Agriculture and Rural Development Strategies—

1. Technologies and institutions,

2. land relations and land reforms,
3. rural credit,
4. modern farm inputs
5. marketing— price policy and subsidies;
6. commercialisation and diversification.
7. Rural development programmes including poverty alleviation programmes,
8. development of economic and social infrastructure
9. New Rural Employment Guarantee Scheme.
10. Agriculte trends
11. Productivity and green revolution
12. PDS and food security

Role of agriculture plays an important role in the economy from demand as well as supply dimensions in the
economy. From the demand side, the expansion of agriculture sector generates demand for the products in the
modern sector and helps the expansion of the modern sector. From the supply side agriculture sector ensures
the adequate supply of food grains for the workers engaged in the non-agriculture sectors. It also ensures the
supply of verities of raw materials to the industrial and service sectors. The release of surplus labourers
augments the production capacity in the modern sectors. It also helps in controlling the food inflation in a country,
which is vital for stable economic growth.
Cropping pattern plays important role in agriculture sector for ensuring suitable cropping for different areas to
enhance the land productivity. Appropriate cropping pattern helps to overcome deficiencies in nutritional
balances in the population of the country.
Agriculture has played very crucial role in making economic advances of the currently developed countries.
Cases of Japan, Taiwan and Denmark are few examples where the adoption of modern techniques as well as
improved verities of seeds played crucial role in developing the agriculture sector with very visible change
towards the crops which caused the greater land productivity.
Indian economy which witnessed food scarcity and dependence on the foreign nations for its even basic
requirements of cereals based food requirements till the mid-1960s adopted the Green Revolution techniques to
overcome such challenges. The Green Revolution techniques were primarily based on high yielding verities of
seeds, use of fertilizers, modern technologies and suitable cropping patterns. This led to primarily greater change
of cropping pattern where the Green Revolution techniques were implemented that was mainly in the North-
Western region. Wheat and rice, particularly in Punjab, increased their share in total agriculture output. The other
regions also witnessed change in the cropping pattern particularly after the 1980 when the Green Revolution
techniques were implemented little widely. But such diversification got stagnated during the period since
economic liberalization except the Central region where share of cotton and oilseeds increased. The change in
cropping pattern and application of the Green Revolution techniques did trigger better agricultural performance
particularly during the period between 1980 and 1992. But the post-economic liberalization has witnessed slow
down of agriculture sector.
There has also been deficiency in the cropping pattern in India as some regions have witnessed emergence of
unsuitable crops. Such as Punjab has witnessed rise in the share of rice in total output of crops which is
unsustainable as the there is fall in the ground water level. Similarly the Eastern region has not witnessed rise in
share of the most suitable crops such as rice, which is most suitable for the Eastern region. The uneven
implementation of the Green revolution techniques has caused uneven performance of agriculture sector in
different regions.
India has to strengthen its agriculture sector performance by infusing the greater degree of public investments
across all the regions for increasing the irrigation facilities as well as increasing the number of cold storages and
ware houses. India needs to match the level of land productivity that exists in the developed countries.

AGRICULTRURE SECTOR- QUICK SNAP SHOT

 The history of Agriculture in India dates back to Indus Valley Civilization and in some parts of Southern
India, it was found to be practised even before the Harappans.
 Today, India ranks second worldwide in farm output. The economic contribution of agriculture to India’s
GDP is steadily declining with the country’s broad-based economic growth, yet, having nearly 50% of
the population dependent on it for livelihood.
 Agriculture, along with fisheries and forestry, is one of the largest contributors to the Gross Domestic
Product (GDP). As per the estimates by the Central Statistics Office (CSO), the share of agriculture and
allied sectors (including agriculture, livestock, forestry and fishery) is expected to be 17.3 per cent of the
Gross Value Added (GVA) during 2016-17 at 2011-12 prices.
 The Department of Agriculture and Cooperation under the Ministry of Agriculture is responsible for the
development of the agriculture sector in India. It manages several other bodies, such as the National
Dairy Development Board (NDDB), to develop other allied agricultural sectors.
 
Indian agriculture: Potential, Prospects and Prescriptions
Index Figure

Gross cropped area 195 million hectare

Net sown area 141 million hectare

Agricultural irrigated land (% of total agricultural 36% (As per 2014 World bank data)
land)

Animal husbandry output Constitutes about 32% of country’s agricultural output

Agricultural growth 4.1% in the current year from 1.2% in 2015-16 (Economic
survey)
 Horticultural crops occupy 10% of Gross cropped area and producing 160.75 m tones. Total production
of fruits is at 49.36 m tones and vegetables are at 93 m tones.
 Animal husbandry output constitutes about 32% of country’s agricultural output. The contribution of this
sector to the total GDP during 2006-07 was 5.26%.
 India is the highest producer of milk and second highest producer of fruits and vegetables.
 India accounts for 57% of the world’s buffalo population and 14% of cattle population.
 India holds 6th place with 7% world’s market share in medicinal and aromatic plants.
 
Problems faced by Indian Agricultural sector
Productivity of Agriculture in India
 Although India has attained self-sufficiency in food staples, the productivity of its farms is below that of
Brazil, the United States, France and other nations. Indian wheat farms, for example, produce about a
third of the wheat per hectare per year compared to farms in France.
 Rice productivity in India was less than half that of China. Other staples productivity in India is similarly
low.
 Indian total factor productivity growth remains below 2% per annum; in contrast, China’s total factor
productivity growth is about 6% per annum, even though China also has smallholding farmers.
 Several studies suggest India could eradicate its hunger and malnutrition and be a major source of food
for the world by achieving productivity comparable with other countries.

 
Infrastructure

Poor penetration of forward and backward linkages in Agriculture

Food processing units needs to have strong backward linkages with the farmers, farmer producer organizations,
self-help groups, farmer’s groups etc. Further, to be able to sell its processed food, it needs to develop strong
forward linkages with wholesalers, retailers, exporters etc.
India has poor rural roads affecting timely supply of inputs and timely transfer of outputs from farms. In other
areas regional floods, poor seed quality and inefficient farming practices, lack of cold storage and harvest
spoilage cause over 30% of farmer’s produce going to waste, lack of organised retail and competing buyers
thereby limiting Indian farmer’s ability to sell the surplus and commercial crops.
 
Agriculture Price Policy

 The agricultural price policy in India has succeeded in establishing certainty and confidence in respect
of the prices of agricultural commodities through the fixation of minimum support prices by Commission
for Agricultural Costs and Prices.
 But due to the variations in the degree of enforcement of procurement in different years, some degree of
uncertainty and instability in prices were experienced by the Indian farmers.
 Again raising the minimum support prices and procurement prices offered incentive to the producers to
increase their production but these benefits were mostly restricted to large farmers. Moreover, the public
distribution system in India is also subjected to various limitations such as its restricted operation in
wheat and rice only, insufficient coverage of rural areas, inadequate coverage of the people lying below
the poverty line and it’s too much expensiveness due to lack of targeting.
 As argued by several economists, continuous increase in the procurement prices has resulted
inflationary pressures in the economy. This increase in the price of food grains has also resulted in huge
hardships to the rural poor consisting of marginal farmers and landless labourers who constitute the bulk
of rural population.
 
Other problems include

 Falling water levels, Expensive credit.

 A distorted market.
 Many intermediaries who increase cost but do not add much value.
 Laws that stifle private investment.
 Produce that does not meet international standards.
 Inappropriate research.
 Crop pattern.
 
