thrustfor efficient nutrient cycling, nitrogen fixation, organic matter addition and for improving drainage.Farmers will be encouraged to take up farm/agro-forestry for higher income generation by evolvingtechnology, extension and credit support packages and removing constraints to development of agroand farm forestry. Involvement of farmers and landless labourers will be sought in the development ofpastures/forestry programmes on public wastelands by giving financial incentives and entitlements tothe usufructs of trees and pastures.The history and traditional knowledge of agriculture, particularly of tribal communities, relating toorganic farming and preservation and processing of food for nutritional and medicinal purposes is oneof the oldest in the world. Concerted efforts will be made to pool, distil and evaluate traditionalpractices, knowledge and wisdom and to harness them for sustainable agricultural growth.Food and Nutritional SecuritySpecial efforts will be made to raise the productivity and production of crops to meet the increasingdemand for food generated by unabated demographic pressures and raw materials for expandingagro-based industries. A regionally differentiated strategy will be pursued, taking into account theagronomic, climatic and environmental conditions to realize the full growth potential of every region.Special attention will be given to development of new crop varieties, particularly of food crops, withhigher nutritional value through adoption of bio-technology particularly genetic modification, whileaddressing bio-safety concerns. PAGE 22
  26. 26. A major thrust will be given to development of rainfed and irrigated horticulture, floriculture, roots andtubers, plantation crops, aromatic and medicinal plants, bee-keeping and sericulture, for augmentingfood supply, exports and generating employment in rural areas. Availability of hybrid seeds anddisease-free planting materials of improved varieties, supported by a network of regional nurseries,tissue culture laboratories, seed farms will be promoted to support systematic development ofhorticulture having emphasis on increased production, post-harvest management, precision farming,bio-control of pests and quality regulation mechanism and exports.Animal husbandry and fisheries also generate wealth and employment in agriculture sector.Development of animal husbandry, poultry, dairying and aqua-culture will receive a high priority in theefforts for diversifying agriculture, increasing animal protein availability in the food basket and forgenerating exportable surpluses. A national livestock breeding strategy will be evolved to meet therequirements of milk, meat, egg and livestock products and to enhance the role of draught animals asa source of energy for farming operations and transport. Major thrust will be on genetic upgradation ofindigenous/native cattle and buffaloes using proven semen and high quality pedigreed bulls and byexpanding artificial insemination network to provide services at the farmer‘s doorstep.Generation and dissemination of appropriate technologies in the field of animal production as alsohealth care to enhance production and productivity levels will be given greater attention. Cultivation offodder crops and fodder trees will be encouraged to meet the feed and fodder requirements and toimprove animal nutrition and welfare. Priority will also be given to improve the processing, marketingand transport facilities, with emphasis on modernization of abattoirs, carcass utilization and valueaddition thereon. Since animal disease eradication and quarantine is critical to exports, animal healthsystem will be strengthened and disease-free zones created. The involvement of cooperatives andprivate sector will be encouraged for development of animal husbandry, poultry and dairy. Incentivesfor livestock and fisheries production activities will be brought at par with incentives for cropproduction.An integrated approach to marine and inland fisheries, designed to promote sustainable aquaculturepractices, will be adopted. Biotechnological application in the field of genetics and breeding, harmonalapplications, immunology and disease control will receive particular attention for increasedaquaculture production. Development of sustainable technologies for fin and shell fish culture as alsopearl-culture, their yield optimization, harvest and post-harvest operations, mechanization of fishingboats, strengthening of infrastructure for production of fish seed, berthing and landing facilities forfishing vessels and development of marketing infrastructure will be accorded high priority. Deep seafishing industry will be developed to take advantage of the vast potential of country‘s exclusiveeconomic zone. PAGE 23
