India’s Agriculture: The Failure of the Success

Mohan Guruswamy

It was around the mid-1960s when the Paddock brothers, Paul and William, the ‘prophets of doom’, predicted that in another decade, recurring famines and an acute shortage of food grains would push India towards disaster. Stanford University Professor Paul R. Ehrlich in his 1968 best selling book The Population Bomb warned of the mass starvation of humans in the 1970s and 1980s in countries like India due to over population.

Their prophecies were based on a rising shortage of food because of droughts, which forced India to import 10 million tonnes of grain in 1965-66 and a similar amount a year before. Little did they know that thanks to quick adoption of a new technology by Indian farmers, the country would more than double its annual wheat production from 11.28 million tonnes in 1962-63 to more than twice that within ten years to 24.99 million tonnes. It was 71.26 million tonnes in 2007. Similarly rice production also grew spectacularly from 34.48 million tonnes to almost 90 million tonnes in 2007.

Total food grains production in India reached an all-time high of 251.12 million tonnes (MT) in FY15. Rice and wheat production in the country stood at 102.54 MT and 90.78 MT, respectively. India is among the 15 leading exporters of agricultural products in the world. The value of which was Rs.1.31 lakh crores in FY15.

Despite its falling share of GDP, agriculture plays a vital role in India’s economy. Over 58 per cent of the rural households depend on agriculture as their principal means of livelihood. Census 2011 says there are 118.9 million cultivators across the country or 24.6 per cent of the total workforce of over 481 million. In addition there are 144 million persons employed as agricultural laborers. If we add the number of cultivators and agricultural laborers, it would be around 263 million or 22 percent of the population. As per estimates by the Central Statistics Office (CSO), the share of agriculture and allied sectors (including agriculture, livestock, forestry and fishery) was 16.1 per cent of the Gross Value Added (GVA) during 2014–15 at 2011–12 prices. This about sums up what ails our Agriculture- its contribution to the GDP is fast dwindling, now about 13.7 per cent, and it still sustains almost 60 per cent of the population.

With 157.35 million hectares, India holds the world’s second largest agricultural land area. India has about 20 agro-climatic regions, and all 15 major climates in the world exist here. Consequently it is a large producer of a wide variety of foods. India is the world’s largest producer of spices, pulses, milk, tea, cashew and jute; and the second largest producer of wheat, rice, fruits and vegetables, sugarcane, cotton and oilseeds. Further, India is 2nd in global production of fruits and vegetables, and is the largest producer of mango and banana. It also has the highest productivity of grapes in the world. Agricultural export constitutes 10 per cent of the country’s exports and is the fourth-largest exported principal commodity.

According to the Agriculture Census, only 58.1 million hectares of land was actually irrigated in India. Of this 38 percent was from surface water and 62 per cent was from groundwater. India has the world's largest groundwater well equipped irrigation system.
There is a flipside to this great Indian agriculture story.

The Indian subcontinent boasts nearly half the world's hungry people. Half of all children under five years of age in South Asia are malnourished, which is more than even sub-Saharan Africa.

More than 65 per cent of the farmland consists of marginal and small farms less than one hectare in size. Moreover, because of population growth, the average farm size has been decreasing. The average size of operational holdings has almost halved since 1970 to 1.05 ha. Approximately 92 million households or 490 million people are dependent on marginal or small farm holdings as per the 2001 census. This translates into 60 per cent of rural population or 42 per cent of total population.

About 70 per cent of India lives in rural areas and all-weather roads do not connect about 40 per cent of rural habitations. Lack of proper transport facility and inadequate post harvesting methods, food processing and transportation of foodstuffs has meant an annual wastage of Rs. 50,000 crores, out of an out of about Rs.370, 000 crores.

There is a pronounced bias in the government’s procurement policy, with Punjab, Haryana, coastal AP and western UP accounting for the bulk (83.51 per cent) of the procurement. The food subsidy bill has increased from Rs. 24500 crores in 1990-91 to Rs. 1.75 lakh crores in 2001-02 to Rs. 2.31 lakh crores in 2016. Instead of being the buyer of last resort FCI has become the preferred buyer for the farmers. The government policy has resulted in mountains of food-grains coinciding with starvation deaths. A few regions of concentrated rural prosperity.

The total subsidy provided to agricultural consumers by way of fertilizers and free power has quadrupled from Rs. 73000 crores in 1992-93, to Rs. 3.04 lakh crores now. While the subsidy was launched to reach the lower rung farmers, it has mostly benefited the well-off farmers. Free power has also meant a huge pressure on depleting groundwater resources.

These huge subsidies come at a cost. Thus, public investment in agriculture, in real terms, had witnessed a steady decline from the Sixth Five-Year Plan onwards. With the exception of the Tenth Plan, public investment has consistently declined in real terms (at 1999-2000 prices) from Rs.64, 012 crores during the Sixth Plan (1980-85) to Rs 52,107 crores during the Seventh Plan (1985-90), Rs 45,565 crores during the Eighth Plan (1992-97) and about Rs 42,226 crores during Ninth Plan (1997-2002).

Share of agriculture in total Gross Capital Formation (GCF) at 93-94 prices has halved from 15.44 per cent to 7.0 per cent in 2000-01. In 2001-02 almost half of the amount allocated to irrigation was actually spent on power generation. While it makes more economic sense to focus on minor irrigation schemes, major and medium irrigation projects have accounted for more than three fourth of the planned funds.

By 2050, India’s population is expected to reach 1.7 billion, which will then be equivalent to nearly that of China and the US combined. A fundamental question then is can India feed 1.7 billion people properly? In the four decades starting 1965-66, wheat production in Punjab and Haryana has risen nine-fold, while rice production increased by more than 30 times. These two states and parts of Andhra Pradesh and Uttar Pradesh now not only produce enough to feed the country but to leave a significant surplus for export.

Farm outputs in India in recent years have been setting new records. It has gone up from 208 MT in 2005-06 to an estimated 251 MT in 2014-15. Even accounting for population growth during this period, the country would need probably around 225 to 230 MT to feed its people. There is one huge paradox implicit in this. Record food production is depressing prices. No wonder farmers with marketable surpluses are restive

India is producing enough food to feed its people, now and in the foreseeable future. Since food production is no longer the issue, putting economic power into the hands of the vast rural poor becomes the issue.

The first focus should be on separating them from their smallholdings by offering more gainful vocations. With the level of skills prevailing, only the construction sector can immediately absorb the tens of millions that will be released. Government must step up its expenditures for infrastructure and habitations to create a demand for labor. The land released can be consolidated into larger holdings by easy credit to facilitate accumulation of smaller holdings to create more productive farms.

Finally the entire government machinery geared to controlling food prices to satisfy the urban population should be dismantled. If a farmer has to buy a motorcycle or even a tractor he pays globally comparative prices, why should he make food available to the modern and industrial sector at the worlds lowest prices?

Why should Bharat have to feed India at its cost?

13 June 2017

Jun 14, 2017

Mohan Guruswamy

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