Related issues
Farmer Suicides
In 2012, the National Crime Records Bureau of India reported 13,754 farmer suicides. Farmer suicides account
for 11.2% of all suicides in India. Activists and scholars have offered a number of conflicting reasons for farmer
suicides, such as
 Natural
o Monsoon failure, frequent El-Nino events, and draught have decreased the production
substantially.
 Economic
o Less fund at their disposal, higher interest rate since many buy from local zamidars and
landholders often result into burgeoning effect of actual & interest money which in adverse
case sometime take away their land and hence their livelihood.
 Social
o Farmers from rural areas have big families which are dependent on the small farmland which
leads to economic burden. Dowry for daughters Farmers either offer their property or give
away the land as dowry to the groom.
 Policy paralysis
o Poor targeting of Subsidies mostly benefiting the rich creating wide gap in earning profit.
o Local administration is often insensitive to the demands and requirements of farmers.
 Personal issues such as illness, alcohol addiction, stress and family responsibilities.
 
Farm loan Waiver
The farm credit system in Indian agriculture, evolved over decades has been instrumental in enhancing
production and marketing of farm produce and stimulating capital formation in agriculture.
Credit for Indian agriculture has to expand at a faster rate than before because of the need to step-up agricultural
growth to generate surplus for exports, and also because of change in the product mix towards animal
husbandry, aquaculture, fish farming, horticulture and floriculture, medicinal plants, which will necessitate larger
investments.
Why is it important?
  Agriculture Growth has decreased since 2011-12 to around 1%
 Input cost is increasing due to rise in prices of seeds, fertilisers etc.
 Distress migrations- causing burden on destinations.
 Growth of unorganised credit sector- lack of access to organised sector lending, many farmers resort to
unorganised credit sector.
 Increasing attrition rate in agriculture
 
Concerns

“A farm loan waiver undermines an honest credit culture and discipline.... It engenders moral
hazard and entails transfer from tax payers, there’s a need to create consensus that farm loan
waiver promises are eschewed.” -RBI Governor Urjit patel
 Loan waivers provide some relief to farmers in such situations, but there are debates about the long-
term effectiveness of the measure. Critics demand making agriculture sustainable by reducing
inefficiencies, increasing income, reducing costs and providing protection through insurance schemes.
 They point out that farm loan waivers are at best a temporary solution and entail a moral hazard — even
those who can afford to pay may not, in the expectation of a waiver. Such measures can erode credit
discipline and may make banks wary of lending to farmers in the future.
 It also makes a sharp dent in the finances of the government that finances the write-off.
 A blanket waiver scheme is detrimental to the development of credit markets. Repeated debt-waiver
programmes distort households’ incentive structures, away from productive investments and towards
unproductive consumption and wilful defaults.
 These wilful defaults, in turn, are likely to disrupt the functioning of the entire credit system.
 
Economic cost of farm loan waiver

 The loan waiver for small and marginal farmers will push up states’ fiscal deficit to 2.71% (Budgeted:
1.53%) in FY’18 of gross state domestic product (GSDP).
 The unintended outcome of this could be reduced availability of credit to the farmers from banks, forcing
them to resort to the unorganised lending sector.
 It affects credit discipline and demand for debt waiver may also come in from other states as well.
 
Criticisms

According to Parshuram Ray, director of the New Delhi-based Centre for Environment and Food Security, the
loan waiver was “an electoral sop that involves a lot of statistical jugglery and very little of real hope for Indian
farmers.”
An important feature of the program which has been heavily criticized is that it covers only formal sources of
credit and excludes any kind of informal loan. Thus, while it benefitted wealthy and large-scale farmers who had
access to institutional credit (about 23% of the total number of farmers), small and marginal farmers, who borrow
the majority of their funds from private moneylenders, would not benefit from the scheme.
Another criticism of this scheme was that it might cripple the agricultural credit system.
 
 
Government to Double the Income of Farmers by 2022

Why Double Farmers’ Income?

 Past strategy for development of the agriculture sector in India has focused primarily on raising
agricultural output and improving food security.
 The net result has been a 45 per cent increase in per person food production, which has made India not
only food self-sufficient at aggregate level, but also a net food exporting country.
 The strategy did not explicitly recognise the need to raise farmers’ income and did not mention any
direct measure to promote farmers welfare.
 The net result has been that farmers income remained low, which is evident from the incidence of
poverty among farm households.
Doubling real income of farmers till 2022-23 over the base year of 2015-16, requires annual growth of 10.41 per
cent in farmer’s income. This implies that the on-going and previously achieved rate of growth in farm income has
to be sharply accelerated. Therefore, strong measures will be needed to harness all possible sources of growth
in farmers’ income within as well as outside agriculture sector.
The major sources of growth operating within agriculture sector are:
 Improvement in productivity
 Resource use efficiency or saving in cost of production
 Increase in cropping intensity
 Diversification towards high value crops
The sources outside agriculture include:
 Shifting cultivators from farm to non-farm occupations, and
 Improvement in terms of trade for farmers or real prices received by farmers.
 
Niti Ayog Agricultural Marketing and Farmer Friendly Reforms Index
The index ranks states based on their initiatives taken in implementing provision of seven farm sector reforms.
These reforms have been proposed under model APMC Act, joining e-NAM initiative, special treatment to fruits
and vegetables for marketing and level of taxes in mandis. States are ranked based on score on the scale
ranging from 0 to 100. The minimum score of 0 implies no reforms at all and score of 100 means state is
friendliest to farmers. The index identifies three major parameters. They are:
 Reforms in agricultural marketing
 Land lease
 Forestry on private land.
 
Major Government Initiatives in India's Agriculture Sector

 
Pradhan Mantri Krishi Sinchai Yojana

The primary objectives of PMKSY are:

 To increase the area of agricultural lands covered by irrigation and reduce dependency on monsoon. 
 To improve on farm water use efficiency by adopting water management techniques adoption
of precision-irrigation and other water-saving technologies to reduce wastage of water. 
 Enhancing recharge of aquifers and introducing sustainable water conservation practices. 
 
National Agriculture Market

The Department of Agriculture & Cooperation formulated a Central Sector scheme for Promotion of National
Agriculture Market through Agri-Tech Infrastructure Fund (ATIF)  through provision of the common e-platform. 
Implications / Benefits for various stakeholders:
Farmers
 They can sell produce without the interference of any brokers or middlemen thereby making competitive
returns out of their investment.
Traders
 Traders will be able to do secondary trading from one APMC to another one anywhere in India. Local
traders can get access to larger national market for secondary trading.
Buyers, Processers & Exporters
 Buyers like large retailers, processors or exporters will be able to source commodities from any mandi in
India thereby reducing the inter-mediation cost. Their physical presence and dependence on
intermediaries will not be needed.
Consumers
 NAM will increase the number of traders and the competition among them increases. This translates
into stable prices and availability to the consumers.
 
Paramparagat Krishi Vikas Yojana

Paramparagat Krishi Vikas Yojana is an elaborated component of Soil Health Management (SHM) of major
project National Mission of Sustainable Agriculture (NMSA). Under PKVY Organic farming is promoted through
adoption of organic village by cluster approach and PGS certification.
The Scheme envisages:
 Promotion of commercial organic production through certified organic farming.
 The produce will be pesticide residue free and will contribute to improve the health of consumer.
 It will raise farmer’s income and create potential market for traders.
 It will motivate the farmers for natural resource mobilization for input production.
 