  27. 27. Generation and Transfer of TechnologyA very high priority will be accorded to evolving new location-specific and economically viableimproved varieties of agricultural and horticultural crops, livestock species and aquaculture as alsoconservation and judicious use of germplasm and other bio-diversity resources. The regionalization ofagricultural research, based on identified agro-climatic zones, will be accorded high priority.Application of frontier sciences like bio-technology, remote sensing technologies, pre and post-harvest technologies, energy saving technologies, technology for environmental protection throughnational research system as well as proprietary research will be encouraged. The endeavour will beto build a well organized, efficient and result-oriented agriculture research and education system tointroduce technological change in Indian agriculture. Upgradation of agricultural education and itsorientation towards uniformity in education standards, women empowerment, user-orientation,vocationalization and promotion of excellence will be the hallmark of the new policy.The research and extension linkages will be strengthened to improve quality and effectiveness ofresearch and extension system. The extension system will be broad-based and revitalized. Innovativeand decentralized institutional changes will be introduced to make the extension system farmer-responsible and farmer-accountable. Role of Krishi Vigyan Kendras (KVKs), Non-GovernmentalOrganizations (NGOs), Farmers Organizations, Cooperatives, corporate sector and para-techniciansin agricultural extension will be encouraged for organizing demand-driven production systems.Development of human resources through capacity building and skill upgradation of public extensionfunctionaries and other extension functionaries will be accorded a high priority. The Government willendeavour to move towards a regime of financial sustainability of extension services through effectingin a phased manner, a more realistic cost recovery of extension services and inputs, whilesimultaneously safeguarding the interests of the poor and the vulnerable groups.Mainstreaming gender concerns in agriculture will receive particular attention. Appropriate structural,functional and institutional measures will be initiated to empower women and build their capabilitiesand improve their access to inputs, technology and other farming resources.Inputs ManagementAdequate and timely supply of quality inputs such as seeds, fertilizers, plant protection chemicals,bio-pesticides, agricultural machinery and credit at reasonable rates to farmers will be the endeavourof the Government. Soil testing and quality testing of fertilisers and seeds will be ensured and supplyof spurious inputs will be checked. Balanced and optimum use of fertilizers will be promoted togetherwith use of organic manures and bio-fertilizers to optimize the efficiency of nutrient use.Development, production and distribution of improved varieties of seeds and planting materials andstrengthening and expansion of seed and plant certification system with private sector participationwill receive a high priority. A National Seed Grid will be established to ensure supply of seedsespecially to areas affected by natural calamities. The National Seeds Corporation (NSC) and StateFarms Corporation of India (SFCI) will be restructured for efficient utilization of investment andmanpower. PAGE 24
  28. 28. Protection to plant varieties through a sui generis legislation, will be granted to encourage researchand breeding of new varieties particularly in the private sector in line with India‘s obligations underTRIPS Agreement. The farmers will, however, be allowed their traditional rights to save, use,exchange, share and sell their farm saved seeds except as branded seeds of protected varieties forcommercial purpose. The interests of the researchers will also be safeguarded in carrying outresearch on proprietary varieties to develop new varieties.Integrated pest management and use of biotic agents in order to minimize the indiscriminate andinjudicious use of chemical pesticides will be the cardinal principle covering plant protection. Selectiveand eco-friendly farm mechanization through appropriate technology will be promoted, with specialreference to rainfed farming to reduce arduous work and to make agriculture efficient and competitiveas also to increase crop productivity.Incentives for AgricultureThe Government will endeavour to create a favourable economic environment for increasing capitalformation and farmer‘s own investments by removal of distortions in the incentive regime foragriculture, improving the terms of trade with manufacturing sectors and bringing about external anddomestic market reforms backed by rationalization of domestic tax structure. It will seek to bestow onthe agriculture sector in as many respects as possible benefits similar to those obtaining in themanufacturing sector, such as easy availability of credit and other inputs, and infrastructure facilitiesfor development of agri-business industries and development of effective delivery systems and freedmovement of agro produce.Consequent upon dismantling of Quantitative Restrictions on imports as per WTO Agreement onAgriculture, commodity-wise strategies and arrangements for protecting the grower from adverseimpact of undue price fluctuations in world markets and for promoting