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Agricultural Challenges and Policies
for the 21st Century
Ramesh Chand
NABARD Research and Policy Series No. 6/2022 O³es³e NABARD Research and Policy Series No. 6/2022
२१ वीं सदी की कृ षि क्षेत्र से संबंधित चुनौतियाँ और नीतियाँ
Agricultural Challenges and Policies for the 21
st
Century
रमेश चंद
Ramesh Chand
आर्थिक विश्लेषण और अनुसंधान विभाग
Department of Economic Analysis and Research
राष्ट्रीय कृ षि और ग्रामीण विकास बैंक, मुंबई
National Bank for Agriculture and Rural Development, Mumbai
2
Agricultural Challenges and Policies for the 21
st
Century
National Bank for Agriculture and Rural Development
Office Address
National Bank for Agriculture and Rural Development
Plot No. C-24. ‘G’ Block, Bandra-Kurla Complex
Bandra (E), Mumbai - 400051
Email : dear@nabard.org
Website : www.nabard.org
© National Bank for Agriculture and Rural Development 2022
ISBN 978-93-5627-002-2
Published by
Department of Economic Analysis and Research
National Bank for Agriculture and Rural Development
Plot No. C-24. ‘G’ Block, Bandra-Kurla Complex
Bandra (E), Mumbai –400051
Printed at
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Mumbai
पेपर में उद्धृत तथ्यों और व्यक्त विचारों के लिए राष्ट्रीय बैंक ज़िम्मेदार नहीं है।
The National Bank is not responsible for the facts cited and views expressed in the paper. 3
Disclaimer
Views expressed in this paper are personal. 4 i
Chairman’s Message
Academic research can inform policy making. However,
since each piece of research may cover certain aspects of
an issue, a comprehensive review of research may help
collate thefindingsthatmayleadtopolicyrecommendations.
Further, the research available may be often very technical and
less communicative to the policy makers. NABARD
commenced the “Research and Policy” series to commission
reviewpapersonvariousthemestobring research findingson
a given theme in a capsule form.
With t<> his series, veteran scholars in different fields of specialisation have been
requested to document research in their field highlighting various issues, policy
relevance and prescriptions, and suggestions for future research. I am glad to present
the paper on “Agricultural Challenges and Policies for the 21
st
Century” by Dr. Ramesh
Chand who has been an authority on the subject.
The series will present more such authoritative papers on various issues ranging from
climate change to agricultural policy in the coming months. I hope that series will be
beneficial t<> o academicians, researchers and policy makers for use at the ground level.
My best wishes to the authors and the Department of Economic Analysis and Research
(DEAR) for initiating such a wonderful series.
Dr. G. R. Chintala ii iii
Foreword
There is a vast body of research available on topics related
to agriculture and rural development in the academic
world. But, most of it is in the technical realm and not in
a form which could feed into the policy. Research must
first lead to better understanding of a subject and then
into a robust policy, wherever it can, so that it touches
the multitude of Indians across the length and breadth
of our country through better public policy and efficient
services. Discussion with my colleagues on this issue
lead to this new series “Research & Policy”. We wish that
this series will provide the breadth and depth of research into an area topped up by a
lucid presentation for the policy makers.
I am happy to present the sixth publication in this series on “Agricultural Challenges
and Policies for the 21
st
Century” written by Dr. Ramesh Chand.
I wish this new series acts as a bridge between the researchers and policy makers.
P. V. S. Suryakumar
Deputy Managing Director
iv v
Preface
Agriculture sector proved a silver lining in the pandemic
period registering a positive growth in the covid times. Yet it
faces various structural challenges to be addressed to make it
profitable. For, the majority of the population is still dependent
on the sector. As we all know, investing in research is one of
the best strategies to address problems of agriculture. Equally
important is to communicate the research findings to policy
makers to design and tweak policies that matter. During one
of our meetings with Shri P. V. S. Suryakumar, our DMD, we
had loud thinking if we can commission a few review papers
on select themes. We thought that it is appropriate to request veteran scholars who
spent prime of their life on a given research theme to attempt such a work where they
will distil their understanding and the research done on the theme in a short paper.
Duly encouraged by DMD and Chairman, we wrote to a dozen eminent scholars. And
the response was overwhelming resulting in Department of Economic Analysis and
Research (DEAR), the research wing of NABARD, initiating the ‘Research and Policy
Series’. The motivation is, thus, to get a few handles from research that can help effective
policy intervention. This series will be useful to policy makers and researchers alike.
The ‘Research and Policy’ series is an attempt to get a glimpse of hardcore research
findings in a capsule form thereby making it more effective and communicative to
policy makers. The group of researchers who agreed to prepare a review of research
have spent their life in the field of agricultural research. Our purpose here, as we
communicated to them, was not just to get literature survey but to get researcher’s heart
and their experience which they gained during their long passionate innings. The paper
is expected to highlight various issues, policy relevance, prescription, and suggestion
for future papers on the themes of interest to NABARD.
Agriculture policies implemented by governments at various levels after the
Independence were critical in bringing socio-economic transformation to many parts of
the country. These production methods, despite their achievements, must be evaluated
against the test of sustainability and the challenges they present for the sector’s current
growth. In view of this, the current paper on “Agricultural Challenges and Policies
vi
for the 21
st
Century” written by Dr. Ramesh Chand, Member, NITI Aayog, assumes
importance. Dr. Ramesh Chand has a distinguished academic career, with research
interests in agriculture that include production, growth, development policy, farmers’
issues, markets, and trade.
The paper begins by examining the severity and extent of various types of challenges
confronting Indian agriculture, ranging from over exploitation of natural resources to
smallholder viability to agricultural research and development. It then highlights key
policies and initiatives that can be put in place to address these issues. While discussing
the policies, the author thoroughly reviewed the current agri-marketing and MSP
policies and tried to provide solutions to major problems under the current policy setup.
At the end, the author discusses various issues that must be debated to ensure sustain-
ability of all the stakeholders in agricultural sector. Overall, the paper will give readers
more to think about.
In bringing this series as planned, we would like to express our sincere gratitude to Dr.
G. R. Chintala, Chairman, NABARD for his inspiring leadership, unstinted support and
guidance. We also wish to express our sincere thanks to Shri P. V. S. Suryakumar, DMD,
for being the inspiration and the driving force behind the publication of this first of its
kind series. We are grateful to the authors of this series who agreed to write on themes
relevant to NABARD in such a short period of time. Indeed, it has been a great privilege
for us.
I also acknowledge the contributions of the officers of DEAR, NABARD especially Dr.
Ashutosh Kumar, DGM; Mrs. Geeta Acharya, Manager; Ms Neha Gupta, Shri Vinay
Jadhav, Assistant Managers, and others who coordinated with the authors and the
editor to bring out the series as envisaged.
Thanks are due to Dr. J. Dennis Rajakumar, Director, EPWRF and his team for their
contribution in copy editing and bringing uniformity to the document.
K. J. Satyasai
Chief General Manager
Department of Economic Analysis and Research (DEAR)
NABARD, Mumbai-400051 vii
Contents
Chairman’s Message i
Foreword iii
Preface v
List of Tables ix
List of Figures xi
Abbreviations xiii
Executive Summary xv
1 Introduction 1
2 Agricultural Challenges 1
2.1 Overexploitation of Water Resources 2
2.2 Disregard for Nature and Loss of Crop Diversity 3
2.3 Low Efficiency and Price Led Growth 5
2.4 Imbalances and Regional Disparities 6
2.5 Wasteful Investment 8
2.6 Technology Generation and Dissemination 9
2.7 Viability of Smallholders 10
2.8 Nutrition, Food Safety and Health 10
2.9 Mismatch between Structural Changes in Output & Workforce 12
2.10 Low income of Farmers 13
3 Policies for 21
st
Century 13
3.1 Growth and Efficiency 14
3.2 R&D and Innovation 16
3.3 Employment Generation for Decent Jobs 18
3.4 Food Security, Nutrition and Health 20
3.5 Surplus Management 22
3.6 Input Intensive to Knowledge Intensive Agriculture 23
3.7 Climate Change and Sustainability 24
(Contd....) viii
Contents (Concluded)
3.8 Responsible Investment in Agriculture 25
3.9 Farmers’ Income 27
3.10 Reforms in Policies and Regulations Affecting Agriculture 29
4 Conclusion 34
References 34 ix
List of Tables
No. Title Page
1 Changes in Irrigation and Status of Groundwater 3
2 Crop Shifts Towards Water Guzzling Crops in Selected States 4
and All-India
3 Value of Crop Output Per Hectare (ha) During TE 2018-19 7
4 Food Supply Per Capita Kg/Year 11
5 Share of Agriculture including Allied Activities in Workforce 12
and National Income Since 1950-51
6 Agriculture Sector’s Share in National Income and Employment 18
in Selected Developing Countries, 1991 and 2019
7 Changes in Cultivators and Agricultural Labour in Rural India 19
8 Child and Women Health Indicators at All-India Level: 2015-16 21
and 2019-20
9 Public Investments and Subsidies in Agriculture & Allied Sector 26
10 Share of Various Sources in Gross Fixed Capital Formation (GFCF) 27
in Agriculture and Total Economy at Current Prices, 2019-20
11 Average Monthly Income (Rs.) from Different Sources Per 28
Agricultural Household During July 2018-June 2019 for
Each Size Class of Land Possessed (ha) x xi
List of Figures
No. Title Page
1 Movement in Terms of Trade for Agriculture 6
2 Area under Canal Irrigation and Its Share in Total Irrigated 8
Area, All-India
3a Soyabean Yield/Hectare in India, USA, Argentina and World 17
3b Maize Yield/Hectare in India, USA, Argentina and World 17
4 Per Capita Food Production and Domestic Absorption, 22
1980-83 to 2016-17
xii xiii
Abbreviations
ACIAR Australian Centre for International Agricultural Research
ACRP Agro Climatic Regional Planning
AI Artificial Intelligence
APMC Agricultural Produce Market Committee
CACP Commission for Agricultural Costs & Prices
ESCAP Economic and Social Commission for Asia and the Pacific
FAO Food and Agriculture Organisation
FRP Fair and Remunerative Price
GFCF Gross Fixed Capital Formation
GHG Greenhouse Gases
GVA Gross Value Added
HYV High Yielding Varieties
IARI Indian Agricultural Research Institute
ICAR Indian Council of Agricultural Research
IOT Internet of Things
IPC Irrigation Potential Created
IPM Integrated Pest Management
IPN Integrated Plant Nutrient
IPR Intellectual Property Right
KVK Krishi Vigyan Kendra
(Contd....) xiv
Abbreviations (Concluded)
MSP Minimum Support Price
MSME Micro, Small and Medium Enterprises
NARS National Agricultural Research System
NGOs Non-governmental Organisations
NITI National Institution for Transforming India
PMKVY Pardhan Mantri Kaushal Vikas Yojana
PDP Price Deficiency Payment
PSS Price Support Scheme
R&D Research and Development
SAARC South Asian Association for Regional Cooperation
SAUs State Agriculture Universities
SDG Sustainable Development Goal
TOT Terms of Trade
UNCTAD United Nations Conference on Trade and Development
UNDP United Nations Development Programme
USA United States of America
UTs Union Territories xv
Executive Summary
The agri-food sector in India has undergone a sea change since the onset of the
Green Revolution in the late 1960s. From an uncomfortable state of acute shortage
of food, widespread hunger and heavy import dependence, the country has emerged
as a net exporter and surplus producer of many agricultural commodities. The over-
all effect of the Green Revolution technology and other aspects of the agricultural
strategy and policy is that the per capita production of food in the country has
more than doubled during the last 50 years, despite the 237% increase in human
population.
Till a few years back, the entire agriculture strategy was focused on the single
motto of ‘grow more food’ at any cost. This strategy brought many positive changes
like food self-sufficiency, emergence of export surplus of many commodities, better
nourishment, socio-economic transformation in some regions, increase in rural wages
and employment, and gradual increase in farm income. But these achievements also
threw up new challenges on several fronts, and some of those are formidable and
require urgent attention.
The foremost challenge relates to sustainability of the current method of
production. The indiscriminate use of chemical fertilizers, pesticides and weedicides,
expansion of irrigation, and crop specialisations favouring a few crops, which were
the main sources of growth of agriculture post-Green Revolution, played havoc with
natural resources, environment and ecology. Heavy subsidy and free supply of power
for irrigation led to reckless, indiscriminate and overuse of water, and brought serious
distortions in crop choices.
Agriculture is quite important in determining quality of air, water and land, and
pressure on land and water, which are pillars of sustainability. In order to check
further overexploitation of water resources, the country should create a policy
environment that leads to crop pattern and practices consistent with the natural
resource endowment in various agro ecological zones. Further, without improving
efficiency of water use in agriculture through modern methods of irrigation (drip,
sprinkler and sensors), stress on water use and future water requirement cannot be
addressed. xvi
Despite the technological breakthroughs in many areas, our productivity levels
both in crops and livestock at the national level remained lower than many other major
agricultural countries. Agricultural practices involving prolific use of inputs like broad-
casting of fertilizer and flood irrigation are not showing any significant improvement.
In most of the crops, increase in productivity has been accompanied by an increase in
average cost of production that necessitated an increase in output prices to keep incre-
mental production profitable. The dependence of the agriculture sector on government
support is rising. Because of this, the sector is becoming less competitive.
India is accumulating a large surplus of rice, wheat and sugar which involves a
huge cost to state exchequer. On the other hand, deficit in edible oils is rising year after
year. Disposing off surplus rice and sugar in international markets needs high level
of financial support, because international prices are lower than the cost of supply or
domestic price of the produce.
The country spends more than Rs. 30,000 crore each year after 2007-08 as capital
expenditure and also huge amounts on operation and maintenance of canals, but area
under canal irrigation has shown either stagnation or a decline. This disquieting trend
necessitates a close examination and urgent action to ensure that country’s resources
spent on canal irrigation gives expected returns.
Indian diets are changing in a significant manner. Per capita absorption of cereals
has witnessed the smallest increase, despite an increase in availability and heavy
subsidy of cereals. There is a manifold increase in the per capita net availability of
vegetables, fruits and milk for domestic consumption. However, around 16% of the
population still live in hunger, and a large population remains malnourished. India
presents a paradoxical situation of ‘hunger in the midst of plenty’. Health of children
and women is also a matter of concern.
Low intake of the total food is the main reason for widespread hunger and
malnutrition. The country would need to relook at policy interventions in agriculture
that are heavily biased towards rice, wheat and sugar, which are produced in excess
of domestic and export demand. Further, nutrition awareness is very important to
improve nutrition and health, as there is a growing tendency for preferring more of
spicy, oily and sugary foods to nutritive food. Attributing poor nutrition entirely to low
paying capacity is not correct. xvii
If the current trends in agriculture are not corrected, there will be little
improvement in reducing the gap between agriculture and non-agriculture income
and alleviating rural distress. In this background, the present government has set a
vision for a new India that involves ‘Sabka Saath Sabka Vikas’. Agriculture growth is
significantly beneficial for reducing poverty and increasing per capita income of low-
income classes in rural India. Beside inclusive growth, agriculture matters for health
and nutrition, sustainability, climate change and the quality of life in the country. All
these factors underscore the need for a new vision for agriculture as we move forward
in the 21
st
century – a vision that addresses various challenges facing agriculture.
Ironically, high growth rate in agriculture experienced during some phas-
es did not bring down real prices of food in the country. The reason has been that
the prices drove output growth rather than output growth determining prices! The
goal and strategy for agriculture must shift from ‘growth to efficient growth’. Indian
agriculture is without the state-of-the-art technology and modern methods of
farming. Application of advanced science at the farm level requires skill, knowledge,
investment and improvement in human capital in farming. Upgrading farming from
low-tech to high-tech (like greenhouse cultivation, poly houses, tissue culture and
precision farming) will reduce the average cost, raise farmers income and address
some scale disabilities.
Lately, methods that have roots in traditional Indian methods of farming like
natural farming and organic farming are being proposed in place of chemical-based
farming with the aim to reduce cost of production, besides also addressing adverse
effects of chemicals on health, environment and natural resources. Lot of anecdotal
evidence is quoted in support of benefits of the alternative system of farming.
However, the scientific community in public research institutes cast doubts on the
claim of benefits of traditional systems of farming and raise the issue of a significant
yield discount in such methods, which could be detrimental to the food and nutrition
security of the country in coming years. They feel, the breakthrough in biotechnology
and scientific practices like integrated pest management (IPM) and integrated plant
nutrient (IPN) systems, modern methods of fertiliser application and irrigation can
address various concerns related to farming, based on the use of agro-chemicals
rather than taking the risk of a shift towards natural farming. Public research system
must look into various aspects of alternative methods of farming and develop best xviii
practices to meet public preferences and the national goals of raising farmers income
by lowering costs and supply of safe and healthy food.
Capital intensive production preferred by the manufacturing sector and anticipated
threats to jobs posed by emerging technological innovations necessitate a rethinking
of the development strategy of shifting workforce from agriculture to manufacturing
and services. India should explore possibilities of creating blue collar jobs in and
around agriculture.
Current and projected growth for food demand and supply reveal that India would
need to add 20% - 25% of incremental output to the current level of food exports.
This requires export competitiveness. At present, the minimum support prices (MSP)
of some commodities recommended by the government are higher than the interna-
tional prices. If such MSP is used for procurement, it will keep domestic prices higher
than international prices, thus, making the exports impossible.
Keeping prices artificially above the levels dictated by demand and supply and
forcing them on the market through government interventions causes serious price
distortions, which have a number of implications. The best option in such situations is
to pay the farmers the difference between a reasonable MSP and average market price
at the state level, as is the practice in many countries.
Regulatory restrictions on marketing and absence of business-friendly envi-
ronment in agriculture acts as a deterrent for corporate investment in agriculture
production and marketing. This is said to be an important reason for the slow change
in agriculture, the dominance of traditional marketing channels and the weak linkage
between farm and fork.
Economic reforms launched in 1991 helped in doubling real per capita income in
the country in just 17 years compared to 37 years it took to double per capita income
before 1991. However, the gross value added (GVA) of agriculture and allied sectors
doubled in about 23 years before 1991, and it took same number of years to double
again. This is a major cause of rural distress. Special focus is needed to raise farmers’
income at a faster rate. This requires transformation of agriculture production as well
as marketing through a multi-pronged strategy that involves increase in productiv-
ity, reduction in average cost, better price realisation for farm produce, expansion of
allied activities and shift of farmers to non-farm occupations. The three farm laws xix
enacted in year 2020, which have been repealed now because of opposition from some
farmers groups, were aimed to achieve this goal.
Since long, there is a felt need to overcome the limitations and constraints of the
present agricultural marketing system and to develop a competitive, transparent
and barrier free markets with the choices to the farmers to sell their produce to the
buyers offering better prices in a transparent manner. When states did not come on
board to reform their Agricultural Produce Market Committee (APMC) Acts, despite
repeated pleas and persuasions by successive governments at the centre for 18 long
years, the union government in 2020 took a historical decision to take on itself the
responsibility of bringing reforms in agriculture, and the three new farm acts were
enacted after they were passed by the Parliament. Consequently, the three farm laws
have been repealed because of farmers protest against these reforms. Nevertheless, it
is very clear that the sector cannot move forward on a healthy pace without reforms.
Some farmers’ groups demand legalising of MSP as a solution to low market prices.
Legal MSP cannot work when they are not supported by demand and supply side
factors. If we want to protect the farmers against unremunerative or uncompetitive
prices through legal MSP, we should be guided by the price recommended by
institutions like the Commission for Agricultural Costs & Prices (CACP), and after
considering demand side factors and possible open market price.
Agricultural economists and experts need to debate about (a) what is remu-
nerative prices for farmers and the best option for ensuring it without distortions in
market; (b) sharing of responsibility for price assurance between the centre and the
states; and, (c) the pathways for modernising agriculture.
Significant and sustained increase in farmers’ income and transformation of agriculture
require a paradigm shift in the entire approach towards agriculture sector. Changes in
archaic regulations and liberalisation of the sector are a must for creating an enabling en-
vironment for a modern and vibrant agriculture. Advancement in science led technology,
enhanced role of the private sector in both pre and postharvest phases, liberalised out-
put markets, active land lease markets and emphasis on efficiency will equip agriculture
to address the challenges of 21st century and contribute towards the goal of new India.
A well-co-ordinated action and strategy between the centre and the states is needed to
ensure that agriculture moves to next stage of development along with other sectors. xx Agricultural Challenges and Policies for the 21
st
Century
1. Introduction
Historical experience of almost all economies shows that the share of the
agriculture sector in the total employment and national income falls with the progress
in economic development and growth over time. However, this decline does not
diminish the need to address various challenges facing the agriculture sector from
time to time because of several reasons. The foremost is the dependence of human life
on food for survival. This dependence goes beyond survival to adequate nutrition for
an active and healthy life. The other significant reasons for the continuing importance
of agriculture is its role in:
(i) supporting and improving rural livelihoods,
(ii) maintaining agro ecological balance,
(iii) mitigating climate change and global warming, and
(iv) ensuring sustainable use of land, water and other natural resources.
Much of the economic activities including industrial production and supply
chains, trade and commerce start with raw material supplied by the agri-food sector.
It is, thus, obvious that agriculture remains a core concern in all the countries, both
developed and developing ones. It is now recognised by the United Nations that
Sustainable Development Goals (SDGs) for 2030 cannot be achieved without paying
attention to agriculture, as 11 out of 17 SDGs are directly linked to agriculture.
Role of agriculture in growth of Indian economy and overall development of the
country hardly needs any elaboration. However, this needs to be re-oriented in the light
of the changing environment and requirements and to meet the new challenges, and
also to harness new opportunities. This will require a shift in our approach and thinking
towards agriculture from ‘pushing for incremental change’ to ‘transformational change’.
2. Agricultural Challenges
There is a sea change in food situation in the country since the 1960s when In-
dia faced acute shortage of food and registered widespread hunger, and depended 2 Ramesh Chand
on food imports to save millions of lives from starvation. The situation was so grave
that the then Prime Minister gave a call to the people to observe fast for one day
in a week. The High Yielding Varieties (HYV) of wheat and paddy became available
around the same time, and the then government took a bold decision to adopt Green
Revolution technology despite strong opposition from some quarters. The entire
agriculture strategy was focused on single motto of ‘grow more food’. Initially, the
Green Revolution technology involving high yielding dwarf varieties of wheat and
paddy, highly responsive to inorganic fertilizer, was adopted in well-endowed irrigated
regions in the country. Subsequently, as irrigation expanded, the Green Revolution
technology spread to wider areas. Improved and HYV were also developed in many
other crops.
