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Indian agriculture sector

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Indian agriculture sector,trends

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Indian agriculture sector

  1. 1. Importance of Agriculture to the Indian Economy “Everything else can wait but not agriculture” – Pt. Jawahar Lal Nehru
  2. 2. 2012-13 2010-11 2008-09 2006-07 2004-05 2002-03 2000-01 1998-99 1996-97 1994-95 1992-93 1990-91 1988-89 1986-87 1984-85 1982-83 1980-81 1978-79 1976-77 1974-75 1972-73 1970-71 1968-69 1966-67 1964-65 1962-63 1960-61 1958-59 1956-57 1954-55 1952-53 1950-51 Composition of India’s GDP 100% 90% 80% Services 70% Manufactu ring 60% 50% Mining and Quarrying 40% Industry 30% Agri- culture 20% 10% 0%
  3. 3. Why has the contribution been declining ? • More urbanization and employment opportunities in services sectors • Small land holdings- 1.16ha (2011,individuals and institutions) –which inhibit large scale mechanization ,and are a less than optimum use of labor resulting in disguised unemployment . • Less irrigated area -35.2%(2010) • Low cereal yield –for 2009-2013 ,it was 2.95 ton/ha ,as compared to 5.83 ton/ha (China) ,4.6 ton/ha (Brazil) , 1.86 ton/ha (Russia) ,and 3.65 ton/ha (South Africa) • Lack of land reforms ,storage facilities work as disincentives . • Lack of infrastructure –access to markets • Government policies – MSP,power subsidies to wheat and rice have distorted the diversification .
  4. 4. Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul-11 Apr-11 Jan-11 Oct-10 Jul-10 Apr-10 Jan-10 Oct-09 Jul-09 Apr-09 Jan-09 Oct-08 Jul-08 Apr-08 Jan-08 Oct-07 Jul-07 Apr-07 Jan-07 Oct-06 Jul-06 Apr-06 Jan-06 Oct-05 Jul-05 Apr-05 WPI –link to agriculture ? 25 20 15 10 All Commodities Food 5 0 -5 Source :http://eaindustry.nic.in/Download_Data_0405.html
  5. 5. Fiscal Deficit 10.00 Gross Fiscal Deficit & Revenue Deficit as % of GDP 8.00 6.00 4.00 Gross Fiscal Deficit Revenue Deficit 2.00 0.00 -2.00 • High Fiscal deficit to decrease unemployment has increased inflation . • High prices oil are cascaded in the supply chain ,leading to price rise . • Hence ,increased borrowing crowds out the private sector investment .
  6. 6. Fiscal Deficit and Subsidies 120000 Rs crores 100000 Fertilizer Subsidies 80000 60000 Imported P+K 40000 Urea 20000 Total 0 Year • Subsidies form a significant portion of government expenses . • Total subsidies increased from Rs 67,498 crore in 2007-08 to Rs 208,503 crore in 2011-12 . • Effective subsidies to farmers are 40 to 75 % for fertilizers and 70 to 90 % for irrigation and electricity. • Apart from overshooting budget estimates ,they also have unwanted effects like overutilization of inputs ,leading to environmental degradation . • India performs worst amongst BRICS countries . Source : http://www.thehindubusinessline.com/features/investmentworld/macro-view/underestimating-subsidies/article3266293.ece
  7. 7. Dependence on rainfall • Monsoon plays an important role in agricultural productivity . • Dependence on rains results in switch to lower yielding crops like jowar, bajra ,pulses ,etc. • To produce mare water intensive crops ,groundwater resources get depleted ,which becomes a sustainibility issue . • Institutes like ICAR are pioneering low cost biotech products .
  8. 8. Rising input costs Trends of Indian Farm Wage Index: Base 2004-05= 100 • Gulati and Saini (2013) examined the trend of rising farm wages for ploughing, sowing, transplanting, weeding, and harvesting • From 1995-96 to 2011-2012 ,nominal farm wages increased @ 9.68% p.a. and real wages @ 3.5% p.a. • However ,from 2007-08 to 2011-12 ,nominal wages increased @17.5% p.a. and real wages increased @ 6.9% p.a. • This also results in increased minimum wages and cost push inflation . Source: Gulati, Ashok, and Shweta Saini. Taming Food Inflation in India. No. 4. Discussion paper, 2013.