Pradhan Manthri Fasal Bima Yojana

The new Crop Insurance Scheme is in line with One Nation – One Scheme theme.  It incorporates the best
features of all previous schemes and at the same time, all previous shortcomings / weaknesses have been
removed.
Objectives
 To provide insurance coverage and financial support to the farmers in the event of failure of any of the
notified crop as a result of natural calamities, pests & diseases.
 To stabilise the income of farmers to ensure their continuance in farming.
 To encourage farmers to adopt innovative and modern agricultural practices.
 To ensure flow of credit to the agriculture sector.

 
 
Mechanisation
Mechanisation has the potential to change many agricultural output challenges as it will lead to higher
productivity and economic contribution. Yet, it has been inaccessible to farmers for long largely due to economic
reasons. With small land ownership and constant fragmentation, small and marginal farmers find it almost
impossible to own a tractor. To make agriculture economically viable ICAR started many initiatives.
 It is working towards developing need-based and region specific engineering technologies and is
engaged in planning, co-ordination and monitoring of R&D programmes in a national and international
level. 
 It has developed many improved machinery such as laser and leveller, self-propelled sprayers,
precision seeders and planters, harvesters for cereals and sugarcane etc. 
 It has introduced gender friendly tools for reduction in the drudgery for women farm workers. 
 Lab to Land programme recently set up of modern mechanised farm units.
 
Infrastructure interventions
Mega food park scheme

 The Scheme of Mega Food Park aims at providing a mechanism to link agricultural production to the
market by bringing together farmers, processors and retailers so as to ensure maximizing value
addition, minimizing wastage, increasing farmers’ income and creating employment opportunities
particularly in rural sector.
 The Mega Food Park Scheme is based on “Cluster” approach and envisages a well-defined agree/
horticultural-processing zone containing state-of-the art processing facilities with support infrastructure
and well-established supply chain.
 9 Mega Food Parks namely Patanjali Food and Herbal Park, Haridwar, Srini Food Park, Chittoor, North
East Mega Food Park, Nalbari, International Mega Food Park, Fazilka, Integrated Food Park, Tumkur,
Jharkhand Mega Food Park, Ranchi, Indus Mega Food Park, Khargoan, Jangipur Bengal Mega Food
Park, Murshidabad and MITS Mega Food Park Pvt Ltd, Rayagada are functional as on 30.06.2017.
 
Cold Storage

India is the largest producer of fruits and second largest producer of vegetables in the world. In spite of that per
capita availability of fruits and vegetables is quite low because of post-harvest losses which account for about
25% to 30% of production. The Task Force on cold-chain development in India had suggested in its report to
establish a National Centre for Cold-chain Development (NCCD) in India as an autonomous centre for excellence
to be established as a registered society to work in close collaboration with industry and other stake holders to
promote and develop integrated cold-chain in India for perishable F&V and other perishable allied agri –
commodities to reduce wastages and improve the gains to farmers and consumers substantially.
 
Food processing and Safety

Food processing levels are quite low in India at 3% when compared to 30-70% in developed countries and
wastage of agriculture produce is as high as 40%. National Food Processing Mission was launched to address
these problems and create potential for higher revenues. The objectives of the program are: 
Promote Primary processing centres close to the farms and link them with Clusters through hub and spoke
models. 
Facilitate exports of high value products like Cheese, Peanut butter etc. and encourage such facilities through
subsidies. 
Develop food processing clusters, Food parks and Agriculture SEZs; Contract farming, Warehouses (Cold
chains) development was also given an important role by providing tax rebates. This scheme has resulted in
some positive outcomes like 
 Exports from Agriculture SEZs have increased over the years. 
 Exports of Meat, Marine products have improved. 
But the performance of this scheme on the whole has left us much to be desired with warehouses, processing
facilities have not been developed. 
In the absence of APMC reforms, contract farming and private procurement is virtually absent. 
 
Crop pattern

 Record productions of sugarcane, ground nuts, and vegetables were seen but wastage was higher as
export opportunities shrunk. 
 Indian farming suffers from excess cropping of water-intensive crops like sugarcanes in dry areas. This
is one of reason for agricultural and farm distress. The high dependency on Monsoon adds to worry. 
 The recent initiative from government which has emphasized the crop diversification and climate-
appropriate agriculture and cropping are helping the shift from switch to value added and less water
intensive crops.
 
Model Land Leasing Law
Taking note of increasing incidents of leasing in and out of land and suboptimal use of land with lesser number of
cultivators, NITI Aayog has formulated a Model Agricultural Land Leasing Act, 2016 to both recognize the rights
of the tenant and safeguard interest of landowners. A dedicated cell for land reforms was also set up in NITI.
 
Soil Health Card

The campaign to provide soil health card with nutrient information of soil would help the farmers to educate about
most viable and appropriate cropping pattern suiting the climatic conditions in region. Shortage of infrastructure
like soil testing labs is hindrances but it‘s a move in right direction. 
 
Higher MSP increase in Pulses and Oil Seeds

From last two years, the MSP has tried to address the issues of higher MSP in cereal and lower in Pulses and oil
seed. The recent move to increase pulses MSP by 7% in move towards the Crop-neutral MSP regime. 
 
Department of Animal Husbandry, Dairying, and Fisheries
 Two National Kamdhenu Breeding Centersopened in the country, one in the North and one in the
South. 
 National Gokul Missionstarted for development and conservation of indigenous cattle breeds.
 Blue Revolutioninitiated to increase fisheries production.
 Coverage under National Livestock Mission (NLM)extended to entire country.
 
Agriculture Research and Education
New schemes such as Mera Gaon Mera Garav, Mission 2050, Farmers First, and Student Ready started in 2015.
Krishi Vigyan Kendras (KVKs) are the frontline agricultural extension center funded by the Indian Council of
Agricultural Research (ICAR). The KVKs focus on training and education of farmers, rural youth, on field
demonstration of new and improved farming techniques etc.  Web-based ‘Farmers Portal’ and mobile based
‘mKisan’ SMS portal along with two mobile Apps (‘Kisan Suvidha’ & ‘Pusa Krishi’) have been launched.
Information is also being disseminated through the ‘Kissan Call Centre’ and ‘DD Kisan Channel’.
 
Future Prospects
Irrigation: Per Drop More Crop

 India also has much less per capita water as compared to other leading agrarian countries. This
problem exacerbated because India has been exporting virtual water embedded in crops, which is
marked by its feature of non-replenishment.
 Once it is exported, it cannot be recovered. Given this scenario, it is time to make a shift to micro
irrigation so that the efficient and judicious use of scarce water resources can be made.
 High initial costs deter farmers to adopt this technology. While big farmers can easily avail this
technology, the government should consider giving subsidies to small farmers to boost the adoption of
this technology.
 
Second green revolution

 India needs second green revolution to bring food security to its billion plus population, to remove
distress of farming community and to make its agriculture globally competitive.
 To achieve these goals, yield rates of food grains, pulses, oil seeds, dairying and poultry, horticultural
crops, and vegetables need to be enhanced; and forward-backward linkages of agriculture with
technology, food processing industry needs to be strengthened to match soil to seed and product to
market.
 High productivity and better value addition by agro-processing are its key parameters.
 
R&D is the future

 India spent 31% of its agricultural GDP on research and development in 2010, in the same year China
spent almost double that amount. Even our neighbour Bangladesh spent 38% of its agricultural GDP on
research and development in that year.
 As a result of this resource crunch there has not been diffusion of new agricultural innovations and
practices that is critical for enhancing farm productivity.
 As the Economic Survey notes, even in states where agriculture is relatively more important (as
measured by their share of agriculture in state GDP), agriculture education is especially weak if
measured by the number of students enrolled in agricultural universities.
  There has also not been any major contribution from the private sector towards research and
development. Government should thus woo private players by giving them incentives to play a major
role in agricultural research and development.
 