The new cultivars were more water intensive, and their success required better
tillage, good quality seeds, use of chemical fertilisers to meet nutrition requirements,
and use of chemicals to control pests, insects, diseases and of late weeds. The Green
Revolution technology was more beneficial and suitable for irrigated regions com-
pared to rainfed areas. These changes were facilitated and encouraged by favourable
policy support and environment both by the centre as well as many states. The spread
of the new technology package led towards enterprise specialisation, mono cropping,
shifts in cropping pattern and crop sequences, withdrawal of more nutrients from the
soil and more extraction of groundwater than recharge. This put serious stress on the
natural resource base (land, water, ecosystem and environment), and thereby, clear
signals emerged on the sacrifice of long-term interest for the short-term gains, and
by future generation for current generation gains. It is now evident that the current
system and practices need thorough changes and a paradigm shift. Before discussing
those changes, it is imperative to discuss the severity and extent of various types of
challenges facing Indian agriculture.
2.1 Overexploitation of Water Resources
Assured irrigation and access to water are crucial for raising crop productivity,
crop intensity and output quality, and lowering risks in agriculture. Expansion in
irrigation, along with technology and fertilizer, have been the major instruments
fuelling agriculture growth. Over time, huge public and private investment have
been made to expand the area under irrigation. Seeing the critical role of water in
raising yields, some states started
subsidising or supplying power for irrigation free 3Agricultural Challenges and Policies for the 21
st
Century
of charges. This led to reckless, indiscriminate and overuse of water, and brought
serious distortions in crop choices. With marginal cost of using water being close to
zero, farmers started growing water intense crops in low rainfall areas and adopted
water-based practices and off-season cultivation. It is evident from the emergence of
monoculture of paddy in traditionally groundnut and cotton growing areas in Punjab,
Haryana and Rajasthan; expansion of sugarcane in Maharashtra and Uttar Pradesh;
groundnut cultivation in peak summer time in Rajasthan and many such cases. Thus,
a new geography of crops appeared in complete violation of agro climatic suitability
of various agro climatic zones in the country. Broad changes in area and sources of
irrigation are presented in Table 1.
Though half of the agricultural area is rainfed and without access to irrigation,
the sector uses close to 90% of the total water used in the country. Further, the
groundwater table show small to very high decline in 36% of the blocks mainly due to
water withdrawal exceeding water recharge. This is being experienced even in water
rich middle Indo Gangetic region. Farmers in some parts of the country are chasing
groundwater beyond 1,000 feet below ground level. This is water mining, and has
very serious implications for water quality, aquifer health and availability of water in
future.
2.2 Disregard for Nature and Loss of Crop Diversity
The guiding principle and recommendations for crops suitable for different regions
are available in literature on Agro Climatic Regional Planning (ACRP) published by
Table 1: Changes in Irrigation and Status of Groundwater
Irrigation/Water use TE 1972-73 TE 2017-18
Gross irrigated area (million hectare) 38.6 98.3
Gross cropped area irrigated (%) 23.5 49.4
Groundwater irrigated area in total irrigated area (%) 28.2 46.0
Overexploitation of ground water (% blocks) 36.0
Share of agriculture in total water use (%) 88.8
Note: TE stands for Triennium Ending
Source: 1. Directorate of Economics and Statistics, Land Use Statistics, Ministry of
Agriculture and Farmers Welfare, Government of India, New Delhi. Accessed
from https://eands.dacnet.nic.in/#
2. Central Ground Water Board (2021): Dynamic Groundwater Resources of India
2020, Ministry of Jal Shakti, Government of India, New Delhi. 4 Ramesh Chand
erstwhile Planning Commission for 15 major agro zones and at a disaggregate level
by Indian Council of Agricultural Research (ICAR) for 127 zones in the country. The
suggested crops and crop pattern are based on natural resource endowment and agro-
climatic conditions prevailing in various parts of the country, and are thus considered
sustainable. Actual crop pattern and acreage allocated to various crops are at signifi-
cant variance with what is suitable from the agro climatic point of view. The deviation
is mainly caused by policy support and disparities in advancement in technology for
various crops. Technological and policy bias in favour of Green Revolution technology
and a few crops not only caused distortions in crop pattern, it also resulted in increased
concentration of area under some crops and a sharp decline in crop diversity. This is
illustrated in Table 2. In the early 1970s, paddy cultivation was undertaken on 10.8%
of the net sown area in Punjab and 8% in Haryana. This share has increased to 73.3%
in Punjab and 39.5% in Haryana. Similarly, area under sugarcane cultivation qua-
drupled in Maharashtra and doubled in Uttar Pradesh after the onset of the Green
Revolution.
Such changes in crop pattern have serious implication for sustainable use of natural
resources, complementarity among crops, outbreak of diseases and pests. These
consequences are also transmitted to human health and nutrition, and environment
quality.
Table 2: Crop Shifts Towards Water Guzzling Crops in Selected States and All-India
Area Under Cultivation: Share in Total Net
Million Hectare Sown Area (%)
TE 1972-73 TE 2017-18 TE 1972-73 TE 2017-18
1. Area under paddy
India 37.4 44.3 26.8 31.8
Punjab 0.44 3.0 10.8 73.3
Haryana 0.28 1.4 8.0 39.5
2. Area under sugarcane
India 2.50 5.00 1.80 3.59
Maharashtra 0.20 0.84 1.15 4.94
Uttar Pradesh 1.35 2.21 7.77 13.39
Note: TE stands for Triennium Ending
Source: Author’s calculation based on data derived from Directorate of Economics and Statistics,
Agriculture Statistics At A Glance, Ministry of Agriculture and Farmers Welfare,
Government of India, New Delhi. Accessed from: https://eands.dacnet.nic.in/# 5Agricultural Challenges and Policies for the 21
st
Century
2.3 Low Efficiency and Price Led Growth
India’s growth in agriculture sector, though impressive in most products and
states, has remained lower than the potential. Our productivity levels are lower than
major agricultural countries. The sector is witnessing slow modernisation. The much-
needed changes in technology, method of production and postharvest value addition
are not visible on a large scale. Agricultural practices involving prolific use of inputs
like broadcasting of fertilizer and flood irrigation are not showing any significant
improvement. In most of the crops, increase in productivity has been accompanied
by an increase in average cost of production, which necessitates an increase in out-
put prices to keep incremental production profitable. The dependence of the agricul-
ture sector on government support is rising. Because of this, the sector is losing its
competitiveness.
The role of incentives like output price support and subsidies, and non-price factors
like irrigation, new seed, fertilizer, technology and institutional reforms in improving
the growth of the agriculture sector is very well documented in the literature. While
non-price factors create potential for growth, remunerative prices incentivise farm-
ers to harness this potential. Thus, both sets of measures are crucial for growth and
development of the agriculture sector. Over time, farmers have focused more on prices
support than making a balanced demand to include non-price factors in policy sup-
port. This was because of a couple of factors. Implementation of MSP and procurement
of rice and wheat in selected states allowed remarkable stability in prices received by
farmers with zero price risk, and assured higher income than through their sale at
market prices. This attracted attention of other producers, who were not able to sell
their crops at MSP, for a similar treatment to them and their crops. And also, MSP
has been made more and more remunerative over time, and increased year after year
irrespective of glut in supply and fluctuations in open market or international prices.
After submission of report of National Commission on Farmers, chaired by
eminent agriculture scientist Dr M S Swaminathan, in 2006, farmers have rallied
around the commission recommendation for a 50% margin over costs while fixing
MSP. This recommendation was a surprise for many economists, as the commission
did not give any rationale or justification for this recommendation that has far-
reaching implications. The recommendation became quite popular among farmers
throughout the country, as it involves a high rate of return over their cost. Political 6 Ramesh Chand
parties also started promising MSP based on the Swaminathan Commission report to
appease and seek farmers’ support. The decision of the central government to accept
Swaminathan Committee recommendation to fix MSP at least 50% above the cost of
production in 2018 further raised the attractiveness of MSP and pushed the MSPs
much above open market prices. Increase in average costs of cultivation due to higher
use of inputs has forced the farmers to rely more on support prices, though increased
use of inputs has improved crop productivity.
Changes in prices of agriculture relative to prices in the non-agriculture sector
can be seen from the terms of trade (TOT) for agriculture. The TOT is taken as ratio of
implicit price deflator of agriculture sector to implicit price deflator of non-agriculture
sector. Generally, TOT is expected to move cyclically with the phase of rise followed
by the phase of decline, and vice versa. But since 2005-06, TOT for agriculture have
moved on a rising trend (Figure 1). This implies that price trends have been more
favourable towards farmers’ output since 2005-06.
2.4 Imbalances and Regional Disparities
Imbalances between demand and domestic production have been growing over the
years. India has been accumulating a large surplus of rice, wheat and sugar, and this in-
Figure 1: Movement in Terms of Trade for Agriculture
Note: Terms of trade for agriculture is the ratio of implicit price deflator of gross value added (GVA) of
agriculture to that of the non-agriculture sectors.
Source: Author’s calculation based on data derived from National Statistical Office: National Accounts Statistics,
Ministry of Statistics and Programme Implementation, New Delhi, Various Issues.
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
1970-71
1972-73
1974-75
1976-77
1978-79
1980-81
1982-83
1984-85
1986-87
1988
-
89
1990
-
91
1992-93
1994-95
1996-97
1998
-
99
2000
-
01
2002
-
03
2004
-
05
2006
-
07
2008
-
09
2010
-
11
2012
-
13
2014
-
15
2016
-
17
2018
-
19
Terms of trade for agriculture
Year 7Agricultural Challenges and Policies for the 21
st
Century
volves a huge cost to the state exche-
quer. The underlying reason for this is
the rise in output price by the centre
and payment of bonus for rice, and
rise in fair and remunerative price
(FRP) for sugarcane by some states
ignoring the CACP recommendations
and, for that matter, demand and
supply or market situations. Where
sugarcane prices ruled higher than
the corresponding price of sugar
prevailing in the domestic market,
sugar mills started paying lower price
compared to the price for sugarcane
announced by the states. The net re-
sult has been an accumulation of ar-
rears for sugarcane growers. Thus,
the demands and protest by farm-
ers to pay sugarcane arrears by the
union government has become a
regular phenomenon for many years.
On the other hand, India’s deficit in
edible oil is rising year after year. The
country meets 55% of its domestic
requirement of vegetable oils by im-
porting them. There is, thus, a scope
in domestic market to absorb 127% in-
crease in domestic oilseed production.
Disposing off surplus rice and sug-
ar in international market needs high
level of financial support, as interna-
tional prices rule much lower than
what turns out to be the cost of supply
or domestic price of the produce.
Table 3: Value of Crop Output Per Hectare (ha)
During TE 2018-19
State Crop Productivity
(Rs/ha)
Daman & Diu 58501
Rajasthan 70977
Chhattisgarh 91560
Lakshadweep 95457
Dadra & Nagar Haveli 100219
Karnataka 105256
Manipur 106838
Maharashtra 108558
Meghalaya 112117
Telangana 114459
Gujarat 129835
Mizoram 131380
Nagaland 135106
Odisha 137555
Madhya Pradesh 138065
Bihar 138302
All India 138884
Arunachal Pradesh 143760
Assam 149815
Uttar Pradesh 155502
Chandigarh 164028
Goa 170647
Uttarakhand 174942
Haryana 179104
Kerala 179941
Andhra Pradesh 191992
Tamil Nadu 199046
Punjab 207743
Himachal Pradesh 219529
Jammu & Kashmir 243605
Jharkhand 253484
West Bengal 283707
Sikkim 308634
A & N Islands 348386
Tripura 358432
Delhi 403213
Puducherry 417096
Note: TE stands for Triennium Ending
Source: Author’s estimates based on data derived from
State Level Value of Output of Crop Sector, in
National Statistical Office: National Accounts
Statistics, Ministry of Statistics and Programme
Implementation, New Delhi, Various Issues. 8 Ramesh Chand
Another dimension of imbalances is the variation in productivity. Though some
variations are bound to be there because of natural resource endowment and access
to irrigation, there are wide variations in crop productivity across states even at a
similar level of irrigation. As can be seen from Table 3, value of crops harvested from
one hectare of land in major states varies between Rs. 70,977 in Rajasthan and Rs.
2.83 lakh in West Bengal. Excluding Rajasthan, which has very low rainfall and dry
and arid climate, per hectare productivity across major states ranges in the ratio of
1:3.1. With more than 72% area under irrigation, Bihar achieved crop productivity of
Rs. 1.38 lakh per hectare – lower than average of many other states where area under
irrigation is less than 50%.
2.5 Wasteful Investment
Investment in major, medium and micro irrigation constitutes a major share
of public investment in agriculture. These investment were meant to increase area
under surface water irrigation. The country spent more than Rs. 30,000 crore each
year after 2007-08 as capital expenditure and also a huge amount as operation and
maintenance of canals, but area under canal irrigation is showing either stagnation
or decline (Figure 2). There are multiple reasons for this, including considerable
Figure 2: Area under Canal Irrigation and Its Share in Total Irrigated Area,
All-India
Source: Same as Table 1.
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
10000
11000
12000
13000
14000
15000
16000
17000
18000
19000
Canal irrigation as % of NIA
Canal irrigated area (000ha)
Total
Canal irrigation as % of NIA 9Agricultural Challenges and Policies for the 21
st
Century
delays in completion of projects resulting in very high time and cost overruns. Several
major irrigation projects even after incurring most of the expenditure are held up by
minor obstacles like forest clearance in small pockets, catchment area development,
construction of distributaries and field channels. Interstate and intra state disputes
are another factor for delay in completion of some major irrigation works.
It looks ironical that area under canal irrigation witnessed stagnation and even
decline for such a long period, despite so much investment in medium and major
irrigation. During 1993-2014, the country spent on an average about Rs. 17,663
crore per year at current prices on capital expenditure for major and medium irriga-
tion projects. This disquieting trend necessitates closer examination and urgent ac-
tion to ensure that the country’s resources spent on canal irrigation gives expected
return.
The main reason for lack of progress in the area under canal irrigation has been
poor utilisation of irrigation potential created, and emergence of a big gap between
irrigation potential created (IPC) and irrigation potential utilised (IPU). This is
despite the fact that Rs. 1,74,473 crore were spend on major and medium irrigation
projects in the Eleventh five year plan period. Though IPU remained poor, even this
should have resulted in an increase in the area under canal irrigation, which is not
visible in the irrigation statistics.
Due to poor progress in the area under canal irrigation, its share in the net irri-
gated area has declined from 37.5% in 1984-85 to 23% during 2018-19. This, in turn,
is putting strong pressure on use of groundwater leading to its overexploitation, which
has several adverse implications.
2.6 Technology Generation and Dissemination
Agricultural problems are becoming more complex, and research is turning more
capital intensive. Climate change, share of agriculture in greenhouse emissions and
sustainability concerns add to the challenges to be addressed by the research and
development (R&D) system. Scope for spillover from research in the developed world
is shrinking, and intellectual property right (IPR) issues are complicating and making
it costly for transfer of technology from the outside world and the private sector. Thus,
India needs to be self-reliant in agricultural research. 10 Ramesh Chand
Basic and strategic research in any discipline lays the foundation for break-
throughs. Sadly, this component has weakened considerably in the National Agricul-
tural Research System (NARS). The concentration of NARS over a period of time has
shifted to applied research and problem-solving research.
Agriculture is also becoming more competitive globally with many new innovations
happening in the sector. However, the rate of adoption of improved as well as frontier
technology is low, mainly due to poor extension services.
Though agricultural research and higher education is largely a responsibility of
State Agriculture Universities (SAUs), the ICAR is required to respond to any chal-
lenges and issues concerning the agriculture sector. Public opinion at large holds
ICAR responsible for any adverse development in the agriculture sector. As a result,
the portfolio of ICAR has been getting bigger and bigger over time. Load of ICAR has
risen manifold with the responsibility to expand frontline extension and operate Kri-
shi Vigyan Kendras (KVKs) throughout the country. Many questions are raised about
the effectiveness of ICAR in fulfilling the larger role it has been assuming over the
years and expected to play in the field of agriculture R&D and education.
2.7 Viability of Smallholders
Agriculture in India and most of Asian countries is dominated by small land hold-
ings. According to Agricultural Census for year 2015-16, 68% farm holdings operate
on less than 1 hectare land area. Further, 85% of farm households undertake farming
on less than 2 hectares. This size of land holding does not generate adequate income
with the usual agricultural practices and products. Thus, two options are left to raise
income of such farm holdings. One, enable these farmers to go for high value crops
and livestock activities, where they can make optimum use of their family work force.
And, two, supplement agriculture income with income from non-agriculture sources
like wages and salaries, some kind of business and trade. Small holders also face the
problem of scale economy in input as well as output markets that require different
type of institutional help.
2.8 Nutrition, Food Safety and Health
India’s nutrition indicators and child health indicators are low. According to the
Food and Agriculture Organisation (FAO) of the United Nations, the largest number 11Agricultural Challenges and Policies for the 21
st
Century
of people who are hungry or undernourished live in India. According to the Global
Hunger Index, an annual publication of two non-government organisations (NGOs),
namely, the Concern Worldwide and Welthungerhilfe, India ranks low year after year
on the hunger indices, even though the country has become the largest rice exporting
country with about 15% of its rice production sold in overseas market. Since 1970-71,
food production in the country has increased at trend rate close to 3%, while popula-
tion growth in the same period was 1.86%. Further, growth rate in food production has
remained in tact in the recent years, whereas population growth rate has decelerated.
Clearly, per capita production of food has witnessed exponential growth. India is also
having an excess stock of rice and wheat for many years in a row. Recently, a huge
surplus of sugar has also accumulated. According to some observers, India represents
a paradoxical situation of ‘hunger in the midst of plenty’.
Indian diets are undergoing diversification in a significant manner. Per capita
absorption of cereals has witnessed the smallest increase, despite an increase in their
Table 4: Food Supply Per Capita Kg/Year
Commodity India China
TE 1982 TE 2013 TE 2018 TE 1982 TE 2013 TE 2018
Cereals 144.7 148.7 182.0 160.0 150.4 192.7
Pulses 12.0 14.1 15.1 4.6 1.4 1.4
Edible oil 5.1 8.7 9.5 3.4 7.7 8.2
Sugar 19.3 22.9 22.8 5.7 7.1 8.0
Milk 40.6 84.7 101.6 3.2 32.6 22.8
Eggs 0.7 2.5 3.1 2.7 18.6 19.8
Meat & Fish 6.2 8.5 10.8 6.9 43.6 99.8
Onion 3.1 12.6 13.8 3.2 13.8 14.6
Potato 9.1 23.9 25.5 9.7 41.0 41.7
Tomato 2.1 12.8 13.5 5.0 29.7 34.8
All vegetables 57.4 108.6 87.7 65.6 382.2 360.2
Citrus 2.2 6.1 8.0 1.2 21.3 24.14
Fruits 23.1 47.2 59.2 6.6 69.0 97.6
Notes: 1. Food supply represent the quantity used for food purpose, directly or indirectly.
2. There are large difference between availability reported in official statistics of India
and FAOSTAT due to variation in concept and methodology used by the two sources.
3. FAO has further refined its methodology for estimating food availability after
2015. Therefore, Triennium Ending (TE) 2018 figures are not comparable with
the previous figures, but these are comparable across countries.
Source: Food and Agriculture Organisation (FAO), Food Balance Sheet, FAOSTAT. Available at
https://www.fao.org/faostat/en/ 12 Ramesh Chand
availability and heavy subsidy. This is consistent with dietary diversification seen in
other countries where per capita income has also risen (Table 4). There is a manifold
increase in per capita net availability of vegetables, and doubling of fruits and milk
available for domestic food use. Per capita availability of domestic edible oils increased
by 60% in the three decades since the early 1980s. Similar changes are seen in the food
balance sheet of China. However, there is a big difference in the growth and the level of
per capita supply of horticultural and livestock products between these two countries.
During the early 1980s, per capita supply of eggs and meat products in India was
close to China. In the next three decades, supply of these items in China became five
times that of India. Along with higher level of eggs and meat products, the Chinese
use three times the vegetables and 80% more fruits than those by Indians. The data
on food supply shows that though there is large shift towards horticultural and live-
stock products use in India, the increase is smaller compared to China, where nutri-
tion and child and maternity health have improved considerably.
2.9 Mismatch between Structural Changes in Output and Workforce
As an economy develops, the share of agriculture in national gross value added
(GVA), a measure of national income, and employment would experience a decline.
Higher the growth of the economy, faster is the transformation in the structure of
economy. In India, between 1950-51 and 1970-71, the share of agriculture in national
income at 2011-12 prices declined from 61.7% to 49.6%, whereas the sector’s share in
employment remained stuck at more than 69% (Table 5). In the next two decades, the
sector’s share in employment declined to 59% and income to 35.1%. After 1990-91,
Table 5: Share of Agriculture including Allied Activities in Workforce and National
Income Since 1950-51 (in %)
Year Share in Share in National Income
Workforce At Constant Prices At Current Prices
1950-51 69.2 61.7 53.2
1970-71 69.7 49.6 43.1
1990-91 59.0 35.1 29.8
2010-11 54.6 18.3 18.4
2019-20 45.6 14.8 18.4
Source: 1. Share in Workforce - Population Census except for year 2019-20 which was taken
from National Statistics Office (2021a).
2. Share in National Income – same as Figure 1. 13Agricultural Challenges and Policies for the 21
st
Century
growth rate of economy accelerated which also resulted in faster decline in the share of
agriculture. However, the decline in the share of agriculture in work force did not keep
pace with the decline in the sector’s share in national income. In 2010-11, agriculture
had a share of 18.3% and 54.6%, respectively, in national income and employment.
The latest data estimated by Periodic Labour Force Survey for 2019-20 shows
that agriculture sector as a whole (that is, including fishery and forestry) provide em-
ployment as the principal occupation to 45.6 % of the total work force in the country
(National Statistical Office 2021a). In the same year, agriculture share in GVA at
current prices was 18.4%. Thus, there is a need to pull workforce out of agriculture
to enhance the per worker income in the sector. However, it is increasingly getting
difficult to get adequate alternate jobs, especially in industry, for shifting the work-
force out of agriculture. This calls for a new strategy for employment.
