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Agriculture in Indian Economy

Agriculture is the process in which land is used to grow a variety of crops. It also includes
breeding and raising livestock as well as poultry and aquaculture. It is the most important
sector of Indian economy. As per census 2011 data about 54% of India’s population depends on
agriculture and its allied activities. According to the Food and Agriculture Organisation, “India is
the world's largest producer of milk, pulses and jute, and ranks as the second largest producer
of rice, wheat, sugarcane, groundnut, vegetables, fruit and cotton. It is also one of the leading
producers of spices, fish, poultry, and livestock and plantation crops.” Besides the huge
number of people dependent on this sector, agriculture also has significant contribution in
India’s GDP and in the year 2018-19, agriculture contributed about 15% to India’s GDP as per
data of Central statistical office. Agriculture has been the mainstay of Indian economy since
ages. Even before independence, agriculture was a significant sector due to its high share in
employment and livelihood creation. Due to its share in the economy and dependence of about
half of the population on agriculture, it is considered as the backbone of the country and India
is known as an agrarian country.

Apart from the above reasons, agriculture is also important for food security of the country.
India has the 2nd largest population in the world and hence the domestic demand of food is too
high which is sustained by agriculture. As per different studies, it has been found that
agriculture also has a crucial role to play in poverty alleviation and development of rural areas. Development of agriculture leads to a decrease in the rural-urban gap in the society thereby
enhancing the overall development of the nation. Development of agriculture is inter-linked
with development of other sectors as well. However, over the past years it has been seen that
the share of agriculture in GDP and the overall development of the economy has been declining
due to various reasons.

Evolution of Agriculture in India during Ancient, Medieval Period and Under
British Rule
The beginning of Indian agriculture can be traced back to the Mesolithic age. Plant cultivation
started during the last phase of Mesolithic age. During the Neolithic age, people used to
cultivate land and grew fruits and certain other crops. Proof of cattle herding and cultivation of
rice have also been found in excavated sites. Cultivation of different crops like wheat (western
India), rice (eastern India), and barley (western India) etc used to be done during the
Chalcolithic age. The practise of jhum cultivation was wide spread during this era. The base of
agriculture began to expand gradually. In the Harappan civilisation, cotton used to be produced
along with other crops like wheat, barley, peas, horse grams etc. Sophisticated irrigation and
water storage systems were developed. During the Vedic period also shifting cultivation was
common and one of the major crops produced was barley. Use of wooden plough for
cultivation during this period is clear from historical evidences. During the later Vedic period,
mixed farming was practised in the India along with jhum cultivation. New iron agricultural
tools were also used for cultivating the fertile land. In the period between 600-300 BCE, village
lands used to be allotted based on family and size of land holding varied. Iron ploughshare was
used for cultivating the available fertile lands which led to great advancement of agriculture.
Agrarian expansion led to the emergence of food-producing economy with rice being the staple
In the Maurya empire iron and iron implements were intensively used and meteorological
observations were also made for agricultural purposes. During rule of the Guptas, vast areas of
virgin land were brought under cultivation and method used was greatly improved in order to
increase the yield. Under the Cholas, land was transferred by an assembly (Sabha or
mahasabha) and instances of group land holdings were reported. Under the Mughals,
agriculture expanded along with expansion of population. A variety of crops like wheat, rice,
and barley, and non-food cash crops such as cotton, indigo and opium were cultivated. The
Mughals focussed on agrarian reforms like uniform system of land measurement, classification
of land, fixation of rates etc. New land revenue systems were introduced like fixing revenue
based on average yield of land assessed on the basis of past ten years etc. The agricultural
produce was divided between state and peasants in a fixed proportion and the people used to
cultivate on behalf of the state or king who was the owner of land. Due to funding by the
Mughals, irrigation was extensively used which increased the crop yield. Use of the seed drill,
growing a wide variety of food and non-food crops, increasing their productivity, mulberry
cultivation and sericulture etc became common during that phase.
In the British era commercialisation of agriculture was done on a large scale. Crops like tobacco,
indigo, tea and coffee were promoted which were unsuitable for Indian soil. The Britishers
focussed on cash crops in order to increase their profits. Cash crops were grown at the cost of
subsistence crops i.e food crops. Britishers gave away ownership of land to individual owners.
The peasants were divided into different categories like middle peasants, marginal peasants
etc. The land revenue was increased to half of the produce that had to given in form of cash.
Landlords were assigned to collect the revenue and due to high revenue, another new class of
people known as money lenders came into existence. The landlords and the money lenders
increased the burden on peasants who were already overwhelmed due to the increase in
revenue by the British government. Due to the systems adopted by the Britishers for
assessment of land revenue like the Zamindari, Mahalwari and Ryotwari, the agricultural sector
in India suffered. The British policies also divided the land into smaller fragments. Further,
permanent settlement and other actions of the Britishers including low investment in irrigation
and negligence towards other developmental activities to address the issues of agricultural
sector led to the decline of overall structure of agriculture.