exports will be formulated.Apart from price competition, other aspects of marketing such as quality, choice, health and bio-safety will be promoted. Exports of horticultural produce and marine products will receive particularemphasis. A two-fold long term strategy of diversification of agricultural produce and value additionenabling the production system to respond to external environment and creating export demand forthe commodities produced in the country will be evolved with a view to providing the farmersincremental income from export earnings. A favourable economic environment and supportive publicmanagementsystem will be created for promotion of agricultural exports. Quarantine, both of exportsand imports, will be given particular attention so that Indian agriculture is protected from the ingress ofexotic pests and diseases.In order to protect the interest of farmers in context of removal of Quantitative Restrictions,continuous monitoring of international prices will be undertaken and appropriate tariffs protection willbe provided. Import duties on manufactured commodities used in agriculture will be rationalized. Thedomestic agricultural market will be liberalized and all controls and regulations hindering increase infarmers‘ income will be reviewed and abolished to ensure that agriculturists receive pricescommensurate with their efforts, investment. Restrictions on the movement of agriculturalcommodities throughout the country will be progressively dismantled. PAGE 25
  29. 29. The structure of taxes on foodgrains and other commercial crops will be reviewed and rationalized.Similarly, the excise duty on materials such as farm machinery and implements, fertilizers, etc., usedas inputs in agricultural production, post harvest storage and processing will be reviewed. Appropriatemeasures will be adopted to ensure that agriculturists by and large remain outside the regulatory andtax collection systems. Farmers will be exempted from payment of capital gains tax on compulsoryacquisition of agricultural land.Investments in AgricultureThe agriculture sector has been starved of capital. There has been a decline in the public sectorinvestment in the agriculture sector. Public investment for narrowing regional imbalances,accelerating development of supportive infrastructure for agriculture and rural developmentparticularly rural connectivity will be stepped up. A time-bound strategy for rationalisation andtransparent pricing of inputs will be formulated to encourage judicious input use and to generateresources for agriculture. Input subsidy reforms will be pursued as a combination of price andinstitutional reforms to cut down costs of these inputs for agriculture. Resource allocation regime willbe reviewed with a view to rechannelizing the available resources from support measures towardsassets formation in rural sector.A conducive climate will be created through a favourable price and trade regime to promote farmers‘own investments as also investments by industries producing inputs for agriculture and agro-basedindustries. Private sector investments in agriculture will also be encouraged more particularly in areaslike agricultural research, human resource development, post-harvest management and marketing.Rural electrification will be given a high priority as the prime mover for agricultural development. Thequality and availability of electricity supply will be improved and the demand of the agriculture sectorwill be met adequately in a reliable and cost effective manner. The use of new and renewablesources of energy for irrigation and other agricultural purposes will also be encouraged.Bridging the gap between irrigation potential created and utilized, completion of all on-going projects,restoration and modernization of irrigation infrastructure including drainage, evolving andimplementing an integrated plan of augmentation and management of national water resources willreceive special attention for augmenting the availability and use of irrigation water.Emphasis will be laid on development of marketing infrastructure and techniques of preservation,storage and transportation with a view to reducing post-harvest losses and ensuring a better return tothe grower. The weekly periodic markets under the direct control of Panchayat Raj institutions will beupgraded and strengthened. Direct marketing and pledge financing will be promoted. Producersmarkets on the lines of Ryatu Bazars will be encouraged throughout the width and breadth of thecountry. Storage facilities for different kinds of agriculturalproducts will be created in the productionareas or nearby places particularly in the rural areas so that the farmers can transport their produceto these places immediately after harvest in shortest possible time. The establishment of cold chains,provision of pre-cooling facilities to farmers as a service and cold storage in the terminal markets andimproving the retail marketing arrangements in urban areas, will be given priority. Upgradation anddissemination of market intelligence will receive particular attention. PAGE 26