business environment

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9.7.2011
DEVELOPMENT S AND REFORMS IN THE AGRICULTURE SECTOR
Sectoral shifts are often taken to indicate economic development
I )Role of agriculture in the Indian economy
1. Share in national income-55.4% in 1950-51 to 30.9% in 1990-
91(2% in USA)
2. Share in total employment-71% in 1901, 68.8% in 1981, 66.7% in
1991(USA it is 3%)
3. Role in industrial development-
 Raw material source-25% in cash crops-oilseeds, tobacco,
cotton, sugarcane, jute, tea and coffee
 Food
 Demand for industrial products-tractors and pump sets
4. Supply of food and fodder in general936 crs in 1951 and 101
crores in 2001)
5. Importance in exports-44% in 1960-61 and reduced to 22% in
1998-99
6. Backbone of the Indian economy-71% of population in 2000
supported by agriculture
7. Role in economic development
 Rate of growth(26% of GDP). Agriculture in a year of good
monsoons grows at about 10%
 Labour intensive-capital output ratio low and the size of
holdings is small
 Additional employment-reclaim waste lands, terracing and
contour bunding, afforestation and rural infrastructure

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 Export opportunities-fruits, vegetables and flowers
 Regional imbalances can be removed by agri development
II) Agricultural productivity :
 Nature centric
 1970-71 green revolution-oilseeds showed remarkable
improvement and the growth of pulses has not been satisfactory
The main areas are :
1. Crop pattern changes-in 50 years area under cultivation increased
50%. The area under crop has increased for wheat and declined
for rice. Foodgrains claims 2/3rd
of area and % area is declining as
per parameters of development. Predominance of foodcrops is
due to :
 Population growth
 Low productivity
 Low per capita productivity
 Inadequate capital investment in agriculture
 Out moded techniques of production
 Slow pace of economic development
2. Trends in agricultural production-extensive and
intensive(fertilizer, irrigation , seed variety, and institutional
changes) Pulses stagnating and hence cause of concern
Crop 50 60 70 80 90 98
Oilseeds 5 7 9.6 9.4 18.6 18.4
Cotton 3.5 5.6 4.8 7 9.8 9.7
Jute 3.5 5.3 6.2 8.2 9.2 9.3
Sugarcane 70 110 126.4 154.2 241 299.2
The figures are in million tons/bales

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Oilseeds production made satisfactory progress in the first 20
years . Sugarcane growth consistent. Last three decades cotton,
oilseeds have shown excellent growth
UP 21.2%
Punjab 11%
MP 9.7%
WB 7.2%
Bihar 7%
Andhra 6.3%
Rajasthan 6.3%
Maharashtra 6.2%
Haryana 5.7%
Rest 19.4%
3. Growth rates in major crops
After 1967-68 the production of rice and wheat increased because
of introduction of HYV(high yielding varieties). Agricultural
productivity growth rate 1.64%. after 1965 only wheat recorded
high growth rate of 5.9%
During the pre 1964-65 period emphasis was laid on :
 Land reforms
 Cedit facilities
 Reforming africultural marketing
 Irrigation
 Increased storage in warehouses
Extensive cultivation in increased gross area sown was the main reason
Green revolution of 1965
 HYV

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 Fertilizers and irrigation water
 Pest control
 Improved agricultural implements
Summary of last 60 years
-First 15 yeas due to gross area increase. Post 1965 due to
increase in land productivity
-green revolution growth sustained only for wheat
-2.6% growth rate for rice as area under HYV was limited
-Foodgrains 2.4% mainly because wheat grew at 5.9%
-The major rice growing states are WB,UP, AP& Punjab. The
major wheat growing states are UP, Punjab, Hayana, MP,
Rajasthan
-due to better irrigation coarse grains neglected as farmers
preferred foodgrains
-area doubled from 17% to 34% and still due to nature the output
kept fluctuating
4. Productivity of Indian agriculture-lowest for labour in agriculture.
The land productivity is much lower in India compared to China,
Pakistan and Indonesia. The advanced countries are much ahead
Jowar and maize impressive in first decade. Wheat, maize and
groundnut impressive in the second decade. Wheat, maize and
sugarcane have shown overall excellent performance. Groundnut
and pulses have not improved and not satisfactory
5. Causes of low productivity of Indian agriculture
 Pressure of population on agriculture-fragmentation of
agriculture holdings causing diseconomies

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 Unfavourable rural atmosphere-ignorant and
superstitious
 Inadequacy of non-farm services-finance, technical
advice, marketing
 The small size of agricultural holdings-59% below2.5
acres, 20% in 2.5 to 5 acres
 Systems of land tenure-number of intermediaries
between government and tiller
 Outmoded techniques of production-HYV, techniques,
methods of production
 Inadequate facilities of irrigation-2/3rd
under dry
irrigation. Only one crop per year in low rainfall areas
III) Agricultural marketing in global perspective : 70% of the total
workforce of the country
A) The meaning and importance of agricultural marketing
Buyers are of three types : involves collection, storage, transportation,
distribution, final hand over to consumers
 For direct consumption
 Intermediaries like cotton and sugarcane
 Export
Importance
1) Due to unique features
 Land widespread and collection is ticklish
 Wide variation in variety and hence grading is important
 Bulkly