2.10 Low Income of Farmers
Disproportionate share of agriculture in national income and employment im-
plies disparity in per worker income in agriculture and non-agriculture sector. At the
macro level, income per worker in non-agriculture is 3.75 times the income of an aver-
age agriculture worker which includes agricultural labourers and cultivators. Lately,
the Prime Minister has repeatedly called for focusing attention on raising farmers’
income. However, the small and shrinking land size, excess workforce, low produc-
tivity and poorly working markets are the main causes for low per farmer income in
the country. Besides focusing on raising income from farming, there is a pressing
need for enhancing avenues for agricultural households to earn income from non-
farm sources.
3. Policies for 21
st
Century
The present government has set a vision for a new India that involves ‘Sabka
Saath Sabka Vikas’. Transformation of the agriculture sector is crucial for achieving
this vision, as 45% of the workforce in the country is employed and dependent on
agriculture for their livelihood (National Statistical Office 2021a). There is a large
gap between income of agriculture workers and non-agriculture workers (Chand et
al 2015; Chand 2019). Poverty and undernutrition in the country are concentrated
among agricultural labour and small and marginal farmers. There is a lot of concern 14 Ramesh Chand
relating to rural distress. If current trends in agriculture are not changed, there will
be little improvement in reducing the income gap between agriculture and non-agri-
culture income, and alleviating rural distress.
It has been empirically demonstrated that agriculture growth is significantly ben-
eficial for reducing poverty and increasing per capita incomes (Virmani 2008). Beside
inclusive growth, agriculture matters for health and nutrition, sustainability, climate
change and quality of life. All these factors underscore the need for a new vision for
agriculture, as we move forward in the 21
st
century – a vision that addresses various
challenges presented in Section I above. This section discusses and suggests policy
changes and reforms needed for transformation of agriculture to help achieving the
aspiration of India of the 21
st
century. The discussion is organised under following
themes:
1. Growth and efficiency
2. R&D and innovations
3. Employment generation for decent jobs
4. Food security, nutrition and health
5. Surplus management
6. Input intensive to knowledge intensive agriculture
7. Climate change and sustainability
8. Responsible investments in agriculture
9. Farmers’ income
10. Reforms in policies and regulations affecting agriculture
3.1 Growth and Efficiency
Since 1970-71, agricultural output and value added have moved on a growth
trajectory of around 3.0% for most of the period. Recent years have seen an accelera-
tion in the growth rate. It may appear strange that high growth rate in agriculture
experienced during some phases did not bring down real prices of food in the country. 15Agricultural Challenges and Policies for the 21
st
Century
The reason has been that the prices drove output growth rather than output growth
determining prices! Some studies on this aspect also show that during the period of
high agriculture growth (above 4%), much of the growth was driven by an increase in
agricultural prices (Chand 2014; Chand and Parapurathu 2012; Chand et al 2015). The
strong association between agricultural prices and growth suggests that if agricul-
tural prices do not rise faster than other prices, the growth rate of agriculture is likely
to fall, which then becomes a major cause for agrarian distress, and thus, the economy
as a whole. Formidable and foremost policy challenges to achieve efficient growth are:
(i) how to sustain agriculture growth without letting food price inflation rise
beyond acceptable limits?
(ii) how to incentivise farmers to raise production without causing hardship to
consumers?
The answer seems to be change in our goal and strategy from ‘growth to efficient
growth’. This requires upgradation of agricultural technology, application of modern
skills in farm practices, new innovation in farming, and lowering wastages in use
of fertilizer, water and other inputs. This will also require change in input pricing
policy to discourage prolific and indiscriminate use of inputs like water and fertiliser,
and promote their optimum use. Digital technology can also play a significant role
in improving efficiency through easy dissemination of technology and knowledge to
farmers.
Supply of low quality and spurious inputs is an important factor for increased
cost without adequate gain in productivity. Thus, beside emphasising use of modern
inputs, there is a need to put in place an effective mechanism for monitoring and regu-
lating quality of inputs like seeds, fertilisers and agro-chemicals.
Rising cost of production associated with modern technology is moving the atten-
tion towards alternative methods of farming. Methods that are rooted in traditional
Indian methods of farming, like natural farming and organic farming, are proposed
in place of chemical-based farming with the aim to reduce cost of production, beside
addressing adverse effects of chemicals on health, environment and natural resources.
Lots of anecdotal evidence is quoted in support of benefits of alternative system of
farming. However, the scientific community in public research institutes cast doubts 16 Ramesh Chand
on the claim of benefits of traditional system of farming and raise the issue of sig-
nificant yield discount in such methods, which could be detrimental to the food and
nutrition security of the country in the coming years (NAAS 2019). They feel, a break-
through in biotechnology and scientific practices like integrated pest management
(IPM) and integrated plant nutrient (IPN) systems, modern method of fertiliser ap-
plication and irrigation can address the various concerns related to farming, based on
the use of agro-chemicals rather than taking the risk of shift towards natural farming.
Notwithstanding this debate, public opinion is growing in favour of safe, healthy and
environmentally sustainable food production. It is high time that public research
system looks in-depth into various aspects of alternative methods of farming and de-
velop best methods to meet public preferences and national goals of raising farmers’
income by lowering costs, and supply of safe and healthy food.
3.2 R&D and Innovation
Efficiency is driven by strong and vibrant R&D by public or private sector. Public
sector R&D in the country is suffering from resource constraint, disciplinary frag-
mentations, and lack of drive and inspiration. At the same time, fascinating innova-
tion and changes in agriculture are being seen in developed world institutions and in
private sector. Private sector investment in agri R&D in India is also low due to the
nature of Intellectual Property Right (IPR) regime in the country. Consequently, the
gap between domestic and global agricultural innovations is rising, and many fasci-
nating changes experienced in global agriculture are missing in the country. In the
absence of domestic R&D attaining global standard, agriculture is losing its competi-
tive edge. There is a need to facilitate easy access to our farmers to global technology,
high quality seeds and germplasm, and other knowledge products.
Application of biotechnology in agriculture through genetic breakthrough and
genetic enhancement is playing an important role in shaping the future of agriculture.
Agri biotechnology in India has occupied a backseat after the restrictions imposed
on field testing and non-release of Bt brinjal. The countries which have embraced
genetically modified and genetically edited technology are gaining advantage in
terms of productivity and cost. A comparison of the trends in productivity of soy-
bean and maize in India and in those countries which have adopted biotech crops
presents a stark example of competitive advantage gained by the latter through agri
biotechnology (Figures 3a & 3b). India will face very tough competition from biotech 17Agricultural Challenges and Policies for the 21
st
Century
crops, which are leading to higher yield and lower average cost, if the country does not
upgrade technology in such crops.
Basic and strategic research in any discipline lays the foundation for breakthroughs.
This component has weakened considerably in NARS. The concentration of NARS
Figure 3a: Soyabean Yield/Hectare in India, USA, Argentina and World
Source: Food and Agriculture Organisation, FAOSTAT. Available at https://www.fao.org/faostat/en/
0
500
1000
1500
2000
2500
3000
3500
4000
1 9 9 0 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7
1 9 9 8
1 9 9 9
2 0 0 0
2 0 0 1
2 0 0 2 2 0 0 3 2 0 0 4
2 0 0 5
2 0 0 6 2 0 0 7
2 0 0 8
2 0 0 9 2 0 1 0
2 0 1 1
2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7
YIELD (KG/HA)
Year
Argentina India
USAWorld
Figure 3b: Maize Yield/Hectare in India, USA, Argentina and World
Source: Same as Figure 3a.
0
2000
4000
6000
8000
10000
12000
1 9 9 0 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7
1 9 9 8
1 9 9 9
2 0 0 0
2 0 0 1
2 0 0 2
2 0 0 3
2 0 0 4
2 0 0 5
2 0 0 6
2 0 0 7
2 0 0 8
2 0 0 9
2 0 1 0
2 0 1 1
2 0 1 2
2 0 1 3
2 0 1 4
2 0 1 5
2 0 1 6
2 0 1 7
Yield (KG/HA)
Year
Argentina India
USA World 18 Ramesh Chand
over a period of time has shifted to applied research and problem-solving research.
This is giving incremental gains but not breakthroughs. Thus, to have breakthrough in
agricultural R&D and technology and to have science driven growth, we need to create
a new set of research institutions in agriculture on the pattern of Indian Institute of
Technology, Indian Institute of Management and Indian Institute of Science.
The most important concern voiced by ICAR and SAUs is inadequate funding for
research. On the other hand, state after state have been setting up new universities
generally by fragmenting the existing structure to have separate universities for
Animal Sciences, Horticulture, Fishery, etc. Similarly, ICAR is also setting up some
new institutes to address new areas. Lack of adequate budgetary support and expan-
sion of institutions are damaging the inter disciplinary nature of agricultural research,
creating turf conflicts, hampering research and lowering the morale of scientists.
We must put a stop to the growth of new institutes under NARS, particularly those
which result in fragmentation of agriculture and allied disciplines. There is a need to
improve quality of institutions rather than just raising their number.
3.3 Employment Generation for Decent Jobs
Traditional theories of economic transformation clearly established that the share
of agriculture in national income and total employment declines with the economic
development. This has been experienced by the most of the countries even in the
recent times (Table 6). This transition has been slow in the case of India, particularly
in respect of the share of agriculture in the total workforce. Between 1991 and 2019,
the share of agriculture in workforce declined by less than a half in Brazil, China, and
Malaysia. Labour share of agriculture in Vietnam declined by nearly 30 percentage
points. As per the World Bank data, the decline has been much smaller in the case of
Table 6: Agriculture Sector’s Share in National Income and Employment in Selected
Developing Countries, 1991 and 2019
Share in National Income (in %) Share in Employment (in %)
Country 1991 2019 1991 2019
Brazil 6.8 4.4 22.4 9.1
China 24.0 7.1 59.7 25.3
India 27.3 16.7 63.0 42.3
Malaysia 14.4 7.3 22.0 10.3
Vietnam 40.5 14.0 68.6 37.2
Source: World Bank, World Development Indicators. Accessed from www.worldbank.org 19Agricultural Challenges and Policies for the 21
st
Century
India. This has created serious structural imbalances between sectoral composition
of output and employment (Table 6). The primary reason for this is the failure of the
industrial sector to attract and accommodate labour force from agriculture.
Recent developments in technology like automation, artificial intelligence (AI),
big data, internet of things (IOT) and machine learning are further restricting the
capacity of non-agriculture sector to absorb the workforce from agriculture. This has
put renewed focus on agriculture to create gainful employment in postharvest value
addition activities.
Empirical evidence from successive surveys on employment and labour use since
2004-05 reveals significant changes in rural and agricultural workforce (Table 7),
which have important implications for agriculture and the economy. There is large
scale withdrawal by female labour from agriculture (cultivators as well as labourers) in
contrast to the popular perception of feminisation of agriculture. Moreover, the with-
drawal from agriculture by cultivators has sharply decelerated after 2011-12, while
shift of agricultural labour from the sector has accelerated. This necessitates support
for mechanisation on smallholder farms. The concerns about the threat to agriculture
due to youth not staying in agriculture is belied by NSO’s Periodic Labour-Force
Surveys (National Statistical Office 2021a).
An important reason for the slow shift of farm youths to non-agriculture sec-
tor is their strong preference for middle income jobs. But, in many cases, required
Table 7: Changes in Cultivators and Agricultural Labour in Rural India
(Million)
Year Cultivators Agricultural Labour Agricultural Workforce
Male Female Total Male Female Total Male Female Total
1993-94 85 53 138 54 37 91 139 90 229
2004-05 93 67 160 53 37 89 146 103 249
2011-12 91 49 140 48 27 75 139 76 215
2017-18 102 37 138 30 20 50 131 56 188
2018-19 100 41 140 29 19 49 129 60 188
2019-20 108 58 165 33 24 57 141 81 222
Source: Author’s calculation based on data derived from:
1. NSSO Survey on Employment and Unemployment 1993-94, 2004-05 and 2011-12.
2. NSO Periodic Labour Force Survey, 2017-18.
3. Population Census of India and projected population. 20 Ramesh Chand
skill and capability for such jobs is missing. Medium, small and micro enterprises
(MSME), which are labour intensive, seem to be an appropriate alternative for rural
employment generation. Linking agri-food processing to production through efficient
value chains, contract farming and direct linkage between factory and farm offer a
considerable scope for rural employment generation as well as for raising farmers’
income.
In the wake of capital intensive production preferred by the manufacturing sector
and anticipated threats to jobs posed by emerging technological innovations, there is a
need for a rethink on pursuing traditional development strategy of shifting workforce
from agriculture to manufacturing and services. India should explore possibilities of
creating blue collar jobs in and around agriculture. This also looks desirable, as there
is a serious shortage of skilled workers in agriculture (Bajar and Mushtaq 2019).
The reasons for workers preferring to move from agriculture to non-agriculture are
relatively low wages in agriculture, stress of manual work and irregular employment.
These three problems can be addressed by innovative approaches in agriculture produc-
tion and postharvest activities. These can be harnessed by developing and promoting
new farm models centred on the knowledge- and skill-based agriculture and the post-
harvest value addition at the farm itself (Chand et al 2017). Pradhan Mantri Kaushal
Vikas Yojana (PMKVY) can play a major role in this by promoting and imparting skills
required in modern agriculture, value addition and primary processing.
3.4 Food Security, Nutrition and Health
Per capita food production in India has risen steadily over the last decades, from
little more than 1 kg per person per day in the early 1980s to 1.73 kg in recent years.
However, some health and nutrition indicators are awfully poor. According to Fifth
National Family Health Survey 2021, two-third of the children below the age of 5 years,
and 57% of women are found to be anaemic. Similarly, the proportion of underweight
and stunted children, and child mortality are higher in India compared to many other
south Asian countries. What is more worrying is that some of these health indicators
have shown a deterioration between 2015-16 and 2019-20 (Table 8). Concerned with
the situation, the Government of India has launched several measures to improve
health and nutrition especially of children and women. Increasing nutrition density
through biofortification of food can play an important role in this. 21Agricultural Challenges and Policies for the 21
st
Century
Low intake of the total food is the main reason for the widespread hunger and
malnutrition. The country would need to relook at policy interventions in agriculture
that are heavily biased towards rice, wheat and sugar, which are produced in excess of
domestic and export demand.
Some studies show that even among economically well-off households, incidence
of undernutrition and underweight children is quite common (Chand and Jumarani
2013). Addressing all these concerns requires a close coordination between the
strategy for food production and health. Further, nutrition awareness is very important
to improve nutrition and health, as rising preference towards spicy, oily and sugary
foods is the major cause for poor nutrition rather than non-availability of nutritive
food. Attributing poor nutrition entirely to low paying capacity is not correct.
Beside food intake, health and absorption of nutrients by body are also affected by
use of clean water, sanitation and hygiene, and balanced and diversified diet. Creating
awareness about nutrition is crucial for improving health outcomes.
Food safety is emerging as a major concern, as there are overwhelming reports
of excessive and unsafe use of chemicals and hormones in crops, livestock and fish
food, and presence of chemical residue in food. This requires strict regulation and
its enforcement in both at the production stage and in postharvest stages. Awareness
should be created amongst producers, middlemen in the value chain and processors
about safe agro chemicals and methods of their usage in the entire food system and
food chain.
New interest has emerged in therapeutic values of food and its proper usages for
maintaining immunity against various ailments and diseases and for good health. As
Table 8: Child and Women Health Indicators at All-India Level: 2015-16 and 2019-20
Particular 2015-16 2019-20
All women aged 15-49 years who are anaemic (%) 53.1 57.0
Children aged < 5 anaemic % 58.6 67.1
Under-five mortality rate (U5MR) 49.7 41.9
Children under 5 years who are stunted % 38.4 35.5
Children under 5 years who are underweight % 21.0 19.3
Children under 5 years who are wasted % 35.8 32.1
FAO: Prevalence of undernourishment (percent) 14.7 15.3
Source: National Family Health Survey -5 and 4, Indian Institute of Population Sciences, Mumbai. 22 Ramesh Chand
a result, demand for medicinal plants and varieties with specific attributes is on the
rise. Some startups are linking consumers and producers for supply of such products.
Supply of such products on a large scale will require value chain with traceability and
labelling.
3.5 Surplus Management
As discussed above, domestic absorption of food has grown at a lower rate than
domestic production. In the early 1980s, India produced and consumed a little more
than 1 kg food per person per day. The production has gradually increased to 1.73 kg in
recent years, whereas domestic absorption increased to 1.59 kg (Figure 4). This shows
that food surplus (domestic production less domestic absorption) has been continu-
ously increasing for the last 35 years. This requires a complete shift in food policy
from shortage management to surplus management. This also indicates that much of
the under nutrition in India is not due to non-availability of food, but it is due to low
food intake. India has to look for overseas market to dispose the surplus food produce.
Agriculture production in the country is growing at a trend rate of above 3% per
year. Domestic demand is projected to rise by about 2.3%. Therefore, the surplus
Figure 4: Per Capita Food Production and Domestic Absorption,
1980-83 to 2016-17
Source: Author’s calculation based on data derived from Department of Economics and Statistics, Agricultural
Statistics At A Glance, Ministry of Agriculture and Farmers Welfare, Government of India, New Delhi,
Various Issues.
1.05
1.18
1.25
1.60
1.73
1.04
1.14
1.19
1.49
1.59
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1.70
1.80
1980 to 83 1990 to 93 2000 to 03 2010 to 13 2016-17
Per Capita food production and demand
Year
Food production/person/day Kg Demand 23Agricultural Challenges and Policies for the 21
st
Century
available for export will further grow in the coming years, and India will be required
to sell a higher proportion of domestic production in overseas market. With the same
trend in growth of food output, India will need to add 20% - 25% of incremental out-
put to current level of food export. This requires export competitiveness and action in
three following areas:
• prices in primary markets should be sufficiently lower than international
prices.
• price spread in various stages of marketing should be reduced.
• producers should be integrated with global value chains.
At present, the MSP of some commodities recommended by the government are
higher than the international prices. In such a situation, if MSP is implemented through
the system of procurement, it will keep domestic prices higher than international
prices, making exports impossible. Experience of many countries, also of late China,
shows that paying higher than open market prices to farmers through procurement
cannot be sustained. Fixing prices higher than open market price attract imports
even for exportable and commodities that are surplus. More focus on supply than on
demand is justified as long as demand is ahead of supply. Once demand falls short of
supply, the guiding principle for price intervention should be open market price or
demand side factor.
Rising surplus and export dependence for its disposal underline a strong need
to let market forces to determine prices of produce. Keeping prices artificially above
the level dictated by demand and supply and thrusting them on the market through
government intervention causes serious price distortions, which have a number of
implications. On the other hand, MSPs are considered important to ensure remu-
nerative prices for the farmers. The best option to deal with such situations is to pay
to farmers the difference between reasonable MSP and average market price at the
state level, as is the practice in many countries, rather than distorting market prices
through procurement (Chand 2019).
3.6 Input Intensive to Knowledge Intensive Agriculture
Indian agriculture is missing the state-of-the-art technology and modern method of
farming. Advanced countries are moving towards precision farming using sensors and
other scientific tools for exact practices and application of inputs. It saves costs, reduces 24 Ramesh Chand
environmental effect and yields more and better-quality produce. We still continue to
use flood method of irrigation, broadcasting fertilisers and indiscriminately spraying
chemicals, whereas advanced countries are shifting towards the use of sensor-based
application of inputs based on actual requirement of plants. Application of advanced
science at the farm level requires skill, knowledge, investment and improvement in
human capital in farming. Upgrading farming from low-tech to high-tech (green house
cultivation, poly houses, tissue culture and precision farming) will reduce average cost,
raise farmers’ income and address some scale disabilities.
Recent years have seen a lot of interest among agri tech firms and several startups
have come in agriculture. They are infusing new innovations in a range of areas like
digital extension and solutions, arranging finance, agromet advisory, best practices,
better crop management, disease and pest control, reading market pulses, price
prediction, fetching better price for output, and so on. So far, their impact is restricted
to some pockets; but it shows great promise, and is expanding.
3.7 Climate Change and Sustainability
Greenhouse gases (GHG) emitted from agricultural activities are generally not
visible. The emission results from application of organic and inorganic inputs to the
soil, decomposition of biomass and dead plant residues, plant respiration, livestock
rearing, enteric fermentation in ruminants, manure handling and burning of crop
residues. Agriculture is responsible for about 17% of GHG emission in India, which is
almost same as its share in the country’s GVA. This share will increase significantly
if burning of crop residue, which is now spreading to all states, is taken into account.
Similarly, bulk of water used in the country is used in agriculture, and more than
40% of the land area is put under agriculture. Thus, agriculture is quite significant for
quality of air, water and land, and pressure on land and water, which are the pillars
of sustainability.
In order to put a check on further overexploitation of water resources, the country
should create a policy environment that leads to crop pattern and practices consistent
with the natural resource endowment in various agro ecological zones of the country.
Further, without improving efficiency in water use in agriculture, through modern
method of irrigation (drip, sprinkler and sensors), the country cannot address the
stress on water use and meet the future water requirement. 25Agricultural Challenges and Policies for the 21
st
Century
3.8 Responsible Investment in Agriculture
Investment and subsidies are two important instruments for promoting growth in
agriculture. Subsidies are needed in the initial phases of many economic activities to
push adoption of new inputs, practices and technology. All major agriculture countries
subsidise agriculture to a varying extent. The broad guiding principle for subsidy in
today’s context are:
(i) should promote growth and efficiency.
(ii) should avoid distorting input – output markets,
(iii) should not encourage uneconomic production,
(iv) should not damage capacity of natural resource system and sustainability,
(v) should not create serious inequity among social and economic classes and
regions, and
(vi) should not cause adverse effect on investments.
The biggest concern relating to subsidy is that they get entrenched and hurt fiscal
discipline of the centre or the states.