Other Initiatives needed
 ‘More from less’ should be the aim of agriculture because rapid industrialization and climate change
have raised the scarcity value of land and water.
 Indian agriculture is the victim of the Green Revolution’s success. It has become cereal-centric,
regionally-biased and resource-intensive. A rainbow revolution must follow the green and white
revolutions.
 Genetically modified crop technologies have ‘significant net benefits.’ Evolved regulation is needed to
allay public fears so they can be deployed.
 Pulses and oilseeds must be supported with procurement and support prices that reflect their social
contribution – less water use and enrichment of soil with atmospheric nitrogen.
 Advancements in Seed Technology – New varieties need to be tested and seeds of these varieties
should be made available to the farmers for cultivation in the regions in which it is suitable.
 Regulatory measures for quality seed production have to be tightened so as to discourage the sale of
spurious seeds to the farmers.
 Subsidies on power must end to curb water wastage. Cheap power makes India a net exporter of water
through commodities like cotton, sugar and soybean, while China is a net importer of water through
soybean, cotton, meat and grains.
 Agricultural research has the biggest impact on yield and profitability but it is weak in states where
agriculture is relatively more important (eastern and northern states, except Punjab and Haryana).
 The private sector must be enticed into pulses research (which it has shunned) by offering a
‘disproportionately large enough award’ to the winner for innovating in desirable traits, but the
intellectual property rights must vest with the government. There should be equal treatment of the
private, public and citizen sectors in this respect.
 
Conclusion
The recent initiatives taken by the Government are definitely steps taken in the right direction. The agreements
signed between India and Israel further underscore the fact how water management, and judicious usage of
limited resources is vital for a thriving agricultural sector.
 Recent developments further underscore the fact that India urgently needs to diversify its cropping
pattern- this will help conserve moisture and thus help in judicious usage of resources. Efforts described
above can further the objective of the Government of doubling farmer’s income by the year 2022.
 Such an effort would involve the collective participation of various stakeholders, including the wider
farming community, pressure groups, private sector, banking sector, and both the central and state
governments.
 
LAND REFORMS

“Land is not merely soil, it is a fountain of energy flowing through a circuit of soils, plants and animals.” – Aldo
Leopold
In simple terms, land reforms mean equitable redistribution of land with the aim of increasing productivity and
decreasing poverty. It refers to the redistribution of land from the few who have to the many who are landless or
own far too little.
The pre-British scenario
Traditionally, in India before the coming of the British, private ownership of land was an unfamiliar idea. Land was
generally owned by the village community collectively. A proper land revenue system was initiated by Todar Mal
during the reign of Akbar. Under this system, land was measured, classified and the rent was fixed accordingly.
When the leash of power went into the hands of the British, a sea-change was seen in the pattern of ownership
of land in India.
Land ownership patterns under the British rule
PERMANENT SETTLEMENT OF BENGAL/ ZAMINDARI SYSTEM
Lord Cornwallis introduced the Permanent Settlement in 1793. Under this system, a class of landlords called
Zamindars was created whose responsibility it was to pay a fixed rent to the government for the lands they
owned. They gave out parcels of land to farmers who became their tenants. Their title to the land was hereditary.
What was intended as a system beneficial for all parties concerned soon turned out to be exploitative. The State
was only concerned with maximising revenue with minimum effort. The Zamindar too wanted maximum rent from
his tenants irrespective of the land’s true potential. He could increase his own wealth by extracting most out of his
farmer tenants since his due to the State was fixed. In addition, several layers of intermediaries were created
between the Zamindar and the tenants adding to the burden. The landless farmers and labourers suffered greatly
in poverty. Also, this led to the creation of a group of rich Indians whose loyalty lay largely with the British. As you
can see the Permanent Settlement gave rise to the Zamindari system of tenancy in Bengal and soon was
adopted in other regions.
Another system was called the Jagirdari system which was similar to the Zamindari system.
RYOTWARI SYSTEM
Under this system, the proprietor of land gave the rent and taxes directly to the government in the absence of any
middlemen. This started in Madras and was later adopted in Bombay as well.
MAHALWARI SYSTEM
This system was introduced by William Bentinck’s government under which landlords were responsible for the
payment of revenue to the State. These landlords or Zamindars had a whole village or a group of villages under
their control. The Mahalwari system prevailed in UP, the North Western Province, Punjab and parts of Central
India.
Outcomes of landowning systems during the colonial era
 Extreme peasant indebtedness due to sky-high tax rates.
 Creation of a class of a rich few who mostly exploited the poor peasant.
 Peasants lived in constant fear of eviction.
 Poverty was entrenched into the farmer class.
These systems created, at the time of independence, a class of landlords who owned large swathes of land and
innumerable peasants who owned nothing and lived in dire poverty and misery. The following figures will reveal
this.
7% of the landowners owned 54% of land. In contrast, only 6% of land was owned by 28% of landowners (with
marginal and sub-marginal holdings).
Land reforms since independence
Land reforms refer to the regulation of ownership, operation, leasing, sales, and inheritance of land.
Objectives of land reforms after independence
Land is the basis of all economic activity and for a largely agrarian society like India; this carries a lot of import.
Indian rural society is symbolised by a rich landowning minority (zamindars/landlords) and an impoverished
landless majority (peasants). Therefore, land reforms are a vital step towards economic and social equality.
Objectives of land reforms:
 Redistribution of land across society so that land is not held in the hands of a few people.
 Land ceiling to disburse surplus land amongst small and marginal farmers.
 Removal of rural poverty.
 Abolition of intermediaries.
 Tenancy reforms.
 Increasing agricultural productivity.
 Consolidation of land holdings and prevention of land fragmentation.
 Developing cooperative farming.
 To ensure social equality through economic parity.
 Tribal protection by ensuring their traditional land is not taken over by outsiders.
 Land reforms were also for non-agricultural purposes like development and manufacturing.
Out of these the major objectives post-independence were abolition of intermediaries, regulation of
tenancy, land ceiling, consolidation of fragmented holdings.
In India, the abolition of intermediaries who existed under the various British systems has largely been
successful. The other objectives have yielded mixed results and vary across states and over time periods. Land
reforms come under the State List and so, the success of land reforms varies from state to state. The most
comprehensive and successful reforms took place in the communist strongholds of Kerala and West Bengal.
Andhra Pradesh, Madhya Pradesh and Bihar saw inter-community clashes as a result of land reforms.
India has seen four ‘experiments’ since independence to redistribute the land holdings. They are:
1. Reforms from ‘above’, i.e., through legislation.
2. Reforms from above from the government coupled with peasant mobilisation; like in Kerala and West
Bengal where land was seized and redistributed; and also to improve the conditions of peasants.
3. Naxalite movement and also the ‘land grab’ movement.
4. Reforms from ‘below’ through voluntary donations by landlords and peaceful processions by farmers like
the Bhoodan movement and the Gram Dan.
 Zamindari Abolition Acts
Initially when these acts were passed in various states, they were challenged in the courts as being against the
right to property enshrined in the Indian Constitution. So, amendments were passed in the Parliament to legalise
the abolition of landlordism. By 1956, Zamindari abolition acts were passed in many states. As a result of this,
about 30 lakh tenants and share-croppers acquired ownership rights over a total of 62 lakh acres of land all over
the country.
Land Ceilings Act
Land ceiling refers to fixing a cap on the size of land holding a family or individual can own. Any surplus land is
distributed among landless people like tenants, farmers, or agricultural labourers.
Tenancy reforms
This focused on three areas:
1. Rent regulation
2. Tenure security
3. Conferring ownership to tenants
 Outcomes of Land Reforms
 Abolition of middlemen like landlords
The powerful class of Zamindars and Jagirdars cease to exist. This reduced the exploitation of peasants who
now became owners of the land they tilled. This move was vehemently opposed by the Zamindars who employed
many means to evade the law. They registered their own land under their relatives’ names. They also shuffled
tenants around different plots of land so that they wouldn’t acquire incumbency rights.
 Land ceiling
With a cap on the size of land holding an individual/family could hold equitable distribution of land was possible to
an extent. With only landlord abolition and no land ceiling, the land reforms would not have been at least partially
successful. Land ceiling ensured that the rich farmers or higher tenants did not become the new avatar
Zamindars.
 Land possession
Land is a source of not just economic income but also social standing. Land reforms made it mandatory to have
records of holdings, which was not the case previously. It is also compulsory to register all tenancy
arrangements.
 Increased productivity
More land came under cultivation and since tillers themselves became the landowners, productivity increased.
Land reforms were largely successful in the states of West Bengal and Kerala because of the political will of the
left-wing governments to implement them efficiently. There was a sort of revolution in these places in terms of
land holding patterns and ownership, and also the condition of peasants. The backing slogan was ‘land to the
tiller’. In Jammu and Kashmir also, there was partial success in the redistribution of land to landless labourers.
Drawbacks of land reforms
 There are still many small and marginal farmers in India who pray to the clutches of moneylenders and
continue to remain indebted.
 Rural poverty still exists.
 Land ceiling varies from state to state.
 Many plantations were exempt from land ceiling act.
 Many people own huge tracts of land under ‘benami’ names.
Land reforms also include agrarian reforms which deal with measures to improve the productivity of land
especially agricultural land. This includes the Green Revolution.
To fix the various loopholes in the land reforms, in the late 60s and early 70s, the recommendations of
the Central Land Reforms Committee were implemented.
 The ceiling was lowered according to the crop pattern. It was brought to 54 acres for inferior dry land.
 For purposes of law, family of five was made one unit.
 Land distribution was given priority particularly to the landless peasants, SC and ST communities.
The government was responsible for the acquisition of land which it did under the Land Acquisition Act of 1894.
This law, being archaic and inadequate to address farmers’ concerns was replaced by the Right to Fair
Compensation and Transparency in land Acquisition, Rehabilitation and Resettlement Act of 2013. In 2015, the
government proposed a few amendments to the law and introduced the Right to Fair Compensation and
Transparency in land Acquisition, Rehabilitation and Resettlement (Amendment) Bill of 2015, which came into
effect as an ordinance.