Changing Dynamics of Indian Agriculture After Independence
During independence, India inherited the burden of bonded labour, commercialised agriculture,
fragmented land, zamindars owning land, peasants in pathetic situation due to burden of taxes,
lack of proper agricultural facilities for development, money lenders etc. After independence,
Indian government had the priority to resolve these issues and to establish a system for the
benefit of farmers and the overall agricultural sector. Government adopted different measures
in order to address the issues. Zamindari system was abolished and tenancy reforms were
brought in with assurance being given to the tenants about their ownership rights. A ceiling was
also placed on the size of land holdings besides reducing the rent paid by tenants.
Redistribution of land was done in order to give ownership rights to tenants who had cultivated
the land based on certain restrictions. These reforms were carried out till 1960s. In mid 1960s
another set of reforms in the agricultural sector known as the green revolution was initiated.
In 1965, on the recommendation of the Agricultural Prices Commission, certain changes were
adopted. Minimum Support Price was introduced to be given to the farmers as remuneration
and serve as an incentive in case of falling prices. The Food Corporation of India was also set up
to monitor and deal with the logistics of procuring major agricultural commodities. Another
significant step taken by the government was the introduction of HYV (high-yielding seed
varieties) in order to increase production. These measures significantly increased India’s
agricultural harvest. Farmers were supplied with facilities like canal water for irrigation,
fertilisers, power and credit. Government started the policy of giving subsidies like fertiliser
subsidy, power subsidy etc to aid and assist the farmers. Use of modern methods of cultivation
along with use of technology improved the agricultural sector as well as the state of farmers.
During 1970s, due to different conditions like repeated droughts, the agricultural sector was
affected. Indian government adopted measures like increasing the fertiliser subsidies in
response to oil shock in the market that would have led to drop in consumption due to soaring
prices. Focus on groundwater irrigation, private investment in tubewells by farmers, extension
of HYV from wheat to rice etc gave a boost to green revolution in India. During this phase the
subsidies bill of the government also swelled due to factors like increasing power subsidies for
pumping groundwater. From 1980 to 1990, the HYV technology spread further and increased
the production. However, during this entire phase of green revolution, the agricultural sector
was burdened with strict regulated policy measures, wide scale restrictions on production by
means of licensing requirements, control on pricing and private trading of produce etc. Besides
green revolution, blue revolution and white revolution also contributed to development of
agricultural sector in India.
From 1991, India adopted different macroeconomic and structural reforms in economic sector.
This significantly impacted the agricultural sector leading to more liberalised and open
structure. The high rate of economic growth due to reforms increased the food demand and
improved terms of trade for agriculture led to an increase in inflow of private investments. The
increased investments in turn boosted the production of horticultural produce, poultry, fish,
milk, eggs etc. In 1997, the public distribution system was changed into targeted public
distribution system in order to reduce the pressure of rising subsidies on the government. In
the subsequent times government has adopted different policies like Antyodaya Ann Yojana
(2000), Agricultural Produce Market Committee Act (2003), National Policy for Farmers (2007),
National Food Security Act (2013), National Mission on Sustainable Agriculture (2014), direct
cash transfer benefit (starting from 2015), Pradhan Mantri Fasal Bima Yojana (2016) etc in order
to modify the agricultural sector as well as its related sectors.