The trend in subsidies and public investment in agriculture sector during the
previous two decades is presented in Table 9. The subsidy presented in Table 9 does
not include subsidy provided by the states and union territories (UTs) on power supply
to agriculture, which is as high as all other subsidies for agriculture. It also does not
include support to farmers under PM Kisan Nidhi amounting to Rs. 65,000 crore
(revised estimate), and most of the output price support and export subsidies. When
all these are reckoned, the support to agriculture sector turns out to be much higher
than the subsidy figure presented in Table 9. Even when major support to agricul-
ture is not included in the subsidy data reported by National Accounts Statistics, the
reported level of subsidy is still 2.27 times the amount spent on infrastructure devel-
opment in agriculture – that is so important for future growth of the sector. Public
investment to GDP ratio in agriculture is as low as 2.2. Total investment in agriculture
by all sources was 13.3% in year 2019-20.
Sector-wise shares in the total investment in agriculture show that 82% of it
comes from households (that is, farmers themselves), 17.49% from public sector and 26 Ramesh Chand
the remaining (0.54%) from private corporate sector (Table 10). During 2019-20, the
corporate investment in agriculture sector accounted for a meagre percentage (0.11%)
of the total investment in the economy.
Regulatory restrictions on marketing and absence of business-friendly environ-
ment in agriculture act as a deterrent for corporate investment in agriculture produc-
tion and marketing. This is said to be an important reason for the slow change in agri-
culture, dominance of traditional marketing channels and the weak linkage between
pre and postharvest agriculture phases.
A major chunk of the public investment in agriculture is spent on medium and
major irrigation projects. However, these investments did not translate into creation
Table 9: Public Investments and Subsidies in Agriculture and Allied Sector
(At 2011-12 Prices)
Year Amount in Rs. Crore As % of GVA in Agriculture and
Allied Sectors at Current Price
Subsidy Public Investment Subsidy Public Investment
2000-01 67027 16200 7.0 1.7
2001-02 76838 19827 7.7 2.0
2002-03 83850 17656 9.0 1.9
2003-04 81121 21619 8.0 2.2
2004-05 85776 27497 8.6 2.8
2005-06 84638 33162 8.0 3.2
2006-07 90805 38917 8.3 3.5
2007-08 122115 39278 10.4 3.3
2008-09 202340 34519 16.9 2.8
2009-10 156417 38582 12.3 3.0
2010-11 158337 33398 11.2 2.4
2011-12 100505 35576 6.7 2.4
2012-13 99928 35905 6.4 2.4
2013-14 90252 33631 5.4 2.1
2014-15 89663 36919 5.1 2.2
2015-16 90237 42287 4.9 2.5
2016-17 79179 47379 3.9 2.6
2017-18 98228 45918 4.5 2.4
2018-19 96475 52780 4.3 2.6
2019-20 122246 48971 5.0 2.2
Note: GVA refers to gross value added.
Source: National Statistical Office, National Accounts Statistics, Ministry of Statistics and
Programme Implementation, New Delhi, Various Issues. 27Agricultural Challenges and Policies for the 21
st
Century
of corresponding area under irrigation at the ground level (Figure 2). The Pradhan
Mantri Krishi Sinchayi Yojana, launched in 2015, aims at fixing the problem of poor
performance of medium and major irrigation projects and corrects the trend in area
under canal irrigation. This involves a paradigm shift in public investment in irriga-
tion to close the gap between IPC and IPU, and targets early completion of the ongoing
irrigation projects facing last mile connectivity problems. This change in approach to
public irrigation is expected to help in achieving the goal of ‘har khet ko pani’.
3.9 Farmers’ Income
Till recently, an increase in agri-food production remained primary focus of
agricultural policy and strategy. This strategy did not specifically target improvement
in farmers’ income and supply of food to consumers at competitive price, which are
important for welfare of farmers and consumers, respectively.
Accelerated growth in some sectors of the Indian economy, following economic
reforms in the early 1990s, lifted the overall growth rate of the economy from 4.2%
during the period between 1971 and 1991 to close to 7% after 1991. This helped in
doubling per capita income in the country at constant prices (2004-05) in just 17
years as compared to the 37 years it took to double per capita income before 1991.
However, the agriculture sector, which comprised over 40% of the Indian economy
and 59% of the workforce in 1991, did not experience any permanent change in its
growth trajectory. The GVA of agriculture and allied sectors doubled in about 23 years
before 1991, and it took same number of years to double again. Consequently, the
income of cultivators (farmers) has remained relatively low, and the gap with income
of non-farm workers has enlarged. A cultivator (farmer) earns less than one-third of
Table 10: Share of Various Sources in Gross Fixed Capital Formation (GFCF) in
Agriculture and Total Economy at Current Prices, 2019-20
Sector GFCF As % Percentage Share in Total GFCF of
(Rs. 000 crore) of GVA Private Public House
Corporate Sector holds
Agriculture 435 12.8 0.54 17.49 82.0
Non-Agriculture 5416 35.9 39.2 24.6 36.2
Total 5851 31.7 36.3 24.1 39.6
Note: GVA refers to gross value added.
Source: National Statistical Office (2021): National Accounts Statistics 2021, Ministry of
Statistics and Programme Implementation, New Delhi. 28 Ramesh Chand
the income of a non-farm worker (Chand 2019). This is major cause of rural distress.
Special focus is needed to raise income of farmers at a faster rate. This requires trans-
formation of agriculture production as well as marketing through a multi-pronged
strategy with due emphasis on enhancing productivity, reducing average cost, realis-
ing better price for farm produce, expanding allied activities and shifting farmers
to non-farm occupations (Chand 2017). The three farm laws, enacted in year 2020,
which have been repealed now because of opposition from some farmers groups, were
aimed to achieve this goal.
Beside agriculture, income from non-farm sources constitutes an important part
of income of farm households. According to the Situation Assessment of Agricultural
Household 2019, on an average, an agricultural household earns 47.4% income from
non-agricultural economic activities (Table 11). This share was 40% during 2012-13.
This shows that non-agriculture income sources are becoming more important.
It may be contended that agriculture households include a large number of agri-
cultural labour households, who satisfies the definition of agricultural household and
their wage earnings raise the share of non-agriculture income in the total household
Table 11: Average Monthly Income (Rs.) from Different Sources Per Agricultural Household
During July 2018-June 2019 for Each Size Class of Land Possessed (ha)
Size Class Farm Size Total Share of Various Sources in Total Income (%) @
of Land Category Income Net Receipt Wages Net receipt
Possessed (Rs.) from Crop and and from Non-farm
(ha) Livestock Salaries business
<0.01 Below Sub-marginal 11204 33.42 57.43 6.89
0.01-0.40 Sub-marginal 7522 28.44 59.70 9.35
0.40-1.00 Marginal 8571 46.88 45.57 6.65
1.01-2.00 Small 11449 62.14 31.85 5.35
2.01-4.00 Semi-medium 16435 72.91 21.59 4.61
4.01-10.00 Medium 28292 81.63 15.10 1.67
10.00+ Large 60758 90.64 6.49 1.91
All Sizes 10218 52.65 39.76 6.27
Notes: * only out-of-pocket expenses were considered for working out net receipt.
@ Shares do not sum up to 100 as income from leasing out land is excluded.
# Income from non-economic activities like pension, remittances, etc., are not included.
Source: National Statistical Office (2021b): Situation Assessment of Agricultural Households
and Land Holdings in Rural India, 2019, Ministry of Statistics and Programme
Implementation, New Delhi. 29Agricultural Challenges and Policies for the 21
st
Century
income. The Situation Assessment Survey also provides detailed estimates of source-
wise income by categories of land possessed (Table 11). The first category of below
sub-marginal households (that is, those households possessing less than 0.01 hectare
of land) may include households who are primarily labour households. The second
and third categories sum up to marginal land holding and fourth category represents
small farm size. Marginal farmers classified in the second and third sub categories
of land possessed earned only 28% - 47% income from agriculture (crop and live-
stock farming) and the remaining from salaries, wages and non-farm business. Small
farmers and semi-medium farm households earned 37.2% and 26.2% of their total
respective household income from non-agriculture sources. Furthermore, it is also
observed that not only is the share of non-agriculture sources in the total household
income substantial, but 68% of the farm households earned more income from non-
agriculture sources than from crops and livestock production (that is, agriculture).
Therefore, in order to increase income of farm households at a faster rate, both agri-
culture as well as non-agriculture sources need to be tapped.
3.10 Reforms in Policies and Regulations Affecting Agriculture
The package of economic reforms launched in the early 1990s did not cover poli-
cies and regulations in the agriculture sector except some liberalisation of trade. The
effect of these reforms is visible in the growth trend of agricultural output and non-
agricultural output. The latter witnessed acceleration, whereas the former remained
stuck at a 3% trend growth rate.
3.10.1 Reforms in Agricultural Policy and Market
Except a few states, agriculture marketing was brought under the state level APMC
Acts, also known as Agriculture Produce Market Regulation Act during the 1960s and
1970s. These regulations helped in many ways. They checked rampant malpractices in
transactions of farm produce, upgraded mandis, improved competitiveness, brought
transparency in transactions through open auction of produce, and set up mechanism
for redressal of any grievance of seller farmers.
Over time, it was felt that the system of agri marketing was not keeping pace with
the growth, and did not align with the needs of the agriculture sector and open new
opportunities for trade. Some weaknesses also crept in the prevailing APMC system
necessitating change and improvement in regulations. Some of the states started us- 30 Ramesh Chand
ing APMC mandis for revenue generation, which added to cost and price spread. Vari-
ous types of requirements in the form of licensing, registration and so on restricted
participation in mandis to local traders, and closed the door for traders and buyers
from outside the APMC. This raised the possibility of collusions, exploitation and
restrictive competition. Growth of APMC infrastructure fell far short of growth in
marketable surplus of crop output (Chand 2012). The net result has been that more
produce is transacted outside APMC mandis. Regulations also necessitated a large
number of transactions between producers and consumers. This created a gap between
the prices paid by consumers and the prices received by producers, and denied direct
purchase from farmers and direct supply by farmers to producers that has acquired
a lot of significance for high value crops and quality produce. The regulations worked
against investment in agricultural marketing, infrastructure and logistics.
Thus, since long, there was a felt need to overcome the limitations and constraints
of the present agricultural marketing system and to develop competitive, transparent
and barrier free markets with the choices to the farmers to sell their produce in the
markets and to the buyers offering a better price to them in a transparent manner.
Around the year 2000, a debate started to bring reforms in agriculture, especially
in agriculture marketing. Almost all experts and various high-level committees on
agriculture constituted from time to time held the lack or poor progress of reforms
in agriculture as a major constraint for high growth and the modernisation of
agriculture. It was concluded that policy interventions at the national and state level
did not address structural problem of the agricultural sector, which is the basic reason
for various problems faced by the sector, farmers discontent and relatively low growth
in farmers’ income. Ten important reasons for reforms in agriculture were discussed
by Chand (2020).
The Government of India formulated and circulated model APMC Acts and Model
Contract Farming Acts for their adoption by the states. A large number of attempts
were made by successive governments to persuade the states to adopt marketing
reforms and reforms related to contract farming. Some of the states adopted model
Acts partially, but by and large their adoption remained partial, diluted, patchy and
half hearted. Series of attempts were made by the government during 2017 to 2019 to
persuade the states to adopt the model Acts to bring reforms in agriculture. However,
implementation of APMC and other reforms did not register any significant progress. 31Agricultural Challenges and Policies for the 21
st
Century
When states did not come on board to reform their APMC Acts, despite repeated
pleas and persuasions by successive governments at the centre for 18 long years, the
option left with the union government was either to ignore its responsibility to secure
the future of agriculture and farmers, or use the constitutional route for pan India
reforms in agricultural policy and market. Moreover, COVID-19 threw up formidable
challenges to the economy, which could be addressed through bold and courageous
policy decisions with a potential of converting challenges into opportunity. Based on
all these developments, the union government took a historical decision to take on
itself the responsibility of bringing reforms in agriculture in 2020, and three new
farm acts were enacted after they were passed by the Parliament. These acts relate to
(i) domestic agriculture trade, (ii) contract farming, and (iii) modification in Essential
Commodities Act (1951). However, some misunderstanding and apprehensions
developed about the new farm laws amongst farmers of some of the states, and they
went on a long protest against the three new farm laws. Consequently, the three farm
laws have been repealed. Nevertheless, it is very clear that the sector cannot move
forward on a healthy trend without reforms.
3.10.2 MSP and Fair and Remunerative Prices
Some farmers groups seek more support from the government for higher and
assured price of farm produce and the continuation of present regime of support
policies having direct and indirect effect on agriculture. This implies a status quo for
power, fertiliser and water sectors. The demand for legalising MSP has gained consid-
erable traction during the recent farmers’ agitation against the new farm laws. On the
other hand, many experts contend that farmers’ aspirations from agriculture will not
be fulfilled without transformative changes in the sector. Nor can agriculture move to
the next stage of development without an enabling environment. Both of these goals
require a reimagining of agriculture. It is really a tough situation to address these
issues without suitable changes in the regulatory environment.
There are three ways to enable farmers to get fair and remunerative prices: one,
by creating an enabling environment for a fair, competitive and remunerative prices
through market mechanism, two, by public intervention to keep prices remunerative
through procurement or other means, and, three, by a combination of the above two.
The NDA government which came to power in 2014 followed the third route. It first
changed the norm for fixing MSP in 2018 to increase margin for producers to 50% 32 Ramesh Chand
or more over the average cost of crop production. Simultaneously, the government at
the centre circulated Model Acts ‘The Agricultural Produce and Livestock Marketing
(Promotion and Facilitation) Act (2017)’ and ‘The Agricultural Produce & Livestock
Contract Farming and Services (Promotion and Facilitation) Act, 2018’ for adoption
by the states. The third initiative taken by the government included two components
of public intervention: (i) expansion in procurement of pulses and oilseeds by central
agencies, and (ii) the states were given three options to keep farm prices at or above
MSP. These were covered under the scheme PMASHA which include procurement
under (i) Price Support Scheme (PSS), (ii) Price Deficiency Payment (PDP), and (iii)
Private Procurement and Stockists Scheme as a Pilot Scheme.
States were offered central assistance to procure up to 25% of the produce and to
meet up to 25% price deficiency under PDP scheme. The rationale behind the PSS was
that once 25% produce is purchased by public agencies, it will result in an increase in
open market prices to the level of MSP. This was same as the intervention in rice and
wheat until a few years back. At the same time, attempts were made by the centre to
persuade states to adopt model marketing act and Contract Farming Acts, but these
attempts were met with lukewarm response from the states. The centre then brought
comprehensive reforms in agriculture through three farm laws to create a competitive
market environment and other options like direct marketing and contract farming
for better price realisation by the farmers. But the new laws now stand repealed. The
concern now is how to ensure remunerative prices to farmers and to help them to get
higher incomes.
Some farmers’ groups demand legalising of MSP as a solution to low market
prices. Suggestions are also made to adopt mechanism like PDP, if procurement at
MSP is not feasible. Both these suggestions have far-reaching implications for the
economy, especially the fiscal health, private sector, crop pattern, diversification,
entrepreneurial skills of farmers and exports. Legal MSP cannot work if not supported
by demand and supply side factors. At best, it can work only when trade pays a lower
price to farmers as compared to a competitive market price. But if MSP itself is above
the price dictated by demand and supply, then even competitive markets will not
support MSP. Thus, legal MSP can work if it is based on what would be open market
price or market clearance price. If MSP is anchored to a fixated formula of cost plus,
which happens to be above the price supported by demand, then the private players 33Agricultural Challenges and Policies for the 21
st
Century
will not have any incentive to buy the produce. Price data shows that after adoption
of the new formula for MSP in 2018, MSP remained higher than open market prices
and international prices of most of the crops. In such a situation, neither will the
private sector buy the produce, nor can the produce be exported without subsidising
it. Thus, if we want to protect the farmers against unremunerative or uncompetitive
prices through legal MSP, we should be guided by the price recommended by institu-
tions like CACP considering the demand side factors and possible open market price.
Making MSP legal by itself will not ensure market prices moving to MSP.
When private sector does not buy at legal MSP, all that is offered for sale will not be
purchased and market clearance will not happen leading to a chaotic situation. Thus,
the government will be called to buy the produce. This amounts to taking over agricul-
ture trade by government, and has its own serious implications. Nowhere in the world,
not even in the socialist countries, this kind of mechanism is working. It should also
be kept in mind that non-MSP crops and products like fruits, vegetables, milk, egg and
fish are showing a much higher growth rate than MSP crops in the country. A demand
driven production can be much more remunerative for farmers than production fixated
to MSP.
Another suggestion to ensure legal MSP for farmers without distorting prices is to
pay the difference between legal MSP and market price received by farmers. A mecha-
nism similar to this is followed in United States of America (USA) and China to pay the
farmers the difference between target or guaranteed price and actual market price.
The question is when USA and China are doing it, why India cannot do it? To under-
stand this, the system prevailing in USA and China need to be understood clearly.
China has faced same situation which India is now facing in the case of surplus of rice
and sugar, and changed policy support mechanism for agriculture from procurement
and stocking to payment of price difference on a selective basis.
Agricultural economists and experts need to debate the following issues to bring
clarity to future policy for transformation of agriculture, price assurance and better
farm incomes:
1. What is the best way to support farmers in raising their income?
2. What are the learnings for India from the experience of other countries that
provide price support to their farmers? 34 Ramesh Chand
3. What are the implications of legalising MSP? What are other options to ensure
remunerative prices to farmers?
4. What should be the norm for MSP if it has to serve as a price guarantee?
5. Should the responsibility for price assurance rest entirely with the centre?
Should it be shared between the centre and the states? The China model can
be useful in this case.
6. Should India move from price support and input subsidies to income support
for farmers?
A scholarly and widespread debate is required on the above issues to steer clear
the policy roadmap for reimagining agriculture and its role in the future development
of the country.
4. Conclusion
A significant and sustained increase in farmers’ income and the transformation of
agriculture require a paradigm shift in the entire approach towards agriculture sector.
Changes in archaic regulations and liberalisation of the sector are a must for creating
an enabling environment for a modern and vibrant agriculture. Advancement in
science led technology, an enhanced role of private sector in both pre and postharvest
phases, liberalised output market, active land lease market and emphasis on efficiency
will equip agriculture to address the challenges of 21
st
century and contribute towards
the goal of a new India. A well-coordinated action and strategy between the centre
and the states is needed to ensure that agriculture marches to the next stage of
development along with the other sectors.
References
Bajar, S and U Mushtaq (2019): “The processes of Transformation”, in Inequality and
the Demand for Non-Farm Jobs, NIAS Report: NIAS/SSc/IHD/U/RR/15/2019,
National Institute of Advance Studies, Bengaluru, pp. 23-41.
Centra Ground Water Board (2021): Dynamic Groundwater Resources of India 2020,
Ministry of Jal Shakti, Government of India, New Delhi. 35Agricultural Challenges and Policies for the 21
st
Century
Chand, R (2012): “Development Policies and Agricultural Markets”, Economic &
Political Weekly, Vol. 47, No. 52, pp. 53-63.
Chand, R (2014): From Slowdown to Fast Track: Indian Agriculture since 1995,
Working Paper 1/2014, National Centre for Agricultural Economics and Policy
Research, New Delhi.
Chand, R (2017): Doubling Farmers’ Income: Rationale, Strategy, Prospects and Ac-
tion Plan, NITI Policy Paper No.1/2017, National Institution for Transforming
India, New Delhi.
Chand, R (2019): “Innovative Policy Interventions for Transformation of Agriculture
Sector”, Agricultural Economics Research Review, Vol. 32, No. 1, pp. 1-10.
Chand, R (2020): New Farm Acts: Understanding the Implications, NITI Working
Paper Series 1/2000, National Institution for Transforming India, New Delhi.
Chand, R and J Jumrani (2013): “Food Security and Undernourishment in India:
Assessment of Alternative Norms and the Income Effect”, Indian Journal of
Agriculture Economics, Vol. 68, No. 1, pp. 39-53.
Chand, R and S Parappurathu (2012): “Temporal and Spatial Variations in Agricultural
Growth and Its Determinants”, Economic & Political Weekly, June 30, Vol. 47,
No. 26 & 27, pp. 55-64.
Chand, R and S Pavithra (2015): “Fertiliser Use and Imbalance in India Analysis of
States”, Economic & Political Weekly, October 31, Vol. 50, No. 44, pp. 98-104.
Chand, R, R Saxena and S Rana (2015): “Estimates and Analysis of Farm Income in
India, 1983-84 to 2011-12”, Economic & Political Weekly, May 30, Vol. 50, No.
22, pp. 139-145.
Chand, R, S K Srivastava and J Singh (2017): “Changes in Rural Economy of India,
1971 to 2012: Lessons for Job-led Growth”, Economic & Political Weekly,
December 30, Vol. 53, No. 52, pp. 64-71.
Directorate of Economics and Statistics, Land Use Statistics, Ministry of Agriculture
and Farmers Welfare, Government of India, New Delhi, Various Issues. 36 Ramesh Chand
Directorate of Economics and Statistics, Agricultural Statistics At A Glance, Ministry
of Agriculture and Farmers Welfare, Government of India, New Delhi, Various
Issues.
National Academy of Agricultural Sciences (2019): Zero Budget Natural Farming – A
Myth or Reality? Policy Paper 90, National Academy of Agricultural Sciences,
New Delhi.
National Statistical Office: National Accounts Statistics, Ministry of Statistics and
Programme Implementation, New Delhi, Various Issues.
National Statistical Office (2021a): Periodic Labour Force Survey: July 2019-June
2020, Annual Report, Ministry of Statistics and Programme Implementation,
New Delhi.
National Statistical Office (2021b): Situation Assessment of Agricultural House-
holds and Land Holdings in Rural India, 2019, Ministry of Statistics and
Programme Implementation, New Delhi.
Singh, H and R Chand (2011): “The Seeds Bill, 2011: Some Reflections”, Economic &
Political Weekly, December 17, Vol. 46, No. 51, pp. 22-25.
Virmani, A (2008): “Growth and Poverty: Policy Implications for Lagging States”,
Economic & Political Weekly, January 12, Vol. 43, No. 2, pp. 54-62. About The Author
Professor Ramesh Chand is currently Member of the
National Institution for Transforming India (NITI) Aayog
(in the rank and status of union minister of state). He has
a PhD in agricultural economics from Indian Agricultural
Research Institute, New Delhi. He is fellow, National
Academy of Agricultural Sciences and Indian Society of
Agricultural Economics. He has been involved in policy
formulation for the agriculture sector for the last two and a
half decades. Prior to joining NITI Aayog, he was Director, National Institute of
Agricultural Economics and Policy Research, New Delhi.
