Economic Survey 2024: The Upside and Downside of India’s Agriculture Sector
By Nimish Gangrade, Editor, Global Agriculture
05 September 2024, New Delhi: The agriculture sector in India serves as a backbone to the economy, providing livelihood support to approximately 42.3% of the population and contributing 18.2% to the country’s Gross Domestic Product (GDP) at current prices. Over the past five years, the sector has shown resilience and growth, averaging an annual growth rate of 4.18% at constant prices. This steady growth can be attributed to various government initiatives and measures, including assured remunerative prices through the Minimum Support Price (MSP), improved access to institutional credit, crop diversification, digitization, mechanization, and sustainable practices like organic and natural farming .
Growth of Agriculture and Allied Sectors
The Upside of India’s Agriculture Sector
India’s agriculture sector has numerous strengths and potentials, underscored by significant achievements and positive trends in recent years. One of the standout aspects is the robust growth rate of 4.18% over the past five years, reflecting the sector’s buoyancy and resilience . The country maintains a comfortable stock of food grains, distributing around 40% of it to two-thirds of the population free of cost, which highlights the efficiency and reach of its food management system. Additionally, India exports more than 7% of its food grains, further demonstrating its agricultural productivity and the global demand for its produce .
The Indian Council of Agricultural Research (ICAR) has played a pivotal role in advancing agricultural research, leading to the development of high-yield and bio-fortified varieties of grains and oils, and promoting the cultivation of millets. In 2022-23, ICAR released 347 varieties/hybrids of 44 crops and 99 varieties of horticultural crops, among others. These innovations have significantly contributed to the country’s agricultural output and export potential .
India is also the largest producer of milk and the second-largest producer of fruits, vegetables, and sugar globally. The food processing sector, a critical component of the agriculture industry, employs 12.02% of the total workforce in the organized manufacturing sector. The value of agri-food exports, including processed food, was USD 46.44 billion in 2022-23, accounting for about 11.7% of India’s total exports. The share of processed food exports increased from 14.9% in 2017-18 to 23.4% in 2022-23, reflecting the sector’s growth and potential .
Government schemes like the Pradhan Mantri Fasal Bima Yojana (PMFBY) have introduced technology-driven initiatives such as the Digi-Claim-Payment Module, Yield Estimation Based on Technology (YES-Tech), and the Weather Information Network & Data System (WINDS). These innovations aim to improve crop insurance efficiency, yield estimation accuracy, and weather data accessibility, thereby enhancing the overall resilience and productivity of the agricultural sector .
The Downside of India’s Agriculture Sector
Despite its numerous strengths, the Indian agriculture sector faces several significant challenges. One of the primary issues is low productivity levels, which are further exacerbated by fragmented land holdings and inadequate marketing infrastructure. The variability in weather conditions and the predominant reliance on rainfed agriculture significantly impact production and productivity, posing a substantial risk to farmers’ livelihoods and the sector’s overall stability .
Production of Major Crops
International Productivity Comparison For Major Kharif Crops (2022)
The sustainability of agricultural practices remains a critical concern. Overexploitation of natural resources, soil degradation, and the adverse impacts of climate change threaten the long-term productivity of agricultural lands. For instance, climate change projections indicate a potential reduction in rainfed rice yields by 20% by 2050 and 47% by 2080, while wheat yields could decline by 19.3% by 2050 and 40% by 2080. Such reductions indicate the urgent need for sustainable agricultural practices and adaptation measures to mitigate these risks .
Another significant challenge is the accessibility of credit for farmers. Although the share of non-institutional credit has reduced from 90% in 1950 to 23.40% in 2021-22, small landholders, who constitute about 89.4% of farm households, still face difficulties in accessing affordable and timely credit. As of January 2024, the total credit disbursed to agriculture was ₹22.84 lakh crore, with ₹13.67 lakh crore allocated to crop loans and ₹9.17 lakh crore to term loans .
Marketing infrastructure also poses a significant challenge. The average area served by mandis (agricultural markets) is 434.48 sq. km, far exceeding the National Commission on Farmers’ recommendation of a market within a 5 km radius (about 80 sq. km). This discrepancy highlights the inefficiency and inadequacy of current marketing facilities, particularly affecting small and marginal farmers who may have to travel long distances to sell their produce, thereby increasing their dependence on intermediaries and reducing their profit margins .
Future Prospects and Recommendations
Looking ahead, several strategies and initiatives can help address the challenges and harness the full potential of India’s agriculture sector. One of the critical areas is enhancing private sector investment in agriculture. Investments in technology, production methods, marketing infrastructure, and post-harvest management are essential to reduce losses and improve the efficiency and profitability of the sector .
Promoting crop diversification towards high-value agriculture, such as fruits, vegetables, fisheries, poultry, and dairy, can significantly boost farmers’ incomes. Government policies and incentives, including MSP and subsidies, should focus on encouraging the production of these high-value crops and allied activities. For instance, the Agriculture Infrastructure Fund (AIF) has mobilized an investment of ₹73,194 crore, supporting numerous projects, including custom hiring centers, primary processing units, warehouses, and cold storage projects .
Digitalization and the adoption of advanced technologies can revolutionize the agriculture sector. Initiatives like E-NAM (National Agriculture Market) and the promotion of Farmer Producer Organizations (FPOs) can improve market access and price discovery for farmers. Integrating digital tools and platforms in agricultural practices can provide farmers with real-time information, enhance decision-making, and increase overall productivity and efficiency .
Sustainable agriculture practices are paramount to ensuring the long-term viability of the sector. Encouraging the use of organic and natural farming methods, improving the quality of seeds, and investing in research and development can promote sustainable practices that enhance soil health and reduce environmental impact. The National Mission for Sustainable Agriculture and other government programs focused on climate-resilient agriculture are steps in the right direction .
Furthermore, enhancing access to affordable and timely credit is crucial for empowering small and marginal farmers. Expanding the reach of institutional credit and reducing the dependence on non-institutional sources can enable farmers to invest in their lands and adopt better farming practices. Government schemes that provide interest subvention and credit guarantees, such as those under the AIF and PMKSY, should be scaled up and made more accessible to farmers .
Potential Mapping
The agriculture sector in India holds immense potential and plays a critical role in the country’s economy. Despite facing significant challenges, including low productivity, fragmented land holdings, and sustainability issues, the sector has shown resilience and growth. By leveraging its strengths and addressing the challenges through strategic investments, policy reforms, and sustainable practices, India can unlock the full potential of its agriculture sector.
The future of India’s agriculture lies in embracing technological advancements, promoting crop diversification, enhancing private sector investment, and ensuring sustainable practices. With the right interventions and support, the agriculture sector can continue to be a pillar of the Indian economy, providing livelihoods to millions, ensuring food security, and contributing to the country’s overall growth and development .
Please reach out at info@krishakjagat.org, nimishgangrade@krishakjagat.org if you would like to share your company story or advertise in the upcoming issue of Global Agriculture magazine.
(For Latest Agriculture News & Updates, follow Krishak Jagat on Google News)
(+80 Million Farming Audience Visits Krishak Jagat’s Hindi Website – Click Here for Website)