Reforms in India: An unfinished agenda

Draft National Land Reforms Policy was put in public domain on 24th July, 2013.It is a draft of a bill that the
Congress government intended to introduce in Parliament. The draft needs to be debated widely.
It ignores the fact that many states are sitting on land which has been appropriated from those with more than the
ceiling, and which has not been distributed to the landless, due to vested interests seeking to preserve the
political and economic status quo. The other reality it ignores is that it is very difficult for any government to
identify who owns how much land. So it is hard to enforce ceilings, or identify the genuinely landless. The
fundamental reason is the sorry state of land records. Registration of tenants is fraught with the same difficulties.
Identifying who is leasing to whom is very difficult for the government, or any outsider to the village. Attempts to
enforce tenancy registration end up driving most tenancy underground. It is resisted vigorously by owners who
tend to be politically more powerful.
There exist a number of other areas where lack of profound thinking is noticed in the draft. To deal with distress
sales, it is suggested that a credit facility for poor landowners in distress be developed, without any further
details. The other big issue is land acquisition. Setting the compensation amount at four times the market price
avoids the question of how 'market price' will be assessed based on land records that are based on British-time
surveys. The ceiling limit on exemptions for religious, education, charitable institutions to a single plot of 15 acres
does not seem to be appropriate. It will lead to a proliferation of institutions opened under different names to
circumvent this regulation. While genuine charitable and educational institutions will be stymied.
The important issue of consolidation of land holdings has missed attention in the draft. There is a huge demand
from landowners for consolidation, as the fragmentation of properties is now widespread, with individual parcels
too small to be economically viable. Government can promote consolidation of land by helping owners with
fragmented plots to exchange holdings. This is one area where there will be little or no political resistance, as it
ends up in a win-win for everyone
Agricultural inputs comprise consumable and capital inputs - seeds, fertilisers, irrigation, pesticide, tractors and
other agricultural equipment and tools. Credit and infrastructure. Marketing and storage, agricultural labour and
crop insurance.
Inputs in traditional and modern agriculture - traditionally agricultural production was for subsistence or for barter
but with the rise in non-agricultural population need to increase farm output and make it available in the market
became imperative. Need to improve production and productivity implies movement away from traditional to
modern technology. The main characteristic of modern technology is the use of divisible inputs purchased from
the market. This raises the demand for cash. Use of divisible, marketed and modern inputs has slowly evolved to
include the use of machines. However the latter are not scale-neutral and require a particular threshold of farm-
size.
1. SEEDS: Adoption of modern technology in agriculture comprised the use of high yield variety of seeds
(HYVS), assured water supply and the fertiliser to improve land productivity. Seeds account for 20-25% of
productivity.

2. FERTILISERS - Fertilisers comprise six macro and eight micro nutrients.

3. AGRO-CHEMICALS: These comprise insecticides, herbicides, fungicides, veterinary medicines and

pesticides. With a rise in the demand for food and a decline in average yield there is pressure to protect the
meagre crop. In India per hectare consumption of chemicals is 381 gm compared with the world average of 500
grams.

4. MACHINES, FUELS AND LUBRICANTS: Mechanisation of farm activities involving the use of tractors,
threshers, harvesters and irrigation pumps along with simple mechanical tools has increased. Although not part
of the ‘neutral to scale’ modern technology used in agriculture, mechanisation has increased especially on large
farms owned by big farmers. One of the reasons is the rise in the cost of labour. For land development, the
traditional practice of using the plough and blade for tilling and preparing the seed-beds hare has been replaced
by the use of tractors, mould board ploughs and power tillers. Seed drill and seed cum fertiliser drill are used for
sowing and planting, the power weeder for weeding, blower for plant protection and harvesters and threshers for
harvesting and threshing. The advantages of mechanisation of agriculture include a rise in productivity, crop-
intensity, no shortage of labour, shifting of land from fodder to grain production, increased employment and
farmer’s income. It also leads to a conservation in the use of seeds and fertilisers. However increased
mechanisation poses some challenges and issues which also need to be addressed. The most important is the
specificity of equipment to farm-size and soil type. Use of machines renders cattle redundant and safe use of
equipment requires imparting training and knowledge. High cost of equipment and scattered and small farms do
not deter small farmers from using this equipment as they can hire these machines. Of all the equipment used
small tractors are the fastest growing segment compared to the overall growth of 4-5% for all tractors. India is the
largest producer of tractors in the world. Other machines used include electrical and mechanical power operated
told, pump sets, sprayers, ploughs, drills, threshers and combines. The government’s report on agricultural
implements and machinery notes that mechanisation leads to a rise in productivity, saving of seeds and fertilisers
and an increase in the cropping-intensity resulting in farmers’ incomes.
5. WATER: Another important input is water. Traditional agriculture depends on rains but due to uncertainty of
monsoons it is important for farmers to have access to some form of irrigation facilities. Total irrigation potential in
India is 140 million hectares of which 58.4 million hectares comprises major/medium irrigation works and the rest
are the minor works with 70% of irrigation dependent on ground water sources. However there exists a large gap
between actual and potential irrigation. The biggest challenge is the over-use of irrigation water with
environmental consequences especially waste of ground water and increased salinity of soil. Ways have to be
evolved to encourage drip and sprinkler systems and development of micro-irrigation works.
6. LABOUR: Agricultural activity in a country like India is generally labor-intensive. Moreover employment
opportunities outside rural and agricultural area are limited. Most often labour productivity is low due to excessive
dependence on land which hides high disguised unemployment and is reflected in low wages. Low levels of
income due to large dependence on agriculture and inter-sectoral inequalities have resulted in a high incidence
of rural poverty. The government has tried to address these issues by introducing various poverty alleviation
programmes in rural areas in an attempt to either create assets for sustained income generation or wage
employment opportunities.