Prof. Chand is also Member of Board of Trustees of International Maize and Wheat
Improvement Center, Mexico, and of The Policy Advisory Council of the Australian
Centre for International Agricultural Research, Canberra, Australia. He was also
Member of the Fifteenth Finance Commission of India, Government of India.
Prof. Chand has worked in senior academic positions as ICAR National
Professor, Professor and Head, Institute of Economic Growth, Delhi University,
and Professor at Punjab Agricultural University, Ludhiana. Prof. Chand has
been Visiting Professor at the University of Wollongong, Australia and at the
Institute of Developing Economies, Japan. He has also been consultant with
international organisations such as Food and Agriculture Organisation, United
Nations Development Programme, Economic and Social Commission for Asia
and the Pacific (ESCAP), United Nations Conference on Trade and Development,
Commonwealth and World Bank. Prof. Chand has served as India’s nodal officer
for agriculture for South Asian Association for Regional Cooperation for 7 years
and represented India in meetings of G20 and ESCAP.
Prof. Chand has received Jawaharlal Nehru Award (1984) and Rafi Ahmad
Kidwai Award (2006) of the ICAR, and Atal Bihari Vajpayee Award (2018) of
the Indian Economic Association. In 2021, he was also conferred the Degree of
Science (Honoris Causa) by Professor Jayashankar Telangana State Agricultural
University, Hyderabad and Sardar Vallabhbhai Patel University of Agriculture
and Technology, Meerut. Prof. Chand has authored seven books and published
more than 150 research papers in reputed national and international journals in
the areas of agriculture production, growth, development policy, farmers’ issues,
markets and trade.
NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT
Plot No. C-24, ‘G’ Block, BKC, Bandra (E), Mumbai - 400 051
Department of Economic Analysis and Research
www.nabard.orgTaking Rural India >>Forward/nabardonlineYou Tube
for the 21st Century
Ramesh Chand
NABARD Research and Policy Series No. 6/2022 O³es³e NABARD Research and Policy Series No. 6/2022
२१ वीं सदी की कृ षि क्षेत्र से संबंधित चुनौतियाँ और नीतियाँ
Agricultural Challenges and Policies for the 21
st
Century
रमेश चंद
Ramesh Chand
आर्थिक विश्लेषण और अनुसंधान विभाग
Department of Economic Analysis and Research
राष्ट्रीय कृ षि और ग्रामीण विकास बैंक, मुंबई
National Bank for Agriculture and Rural Development, Mumbai
2
Agricultural Challenges and Policies for the 21
st
Century
National Bank for Agriculture and Rural Development
Office Address
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Plot No. C-24. ‘G’ Block, Bandra-Kurla Complex
Bandra (E), Mumbai - 400051
Email : dear@nabard.org
Website : www.nabard.org
© National Bank for Agriculture and Rural Development 2022
ISBN 978-93-5627-002-2
Published by
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National Bank for Agriculture and Rural Development
Plot No. C-24. ‘G’ Block, Bandra-Kurla Complex
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पेपर में उद्धृत तथ्यों और व्यक्त विचारों के लिए राष्ट्रीय बैंक ज़िम्मेदार नहीं है।
The National Bank is not responsible for the facts cited and views expressed in the paper. 3
Disclaimer
Views expressed in this paper are personal. 4 i
Chairman’s Message
Academic research can inform policy making. However,
since each piece of research may cover certain aspects of
an issue, a comprehensive review of research may help
collate thefindingsthatmayleadtopolicyrecommendations.
Further, the research available may be often very technical and
less communicative to the policy makers. NABARD
commenced the “Research and Policy” series to commission
reviewpapersonvariousthemestobring research findingson
a given theme in a capsule form.
With t<> his series, veteran scholars in different fields of specialisation have been
requested to document research in their field highlighting various issues, policy
relevance and prescriptions, and suggestions for future research. I am glad to present
the paper on “Agricultural Challenges and Policies for the 21
st
Century” by Dr. Ramesh
Chand who has been an authority on the subject.
The series will present more such authoritative papers on various issues ranging from
climate change to agricultural policy in the coming months. I hope that series will be
beneficial t<> o academicians, researchers and policy makers for use at the ground level.
My best wishes to the authors and the Department of Economic Analysis and Research
(DEAR) for initiating such a wonderful series.
Dr. G. R. Chintala ii iii
Foreword
There is a vast body of research available on topics related
to agriculture and rural development in the academic
world. But, most of it is in the technical realm and not in
a form which could feed into the policy. Research must
first lead to better understanding of a subject and then
into a robust policy, wherever it can, so that it touches
the multitude of Indians across the length and breadth
of our country through better public policy and efficient
services. Discussion with my colleagues on this issue
lead to this new series “Research & Policy”. We wish that
this series will provide the breadth and depth of research into an area topped up by a
lucid presentation for the policy makers.
I am happy to present the sixth publication in this series on “Agricultural Challenges
and Policies for the 21
st
Century” written by Dr. Ramesh Chand.
I wish this new series acts as a bridge between the researchers and policy makers.
P. V. S. Suryakumar
Deputy Managing Director
iv v
Preface
Agriculture sector proved a silver lining in the pandemic
period registering a positive growth in the covid times. Yet it
faces various structural challenges to be addressed to make it
profitable. For, the majority of the population is still dependent
on the sector. As we all know, investing in research is one of
the best strategies to address problems of agriculture. Equally
important is to communicate the research findings to policy
makers to design and tweak policies that matter. During one
of our meetings with Shri P. V. S. Suryakumar, our DMD, we
had loud thinking if we can commission a few review papers
on select themes. We thought that it is appropriate to request veteran scholars who
spent prime of their life on a given research theme to attempt such a work where they
will distil their understanding and the research done on the theme in a short paper.
Duly encouraged by DMD and Chairman, we wrote to a dozen eminent scholars. And
the response was overwhelming resulting in Department of Economic Analysis and
Research (DEAR), the research wing of NABARD, initiating the ‘Research and Policy
Series’. The motivation is, thus, to get a few handles from research that can help effective
policy intervention. This series will be useful to policy makers and researchers alike.
The ‘Research and Policy’ series is an attempt to get a glimpse of hardcore research
findings in a capsule form thereby making it more effective and communicative to
policy makers. The group of researchers who agreed to prepare a review of research
have spent their life in the field of agricultural research. Our purpose here, as we
communicated to them, was not just to get literature survey but to get researcher’s heart
and their experience which they gained during their long passionate innings. The paper
is expected to highlight various issues, policy relevance, prescription, and suggestion
for future papers on the themes of interest to NABARD.
Agriculture policies implemented by governments at various levels after the
Independence were critical in bringing socio-economic transformation to many parts of
the country. These production methods, despite their achievements, must be evaluated
against the test of sustainability and the challenges they present for the sector’s current
growth. In view of this, the current paper on “Agricultural Challenges and Policies
vi
for the 21
st
Century” written by Dr. Ramesh Chand, Member, NITI Aayog, assumes
importance. Dr. Ramesh Chand has a distinguished academic career, with research
interests in agriculture that include production, growth, development policy, farmers’
issues, markets, and trade.
The paper begins by examining the severity and extent of various types of challenges
confronting Indian agriculture, ranging from over exploitation of natural resources to
smallholder viability to agricultural research and development. It then highlights key
policies and initiatives that can be put in place to address these issues. While discussing
the policies, the author thoroughly reviewed the current agri-marketing and MSP
policies and tried to provide solutions to major problems under the current policy setup.
At the end, the author discusses various issues that must be debated to ensure sustain-
ability of all the stakeholders in agricultural sector. Overall, the paper will give readers
more to think about.
In bringing this series as planned, we would like to express our sincere gratitude to Dr.
G. R. Chintala, Chairman, NABARD for his inspiring leadership, unstinted support and
guidance. We also wish to express our sincere thanks to Shri P. V. S. Suryakumar, DMD,
for being the inspiration and the driving force behind the publication of this first of its
kind series. We are grateful to the authors of this series who agreed to write on themes
relevant to NABARD in such a short period of time. Indeed, it has been a great privilege
for us.
I also acknowledge the contributions of the officers of DEAR, NABARD especially Dr.
Ashutosh Kumar, DGM; Mrs. Geeta Acharya, Manager; Ms Neha Gupta, Shri Vinay
Jadhav, Assistant Managers, and others who coordinated with the authors and the
editor to bring out the series as envisaged.
Thanks are due to Dr. J. Dennis Rajakumar, Director, EPWRF and his team for their
contribution in copy editing and bringing uniformity to the document.
K. J. Satyasai
Chief General Manager
Department of Economic Analysis and Research (DEAR)
NABARD, Mumbai-400051 vii
Contents
Chairman’s Message i
Foreword iii
Preface v
List of Tables ix
List of Figures xi
Abbreviations xiii
Executive Summary xv
1 Introduction 1
2 Agricultural Challenges 1
2.1 Overexploitation of Water Resources 2
2.2 Disregard for Nature and Loss of Crop Diversity 3
2.3 Low Efficiency and Price Led Growth 5
2.4 Imbalances and Regional Disparities 6
2.5 Wasteful Investment 8
2.6 Technology Generation and Dissemination 9
2.7 Viability of Smallholders 10
2.8 Nutrition, Food Safety and Health 10
2.9 Mismatch between Structural Changes in Output & Workforce 12
2.10 Low income of Farmers 13
3 Policies for 21
st
Century 13
3.1 Growth and Efficiency 14
3.2 R&D and Innovation 16
3.3 Employment Generation for Decent Jobs 18
3.4 Food Security, Nutrition and Health 20
3.5 Surplus Management 22
3.6 Input Intensive to Knowledge Intensive Agriculture 23
3.7 Climate Change and Sustainability 24
(Contd....) viii
Contents (Concluded)
3.8 Responsible Investment in Agriculture 25
3.9 Farmers’ Income 27
3.10 Reforms in Policies and Regulations Affecting Agriculture 29
4 Conclusion 34
References 34 ix
List of Tables
No. Title Page
1 Changes in Irrigation and Status of Groundwater 3
2 Crop Shifts Towards Water Guzzling Crops in Selected States 4
and All-India
3 Value of Crop Output Per Hectare (ha) During TE 2018-19 7
4 Food Supply Per Capita Kg/Year 11
5 Share of Agriculture including Allied Activities in Workforce 12
and National Income Since 1950-51
6 Agriculture Sector’s Share in National Income and Employment 18
in Selected Developing Countries, 1991 and 2019
7 Changes in Cultivators and Agricultural Labour in Rural India 19
8 Child and Women Health Indicators at All-India Level: 2015-16 21
and 2019-20
9 Public Investments and Subsidies in Agriculture & Allied Sector 26
10 Share of Various Sources in Gross Fixed Capital Formation (GFCF) 27
in Agriculture and Total Economy at Current Prices, 2019-20
11 Average Monthly Income (Rs.) from Different Sources Per 28
Agricultural Household During July 2018-June 2019 for
Each Size Class of Land Possessed (ha) x xi
List of Figures
No. Title Page
1 Movement in Terms of Trade for Agriculture 6
2 Area under Canal Irrigation and Its Share in Total Irrigated 8
Area, All-India
3a Soyabean Yield/Hectare in India, USA, Argentina and World 17
3b Maize Yield/Hectare in India, USA, Argentina and World 17
4 Per Capita Food Production and Domestic Absorption, 22
1980-83 to 2016-17
xii xiii
Abbreviations
ACIAR Australian Centre for International Agricultural Research
ACRP Agro Climatic Regional Planning
AI Artificial Intelligence
APMC Agricultural Produce Market Committee
CACP Commission for Agricultural Costs & Prices
ESCAP Economic and Social Commission for Asia and the Pacific
FAO Food and Agriculture Organisation
FRP Fair and Remunerative Price
GFCF Gross Fixed Capital Formation
GHG Greenhouse Gases
GVA Gross Value Added
HYV High Yielding Varieties
IARI Indian Agricultural Research Institute
ICAR Indian Council of Agricultural Research
IOT Internet of Things
IPC Irrigation Potential Created
IPM Integrated Pest Management
IPN Integrated Plant Nutrient
IPR Intellectual Property Right
KVK Krishi Vigyan Kendra
(Contd....) xiv
Abbreviations (Concluded)
MSP Minimum Support Price
MSME Micro, Small and Medium Enterprises
NARS National Agricultural Research System
NGOs Non-governmental Organisations
NITI National Institution for Transforming India
PMKVY Pardhan Mantri Kaushal Vikas Yojana
PDP Price Deficiency Payment
PSS Price Support Scheme
R&D Research and Development
SAARC South Asian Association for Regional Cooperation
SAUs State Agriculture Universities
SDG Sustainable Development Goal
TOT Terms of Trade
UNCTAD United Nations Conference on Trade and Development
UNDP United Nations Development Programme
USA United States of America
UTs Union Territories xv
Executive Summary
The agri-food sector in India has undergone a sea change since the onset of the
Green Revolution in the late 1960s. From an uncomfortable state of acute shortage
of food, widespread hunger and heavy import dependence, the country has emerged
as a net exporter and surplus producer of many agricultural commodities. The over-
all effect of the Green Revolution technology and other aspects of the agricultural
strategy and policy is that the per capita production of food in the country has
more than doubled during the last 50 years, despite the 237% increase in human
population.
Till a few years back, the entire agriculture strategy was focused on the single
motto of ‘grow more food’ at any cost. This strategy brought many positive changes
like food self-sufficiency, emergence of export surplus of many commodities, better
nourishment, socio-economic transformation in some regions, increase in rural wages
and employment, and gradual increase in farm income. But these achievements also
threw up new challenges on several fronts, and some of those are formidable and
require urgent attention.
The foremost challenge relates to sustainability of the current method of
production. The indiscriminate use of chemical fertilizers, pesticides and weedicides,
expansion of irrigation, and crop specialisations favouring a few crops, which were
the main sources of growth of agriculture post-Green Revolution, played havoc with
natural resources, environment and ecology. Heavy subsidy and free supply of power
for irrigation led to reckless, indiscriminate and overuse of water, and brought serious
distortions in crop choices.
Agriculture is quite important in determining quality of air, water and land, and
pressure on land and water, which are pillars of sustainability. In order to check
further overexploitation of water resources, the country should create a policy
environment that leads to crop pattern and practices consistent with the natural
resource endowment in various agro ecological zones. Further, without improving
efficiency of water use in agriculture through modern methods of irrigation (drip,
sprinkler and sensors), stress on water use and future water requirement cannot be
addressed. xvi
Despite the technological breakthroughs in many areas, our productivity levels
both in crops and livestock at the national level remained lower than many other major
agricultural countries. Agricultural practices involving prolific use of inputs like broad-
casting of fertilizer and flood irrigation are not showing any significant improvement.
In most of the crops, increase in productivity has been accompanied by an increase in
average cost of production that necessitated an increase in output prices to keep incre-
mental production profitable. The dependence of the agriculture sector on government
support is rising. Because of this, the sector is becoming less competitive.
India is accumulating a large surplus of rice, wheat and sugar which involves a
huge cost to state exchequer. On the other hand, deficit in edible oils is rising year after
year. Disposing off surplus rice and sugar in international markets needs high level
of financial support, because international prices are lower than the cost of supply or
domestic price of the produce.
The country spends more than Rs. 30,000 crore each year after 2007-08 as capital
expenditure and also huge amounts on operation and maintenance of canals, but area
under canal irrigation has shown either stagnation or a decline. This disquieting trend
necessitates a close examination and urgent action to ensure that country’s resources
spent on canal irrigation gives expected returns.
Indian diets are changing in a significant manner. Per capita absorption of cereals
has witnessed the smallest increase, despite an increase in availability and heavy
subsidy of cereals. There is a manifold increase in the per capita net availability of
vegetables, fruits and milk for domestic consumption. However, around 16% of the
population still live in hunger, and a large population remains malnourished. India
presents a paradoxical situation of ‘hunger in the midst of plenty’. Health of children
and women is also a matter of concern.
Low intake of the total food is the main reason for widespread hunger and
malnutrition. The country would need to relook at policy interventions in agriculture
that are heavily biased towards rice, wheat and sugar, which are produced in excess
of domestic and export demand. Further, nutrition awareness is very important to
improve nutrition and health, as there is a growing tendency for preferring more of
spicy, oily and sugary foods to nutritive food. Attributing poor nutrition entirely to low
paying capacity is not correct. xvii
If the current trends in agriculture are not corrected, there will be little
improvement in reducing the gap between agriculture and non-agriculture income
and alleviating rural distress. In this background, the present government has set a
vision for a new India that involves ‘Sabka Saath Sabka Vikas’. Agriculture growth is
significantly beneficial for reducing poverty and increasing per capita income of low-
income classes in rural India. Beside inclusive growth, agriculture matters for health
and nutrition, sustainability, climate change and the quality of life in the country. All
these factors underscore the need for a new vision for agriculture as we move forward
in the 21
st
century – a vision that addresses various challenges facing agriculture.
Ironically, high growth rate in agriculture experienced during some phas-
es did not bring down real prices of food in the country. The reason has been that
the prices drove output growth rather than output growth determining prices! The
goal and strategy for agriculture must shift from ‘growth to efficient growth’. Indian
agriculture is without the state-of-the-art technology and modern methods of
farming. Application of advanced science at the farm level requires skill, knowledge,
investment and improvement in human capital in farming. Upgrading farming from
low-tech to high-tech (like greenhouse cultivation, poly houses, tissue culture and
precision farming) will reduce the average cost, raise farmers income and address
some scale disabilities.
Lately, methods that have roots in traditional Indian methods of farming like
natural farming and organic farming are being proposed in place of chemical-based
farming with the aim to reduce cost of production, besides also addressing adverse
effects of chemicals on health, environment and natural resources. Lot of anecdotal
evidence is quoted in support of benefits of the alternative system of farming.
However, the scientific community in public research institutes cast doubts on the
claim of benefits of traditional systems of farming and raise the issue of a significant
yield discount in such methods, which could be detrimental to the food and nutrition
security of the country in coming years. They feel, the breakthrough in biotechnology
and scientific practices like integrated pest management (IPM) and integrated plant
nutrient (IPN) systems, modern methods of fertiliser application and irrigation can
address various concerns related to farming, based on the use of agro-chemicals
rather than taking the risk of a shift towards natural farming. Public research system
must look into various aspects of alternative methods of farming and develop best xviii
practices to meet public preferences and the national goals of raising farmers income
by lowering costs and supply of safe and healthy food.
Capital intensive production preferred by the manufacturing sector and anticipated
threats to jobs posed by emerging technological innovations necessitate a rethinking
of the development strategy of shifting workforce from agriculture to manufacturing
and services. India should explore possibilities of creating blue collar jobs in and
around agriculture.
Current and projected growth for food demand and supply reveal that India would
need to add 20% - 25% of incremental output to the current level of food exports.
This requires export competitiveness. At present, the minimum support prices (MSP)
of some commodities recommended by the government are higher than the interna-
tional prices. If such MSP is used for procurement, it will keep domestic prices higher
than international prices, thus, making the exports impossible.
Keeping prices artificially above the levels dictated by demand and supply and
forcing them on the market through government interventions causes serious price
distortions, which have a number of implications. The best option in such situations is
to pay the farmers the difference between a reasonable MSP and average market price
at the state level, as is the practice in many countries.
Regulatory restrictions on marketing and absence of business-friendly envi-
ronment in agriculture acts as a deterrent for corporate investment in agriculture
production and marketing. This is said to be an important reason for the slow change
in agriculture, the dominance of traditional marketing channels and the weak linkage
between farm and fork.
Economic reforms launched in 1991 helped in doubling real per capita income in
the country in just 17 years compared to 37 years it took to double per capita income
before 1991. However, the gross value added (GVA) of agriculture and allied sectors
doubled in about 23 years before 1991, and it took same number of years to double
again. This is a major cause of rural distress. Special focus is needed to raise farmers’
income at a faster rate. This requires transformation of agriculture production as well
as marketing through a multi-pronged strategy that involves increase in productiv-
ity, reduction in average cost, better price realisation for farm produce, expansion of
allied activities and shift of farmers to non-farm occupations. The three farm laws xix
enacted in year 2020, which have been repealed now because of opposition from some
farmers groups, were aimed to achieve this goal.
Since long, there is a felt need to overcome the limitations and constraints of the
present agricultural marketing system and to develop a competitive, transparent
and barrier free markets with the choices to the farmers to sell their produce to the
buyers offering better prices in a transparent manner. When states did not come on
board to reform their Agricultural Produce Market Committee (APMC) Acts, despite
repeated pleas and persuasions by successive governments at the centre for 18 long
years, the union government in 2020 took a historical decision to take on itself the
responsibility of bringing reforms in agriculture, and the three new farm acts were
enacted after they were passed by the Parliament. Consequently, the three farm laws
have been repealed because of farmers protest against these reforms. Nevertheless, it
is very clear that the sector cannot move forward on a healthy pace without reforms.
Some farmers’ groups demand legalising of MSP as a solution to low market prices.
Legal MSP cannot work when they are not supported by demand and supply side
factors. If we want to protect the farmers against unremunerative or uncompetitive
prices through legal MSP, we should be guided by the price recommended by
institutions like the Commission for Agricultural Costs & Prices (CACP), and after
considering demand side factors and possible open market price.
Agricultural economists and experts need to debate about (a) what is remu-
nerative prices for farmers and the best option for ensuring it without distortions in
market; (b) sharing of responsibility for price assurance between the centre and the
states; and, (c) the pathways for modernising agriculture.
Significant and sustained increase in farmers’ income and transformation of agriculture
require a paradigm shift in the entire approach towards agriculture sector. Changes in
archaic regulations and liberalisation of the sector are a must for creating an enabling en-
vironment for a modern and vibrant agriculture. Advancement in science led technology,
enhanced role of the private sector in both pre and postharvest phases, liberalised out-
put markets, active land lease markets and emphasis on efficiency will equip agriculture
to address the challenges of 21st century and contribute towards the goal of new India.