  9. 9. Transmission of Global food inflation and Agri -Trade • Share of agriculture in India's foreign trade increased from 5% of GDP (1990-91) to 18% of GDP (2011-12) . •Coupled with exchange rate depreciation ,it results in increased import costs for raw material ,which is again results in cost push inflation . • Uncertainty in agri-trade policies result in lost market opportunities . • AoA with WTO limits ,tariffs ,subsidies ,and import and export restrictions .
  10. 10. Soil Fertility Rate in India Source: Soil Nutrient Balance sheets in India: Importance, Status, issues and concerns, 2007  Fertilizers are taking nutrients from the soil more than they are adding  Productivity of fertilizers has plunged from 150 Kg of food grains per Kg of NPK in 1970 to 5 Kg of food grains per Kg of NPK in 2005  Consumption of Urea has increased over other fertilzers resulting in soil deterioration due to subsidy on Urea
  11. 11. Green Revolution: India’s path to selfsufficiency  The green revolution started around 1965 in India, especially in states of Punjab and Haryana  India became self-sufficient in food grains  od grain production more than doubled to million tonnes in FY86 from 72.4 million tonnes in FY66  Dependence on monsoon decrease Double cropping existing farmland Food grain production (million tonnes) Expansion of farming areas 200 Green Revolution 150 Food grain production (million tonnes) 100 50 0 FY66 FY71 FY76 FY81 FY86 Use of pesticides and fertilizers Source: Handbook of Indian Statistics, Aranca Research High yield seeds
  12. 12. Extending Green Revolution  The Bringing Green Revolution in India (BREI) started in 2011, with special focus on production of rice and wheat  The government used a clustered-based approach, private sector participation and strategic interventions relating to crop production, water harvesting and recycling  Rice production in Eastern states increased by about 20 percent to 487.6 lakh tonnes in FY12 from 403.2 lakh tonnes in FY10  As population increases, need for innovative schemes like contract farming needed Promotion of High yield varieties Companies provide R & D and agricultural implements to farms Stable and steady supply of quality farm output for companies Contract farming in India Lesser logistics cost for both, farmers and companies Regular and timely payments to farmers and credit facilities Reduces the price risk fluctuations and saves land investments for companies Cluster based approach Bringing green revolution to eastern India Ground and rain water utilization. Involvement of private sector Source: Ministry of Agriculture, Ara nca Research
  13. 13. Food Inflation and Growth Consumer Inflation in India has returned to double digit of 10.09% compared with 9.84% a month earlier In response RBI has increased its policy lending rate by a quarter percentage each in Sep and Oct Affected investment sentiments and growth stalls
  14. 14. Surplus Food Production Wasted • India produces around 250 million tonne of food grain in a year, against its annual consumption at 220 million to 225 million tonne, that means surplus • Still more than 250 million people go to bed hungry each day • 61.3 million tonnes of coal storage requirement in the country against the present capacity of around 29 million tonnes • Due to lack of adequate storage infrastructure, fruits, grains and vegetables worth Rs 44,000 crore goes waste every year • FDI in retail expected to help in developing back-end cold storage infrastructure
  15. 15. National Food Security Bill • Currently spending Rs 67,310 crore on food subsidies • National Food Security Bill will increase this by Rs 30,000 crore, which is 4% of the corporate taxes • The added expenditure will mean a subsidy of only Rs 3.25 per person per day • At nearly Rs 1.31 lakh crore a year, it will raise spending on food aid by nearly a third or 31% • India’s annual food subsidy burden could rise to an estimated 1-1.2% of GDP from 0.8% currently
  16. 16. Thank You

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