Indian Agricuture

Updated: September 2009

Agriculture is one of the strongholds of the Indian economy and it accounts for 18.5 per cent of the gross domestic product (GDP).



The average growth rate of agriculture and allied sectors during the last two years i.e., 2006–07 and 2007–08 has been more than 4 per cent as compared to the average annual growth of 2.5 per cent during the 10th Five-Year Plan.

The current revival in agriculture sector has been possible mainly due to a number of initiatives taken in the recent years. While public sector investment in the farm sector has grown from 1.8 per cent of sectoral gross domestic product (GDP) in 2000–01 to 3.5 per cent in 2006–07, private sector investment has increased from 8.9 per cent in 2003–04 to 9.9 per cent in 2006–07.

According to a Rabobank report the agri-biotech sector in India has been growing at a whopping 30 per cent since the last five years, and it is likely to sustain the growth in the future as well. The report further states that agricultural biotech in India has immense potential and India can become a major grower of transgenic rice and several genetically engineered vegetables by 2010.

The food processing sector, which contributes 9 per cent to the GDP, is presently growing at 13.5 per cent against 6.5 per cent in 2003–04, and is going to be an important driver of the Indian economy.

Production

India has become the world's largest producer across a range of commodities due to its favourable agro-climatic conditions and rich natural resource base.

India is the largest producer of coconuts, mangoes, bananas, milk and dairy products, cashew nuts, pulses, ginger, turmeric and black pepper. It is also the second largest producer of rice, wheat, sugar, cotton, fruits and vegetables.

According to the Centre for Monitoring Indian Economy (CMIE), crop production is expected to rise by 1.7 per cent during FY 10. Foodgrain production is expected to increase by 1.1 per cent. Of this, wheat production is projected to remain at the same level of 80-million tonnes as estimated for FY 09. Rice production is projected to increase by 1.1 per cent to 98.8-million tonnes. Production of coarse cereals and pulses is also expected to rise in FY 10.

Cotton production in India, the world’s second-largest producer, may rise 10 per cent to about 32 million bales (one bale is equal to 170 kg) in the 2009-10 season (October-September) on high support price and more sowing of high-yielding Bt seeds.

India’s coffee output is pegged at 3.1 lakh tonne in 2009-2010, 4.4 per cent higher compared to 2008-09, according to the post-blossom estimates released by the Coffee Board.

Exports
According to the government's agri-trade promotion body, Agricultural and Processed Food Products Export Development Authority (APEDA), India's exports of agricultural and processed food products posted a 38 per cent increase in the 2007–08 fiscal, bolstered by an increase in shipments of coarse cereals like maize, jowar and barley. According to official data, India exported about 17.5 million tonnes of agricultural and processed foods worth about US$ 6.39 billion in FY 2007–08 against 10.9 million tonnes valued at about US$ 4.37 billion in the previous year.

Though the global recession is still lingering on, India’s agri-export turnover is expected to double in the next 5 years, according to APEDA. Agri-export turnover is set to rise from US$ 9 billion to nearly US$ 18 billion by 2014.

Despite recession, the country’s agri-exports have registered a 25 per cent growth in 2008-09.

At present, around 70 per cent of the country’s agricultural and processed food exports are to developing countries in the Middle East, Asia, Africa and South America.

Investments

India is expected to spend around US$ 14.05 million for the development of organic spices by 2012, particularly on turmeric, chilli, and ginger.
Tata Chemicals has firmed up plans to set up a manufacturing plant for customised fertilisers at Babrala in Uttar Pradesh. The company will invest close to US$ 10.02 million in this facility having a production capacity of 20 tonne per hour.
The National Cooperative Developement Corporation (NCDC), a statutory corporation under Union Ministry of Agriculture, is to take up programmes worth US$ 684.81 million during the year 2009-10. For the 11th Plan Period, a programme with an outlay of US$ 4.07 billion has been chalked out by NCDC for various cooperative development programmes in the country.
Makhteshim-Agan, an Israel-based farm technology company, is planning to invest US$ 91.96 million in the coming years, generating direct and indirect employment to 2,000 people.
Government Initiatives

Some of the recent initiatives taken by the government to accelerate growth include:

The one-time bank loan waiver of nearly US$ 14.6 billion to cover an estimated 40 million farmers was one of the major highlights of the last Budget. Under the Agricultural Debt Waiver and Debt Relief Scheme (2008), farmers having more than two hectares of land were given time upto June 30, 2009 to pay 75 per cent of their overdues. In the 2009-10 budget, the time frame has been extended by six months upto December 31, 2009.
The government has already approved 60 Agricultural Export Zones (AEZs).
The Government will provide an additional US$ 6.17 billion for new farm initiatives launched by states to double the growth rate in agriculture to 4 per cent over the 11th Plan period.
The National Food Security Mission was launched in 2007, with an outlay of US$ 979.51 million over the 11th Plan (2007–2012). It aims at enhancing the production of rice, wheat and pulses by 10 million tonnes, 8 million tonnes and 2 million tonnes, respectively by the end of the 11th Plan.
The Rashtriya Krishi Vikas Yojana was also launched in 2007. Under this the States are being provided with US$ 5.01 billion over the 11th Plan period for investment in various projects based on local requirements.
Services related to agro and allied sectors have been thrown open to 100 per cent foreign direct investment (FDI) through the automatic route.
Cabinet has approved 2 per cent interest subsidy on bank loans taken by farmers. The subsidy would cost the exchequer about US$ 826 million in the fiscal year 2009-10.
Road ahead

Agriculture is set to play a more dynamic role in the economy, with the government's increased focus on the sector.

In the 2009–10 budget, the government has taken many steps to aid the growth of the sector and focus on the achievement of self-sufficiency in food grains. Agriculture credit is likely to touch US$ 67.14 billion for the year 2009-10. In 2008-09 agriculture credit flow was at US$ 59.3 billion.