A well-co-ordinated action and strategy between the centre and the states is needed to
ensure that agriculture moves to next stage of development along with other sectors. xx Agricultural Challenges and Policies for the 21
st
Century
1. Introduction
Historical experience of almost all economies shows that the share of the
agriculture sector in the total employment and national income falls with the progress
in economic development and growth over time. However, this decline does not
diminish the need to address various challenges facing the agriculture sector from
time to time because of several reasons. The foremost is the dependence of human life
on food for survival. This dependence goes beyond survival to adequate nutrition for
an active and healthy life. The other significant reasons for the continuing importance
of agriculture is its role in:
(i) supporting and improving rural livelihoods,
(ii) maintaining agro ecological balance,
(iii) mitigating climate change and global warming, and
(iv) ensuring sustainable use of land, water and other natural resources.
Much of the economic activities including industrial production and supply
chains, trade and commerce start with raw material supplied by the agri-food sector.
It is, thus, obvious that agriculture remains a core concern in all the countries, both
developed and developing ones. It is now recognised by the United Nations that
Sustainable Development Goals (SDGs) for 2030 cannot be achieved without paying
attention to agriculture, as 11 out of 17 SDGs are directly linked to agriculture.
Role of agriculture in growth of Indian economy and overall development of the
country hardly needs any elaboration. However, this needs to be re-oriented in the light
of the changing environment and requirements and to meet the new challenges, and
also to harness new opportunities. This will require a shift in our approach and thinking
towards agriculture from ‘pushing for incremental change’ to ‘transformational change’.
2. Agricultural Challenges
There is a sea change in food situation in the country since the 1960s when In-
dia faced acute shortage of food and registered widespread hunger, and depended 2 Ramesh Chand
on food imports to save millions of lives from starvation. The situation was so grave
that the then Prime Minister gave a call to the people to observe fast for one day
in a week. The High Yielding Varieties (HYV) of wheat and paddy became available
around the same time, and the then government took a bold decision to adopt Green
Revolution technology despite strong opposition from some quarters. The entire
agriculture strategy was focused on single motto of ‘grow more food’. Initially, the
Green Revolution technology involving high yielding dwarf varieties of wheat and
paddy, highly responsive to inorganic fertilizer, was adopted in well-endowed irrigated
regions in the country. Subsequently, as irrigation expanded, the Green Revolution
technology spread to wider areas. Improved and HYV were also developed in many
other crops.
The new cultivars were more water intensive, and their success required better
tillage, good quality seeds, use of chemical fertilisers to meet nutrition requirements,
and use of chemicals to control pests, insects, diseases and of late weeds. The Green
Revolution technology was more beneficial and suitable for irrigated regions com-
pared to rainfed areas. These changes were facilitated and encouraged by favourable
policy support and environment both by the centre as well as many states. The spread
of the new technology package led towards enterprise specialisation, mono cropping,
shifts in cropping pattern and crop sequences, withdrawal of more nutrients from the
soil and more extraction of groundwater than recharge. This put serious stress on the
natural resource base (land, water, ecosystem and environment), and thereby, clear
signals emerged on the sacrifice of long-term interest for the short-term gains, and
by future generation for current generation gains. It is now evident that the current
system and practices need thorough changes and a paradigm shift. Before discussing
those changes, it is imperative to discuss the severity and extent of various types of
challenges facing Indian agriculture.
2.1 Overexploitation of Water Resources
Assured irrigation and access to water are crucial for raising crop productivity,
crop intensity and output quality, and lowering risks in agriculture. Expansion in
irrigation, along with technology and fertilizer, have been the major instruments
fuelling agriculture growth. Over time, huge public and private investment have
been made to expand the area under irrigation. Seeing the critical role of water in
raising yields, some states started
subsidising or supplying power for irrigation free 3Agricultural Challenges and Policies for the 21
st
Century
of charges. This led to reckless, indiscriminate and overuse of water, and brought
serious distortions in crop choices. With marginal cost of using water being close to
zero, farmers started growing water intense crops in low rainfall areas and adopted
water-based practices and off-season cultivation. It is evident from the emergence of
monoculture of paddy in traditionally groundnut and cotton growing areas in Punjab,
Haryana and Rajasthan; expansion of sugarcane in Maharashtra and Uttar Pradesh;
groundnut cultivation in peak summer time in Rajasthan and many such cases. Thus,
a new geography of crops appeared in complete violation of agro climatic suitability
of various agro climatic zones in the country. Broad changes in area and sources of
irrigation are presented in Table 1.
Though half of the agricultural area is rainfed and without access to irrigation,
the sector uses close to 90% of the total water used in the country. Further, the
groundwater table show small to very high decline in 36% of the blocks mainly due to
water withdrawal exceeding water recharge. This is being experienced even in water
rich middle Indo Gangetic region. Farmers in some parts of the country are chasing
groundwater beyond 1,000 feet below ground level. This is water mining, and has
very serious implications for water quality, aquifer health and availability of water in
future.
2.2 Disregard for Nature and Loss of Crop Diversity
The guiding principle and recommendations for crops suitable for different regions
are available in literature on Agro Climatic Regional Planning (ACRP) published by
Table 1: Changes in Irrigation and Status of Groundwater
Irrigation/Water use TE 1972-73 TE 2017-18
Gross irrigated area (million hectare) 38.6 98.3
Gross cropped area irrigated (%) 23.5 49.4
Groundwater irrigated area in total irrigated area (%) 28.2 46.0
Overexploitation of ground water (% blocks) 36.0
Share of agriculture in total water use (%) 88.8
Note: TE stands for Triennium Ending
Source: 1. Directorate of Economics and Statistics, Land Use Statistics, Ministry of
Agriculture and Farmers Welfare, Government of India, New Delhi. Accessed
from https://eands.dacnet.nic.in/#
2. Central Ground Water Board (2021): Dynamic Groundwater Resources of India
2020, Ministry of Jal Shakti, Government of India, New Delhi. 4 Ramesh Chand
erstwhile Planning Commission for 15 major agro zones and at a disaggregate level
by Indian Council of Agricultural Research (ICAR) for 127 zones in the country. The
suggested crops and crop pattern are based on natural resource endowment and agro-
climatic conditions prevailing in various parts of the country, and are thus considered
sustainable. Actual crop pattern and acreage allocated to various crops are at signifi-
cant variance with what is suitable from the agro climatic point of view. The deviation
is mainly caused by policy support and disparities in advancement in technology for
various crops. Technological and policy bias in favour of Green Revolution technology
and a few crops not only caused distortions in crop pattern, it also resulted in increased
concentration of area under some crops and a sharp decline in crop diversity. This is
illustrated in Table 2. In the early 1970s, paddy cultivation was undertaken on 10.8%
of the net sown area in Punjab and 8% in Haryana. This share has increased to 73.3%
in Punjab and 39.5% in Haryana. Similarly, area under sugarcane cultivation qua-
drupled in Maharashtra and doubled in Uttar Pradesh after the onset of the Green
Revolution.
Such changes in crop pattern have serious implication for sustainable use of natural
resources, complementarity among crops, outbreak of diseases and pests. These
consequences are also transmitted to human health and nutrition, and environment
quality.
Table 2: Crop Shifts Towards Water Guzzling Crops in Selected States and All-India
Area Under Cultivation: Share in Total Net
Million Hectare Sown Area (%)
TE 1972-73 TE 2017-18 TE 1972-73 TE 2017-18
1. Area under paddy
India 37.4 44.3 26.8 31.8
Punjab 0.44 3.0 10.8 73.3
Haryana 0.28 1.4 8.0 39.5
2. Area under sugarcane
India 2.50 5.00 1.80 3.59
Maharashtra 0.20 0.84 1.15 4.94
Uttar Pradesh 1.35 2.21 7.77 13.39
Note: TE stands for Triennium Ending
Source: Author’s calculation based on data derived from Directorate of Economics and Statistics,
Agriculture Statistics At A Glance, Ministry of Agriculture and Farmers Welfare,
Government of India, New Delhi. Accessed from: https://eands.dacnet.nic.in/# 5Agricultural Challenges and Policies for the 21
st
Century
2.3 Low Efficiency and Price Led Growth
India’s growth in agriculture sector, though impressive in most products and
states, has remained lower than the potential. Our productivity levels are lower than
major agricultural countries. The sector is witnessing slow modernisation. The much-
needed changes in technology, method of production and postharvest value addition
are not visible on a large scale. Agricultural practices involving prolific use of inputs
like broadcasting of fertilizer and flood irrigation are not showing any significant
improvement. In most of the crops, increase in productivity has been accompanied
by an increase in average cost of production, which necessitates an increase in out-
put prices to keep incremental production profitable. The dependence of the agricul-
ture sector on government support is rising. Because of this, the sector is losing its
competitiveness.
The role of incentives like output price support and subsidies, and non-price factors
like irrigation, new seed, fertilizer, technology and institutional reforms in improving
the growth of the agriculture sector is very well documented in the literature. While
non-price factors create potential for growth, remunerative prices incentivise farm-
ers to harness this potential. Thus, both sets of measures are crucial for growth and
development of the agriculture sector. Over time, farmers have focused more on prices
support than making a balanced demand to include non-price factors in policy sup-
port. This was because of a couple of factors. Implementation of MSP and procurement
of rice and wheat in selected states allowed remarkable stability in prices received by
farmers with zero price risk, and assured higher income than through their sale at
market prices. This attracted attention of other producers, who were not able to sell
their crops at MSP, for a similar treatment to them and their crops. And also, MSP
has been made more and more remunerative over time, and increased year after year
irrespective of glut in supply and fluctuations in open market or international prices.
After submission of report of National Commission on Farmers, chaired by
eminent agriculture scientist Dr M S Swaminathan, in 2006, farmers have rallied
around the commission recommendation for a 50% margin over costs while fixing
MSP. This recommendation was a surprise for many economists, as the commission
did not give any rationale or justification for this recommendation that has far-
reaching implications. The recommendation became quite popular among farmers
throughout the country, as it involves a high rate of return over their cost. Political 6 Ramesh Chand
parties also started promising MSP based on the Swaminathan Commission report to
appease and seek farmers’ support. The decision of the central government to accept
Swaminathan Committee recommendation to fix MSP at least 50% above the cost of
production in 2018 further raised the attractiveness of MSP and pushed the MSPs
much above open market prices. Increase in average costs of cultivation due to higher
use of inputs has forced the farmers to rely more on support prices, though increased
use of inputs has improved crop productivity.
Changes in prices of agriculture relative to prices in the non-agriculture sector
can be seen from the terms of trade (TOT) for agriculture. The TOT is taken as ratio of
implicit price deflator of agriculture sector to implicit price deflator of non-agriculture
sector. Generally, TOT is expected to move cyclically with the phase of rise followed
by the phase of decline, and vice versa. But since 2005-06, TOT for agriculture have
moved on a rising trend (Figure 1). This implies that price trends have been more
favourable towards farmers’ output since 2005-06.
2.4 Imbalances and Regional Disparities
Imbalances between demand and domestic production have been growing over the
years. India has been accumulating a large surplus of rice, wheat and sugar, and this in-
Figure 1: Movement in Terms of Trade for Agriculture
Note: Terms of trade for agriculture is the ratio of implicit price deflator of gross value added (GVA) of
agriculture to that of the non-agriculture sectors.
Source: Author’s calculation based on data derived from National Statistical Office: National Accounts Statistics,
Ministry of Statistics and Programme Implementation, New Delhi, Various Issues.
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
1970-71
1972-73
1974-75
1976-77
1978-79
1980-81
1982-83
1984-85
1986-87
1988
-
89
1990
-
91
1992-93
1994-95
1996-97
1998
-
99
2000
-
01
2002
-
03
2004
-
05
2006
-
07
2008
-
09
2010
-
11
2012
-
13
2014
-
15
2016
-
17
2018
-
19
Terms of trade for agriculture
Year 7Agricultural Challenges and Policies for the 21
st
Century
volves a huge cost to the state exche-
quer. The underlying reason for this is
the rise in output price by the centre
and payment of bonus for rice, and
rise in fair and remunerative price
(FRP) for sugarcane by some states
ignoring the CACP recommendations
and, for that matter, demand and
supply or market situations. Where
sugarcane prices ruled higher than
the corresponding price of sugar
prevailing in the domestic market,
sugar mills started paying lower price
compared to the price for sugarcane
announced by the states. The net re-
sult has been an accumulation of ar-
rears for sugarcane growers. Thus,
the demands and protest by farm-
ers to pay sugarcane arrears by the
union government has become a
regular phenomenon for many years.
On the other hand, India’s deficit in
edible oil is rising year after year. The
country meets 55% of its domestic
requirement of vegetable oils by im-
porting them. There is, thus, a scope
in domestic market to absorb 127% in-
crease in domestic oilseed production.
Disposing off surplus rice and sug-
ar in international market needs high
level of financial support, as interna-
tional prices rule much lower than
what turns out to be the cost of supply
or domestic price of the produce.
Table 3: Value of Crop Output Per Hectare (ha)
During TE 2018-19
State Crop Productivity
(Rs/ha)
Daman & Diu 58501
Rajasthan 70977
Chhattisgarh 91560
Lakshadweep 95457
Dadra & Nagar Haveli 100219
Karnataka 105256
Manipur 106838
Maharashtra 108558
Meghalaya 112117
Telangana 114459
Gujarat 129835
Mizoram 131380
Nagaland 135106
Odisha 137555
Madhya Pradesh 138065
Bihar 138302
All India 138884
Arunachal Pradesh 143760
Assam 149815
Uttar Pradesh 155502
Chandigarh 164028
Goa 170647
Uttarakhand 174942
Haryana 179104
Kerala 179941
Andhra Pradesh 191992
Tamil Nadu 199046
Punjab 207743
Himachal Pradesh 219529
Jammu & Kashmir 243605
Jharkhand 253484
West Bengal 283707
Sikkim 308634
A & N Islands 348386
Tripura 358432
Delhi 403213
Puducherry 417096
Note: TE stands for Triennium Ending
Source: Author’s estimates based on data derived from
State Level Value of Output of Crop Sector, in
National Statistical Office: National Accounts
Statistics, Ministry of Statistics and Programme
Implementation, New Delhi, Various Issues. 8 Ramesh Chand
Another dimension of imbalances is the variation in productivity. Though some
variations are bound to be there because of natural resource endowment and access
to irrigation, there are wide variations in crop productivity across states even at a
similar level of irrigation. As can be seen from Table 3, value of crops harvested from
one hectare of land in major states varies between Rs. 70,977 in Rajasthan and Rs.
2.83 lakh in West Bengal. Excluding Rajasthan, which has very low rainfall and dry
and arid climate, per hectare productivity across major states ranges in the ratio of
1:3.1. With more than 72% area under irrigation, Bihar achieved crop productivity of
Rs. 1.38 lakh per hectare – lower than average of many other states where area under
irrigation is less than 50%.
2.5 Wasteful Investment
Investment in major, medium and micro irrigation constitutes a major share
of public investment in agriculture. These investment were meant to increase area
under surface water irrigation. The country spent more than Rs. 30,000 crore each
year after 2007-08 as capital expenditure and also a huge amount as operation and
maintenance of canals, but area under canal irrigation is showing either stagnation
or decline (Figure 2). There are multiple reasons for this, including considerable
Figure 2: Area under Canal Irrigation and Its Share in Total Irrigated Area,
All-India
Source: Same as Table 1.
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
10000
11000
12000
13000
14000
15000
16000
17000
18000
19000
Canal irrigation as % of NIA
Canal irrigated area (000ha)
Total
Canal irrigation as % of NIA 9Agricultural Challenges and Policies for the 21
st
Century
delays in completion of projects resulting in very high time and cost overruns. Several
major irrigation projects even after incurring most of the expenditure are held up by
minor obstacles like forest clearance in small pockets, catchment area development,
construction of distributaries and field channels. Interstate and intra state disputes
are another factor for delay in completion of some major irrigation works.
It looks ironical that area under canal irrigation witnessed stagnation and even
decline for such a long period, despite so much investment in medium and major
irrigation. During 1993-2014, the country spent on an average about Rs. 17,663
crore per year at current prices on capital expenditure for major and medium irriga-
tion projects. This disquieting trend necessitates closer examination and urgent ac-
tion to ensure that the country’s resources spent on canal irrigation gives expected
return.
The main reason for lack of progress in the area under canal irrigation has been
poor utilisation of irrigation potential created, and emergence of a big gap between
irrigation potential created (IPC) and irrigation potential utilised (IPU). This is
despite the fact that Rs. 1,74,473 crore were spend on major and medium irrigation
projects in the Eleventh five year plan period. Though IPU remained poor, even this
should have resulted in an increase in the area under canal irrigation, which is not
visible in the irrigation statistics.
Due to poor progress in the area under canal irrigation, its share in the net irri-
gated area has declined from 37.5% in 1984-85 to 23% during 2018-19. This, in turn,
is putting strong pressure on use of groundwater leading to its overexploitation, which
has several adverse implications.
2.6 Technology Generation and Dissemination
Agricultural problems are becoming more complex, and research is turning more
capital intensive. Climate change, share of agriculture in greenhouse emissions and
sustainability concerns add to the challenges to be addressed by the research and
development (R&D) system. Scope for spillover from research in the developed world
is shrinking, and intellectual property right (IPR) issues are complicating and making
it costly for transfer of technology from the outside world and the private sector. Thus,
India needs to be self-reliant in agricultural research. 10 Ramesh Chand
Basic and strategic research in any discipline lays the foundation for break-
throughs. Sadly, this component has weakened considerably in the National Agricul-
tural Research System (NARS). The concentration of NARS over a period of time has
shifted to applied research and problem-solving research.
Agriculture is also becoming more competitive globally with many new innovations
happening in the sector. However, the rate of adoption of improved as well as frontier
technology is low, mainly due to poor extension services.
Though agricultural research and higher education is largely a responsibility of
State Agriculture Universities (SAUs), the ICAR is required to respond to any chal-
lenges and issues concerning the agriculture sector. Public opinion at large holds
ICAR responsible for any adverse development in the agriculture sector. As a result,
the portfolio of ICAR has been getting bigger and bigger over time. Load of ICAR has
risen manifold with the responsibility to expand frontline extension and operate Kri-
shi Vigyan Kendras (KVKs) throughout the country. Many questions are raised about
the effectiveness of ICAR in fulfilling the larger role it has been assuming over the
years and expected to play in the field of agriculture R&D and education.
2.7 Viability of Smallholders
Agriculture in India and most of Asian countries is dominated by small land hold-
ings. According to Agricultural Census for year 2015-16, 68% farm holdings operate
on less than 1 hectare land area. Further, 85% of farm households undertake farming
on less than 2 hectares. This size of land holding does not generate adequate income
with the usual agricultural practices and products. Thus, two options are left to raise
income of such farm holdings. One, enable these farmers to go for high value crops
and livestock activities, where they can make optimum use of their family work force.
And, two, supplement agriculture income with income from non-agriculture sources
like wages and salaries, some kind of business and trade. Small holders also face the
problem of scale economy in input as well as output markets that require different
type of institutional help.
2.8 Nutrition, Food Safety and Health
India’s nutrition indicators and child health indicators are low. According to the
Food and Agriculture Organisation (FAO) of the United Nations, the largest number 11Agricultural Challenges and Policies for the 21
st
Century
of people who are hungry or undernourished live in India. According to the Global
Hunger Index, an annual publication of two non-government organisations (NGOs),
namely, the Concern Worldwide and Welthungerhilfe, India ranks low year after year
on the hunger indices, even though the country has become the largest rice exporting
country with about 15% of its rice production sold in overseas market. Since 1970-71,
food production in the country has increased at trend rate close to 3%, while popula-
tion growth in the same period was 1.86%. Further, growth rate in food production has
remained in tact in the recent years, whereas population growth rate has decelerated.
Clearly, per capita production of food has witnessed exponential growth. India is also
having an excess stock of rice and wheat for many years in a row. Recently, a huge
surplus of sugar has also accumulated. According to some observers, India represents
a paradoxical situation of ‘hunger in the midst of plenty’.
Indian diets are undergoing diversification in a significant manner. Per capita
absorption of cereals has witnessed the smallest increase, despite an increase in their
Table 4: Food Supply Per Capita Kg/Year
Commodity India China
TE 1982 TE 2013 TE 2018 TE 1982 TE 2013 TE 2018
Cereals 144.7 148.7 182.0 160.0 150.4 192.7
Pulses 12.0 14.1 15.1 4.6 1.4 1.4
Edible oil 5.1 8.7 9.5 3.4 7.7 8.2
Sugar 19.3 22.9 22.8 5.7 7.1 8.0
Milk 40.6 84.7 101.6 3.2 32.6 22.8
Eggs 0.7 2.5 3.1 2.7 18.6 19.8
Meat & Fish 6.2 8.5 10.8 6.9 43.6 99.8
Onion 3.1 12.6 13.8 3.2 13.8 14.6
Potato 9.1 23.9 25.5 9.7 41.0 41.7
Tomato 2.1 12.8 13.5 5.0 29.7 34.8
All vegetables 57.4 108.6 87.7 65.6 382.2 360.2
Citrus 2.2 6.1 8.0 1.2 21.3 24.14
Fruits 23.1 47.2 59.2 6.6 69.0 97.6
Notes: 1. Food supply represent the quantity used for food purpose, directly or indirectly.
2. There are large difference between availability reported in official statistics of India
and FAOSTAT due to variation in concept and methodology used by the two sources.
3. FAO has further refined its methodology for estimating food availability after
2015. Therefore, Triennium Ending (TE) 2018 figures are not comparable with
the previous figures, but these are comparable across countries.
Source: Food and Agriculture Organisation (FAO), Food Balance Sheet, FAOSTAT. Available at
https://www.fao.org/faostat/en/ 12 Ramesh Chand
availability and heavy subsidy. This is consistent with dietary diversification seen in
other countries where per capita income has also risen (Table 4). There is a manifold
increase in per capita net availability of vegetables, and doubling of fruits and milk
available for domestic food use. Per capita availability of domestic edible oils increased
by 60% in the three decades since the early 1980s. Similar changes are seen in the food
balance sheet of China. However, there is a big difference in the growth and the level of
per capita supply of horticultural and livestock products between these two countries.
During the early 1980s, per capita supply of eggs and meat products in India was
close to China. In the next three decades, supply of these items in China became five
times that of India. Along with higher level of eggs and meat products, the Chinese
use three times the vegetables and 80% more fruits than those by Indians. The data
on food supply shows that though there is large shift towards horticultural and live-
stock products use in India, the increase is smaller compared to China, where nutri-
tion and child and maternity health have improved considerably.