Contribution of Agriculture in Indian Economy
Agriculture has different roles to play in the economy. It is the major source of food supply in
the economy. It serves as the primary source of income mainly for the rural people. It also
contributes to the national income. Government also earns significantly from agriculture by
means of internal as well as external trade. Export of agricultural products to different
countries serves as a source of revenue for the government. India exports agricultural as well as
horticultural products to about 100 countries mainly Middle Eastern nations, Southeast Asian
countries, SAARC countries, the EU and the US. Different sectors like railways earn from the
transportation of agricultural products. Agriculture is also the major source of raw materials for
certain industries like cotton industry, jute industry etc. The major agricultural products in India
include rice, milk, wheat, corn, sugarcane, cotton, maize, millets, guava etc. India being a major
rice producer, exports rice mainly basmati rice to the global market. In 2019-20 about 117
million tonnes of rice was produced in India and in 2019 India accounted for about 32% of total
rice exports all over the world. India also is a major producer of pulses and in financial year
2020 India produced about 23 million tonnes of pulses. India’s food grain production was about
295 million tonnes in the year 2019-20 which included rice, wheat, coarse cereals, oilseeds and
cotton. In 2019-20, about 107 million tonnes of wheat and 27 million tonnes of maize were
In 2019-20 total production of horticultural products in India was about 310 million tonnes. In
2019-20, India produced about 24 million tonnes of onion and exported about 2 million tonnes
from it. The potato production in 2019-20 was about 51 million tonnes and tomato production
stood at about 19 million tonnes. As per estimates, total fresh vegetables production was about
97 million tonnes and about 16 lakh tonnes of it was exported. Grapes production in 2019-20
was about 1.9 lakh million tonnes, mangoes stood at about 49 thousand million tonnes (besides
processed mango pulp adding another 85 thousand tonnes). As of 2019, India’s livestock
population rose to around 530 million including cattle, buffaloes, goats, sheep, pigs and poultry.
India is world’s largest milk producer and exports milk to countries like Bangladesh, Nepal,
Bhutan, the UAE, and Afghanistan etc. In 2019-20 about 190 million tonnes of milk was
produced. In 2019-20, poultry meat in India accounted for about 4 million tonnes and buffalo
meat for about 1.5 million metric tonnes. India’s fish production in 2019-20 was approximately
13 thousand tonnes. In terms of export, India exported about 11 lakh million tonnes of buffalo
meat, 14 thousand million tonnes of sheep/goat meat and 3.5 lakh million tonnes of poultry
products in 2019-20.

Issues in Indian Agricultural Sector
Marketing of agricultural products is one of the issues affecting Indian agriculture. India
adopted the APMC model under which major wholesale markets of agricultural commodities
(mandis) are managed. Under the Agricultural Produce Marketing Regulation Act, states are
divided geographically into markets and all produce needs to be brought to market in that area
on mandatory basis for 1st time sale. There are agents who deal with buying and selling of
agricultural produce. However APMCs have various lacunae. Monopoly in such markets has
prevented private companies from entering the markets thereby restricting competition.
Agents in the markets form cartels and work in biased manner for personal benefit which
adversely affects both the customers and the farmers. Entry barriers like license fees etc also
exist in these markets. APMCs play a dual role of regulator as well as market player thereby
giving rise to conflict of interests wherein the role of regulator is affected. There also is delay in
payments to farmers by the agents. Lack of Transport Facilities and too many intermediates has
complicated agricultural marketing. There exist a long supply chain which leads to delays in
movement of products, increases cost of procurement, transportation etc.
Another issue is fragmented land holdings existing in the sector. Due to the fragmented and
scattered nature of land, the produce obtained from the land is low and collecting surpluses for
marketing of produce from these lands becomes a serious problem. Inequality in land
distribution also poses threat to the sector. Inadequate use of fertilisers (excessive use of
chemical fertilisers), manures etc, lack of proper irrigation facilities, lack of adequate knowledge
about best practises etc act as hindrance in the development of the sector. Lack of farm
equipments also deteriorates the production. These issues lead to decline in productivity of
land thereby decreasing the production. Another major issue grappling the sector is that of
debt on farmers. In India, erratic nature of rainfall makes the agricultural produce and its
quantity quite erratic. Indian agriculture is primarily dependent on timely monsoons and the
erratic nature of monsoon has significant effect on the sector. Further, the terms under which
money lenders give loans to the farmers are discriminatory and even the rates charged are
high. When the farmers take up loans from money lenders in order to procure fertilisers and
other necessary products, and the production fails due to unstable climatic conditions, they
enter into a debt trap which circulates through generations and in extreme cases forces farmers
to commit suicide. Even with MSP in place farmers face the issues of under weighing of their
produce, delayed payments etc. Lack of proper infrastructure is also an issues affecting Indian
agriculture. There exist only limited storage facilities for storing the agricultural produce.
Further, the facilities that exist are inadequate and not well maintained thereby causing loss of
huge quantities of agricultural produce. The storage facilities also are not well placed which
gives rise to the issue of transportation from and to the facilities thereby increasing overall cost
and causing inconvenience. Recently a government appointed task force stated that Indian
agriculture is affected by issues like ‘grading and certification facilities, ineffective cold chain
management and low level of processing of agriculture produce’.