7. CREDIT: Lack of institutional credit is one of the most significant binding constraints on Indian agriculture,
notwithstanding the priority given to agricultural credit in government policy. Alternatively peasants and small and
marginal farmers resort to private loans at usurious rates of interest from the local landlords and money lenders.
The reasons for the lack of willingness on part of formal banking sector to provide loans is the low incomes of
the farmers, inability to furnish collateral, small farm size and the associated uncertain output and income and
administrative delays. The role of cooperatives in providing bank loans has also been limited because a
substantial proportion of the loans disbursed are appropriated by large farmers who also have a high rate of
default.

8. CROPINSURANCE: This involves providing insurance or protection to farmers in the event of a natural
disaster or destruction of crops due to pests or disease which either prevents the sowing or else destroys the
crop standing in the field. Risks arise due to loss of crop, lower than expected yields and lower prices. Crop
insurance helps farmers overcome these risks and stabilise their incomes. This way it prevents farmers from
distress sale of land and other family assets

9, PACKAGING AND MARKETING/WAREHOUSING: This involves grading, packaging, transport and storage
of agricultural output. In India the infrastructure is extremely ill designed to support farmers in marketing their
produce for profit. Lack of storage and transport facilities force the marginal farmers to sell at harvest prices
which are low and fail to even cover their costs of production. Important agencies are the Commission for
Agricultural Cost and Prices and the Food Corporation of India. There are also separate bodies or boards for
cotton, tea, coffee, rubber, spices and vegetables and agricultural market committees.

4. Policy Action

Demand - supply gaps: ability to use modern inputs depends on farm size and purchasing power which is direct
function of income or credit availability. High market prices of fertilisers and other marketed inputs necessitate
provision of subsidies which has fiscal implications. Provision of inputs at the right time very crucial especially the
seeds, water and fertiliser. Low purchasing power and high prices due to high cost of production and a significant
share of imports in ensuring availability creates demand-supply gap so that coordination is essential. There is a
need to create awareness among farmers, create packages suited to small farms, improve storage facilities, offer
targeted subsidies and promote certified and standardised products and maintain strict quality control. To
optimise the use of inputs in the correct proportion soil testing is imperative. Use of organic inputs can be
encouraged to reduce the negative effects of excess use of chemicals and deal with shortage of inputs. Use of
fertiliser is low because it is an expensive input and a large majority of farmers have low purchasing power. This
is so because of the forced sale of crops at the time of harvest whereby farmers have limited resources to be
able to afford expensive inputs. Moreover the fate of the crop is uncertain, due to lack of insurance, there is no
guarantee that even the production cost may not be recovered. Government subsidy is appropriated largely by
the rich farmers which needs to be checked. It is crucial to rationalise the use of fertilisers by promoting balanced
and efficient use of fertilisers. There is a need to provide demonstration and training programmes. We must
recognise that the use of all inputs is complementary to each other. For example if irrigation facilities not
available then the use of other inputs like fertilisers is also reduced.

Government must provide support services and inputs through appropriate institutions and organisations. If the
latter exist they are not effective due to inadequate staff, insufficient funds, lack of motivation and appropriation of
most benefits by large farmers excluding the small and marginal farmers from this process. The deficiencies in
the public delivery system have direct implications for agricultural output. Other areas which need urgent
attention are the provision of credit, infrastructure including electricity, availability of inputs like fertilisers and
seeds and assistance in marketing, transportation and storage. It is also suggested by some to include the
private sector in partnership with the public sector to provide inputs and assist farmers in marketing.

Increase in agricultural production and productivity requires concerted policy efforts. There is a need to provide
alternative employment opportunities in rural areas to release the pressure on land and thus increase labour
productivity. Dissemination of information on the use of modern technology and training needs to be imparted to
farmers. Timely and reasonably priced inputs have to be made available to the farmers. There is a need to
consolidate the fragmented holdings to allow optimal use of modern technology and inputs. Provision of
institutional credit and warehousing and marketing facilities need to be provided to avoid distress sale and
increase marketable surplus. There is a need for a rise in public investment with institutional reforms including
land reforms and land tenure systems.

ights since India’s independence, the growth in agriculture has been roughly in the range of 1.7 to 4%. The below
graphics shows the growth of agriculture sector vis-à-vis the growth in overall GDP in different decades.
One notable point is that out of all the five year plans India made so far; growth targets in agriculture was
achieved only in sixth plan. In that plan, the annual growth rate of 4.3% was achieved against the target of 3.8%.
For rest of the plans, agriculture growth remained around 2 or 3%.  Even for the first three years of the 12th Five-
Year plan (2012-17), the rate of agri-GDP growth was a meagre 2 percent per annum against a target of at least
4 percent. In 2014-15, the growth in Indian agriculture was only 1.1%.  Further, except food grains, India has
never seen a spectacular growth in any other agricultural commodities.

The highest growth in agricultural sector was achieved during the mature green revolution period between 1980-
81 and 1989-90. The growth was mainly due to impressive rise in productivity or yield.  After that, land under
cultivation of most crops declined except Rice, Wheat and other crops supported by either government or market
incentives. This was particularly true for North West India where market incentives were in force in terms of price
support, assured government procurement for wheat and rice and favourable policy environment for providing
inputs to farmers at subsidised rates. Despite growth in yield, the negative growth in area led to fall in production
of several crops including coarse cereals.

The other key reasons for low agriculture growth include

 Population pressure and mindless urbanization that leads to conversion of cultivable land to non-
agricultural purposes.

 Slow rate of conversion of a wasteland to cultivable land.

 Average farm holding size is declining

 The higher rate of growth of the non-agricultural sectors; these sectors outperformed agriculture.

 Faulty, stereotyped policies of the Government

 Lack of institutional credit to farmers.

 Obsolete Agricultural Techniques and slow adaptation of new techniques

 Inadequate irrigation and dependency on rains

 Declining soil health due to unbalanced use of fertilizers.

The main causes of low productivity in agriculture in India are:

1. Incomplete land reforms: Despite the initial efforts on part of the government to undertake land reforms in
India comprising abolition of the zamindari system, improvement in the land tenure system and
consolidation of fragmented holdings, the land reforms in India were only a partial success whereby land
holdings continue to be of sub-optimal size which does not allow increase in yields.
2. Labour quality and productivity: With large dependence on agriculture disguised unemployment results in
low productivity. Generally a large mass of the rural population is not literate and lacks training to use the
right mix of inputs which is optimal for their farm size. This also results in waste of resources and lower
yields.