2.9 Mismatch between Structural Changes in Output and Workforce
As an economy develops, the share of agriculture in national gross value added
(GVA), a measure of national income, and employment would experience a decline.
Higher the growth of the economy, faster is the transformation in the structure of
economy. In India, between 1950-51 and 1970-71, the share of agriculture in national
income at 2011-12 prices declined from 61.7% to 49.6%, whereas the sector’s share in
employment remained stuck at more than 69% (Table 5). In the next two decades, the
sector’s share in employment declined to 59% and income to 35.1%. After 1990-91,
Table 5: Share of Agriculture including Allied Activities in Workforce and National
Income Since 1950-51 (in %)
Year Share in Share in National Income
Workforce At Constant Prices At Current Prices
1950-51 69.2 61.7 53.2
1970-71 69.7 49.6 43.1
1990-91 59.0 35.1 29.8
2010-11 54.6 18.3 18.4
2019-20 45.6 14.8 18.4
Source: 1. Share in Workforce - Population Census except for year 2019-20 which was taken
from National Statistics Office (2021a).
2. Share in National Income – same as Figure 1. 13Agricultural Challenges and Policies for the 21
st
Century
growth rate of economy accelerated which also resulted in faster decline in the share of
agriculture. However, the decline in the share of agriculture in work force did not keep
pace with the decline in the sector’s share in national income. In 2010-11, agriculture
had a share of 18.3% and 54.6%, respectively, in national income and employment.
The latest data estimated by Periodic Labour Force Survey for 2019-20 shows
that agriculture sector as a whole (that is, including fishery and forestry) provide em-
ployment as the principal occupation to 45.6 % of the total work force in the country
(National Statistical Office 2021a). In the same year, agriculture share in GVA at
current prices was 18.4%. Thus, there is a need to pull workforce out of agriculture
to enhance the per worker income in the sector. However, it is increasingly getting
difficult to get adequate alternate jobs, especially in industry, for shifting the work-
force out of agriculture. This calls for a new strategy for employment.
2.10 Low Income of Farmers
Disproportionate share of agriculture in national income and employment im-
plies disparity in per worker income in agriculture and non-agriculture sector. At the
macro level, income per worker in non-agriculture is 3.75 times the income of an aver-
age agriculture worker which includes agricultural labourers and cultivators. Lately,
the Prime Minister has repeatedly called for focusing attention on raising farmers’
income. However, the small and shrinking land size, excess workforce, low produc-
tivity and poorly working markets are the main causes for low per farmer income in
the country. Besides focusing on raising income from farming, there is a pressing
need for enhancing avenues for agricultural households to earn income from non-
farm sources.
3. Policies for 21
st
Century
The present government has set a vision for a new India that involves ‘Sabka
Saath Sabka Vikas’. Transformation of the agriculture sector is crucial for achieving
this vision, as 45% of the workforce in the country is employed and dependent on
agriculture for their livelihood (National Statistical Office 2021a). There is a large
gap between income of agriculture workers and non-agriculture workers (Chand et
al 2015; Chand 2019). Poverty and undernutrition in the country are concentrated
among agricultural labour and small and marginal farmers. There is a lot of concern 14 Ramesh Chand
relating to rural distress. If current trends in agriculture are not changed, there will
be little improvement in reducing the income gap between agriculture and non-agri-
culture income, and alleviating rural distress.
It has been empirically demonstrated that agriculture growth is significantly ben-
eficial for reducing poverty and increasing per capita incomes (Virmani 2008). Beside
inclusive growth, agriculture matters for health and nutrition, sustainability, climate
change and quality of life. All these factors underscore the need for a new vision for
agriculture, as we move forward in the 21
st
century – a vision that addresses various
challenges presented in Section I above. This section discusses and suggests policy
changes and reforms needed for transformation of agriculture to help achieving the
aspiration of India of the 21
st
century. The discussion is organised under following
themes:
1. Growth and efficiency
2. R&D and innovations
3. Employment generation for decent jobs
4. Food security, nutrition and health
5. Surplus management
6. Input intensive to knowledge intensive agriculture
7. Climate change and sustainability
8. Responsible investments in agriculture
9. Farmers’ income
10. Reforms in policies and regulations affecting agriculture
3.1 Growth and Efficiency
Since 1970-71, agricultural output and value added have moved on a growth
trajectory of around 3.0% for most of the period. Recent years have seen an accelera-
tion in the growth rate. It may appear strange that high growth rate in agriculture
experienced during some phases did not bring down real prices of food in the country. 15Agricultural Challenges and Policies for the 21
st
Century
The reason has been that the prices drove output growth rather than output growth
determining prices! Some studies on this aspect also show that during the period of
high agriculture growth (above 4%), much of the growth was driven by an increase in
agricultural prices (Chand 2014; Chand and Parapurathu 2012; Chand et al 2015). The
strong association between agricultural prices and growth suggests that if agricul-
tural prices do not rise faster than other prices, the growth rate of agriculture is likely
to fall, which then becomes a major cause for agrarian distress, and thus, the economy
as a whole. Formidable and foremost policy challenges to achieve efficient growth are:
(i) how to sustain agriculture growth without letting food price inflation rise
beyond acceptable limits?
(ii) how to incentivise farmers to raise production without causing hardship to
consumers?
The answer seems to be change in our goal and strategy from ‘growth to efficient
growth’. This requires upgradation of agricultural technology, application of modern
skills in farm practices, new innovation in farming, and lowering wastages in use
of fertilizer, water and other inputs. This will also require change in input pricing
policy to discourage prolific and indiscriminate use of inputs like water and fertiliser,
and promote their optimum use. Digital technology can also play a significant role
in improving efficiency through easy dissemination of technology and knowledge to
farmers.
Supply of low quality and spurious inputs is an important factor for increased
cost without adequate gain in productivity. Thus, beside emphasising use of modern
inputs, there is a need to put in place an effective mechanism for monitoring and regu-
lating quality of inputs like seeds, fertilisers and agro-chemicals.
Rising cost of production associated with modern technology is moving the atten-
tion towards alternative methods of farming. Methods that are rooted in traditional
Indian methods of farming, like natural farming and organic farming, are proposed
in place of chemical-based farming with the aim to reduce cost of production, beside
addressing adverse effects of chemicals on health, environment and natural resources.
Lots of anecdotal evidence is quoted in support of benefits of alternative system of
farming. However, the scientific community in public research institutes cast doubts 16 Ramesh Chand
on the claim of benefits of traditional system of farming and raise the issue of sig-
nificant yield discount in such methods, which could be detrimental to the food and
nutrition security of the country in the coming years (NAAS 2019). They feel, a break-
through in biotechnology and scientific practices like integrated pest management
(IPM) and integrated plant nutrient (IPN) systems, modern method of fertiliser ap-
plication and irrigation can address the various concerns related to farming, based on
the use of agro-chemicals rather than taking the risk of shift towards natural farming.
Notwithstanding this debate, public opinion is growing in favour of safe, healthy and
environmentally sustainable food production. It is high time that public research
system looks in-depth into various aspects of alternative methods of farming and de-
velop best methods to meet public preferences and national goals of raising farmers’
income by lowering costs, and supply of safe and healthy food.
3.2 R&D and Innovation
Efficiency is driven by strong and vibrant R&D by public or private sector. Public
sector R&D in the country is suffering from resource constraint, disciplinary frag-
mentations, and lack of drive and inspiration. At the same time, fascinating innova-
tion and changes in agriculture are being seen in developed world institutions and in
private sector. Private sector investment in agri R&D in India is also low due to the
nature of Intellectual Property Right (IPR) regime in the country. Consequently, the
gap between domestic and global agricultural innovations is rising, and many fasci-
nating changes experienced in global agriculture are missing in the country. In the
absence of domestic R&D attaining global standard, agriculture is losing its competi-
tive edge. There is a need to facilitate easy access to our farmers to global technology,
high quality seeds and germplasm, and other knowledge products.
Application of biotechnology in agriculture through genetic breakthrough and
genetic enhancement is playing an important role in shaping the future of agriculture.
Agri biotechnology in India has occupied a backseat after the restrictions imposed
on field testing and non-release of Bt brinjal. The countries which have embraced
genetically modified and genetically edited technology are gaining advantage in
terms of productivity and cost. A comparison of the trends in productivity of soy-
bean and maize in India and in those countries which have adopted biotech crops
presents a stark example of competitive advantage gained by the latter through agri
biotechnology (Figures 3a & 3b). India will face very tough competition from biotech 17Agricultural Challenges and Policies for the 21
st
Century
crops, which are leading to higher yield and lower average cost, if the country does not
upgrade technology in such crops.
Basic and strategic research in any discipline lays the foundation for breakthroughs.
This component has weakened considerably in NARS. The concentration of NARS
Figure 3a: Soyabean Yield/Hectare in India, USA, Argentina and World
Source: Food and Agriculture Organisation, FAOSTAT. Available at https://www.fao.org/faostat/en/
0
500
1000
1500
2000
2500
3000
3500
4000
1 9 9 0 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7
1 9 9 8
1 9 9 9
2 0 0 0
2 0 0 1
2 0 0 2 2 0 0 3 2 0 0 4
2 0 0 5
2 0 0 6 2 0 0 7
2 0 0 8
2 0 0 9 2 0 1 0
2 0 1 1
2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7
YIELD (KG/HA)
Year
Argentina India
USAWorld
Figure 3b: Maize Yield/Hectare in India, USA, Argentina and World
Source: Same as Figure 3a.
0
2000
4000
6000
8000
10000
12000
1 9 9 0 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7
1 9 9 8
1 9 9 9
2 0 0 0
2 0 0 1
2 0 0 2
2 0 0 3
2 0 0 4
2 0 0 5
2 0 0 6
2 0 0 7
2 0 0 8
2 0 0 9
2 0 1 0
2 0 1 1
2 0 1 2
2 0 1 3
2 0 1 4
2 0 1 5
2 0 1 6
2 0 1 7
Yield (KG/HA)
Year
Argentina India
USA World 18 Ramesh Chand
over a period of time has shifted to applied research and problem-solving research.
This is giving incremental gains but not breakthroughs. Thus, to have breakthrough in
agricultural R&D and technology and to have science driven growth, we need to create
a new set of research institutions in agriculture on the pattern of Indian Institute of
Technology, Indian Institute of Management and Indian Institute of Science.
The most important concern voiced by ICAR and SAUs is inadequate funding for
research. On the other hand, state after state have been setting up new universities
generally by fragmenting the existing structure to have separate universities for
Animal Sciences, Horticulture, Fishery, etc. Similarly, ICAR is also setting up some
new institutes to address new areas. Lack of adequate budgetary support and expan-
sion of institutions are damaging the inter disciplinary nature of agricultural research,
creating turf conflicts, hampering research and lowering the morale of scientists.
We must put a stop to the growth of new institutes under NARS, particularly those
which result in fragmentation of agriculture and allied disciplines. There is a need to
improve quality of institutions rather than just raising their number.
3.3 Employment Generation for Decent Jobs
Traditional theories of economic transformation clearly established that the share
of agriculture in national income and total employment declines with the economic
development. This has been experienced by the most of the countries even in the
recent times (Table 6). This transition has been slow in the case of India, particularly
in respect of the share of agriculture in the total workforce. Between 1991 and 2019,
the share of agriculture in workforce declined by less than a half in Brazil, China, and
Malaysia. Labour share of agriculture in Vietnam declined by nearly 30 percentage
points. As per the World Bank data, the decline has been much smaller in the case of
Table 6: Agriculture Sector’s Share in National Income and Employment in Selected
Developing Countries, 1991 and 2019
Share in National Income (in %) Share in Employment (in %)
Country 1991 2019 1991 2019
Brazil 6.8 4.4 22.4 9.1
China 24.0 7.1 59.7 25.3
India 27.3 16.7 63.0 42.3
Malaysia 14.4 7.3 22.0 10.3
Vietnam 40.5 14.0 68.6 37.2
Source: World Bank, World Development Indicators. Accessed from www.worldbank.org 19Agricultural Challenges and Policies for the 21
st
Century
India. This has created serious structural imbalances between sectoral composition
of output and employment (Table 6). The primary reason for this is the failure of the
industrial sector to attract and accommodate labour force from agriculture.
Recent developments in technology like automation, artificial intelligence (AI),
big data, internet of things (IOT) and machine learning are further restricting the
capacity of non-agriculture sector to absorb the workforce from agriculture. This has
put renewed focus on agriculture to create gainful employment in postharvest value
addition activities.
Empirical evidence from successive surveys on employment and labour use since
2004-05 reveals significant changes in rural and agricultural workforce (Table 7),
which have important implications for agriculture and the economy. There is large
scale withdrawal by female labour from agriculture (cultivators as well as labourers) in
contrast to the popular perception of feminisation of agriculture. Moreover, the with-
drawal from agriculture by cultivators has sharply decelerated after 2011-12, while
shift of agricultural labour from the sector has accelerated. This necessitates support
for mechanisation on smallholder farms. The concerns about the threat to agriculture
due to youth not staying in agriculture is belied by NSO’s Periodic Labour-Force
Surveys (National Statistical Office 2021a).
An important reason for the slow shift of farm youths to non-agriculture sec-
tor is their strong preference for middle income jobs. But, in many cases, required
Table 7: Changes in Cultivators and Agricultural Labour in Rural India
(Million)
Year Cultivators Agricultural Labour Agricultural Workforce
Male Female Total Male Female Total Male Female Total
1993-94 85 53 138 54 37 91 139 90 229
2004-05 93 67 160 53 37 89 146 103 249
2011-12 91 49 140 48 27 75 139 76 215
2017-18 102 37 138 30 20 50 131 56 188
2018-19 100 41 140 29 19 49 129 60 188
2019-20 108 58 165 33 24 57 141 81 222
Source: Author’s calculation based on data derived from:
1. NSSO Survey on Employment and Unemployment 1993-94, 2004-05 and 2011-12.
2. NSO Periodic Labour Force Survey, 2017-18.
3. Population Census of India and projected population. 20 Ramesh Chand
skill and capability for such jobs is missing. Medium, small and micro enterprises
(MSME), which are labour intensive, seem to be an appropriate alternative for rural
employment generation. Linking agri-food processing to production through efficient
value chains, contract farming and direct linkage between factory and farm offer a
considerable scope for rural employment generation as well as for raising farmers’
income.
In the wake of capital intensive production preferred by the manufacturing sector
and anticipated threats to jobs posed by emerging technological innovations, there is a
need for a rethink on pursuing traditional development strategy of shifting workforce
from agriculture to manufacturing and services. India should explore possibilities of
creating blue collar jobs in and around agriculture. This also looks desirable, as there
is a serious shortage of skilled workers in agriculture (Bajar and Mushtaq 2019).
The reasons for workers preferring to move from agriculture to non-agriculture are
relatively low wages in agriculture, stress of manual work and irregular employment.
These three problems can be addressed by innovative approaches in agriculture produc-
tion and postharvest activities. These can be harnessed by developing and promoting
new farm models centred on the knowledge- and skill-based agriculture and the post-
harvest value addition at the farm itself (Chand et al 2017). Pradhan Mantri Kaushal
Vikas Yojana (PMKVY) can play a major role in this by promoting and imparting skills
required in modern agriculture, value addition and primary processing.
3.4 Food Security, Nutrition and Health
Per capita food production in India has risen steadily over the last decades, from
little more than 1 kg per person per day in the early 1980s to 1.73 kg in recent years.
However, some health and nutrition indicators are awfully poor. According to Fifth
National Family Health Survey 2021, two-third of the children below the age of 5 years,
and 57% of women are found to be anaemic. Similarly, the proportion of underweight
and stunted children, and child mortality are higher in India compared to many other
south Asian countries. What is more worrying is that some of these health indicators
have shown a deterioration between 2015-16 and 2019-20 (Table 8). Concerned with
the situation, the Government of India has launched several measures to improve
health and nutrition especially of children and women. Increasing nutrition density
through biofortification of food can play an important role in this. 21Agricultural Challenges and Policies for the 21
st
Century
Low intake of the total food is the main reason for the widespread hunger and
malnutrition. The country would need to relook at policy interventions in agriculture
that are heavily biased towards rice, wheat and sugar, which are produced in excess of
domestic and export demand.
Some studies show that even among economically well-off households, incidence
of undernutrition and underweight children is quite common (Chand and Jumarani
2013). Addressing all these concerns requires a close coordination between the
strategy for food production and health. Further, nutrition awareness is very important
to improve nutrition and health, as rising preference towards spicy, oily and sugary
foods is the major cause for poor nutrition rather than non-availability of nutritive
food. Attributing poor nutrition entirely to low paying capacity is not correct.
Beside food intake, health and absorption of nutrients by body are also affected by
use of clean water, sanitation and hygiene, and balanced and diversified diet. Creating
awareness about nutrition is crucial for improving health outcomes.
Food safety is emerging as a major concern, as there are overwhelming reports
of excessive and unsafe use of chemicals and hormones in crops, livestock and fish
food, and presence of chemical residue in food. This requires strict regulation and
its enforcement in both at the production stage and in postharvest stages. Awareness
should be created amongst producers, middlemen in the value chain and processors
about safe agro chemicals and methods of their usage in the entire food system and
food chain.
New interest has emerged in therapeutic values of food and its proper usages for
maintaining immunity against various ailments and diseases and for good health. As
Table 8: Child and Women Health Indicators at All-India Level: 2015-16 and 2019-20
Particular 2015-16 2019-20
All women aged 15-49 years who are anaemic (%) 53.1 57.0
Children aged < 5 anaemic % 58.6 67.1
Under-five mortality rate (U5MR) 49.7 41.9
Children under 5 years who are stunted % 38.4 35.5
Children under 5 years who are underweight % 21.0 19.3
Children under 5 years who are wasted % 35.8 32.1
FAO: Prevalence of undernourishment (percent) 14.7 15.3
Source: National Family Health Survey -5 and 4, Indian Institute of Population Sciences, Mumbai. 22 Ramesh Chand
a result, demand for medicinal plants and varieties with specific attributes is on the
rise. Some startups are linking consumers and producers for supply of such products.
Supply of such products on a large scale will require value chain with traceability and
labelling.
3.5 Surplus Management
As discussed above, domestic absorption of food has grown at a lower rate than
domestic production. In the early 1980s, India produced and consumed a little more
than 1 kg food per person per day. The production has gradually increased to 1.73 kg in
recent years, whereas domestic absorption increased to 1.59 kg (Figure 4). This shows
that food surplus (domestic production less domestic absorption) has been continu-
ously increasing for the last 35 years. This requires a complete shift in food policy
from shortage management to surplus management. This also indicates that much of
the under nutrition in India is not due to non-availability of food, but it is due to low
food intake. India has to look for overseas market to dispose the surplus food produce.
Agriculture production in the country is growing at a trend rate of above 3% per
year. Domestic demand is projected to rise by about 2.3%. Therefore, the surplus
Figure 4: Per Capita Food Production and Domestic Absorption,
1980-83 to 2016-17
Source: Author’s calculation based on data derived from Department of Economics and Statistics, Agricultural
Statistics At A Glance, Ministry of Agriculture and Farmers Welfare, Government of India, New Delhi,
Various Issues.
1.05
1.18
1.25
1.60
1.73
1.04
1.14
1.19
1.49
1.59
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1.70
1.80
1980 to 83 1990 to 93 2000 to 03 2010 to 13 2016-17
Per Capita food production and demand
Year
Food production/person/day Kg Demand 23Agricultural Challenges and Policies for the 21
st
Century
available for export will further grow in the coming years, and India will be required
to sell a higher proportion of domestic production in overseas market. With the same
trend in growth of food output, India will need to add 20% - 25% of incremental out-
put to current level of food export. This requires export competitiveness and action in
three following areas:
• prices in primary markets should be sufficiently lower than international
prices.
• price spread in various stages of marketing should be reduced.
• producers should be integrated with global value chains.
At present, the MSP of some commodities recommended by the government are
higher than the international prices. In such a situation, if MSP is implemented through
the system of procurement, it will keep domestic prices higher than international
prices, making exports impossible. Experience of many countries, also of late China,
shows that paying higher than open market prices to farmers through procurement
cannot be sustained. Fixing prices higher than open market price attract imports
even for exportable and commodities that are surplus. More focus on supply than on
demand is justified as long as demand is ahead of supply. Once demand falls short of
supply, the guiding principle for price intervention should be open market price or
demand side factor.
Rising surplus and export dependence for its disposal underline a strong need
to let market forces to determine prices of produce. Keeping prices artificially above
the level dictated by demand and supply and thrusting them on the market through
government intervention causes serious price distortions, which have a number of
implications. On the other hand, MSPs are considered important to ensure remu-
nerative prices for the farmers. The best option to deal with such situations is to pay
to farmers the difference between reasonable MSP and average market price at the
state level, as is the practice in many countries, rather than distorting market prices
through procurement (Chand 2019).
3.6 Input Intensive to Knowledge Intensive Agriculture
Indian agriculture is missing the state-of-the-art technology and modern method of
farming. Advanced countries are moving towards precision farming using sensors and
other scientific tools for exact practices and application of inputs. It saves costs, reduces 24 Ramesh Chand
environmental effect and yields more and better-quality produce. We still continue to
use flood method of irrigation, broadcasting fertilisers and indiscriminately spraying
chemicals, whereas advanced countries are shifting towards the use of sensor-based
application of inputs based on actual requirement of plants. Application of advanced
science at the farm level requires skill, knowledge, investment and improvement in
human capital in farming. Upgrading farming from low-tech to high-tech (green house
cultivation, poly houses, tissue culture and precision farming) will reduce average cost,
raise farmers’ income and address some scale disabilities.
Recent years have seen a lot of interest among agri tech firms and several startups
have come in agriculture. They are infusing new innovations in a range of areas like
digital extension and solutions, arranging finance, agromet advisory, best practices,
better crop management, disease and pest control, reading market pulses, price
prediction, fetching better price for output, and so on. So far, their impact is restricted
to some pockets; but it shows great promise, and is expanding.