Government Initiatives to Address The Issues in Agricultural Sector
Government has taken number of steps to deal with the issues in agricultural sector. As
discussed earlier, government adopted the MSP and PDS schemes to support the farmers.
Besides this different policies have been enacted at different times to develop the sector. The
APMC act was introduced to form a common platform for the farmers to sell their produce.
However, due to the issues in the model government has modified the act. In 2003,
government introduced the model APMC act to overcome the issues with the APMC act. As per
the new act, the farmers could sell his produce directly to any parts of choice without bringing
it to the mandis, exporters, packers and other players could buy products directly from the
farmers, it also allowed entry of private players in APMC mandis to deal with the issue of
monopoly and also allowed for PPP in agricultural produce markets. Government brought in
others changes in the sector as well. In 2017, another modification to the model APMC act was
introduced. The modifications were- there would be no reserved areas for mandis and farmer
was free to sell produce as per choice to any mandi, private mandis to be allowed to operate in
physical as well as electronic mode, a particular market could be declared only for a particular
commodity by the state governments and the central government could declare a mandi to be
of national importance. Establishing an e-trading platform was allowed after obtaining a license
that had low cost. The farmers were left free to sell their produce either through government
markets or to any other party; a limit was also set on the fee to be paid by farmer in order to
participate in market yards. Interstate trading between markets of national importance was
also allowed.
Government introduced nutrient based subsidy in 2010 under which subsidies were given to
farmers per kg of nutrient on annual basis. In 2013, government introduced the National Food
Security Act in order to improve the existing targeted PDS. In the year 2015, government
brought in the soil health card scheme. Under this scheme the farmers would be recommended
nutrients and fertilisers needed crop wise in order to increase the productivity based on the soil
quality of the land. Under this scheme farmers could reclaim benefits of nutrient based subsidy
scheme and also purchase fertilisers. Subsequently in 2016, government launched the E- NAM
(electronic national agriculture market). E-NAM was introduced to create a network of APMCs
and would help to reduce the information asymmetry among buyers and farmers. It aimed to
create a transparent information flow channel which would deal with the issues of fragmented
agricultural market, monopoly of APMCs etc. National Mission for Sustainable Agriculture
(NMSA) has also been launched by government to enhance agricultural productivity by means
of integrated farming techniques, efficient use of water and soil health management etc.
In 2015, Pradhan Mantri Krishi Sinchayee Yojana was launched with the aim of increasing the
coverage of irrigation and improving water efficiency. Paramparagat Krishi Vikas Yojana (PKVY)
was also launched in 2015 to promote organic farming in India. Pradhan Mantri Fasal Bima
Yojana (PMFBY) was launched in 2016 to provide insurance cover to farmers in case of damage
of notified crops due to natural calamities, pests & diseases. Other measures by the
government like the National Scheme on Welfare of Fishermen to provide financial assistance
to fishers, Livestock insurance Scheme to provide protection to cattle rearers and farmers and
the Micro Irrigation Fund (MIF) to increase the land cover under micro irrigation etc have been
initiated to improve agricultural sector.

India is an agrarian country with about 50% of the population depending on it for livelihood. It
has significant contribution in country’s overall economic development as well. The agriculture
sector has certain issues like lack of proper infrastructure, complex marketing framework, lack
of proper irrigation facilities, lack of proper credit facilities etc. These issues are being
addressed by the government through its various schemes and policies. However, more effort is
needed in order to develop the sector and the existing issues. It has also been noticed that the
contribution of agriculture in economy has been declining in the last few years. This poses
serious threat to a significant portion of the population and needs to be addressed at the
earliest. On comparing the percentage contribution of agriculture in GDP with its share in total
employment, it can be clearly noticed that issue of disguised unemployment exists in the
sector. This over abundance of labour force in agriculture reduces the per capita income which
leads to poverty. This issue also needs to be addressed as it has significant impact on the
economy and the livelihood of the farmers.

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