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 Perishable
 Seasonal production but full year consumption
 Glut and low prices during peak season
2) Has significance for economic planning
 Stabilize the primary sector
 Targets have to be arrived at by manipulating the prices and
arrivals
 57% expenditure on food
 Sectoral balances
3) Sound system to safeguard interests of the farmers to get
marketable surplus
Essentials of sound marketing in global perspective :
1) Graded and standardized products-quality control
2) Adequate warehousing facilities-godown at every tehsil in 1979
3) Good means of transport and cheap
4) Market information-uptodate prices, demand, arrivals
5) Organized markets-farmers cooperatives to cater to credit,
warehousing, transportation, regulation of markets
B) Defects in marketing system in India
 Transport
 Credit
 Middlemen
 Forced sales
 Incidental charges-commission , brokerage
 Malpractices in buying and selling-weights, grades
 Lack of grading and standardization-at mandis
 Lack of organized agencies
 Lack of storage facilities

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 Lack of market intelligence-on prices in the secondary markets
C) Measures taken by Government to remove the defects
 Improving storage facilities
 Use of standard weights
 Provision of credit
 Grading and standardization-Agmark laboratories
 Betterment of transport
 Market inspection, research and training-as per WTO norms
 Market information-broadcast daily from AIR
 Setting up of regulated markets
 Organisation of cooperative marketing-NAFED and NCDC
 Special commodity boards-for many items
 Future trading
 Promoting exports of agricultural products-14% pulses, rice,
wheat, cashewnuts, edible oils
D) Problems of marketing in global perspective (especially in the
90s)-trade barriers reduced, free capital flow, expanding
international markets
 Preservation problems
 Transport problems
 Standardization and gradation
 Discriminatory conditionalities
 Improving competitveness
 Global market links through WTO
IV ) Constraints on agricultural development
A) Small size of land holding
 Family
 Optimum

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 Economic
1) Factors influencing the size of economic holdings
 The fertility of soil
 Irrigation facilities
 Methods of cultivation
 Nature of crops
2) The size pattern of agricultural holdings
3) Factors responsible for the small size of holdings :
 The pressure of population
 The laws of inheritance
 Decline of joint family system
 Wide spread indebtedness of farmers
 British system of law and judiciary
 Decline of handicrafts and village industries
4) The size of the farm and its relationship with productivities and
profitability
 Smaller the size the greater the productivity
 Imputed value of labour holdings become unremunerative.
The family labour value should be imputed at ruling market
wage rates.
 Profitability increases with the size of the holdings
5) Problems of uneconomic holdings
 Mechanism for perpetuation of property
 Continuance of inefficient methods, and techniques
 Physical constraints ofn mechanization
 Wasteful and costly
 Servitude, exploitation and misery

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IV) B Adoption of new methods and mechanization
 Uncertainties
 Survival motive
 Lack of adequate insurance
 Lack of assured water supply
 Lack of supplementary services
 Alieness of contact
 Knowledge and skills
 Unemployment
 Disadvantages of both markets
 Social and systemic constraints
IV) C side effects of marketing maladies
 Low income traps
 Failures of incentives
 Limited marketable surplus
 Obstacle to development
IV) D Problems of agricultural credit(st, medium term, lt)
1. The nature of the problem of credit
 Cheap, adequate and timely supply of credit
 Small farmers and landless labourers
 Uncertainty shrouding credit requirements
2. The problems of non-institiutional credit. They flourish because of
 Informal business practices
 Unsecured loans
 Unproductive loans
 No delays in granting of loans

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The problems of non institutional credit are :
 Controlling malpractices-illiteracy and ignorance, advance interest,
no receipts
 High cost of borrowing
 Perpetuation of indebtednaess
3. The problems of institutional credit(government, cooperative and
banks)
 Proper security
 Procedural delays
 Uncertain recovery
 Benefits to big landlords
 Inadequate coverage
 Other factors
 Indian experiment of multipurpose cooperatives
IV) E Patterns of land ownership. The forces are :
 The intervention of European rule
 Rise in power of money lenders
 Population explosion
The constraints to land reforms :
 Absentee land-lordism partly abolished
 Tenancy reforms eroded by population
 Cooperative farming did not succeed
 Pattern of land ownership
IV) F Issues connected with other inputs
Further progress of agriculture would involve capital investment

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V Dr Swaminathan on agricultural reforms :
 Dissemination of knowledge-wll and virtual university
 Role of agricultural universities-land use board should be in each
university and advise on meteorological, ecological and marketing
factors
 Village centres-WLL backed rural knowledge centres in every village.
To be connected to virtual university and knowledge disemminated.
 Integrating various activities-water shed management, waste land
development , wate harvesting with technology mission in oilseeds,
pulses, maize and cotton.
 Rural self employment-herbal and food parks, seed villages,rural
knowledge centres,rural godowns and community food banks
 Self help groups for micro enterprises
 Take the effort seriously-65% still live in the villages and 25% of net
domestic product
VI Agricultural income tax
Advantages :
 Removal of tax system anomaly-it is a state subject
 Making the system just-progressive tax on agricultural income
 Resources of development-agriculture must contribute to resource
mobilization through levies
 Controlling tax evasion-used as camouflage
 Allowing the state to share prosperity of agriculture
Disadvantages :
 Small revenue
 Agriculture already burdened-rains,/administrative problems