3.7 Climate Change and Sustainability
Greenhouse gases (GHG) emitted from agricultural activities are generally not
visible. The emission results from application of organic and inorganic inputs to the
soil, decomposition of biomass and dead plant residues, plant respiration, livestock
rearing, enteric fermentation in ruminants, manure handling and burning of crop
residues. Agriculture is responsible for about 17% of GHG emission in India, which is
almost same as its share in the country’s GVA. This share will increase significantly
if burning of crop residue, which is now spreading to all states, is taken into account.
Similarly, bulk of water used in the country is used in agriculture, and more than
40% of the land area is put under agriculture. Thus, agriculture is quite significant for
quality of air, water and land, and pressure on land and water, which are the pillars
of sustainability.
In order to put a check on further overexploitation of water resources, the country
should create a policy environment that leads to crop pattern and practices consistent
with the natural resource endowment in various agro ecological zones of the country.
Further, without improving efficiency in water use in agriculture, through modern
method of irrigation (drip, sprinkler and sensors), the country cannot address the
stress on water use and meet the future water requirement. 25Agricultural Challenges and Policies for the 21
st
Century
3.8 Responsible Investment in Agriculture
Investment and subsidies are two important instruments for promoting growth in
agriculture. Subsidies are needed in the initial phases of many economic activities to
push adoption of new inputs, practices and technology. All major agriculture countries
subsidise agriculture to a varying extent. The broad guiding principle for subsidy in
today’s context are:
(i) should promote growth and efficiency.
(ii) should avoid distorting input – output markets,
(iii) should not encourage uneconomic production,
(iv) should not damage capacity of natural resource system and sustainability,
(v) should not create serious inequity among social and economic classes and
regions, and
(vi) should not cause adverse effect on investments.
The biggest concern relating to subsidy is that they get entrenched and hurt fiscal
discipline of the centre or the states.
The trend in subsidies and public investment in agriculture sector during the
previous two decades is presented in Table 9. The subsidy presented in Table 9 does
not include subsidy provided by the states and union territories (UTs) on power supply
to agriculture, which is as high as all other subsidies for agriculture. It also does not
include support to farmers under PM Kisan Nidhi amounting to Rs. 65,000 crore
(revised estimate), and most of the output price support and export subsidies. When
all these are reckoned, the support to agriculture sector turns out to be much higher
than the subsidy figure presented in Table 9. Even when major support to agricul-
ture is not included in the subsidy data reported by National Accounts Statistics, the
reported level of subsidy is still 2.27 times the amount spent on infrastructure devel-
opment in agriculture – that is so important for future growth of the sector. Public
investment to GDP ratio in agriculture is as low as 2.2. Total investment in agriculture
by all sources was 13.3% in year 2019-20.
Sector-wise shares in the total investment in agriculture show that 82% of it
comes from households (that is, farmers themselves), 17.49% from public sector and 26 Ramesh Chand
the remaining (0.54%) from private corporate sector (Table 10). During 2019-20, the
corporate investment in agriculture sector accounted for a meagre percentage (0.11%)
of the total investment in the economy.
Regulatory restrictions on marketing and absence of business-friendly environ-
ment in agriculture act as a deterrent for corporate investment in agriculture produc-
tion and marketing. This is said to be an important reason for the slow change in agri-
culture, dominance of traditional marketing channels and the weak linkage between
pre and postharvest agriculture phases.
A major chunk of the public investment in agriculture is spent on medium and
major irrigation projects. However, these investments did not translate into creation
Table 9: Public Investments and Subsidies in Agriculture and Allied Sector
(At 2011-12 Prices)
Year Amount in Rs. Crore As % of GVA in Agriculture and
Allied Sectors at Current Price
Subsidy Public Investment Subsidy Public Investment
2000-01 67027 16200 7.0 1.7
2001-02 76838 19827 7.7 2.0
2002-03 83850 17656 9.0 1.9
2003-04 81121 21619 8.0 2.2
2004-05 85776 27497 8.6 2.8
2005-06 84638 33162 8.0 3.2
2006-07 90805 38917 8.3 3.5
2007-08 122115 39278 10.4 3.3
2008-09 202340 34519 16.9 2.8
2009-10 156417 38582 12.3 3.0
2010-11 158337 33398 11.2 2.4
2011-12 100505 35576 6.7 2.4
2012-13 99928 35905 6.4 2.4
2013-14 90252 33631 5.4 2.1
2014-15 89663 36919 5.1 2.2
2015-16 90237 42287 4.9 2.5
2016-17 79179 47379 3.9 2.6
2017-18 98228 45918 4.5 2.4
2018-19 96475 52780 4.3 2.6
2019-20 122246 48971 5.0 2.2
Note: GVA refers to gross value added.
Source: National Statistical Office, National Accounts Statistics, Ministry of Statistics and
Programme Implementation, New Delhi, Various Issues. 27Agricultural Challenges and Policies for the 21
st
Century
of corresponding area under irrigation at the ground level (Figure 2). The Pradhan
Mantri Krishi Sinchayi Yojana, launched in 2015, aims at fixing the problem of poor
performance of medium and major irrigation projects and corrects the trend in area
under canal irrigation. This involves a paradigm shift in public investment in irriga-
tion to close the gap between IPC and IPU, and targets early completion of the ongoing
irrigation projects facing last mile connectivity problems. This change in approach to
public irrigation is expected to help in achieving the goal of ‘har khet ko pani’.
3.9 Farmers’ Income
Till recently, an increase in agri-food production remained primary focus of
agricultural policy and strategy. This strategy did not specifically target improvement
in farmers’ income and supply of food to consumers at competitive price, which are
important for welfare of farmers and consumers, respectively.
Accelerated growth in some sectors of the Indian economy, following economic
reforms in the early 1990s, lifted the overall growth rate of the economy from 4.2%
during the period between 1971 and 1991 to close to 7% after 1991. This helped in
doubling per capita income in the country at constant prices (2004-05) in just 17
years as compared to the 37 years it took to double per capita income before 1991.
However, the agriculture sector, which comprised over 40% of the Indian economy
and 59% of the workforce in 1991, did not experience any permanent change in its
growth trajectory. The GVA of agriculture and allied sectors doubled in about 23 years
before 1991, and it took same number of years to double again. Consequently, the
income of cultivators (farmers) has remained relatively low, and the gap with income
of non-farm workers has enlarged. A cultivator (farmer) earns less than one-third of
Table 10: Share of Various Sources in Gross Fixed Capital Formation (GFCF) in
Agriculture and Total Economy at Current Prices, 2019-20
Sector GFCF As % Percentage Share in Total GFCF of
(Rs. 000 crore) of GVA Private Public House
Corporate Sector holds
Agriculture 435 12.8 0.54 17.49 82.0
Non-Agriculture 5416 35.9 39.2 24.6 36.2
Total 5851 31.7 36.3 24.1 39.6
Note: GVA refers to gross value added.
Source: National Statistical Office (2021): National Accounts Statistics 2021, Ministry of
Statistics and Programme Implementation, New Delhi. 28 Ramesh Chand
the income of a non-farm worker (Chand 2019). This is major cause of rural distress.
Special focus is needed to raise income of farmers at a faster rate. This requires trans-
formation of agriculture production as well as marketing through a multi-pronged
strategy with due emphasis on enhancing productivity, reducing average cost, realis-
ing better price for farm produce, expanding allied activities and shifting farmers
to non-farm occupations (Chand 2017). The three farm laws, enacted in year 2020,
which have been repealed now because of opposition from some farmers groups, were
aimed to achieve this goal.
Beside agriculture, income from non-farm sources constitutes an important part
of income of farm households. According to the Situation Assessment of Agricultural
Household 2019, on an average, an agricultural household earns 47.4% income from
non-agricultural economic activities (Table 11). This share was 40% during 2012-13.
This shows that non-agriculture income sources are becoming more important.
It may be contended that agriculture households include a large number of agri-
cultural labour households, who satisfies the definition of agricultural household and
their wage earnings raise the share of non-agriculture income in the total household
Table 11: Average Monthly Income (Rs.) from Different Sources Per Agricultural Household
During July 2018-June 2019 for Each Size Class of Land Possessed (ha)
Size Class Farm Size Total Share of Various Sources in Total Income (%) @
of Land Category Income Net Receipt Wages Net receipt
Possessed (Rs.) from Crop and and from Non-farm
(ha) Livestock Salaries business
<0.01 Below Sub-marginal 11204 33.42 57.43 6.89
0.01-0.40 Sub-marginal 7522 28.44 59.70 9.35
0.40-1.00 Marginal 8571 46.88 45.57 6.65
1.01-2.00 Small 11449 62.14 31.85 5.35
2.01-4.00 Semi-medium 16435 72.91 21.59 4.61
4.01-10.00 Medium 28292 81.63 15.10 1.67
10.00+ Large 60758 90.64 6.49 1.91
All Sizes 10218 52.65 39.76 6.27
Notes: * only out-of-pocket expenses were considered for working out net receipt.
@ Shares do not sum up to 100 as income from leasing out land is excluded.
# Income from non-economic activities like pension, remittances, etc., are not included.
Source: National Statistical Office (2021b): Situation Assessment of Agricultural Households
and Land Holdings in Rural India, 2019, Ministry of Statistics and Programme
Implementation, New Delhi. 29Agricultural Challenges and Policies for the 21
st
Century
income. The Situation Assessment Survey also provides detailed estimates of source-
wise income by categories of land possessed (Table 11). The first category of below
sub-marginal households (that is, those households possessing less than 0.01 hectare
of land) may include households who are primarily labour households. The second
and third categories sum up to marginal land holding and fourth category represents
small farm size. Marginal farmers classified in the second and third sub categories
of land possessed earned only 28% - 47% income from agriculture (crop and live-
stock farming) and the remaining from salaries, wages and non-farm business. Small
farmers and semi-medium farm households earned 37.2% and 26.2% of their total
respective household income from non-agriculture sources. Furthermore, it is also
observed that not only is the share of non-agriculture sources in the total household
income substantial, but 68% of the farm households earned more income from non-
agriculture sources than from crops and livestock production (that is, agriculture).
Therefore, in order to increase income of farm households at a faster rate, both agri-
culture as well as non-agriculture sources need to be tapped.
3.10 Reforms in Policies and Regulations Affecting Agriculture
The package of economic reforms launched in the early 1990s did not cover poli-
cies and regulations in the agriculture sector except some liberalisation of trade. The
effect of these reforms is visible in the growth trend of agricultural output and non-
agricultural output. The latter witnessed acceleration, whereas the former remained
stuck at a 3% trend growth rate.
3.10.1 Reforms in Agricultural Policy and Market
Except a few states, agriculture marketing was brought under the state level APMC
Acts, also known as Agriculture Produce Market Regulation Act during the 1960s and
1970s. These regulations helped in many ways. They checked rampant malpractices in
transactions of farm produce, upgraded mandis, improved competitiveness, brought
transparency in transactions through open auction of produce, and set up mechanism
for redressal of any grievance of seller farmers.
Over time, it was felt that the system of agri marketing was not keeping pace with
the growth, and did not align with the needs of the agriculture sector and open new
opportunities for trade. Some weaknesses also crept in the prevailing APMC system
necessitating change and improvement in regulations. Some of the states started us- 30 Ramesh Chand
ing APMC mandis for revenue generation, which added to cost and price spread. Vari-
ous types of requirements in the form of licensing, registration and so on restricted
participation in mandis to local traders, and closed the door for traders and buyers
from outside the APMC. This raised the possibility of collusions, exploitation and
restrictive competition. Growth of APMC infrastructure fell far short of growth in
marketable surplus of crop output (Chand 2012). The net result has been that more
produce is transacted outside APMC mandis. Regulations also necessitated a large
number of transactions between producers and consumers. This created a gap between
the prices paid by consumers and the prices received by producers, and denied direct
purchase from farmers and direct supply by farmers to producers that has acquired
a lot of significance for high value crops and quality produce. The regulations worked
against investment in agricultural marketing, infrastructure and logistics.
Thus, since long, there was a felt need to overcome the limitations and constraints
of the present agricultural marketing system and to develop competitive, transparent
and barrier free markets with the choices to the farmers to sell their produce in the
markets and to the buyers offering a better price to them in a transparent manner.
Around the year 2000, a debate started to bring reforms in agriculture, especially
in agriculture marketing. Almost all experts and various high-level committees on
agriculture constituted from time to time held the lack or poor progress of reforms
in agriculture as a major constraint for high growth and the modernisation of
agriculture. It was concluded that policy interventions at the national and state level
did not address structural problem of the agricultural sector, which is the basic reason
for various problems faced by the sector, farmers discontent and relatively low growth
in farmers’ income. Ten important reasons for reforms in agriculture were discussed
by Chand (2020).
The Government of India formulated and circulated model APMC Acts and Model
Contract Farming Acts for their adoption by the states. A large number of attempts
were made by successive governments to persuade the states to adopt marketing
reforms and reforms related to contract farming. Some of the states adopted model
Acts partially, but by and large their adoption remained partial, diluted, patchy and
half hearted. Series of attempts were made by the government during 2017 to 2019 to
persuade the states to adopt the model Acts to bring reforms in agriculture. However,
implementation of APMC and other reforms did not register any significant progress. 31Agricultural Challenges and Policies for the 21
st
Century
When states did not come on board to reform their APMC Acts, despite repeated
pleas and persuasions by successive governments at the centre for 18 long years, the
option left with the union government was either to ignore its responsibility to secure
the future of agriculture and farmers, or use the constitutional route for pan India
reforms in agricultural policy and market. Moreover, COVID-19 threw up formidable
challenges to the economy, which could be addressed through bold and courageous
policy decisions with a potential of converting challenges into opportunity. Based on
all these developments, the union government took a historical decision to take on
itself the responsibility of bringing reforms in agriculture in 2020, and three new
farm acts were enacted after they were passed by the Parliament. These acts relate to
(i) domestic agriculture trade, (ii) contract farming, and (iii) modification in Essential
Commodities Act (1951). However, some misunderstanding and apprehensions
developed about the new farm laws amongst farmers of some of the states, and they
went on a long protest against the three new farm laws. Consequently, the three farm
laws have been repealed. Nevertheless, it is very clear that the sector cannot move
forward on a healthy trend without reforms.
3.10.2 MSP and Fair and Remunerative Prices
Some farmers groups seek more support from the government for higher and
assured price of farm produce and the continuation of present regime of support
policies having direct and indirect effect on agriculture. This implies a status quo for
power, fertiliser and water sectors. The demand for legalising MSP has gained consid-
erable traction during the recent farmers’ agitation against the new farm laws. On the
other hand, many experts contend that farmers’ aspirations from agriculture will not
be fulfilled without transformative changes in the sector. Nor can agriculture move to
the next stage of development without an enabling environment. Both of these goals
require a reimagining of agriculture. It is really a tough situation to address these
issues without suitable changes in the regulatory environment.
There are three ways to enable farmers to get fair and remunerative prices: one,
by creating an enabling environment for a fair, competitive and remunerative prices
through market mechanism, two, by public intervention to keep prices remunerative
through procurement or other means, and, three, by a combination of the above two.
The NDA government which came to power in 2014 followed the third route. It first
changed the norm for fixing MSP in 2018 to increase margin for producers to 50% 32 Ramesh Chand
or more over the average cost of crop production. Simultaneously, the government at
the centre circulated Model Acts ‘The Agricultural Produce and Livestock Marketing
(Promotion and Facilitation) Act (2017)’ and ‘The Agricultural Produce & Livestock
Contract Farming and Services (Promotion and Facilitation) Act, 2018’ for adoption
by the states. The third initiative taken by the government included two components
of public intervention: (i) expansion in procurement of pulses and oilseeds by central
agencies, and (ii) the states were given three options to keep farm prices at or above
MSP. These were covered under the scheme PMASHA which include procurement
under (i) Price Support Scheme (PSS), (ii) Price Deficiency Payment (PDP), and (iii)
Private Procurement and Stockists Scheme as a Pilot Scheme.
States were offered central assistance to procure up to 25% of the produce and to
meet up to 25% price deficiency under PDP scheme. The rationale behind the PSS was
that once 25% produce is purchased by public agencies, it will result in an increase in
open market prices to the level of MSP. This was same as the intervention in rice and
wheat until a few years back. At the same time, attempts were made by the centre to
persuade states to adopt model marketing act and Contract Farming Acts, but these
attempts were met with lukewarm response from the states. The centre then brought
comprehensive reforms in agriculture through three farm laws to create a competitive
market environment and other options like direct marketing and contract farming
for better price realisation by the farmers. But the new laws now stand repealed. The
concern now is how to ensure remunerative prices to farmers and to help them to get
higher incomes.
Some farmers’ groups demand legalising of MSP as a solution to low market
prices. Suggestions are also made to adopt mechanism like PDP, if procurement at
MSP is not feasible. Both these suggestions have far-reaching implications for the
economy, especially the fiscal health, private sector, crop pattern, diversification,
entrepreneurial skills of farmers and exports. Legal MSP cannot work if not supported
by demand and supply side factors. At best, it can work only when trade pays a lower
price to farmers as compared to a competitive market price. But if MSP itself is above
the price dictated by demand and supply, then even competitive markets will not
support MSP. Thus, legal MSP can work if it is based on what would be open market
price or market clearance price. If MSP is anchored to a fixated formula of cost plus,
which happens to be above the price supported by demand, then the private players 33Agricultural Challenges and Policies for the 21
st
Century
will not have any incentive to buy the produce. Price data shows that after adoption
of the new formula for MSP in 2018, MSP remained higher than open market prices
and international prices of most of the crops. In such a situation, neither will the
private sector buy the produce, nor can the produce be exported without subsidising
it. Thus, if we want to protect the farmers against unremunerative or uncompetitive
prices through legal MSP, we should be guided by the price recommended by institu-
tions like CACP considering the demand side factors and possible open market price.
Making MSP legal by itself will not ensure market prices moving to MSP.
When private sector does not buy at legal MSP, all that is offered for sale will not be
purchased and market clearance will not happen leading to a chaotic situation. Thus,
the government will be called to buy the produce. This amounts to taking over agricul-
ture trade by government, and has its own serious implications. Nowhere in the world,
not even in the socialist countries, this kind of mechanism is working. It should also
be kept in mind that non-MSP crops and products like fruits, vegetables, milk, egg and
fish are showing a much higher growth rate than MSP crops in the country. A demand
driven production can be much more remunerative for farmers than production fixated
to MSP.
Another suggestion to ensure legal MSP for farmers without distorting prices is to
pay the difference between legal MSP and market price received by farmers. A mecha-
nism similar to this is followed in United States of America (USA) and China to pay the
farmers the difference between target or guaranteed price and actual market price.
The question is when USA and China are doing it, why India cannot do it? To under-
stand this, the system prevailing in USA and China need to be understood clearly.
China has faced same situation which India is now facing in the case of surplus of rice
and sugar, and changed policy support mechanism for agriculture from procurement
and stocking to payment of price difference on a selective basis.
Agricultural economists and experts need to debate the following issues to bring
clarity to future policy for transformation of agriculture, price assurance and better
farm incomes:
1. What is the best way to support farmers in raising their income?
2. What are the learnings for India from the experience of other countries that
provide price support to their farmers? 34 Ramesh Chand
3. What are the implications of legalising MSP? What are other options to ensure
remunerative prices to farmers?
4. What should be the norm for MSP if it has to serve as a price guarantee?
5. Should the responsibility for price assurance rest entirely with the centre?
Should it be shared between the centre and the states? The China model can
be useful in this case.
6. Should India move from price support and input subsidies to income support
for farmers?
A scholarly and widespread debate is required on the above issues to steer clear
the policy roadmap for reimagining agriculture and its role in the future development
of the country.
4. Conclusion
A significant and sustained increase in farmers’ income and the transformation of
agriculture require a paradigm shift in the entire approach towards agriculture sector.
Changes in archaic regulations and liberalisation of the sector are a must for creating
an enabling environment for a modern and vibrant agriculture. Advancement in
science led technology, an enhanced role of private sector in both pre and postharvest
phases, liberalised output market, active land lease market and emphasis on efficiency
will equip agriculture to address the challenges of 21
st
century and contribute towards
the goal of a new India. A well-coordinated action and strategy between the centre
and the states is needed to ensure that agriculture marches to the next stage of
development along with the other sectors.
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st
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Economic & Political Weekly, January 12, Vol. 43, No. 2, pp. 54-62. About The Author
Professor Ramesh Chand is currently Member of the
National Institution for Transforming India (NITI) Aayog
(in the rank and status of union minister of state). He has
a PhD in agricultural economics from Indian Agricultural
Research Institute, New Delhi. He is fellow, National
Academy of Agricultural Sciences and Indian Society of
Agricultural Economics. He has been involved in policy
formulation for the agriculture sector for the last two and a
half decades. Prior to joining NITI Aayog, he was Director, National Institute of
Agricultural Economics and Policy Research, New Delhi.
Prof. Chand is also Member of Board of Trustees of International Maize and Wheat
Improvement Center, Mexico, and of The Policy Advisory Council of the Australian
Centre for International Agricultural Research, Canberra, Australia. He was also
Member of the Fifteenth Finance Commission of India, Government of India.
Prof. Chand has worked in senior academic positions as ICAR National
Professor, Professor and Head, Institute of Economic Growth, Delhi University,
and Professor at Punjab Agricultural University, Ludhiana. Prof. Chand has
been Visiting Professor at the University of Wollongong, Australia and at the
Institute of Developing Economies, Japan. He has also been consultant with
international organisations such as Food and Agriculture Organisation, United
Nations Development Programme, Economic and Social Commission for Asia
and the Pacific (ESCAP), United Nations Conference on Trade and Development,
Commonwealth and World Bank. Prof. Chand has served as India’s nodal officer
for agriculture for South Asian Association for Regional Cooperation for 7 years
and represented India in meetings of G20 and ESCAP.
Prof. Chand has received Jawaharlal Nehru Award (1984) and Rafi Ahmad
Kidwai Award (2006) of the ICAR, and Atal Bihari Vajpayee Award (2018) of
the Indian Economic Association. In 2021, he was also conferred the Degree of
Science (Honoris Causa) by Professor Jayashankar Telangana State Agricultural
University, Hyderabad and Sardar Vallabhbhai Patel University of Agriculture
and Technology, Meerut. Prof. Chand has authored seven books and published
more than 150 research papers in reputed national and international journals in
the areas of agriculture production, growth, development policy, farmers’ issues,
markets and trade.
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