3. Small size of the holdings: The average size of the holdings for small and marginal farmers is less than
two hectares which limits the use of better and modern inputs and machines and allows production only for
subsistence. As result there is little surplus for the market thus limiting the ability to generate cash incomes.
Rise in indebtedness further limits their prospects of breaking this impasse.

4. Inadequate credit facilities: Institutional credit is not forthcoming despite agriculture being a priority sector.
Rural poverty and lack of collateral force farmers to borrow from the local money-lender who charges
usurious rates of interest and perpetuate indebtedness over generations. This limits the possibility of
investment and improvement in agriculture on part of the individual farmer.

5. Lack of public investment: The share of public investment has also been low which affects productivity in
agriculture. Lack of provision of adequate infrastructure, transport, storage and marketing and extension
services keeps yields low.

6. Non-availability of modern inputs and use of backward technology: Modern inputs like high yield variety of
seeds, irrigation facilities, electricity, fertilisers and farm tools are purchased inputs which required adequate
cash. Indian farmers are cash-strapped whereby they are unable to procure these inputs in the right
quantities at the appropriate time which affects the yields adversely. This leads to insecurity regarding the
future availability of these inputs and so whenever they can access these inputs they tend to over-use them
 especially water, fertiliser and pesticides which has negative consequences for land quality and hence
output. More recently use of genetically modified seeds imposes a constraint on the farmer in that he has to
buy the seed every year which is again a major limitation of modern technology. More often farmers continue
to use their older inputs which are available on farm but at the cost of production of productivity.

Agricultural Production Trends in India: An Overview

(i) Prior to Independence:
It may be pointed out that during the period 1901 to 1947, agricultural production declined.
The population rose by 38 per cent while the increase in cultivated area was to the extent of 18 percent. The
annual output of food grains and pulses remained almost constant.

Pandse has made a special study of the yield of principal crops in India for the period between 1910-11 and
1945-46 and concluded that the yield per acre of cereals did not show any consistent decline or increase but
there was a positive increase in the yield per acre of commercial crops and food-grains. He did not agree with the
belief that there had been deterioration in fertility or in the standards of agriculture.
(ii)  Post Independence Period:
The process of decline in productivity has continued in the post-independence period, as compared to the pre-
1939 period. The average yield of cereals per acre during 1946-47 to 1949-50 had declined from 619 to 565 lbs.
Rangnekar found that the volume of output in India declined from 0.9 metric tones in 1938-39 to 0.86 metric
tones per hectare in 1951. Similar conclusion were reached by studies undertaken by ICAR and the Grow More
Food Enquiries.
With the introduction of economic planning in 1951 and with the special emphasis on agriculture
development, particularly after 1962, stagnant of agriculture was reversed as:
1. There was a steady rise in average yield per hectare.
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2. There was a Steady rise in area under cultivation.
3. Due to increase in area and increase in yield per hectare, total production of the crops recorded a rising trend.
(iii)  Trends in Food-grains Production:
The increase in agricultural production has an important impact on the economic development of a country. In
India, the increase in the production of foodgrains has been given in table 2.
It reveals from table 2, that in the last fifty two years food-grains production has increased by about more than
three times. The increase in the production of rice was four times while it was over nine times in respect of wheat.
Here, it is worth noting that there exists wide variations in the production of food-grains.
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During the course of first two five years plans, the production of food-grains was on the increase but in the third
five year plan it has shown a declining trend. Further, in the course of three annual plans, production of food-
grains has increased to a great extent. But in the subsequent five year plan periods, the rate of growth of
agricultural production was favourable.
According to the first column of the table, the production of cereals was 468 lakh tones in 1949-50 which turned
to double i.e. 947 lakh tones in fourth five year plan. During the sixth plan period, its production was recorded
1340 lakh tones and further 1719 lakh tones ending the last year of eighth five year plan.
The production of pulses was registered at 132 lakh tones in 1995-96 which was 110 lakh tones during first plan
period. This crop witnessed very deep fluctuations during second and third plan period. Thus, total production of
food-grains was recorded 648 lakh tones in first plan period which rose to 1047 lakh tones in fourth plan, 1232
lakh tones in fifth plan, 1462 lakh tones in sixth plan, 1706 lakh tones in seventh plan and 1851 lakh tones in
1995-96.
Regarding trend of rice and wheat, it was 276 lakh tones and 86 lakh tones in first plan which increased to 441
lakh tones and 218 lakh tones in fourth plan and further to 798 lakh tones and 628 lakh tones respectively in
1995- 96. During 2002-03, production of total food-grains 1742 lakh tones, pulses 111 lakh tones, rice 727 million
tones and wheat 651 million tones.
This data indicates that production of food-grains has increased considerably over the years but in terms of
percentage, increase in production varies from one plan period to another plan period.
(iv) Non-Food Grains:
The trends in non-food grains production in India after the introduction of economic planning is shown in table 3.
Table 3 is the evidence that during the course of five year plans, the production of non-food-grains has increased
to a great extent. The production of cotton increased by two and a half times, three times of sugarcane, 3.3 times
of oilseeds and 1½ times of jute. These crops have a great importance, in the field of international trade.
The production of cotton was 30 lakh bales in 1950-51 which increased to 80 lakh bales in 1980-81, 97 lakh
bales in 1991-92 and 131 lakh bales in 1995-96. Regarding jute, its production was 33 lakh bales at the start of
first five year plan in 1950-51 which rose to 68 lakh bales in 1980-81, 103 lakh bales in 1990-91 but its production
reduced to 89 lakh bales in 1995-96.
The production of sugarcane has shown upward trend as it was 570 lakh tones in 1950-51, 1520 lakh tones in
1980-81, and 2540 lakh tones in 1991-92. At the close of eighth five year plan, its production was registered at
2829 lakh tones. In case of oil seeds, production was 186 lakh tones in 1990-91 against 50 lakh tones in 1950-
51, and 101 lakh tones in 1980-81.
During 1995- 96, the production of oilseeds was recovered 224 lakh tones. Similarly, production of cotton, jute,
sugarcane was 87,103 and 2816 lakh tones and production of oilseeds was 151 million tones in 2002-03.
Agricultural Productivity:
The agricultural production depends not only on the area but also on the productivity of land. It shows the
relationship between inputs and output.
The agricultural productivity can be classified into two categories viz;
(A) Agricultural Productivity per worker.
(B) Agricultural Productivity per hectare.
A. Agricultural Productivity per Worker:
In India, the productivity per worker is not only low but also differs from one state to other as is shown in table 5.

The above table 5 shows that the labour productivity is only Rs. 1213 per worker on the average for India as a
whole. It is Rs. 3195 in Punjab, Rs. 1236 in U.P., Rs. 2922 in Haryana, Rs. 2072 in Kerala, Rs. 1707 in Assam
and Rs. 1819 per worker in Kerala.
Per Worker-Agricultural Productivity: International Comparisons:
The per worker labour productivity in India is low as compared to some developed countries. According to Dr.
Baljeet Singh, “In India per worker productivity forms 1/23 of that of U.S.A. and Japan and 1/21 of that in
U.K.” The low level of per-worker productivity is an indicator of backward agriculture. However, a brief
presentation of per worker productivity of different countries of the world has been made in table 6.
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The above table 6 shows that India’s agricultural productivity per worker is a little more than one thirty fourth of
West-Germany and less than one twentieth of England. The stagnation in agricultural productivity has resulted
due to the increasing prices of agricultural produce, disapproving many theories of price production complexes
and imperfect food distribution. However, productivity per worker for India was Rs. 1,213 while it was Rs. 18,120
for Japan, Rs. 19,264 for USA, Rs. 27,690 for West Germany.
B. Agricultural Productivity per Hectare:
The per hectare productivity has been analysed in two aspects as:
1. Per-hectare Productivity of Different Crops:
The trend of per hectare productivity of different crops has been analysed in the table 7.

The table 7 indicates that the per hectare productivity of rice in 1950-51 was 668 kgs. per hectare which in 1980-
81 increased to 1336 kgs. and further 1804 kg. per hectare in 2002-03. The per-hectare productivity of wheat
which was 663 kgs. in 1951 increased significantly to 1630 kg. per hectare in 1980-81 and 2613 kg. per hectare
in 2002-03.
For maize, it was 1638 kgs per hectare in 2002-03 against 547 kgs per hectare in 1950-51. The per hectare
productivity of sugarcane was recorded to be 65,000 kgs. in 2002-03 against 3342 kgs. in 1951. In case of cotton
it rose to 193 kg. per hectare in 2002-03 against 88 kg. per hectare in 1950- 51. Regarding, Jute, it was 1043 kg.
per hectare in 1950-51 which increased to 1130 kg. in 1980-81 and further 2154 kg. per hectare in 2002-03.
C. Some International Comparison of Productivity:
No doubt per hectare productivity in India has increased after the introduction of economic planning. But, if we
compare it with developed countries it seems to be very low as has been shown in table 8.
The table 8 shows that the per hectare productivity of rice during 2000-01 in India is 1913 kgs. which in Japan is
6410 kgs. and in China it is 6320 kgs. Similarly, the productivity of wheat is 7240 kgs. in France and 7250 kgs. in
U.K while in India it is much low i.e. 2553 kgs. per hectare. Similarly, productivity of cotton is very low as
compared other advanced countries.

SOME STRATEGIES
At the time of independence, Indian economy was in total mess, especially in agricultural production. We produce
less than what we need to feed the population of our country. There was widespread hunger and malnutrition in
the country. The agriculture sector was desperately waiting for a reform. A large section of the population was
directly dependent on farming activities.
In order to tame the situation and improve the production of food grains, government adopted two pronged
strategy: a) institutional reforms such as land reforms, irrigation and power projects etc. as long term and
sustainable strategy, b) import of food grains to feed the populace.
However, the strategy of land reforms, due to improper implementation and loopholes in the land reform act
could not catapult in substantial production up-surge. Hence, it was felt that institutional reforms are insufficient to
increase the production and productivity of food grains. During the Nehruvian (till 1964) era policy-makers
believed that mere institutional measures were enough to increase the food grains production. Thus, Agriculture
remained neglected till the mid 1960s in the light of technological improvement.
3. New Agricultural Strategy and Green Revolution
Nonetheless Indian Agriculture witnessed a growth rate of 3% between 1949 and 1965; our country had been
facing food shortages. India was in the throes of crisis. Agricultural growth had begun to stagnate in the early
1960s. The massive population burden further exacerbated the problem. The rising food prices and rising cases
of hunger death forced our Government to resort to import foods from abroad. India made agreement with US to
import wheat under PL 480 scheme in 1956. Nearly 3 million tonnes of foodgrain were imported under this
scheme in the very first year and volumes of import kept increasing over the years. The wars with China (1962)
and Pakistan (1965) and two successive drought years in 1965-66 further worsen the problems. The nightmare
does not end here; US wanted India to support on Vietnam War, return of import of foodgrains from his country. It
was a direct attack on the sovereignty of any country. India was
against the war. US were facing severe criticism for waging war against Vietnam.
Given this scenario of the mid-1960s, economic self-reliance and particularly, food self-reliance became the top
priority. The New Agriculture Strategy began to be implemented in the right earnest.
In common parlance, New Agriculture Strategy refers to adoption of HYV (High Yielding Varieties) crops with
more irrigation facilities and fertilizers usages.
A team of experts sponsored by Ford Foundation was invited by Government of India to suggest ways and
means to increase agricultural production and productivity. Team submitted report in April, 1959, suggesting
emphasis on modern agricultural inputs.
On the basis of the recommendations of the team, our government introduced an intensive development
programme in seven districts selected from seven states in 1960 and programme was named Intensive Area
Development Programme (IADP). The programme was later extended to remaining states by selecting one
district from each state, on an experimental basis during the Third plan. G. S. Bhalla rightly commented that IADP
implemented during the Nehru’s life, but realized after his death.
It is pertinent to mention that Norman Borlaug and his associates developed new HYV for wheat in Mexico during
1960s and later adopted by a number of countries, including India. It led to substantial increase in production and
productivity of wheat. In the context of India the contribution of M.S. Swaminathan is exceptional. He is dubbed
as “Father of Green Revolution in India”. He is a geneticist and international administrator, who made tireless
attempts to develop Indianised HYV of wheat. His stated vision is to make the world free of hunger and poverty.
Swaminathan is an advocate of moving India sustainable development, especially using environmentally
sustainable agriculture, sustainable food security and the preservation of biodiversity, which he calls an
"evergreen revolution” 1
This “New Agricultural Strategy”, also known as the seed-water-fertilizer strategy, was adopted in 1966.The new
strategy primarily introduced more It was introduced in seven selective areas, which includes, inter alia- West
Godavari in Andhra Pradesh, Shahabad in Bihar, Raipur in Madhya Pradesh, Thanjavur in Tamil Naidu,
Ludhiana in Punjab, Aligarh in U.P. and Pali in Rjasthan. The strategy focused on improved water supply, greater
use of chemical fertilizers and pesticides. Mechanisation of agriculture was not part of the strategy although it led
to an increased use of tractors and other machines. This is so because the strategy was supposed to be neutral
to scale and machine are not divisible inputs and hence not neutral to scale. Most of the inputs were purchased
inputs and hence the role of cash was critical to the adoption of this strategy.
Some 32 million acres of land, about 10% of the total cultivated area, was initially chosen in the water-assured
areas for package programme. Government investment rose significantly in agriculture. Government made
efforts to ensure remunerative prices and provide access to modern technology to the farmers. Gross capital
formation in agriculture began to increase as a
result of increase public investment.

Achievements of New Agricultural Strategy

 Boost to the production of cereals
With the adoption of new technology in agriculture production of food grains, particularly wheat and rice, has
increased. Table 1 shows that the total food grains production increased from 82 million tonnes in 1960-61 to
176million tonnes in 1990-91 to 259.32 million tonnes in 2011-12.

 Increase in the production of commercial crops

In the first phase of the introduction of new technology production of cash crops or commercial crops such as
sugarcane, cotton, jute, oilseeds etc was not affected. After 1973-74, modern technology was introduced in other
crops whereby these crops registered robust growth.
 Significant changes in cropping pattern
The cropping pattern in India has undergone significant change due to effect of green revolution. The proportion
of rice in total foodgrains has declined. It has been due to rapid rise in the production of wheat. Similarly the
pulses proportion also has shown substantial decline. The coarse cereals proportion has also declined from 37
percent to 17 percent.
 Boost to agricultural production and employment
The New Agricultural Strategy adopted involved the use of high yield variety of crops, chemical fertilizers,
irrigation, improved technology, pesticides etc which has resulted in higher levels of output. Demand for hired
labour has also increased.
 Forward and backward linkages strengthen
It is established fact that there is a close demand-supply linkage between agriculture and industry. An
improvement in the agricultural production means higher income for farmers. This generates higher demand for
manufactured products, which in turn promotes investment in industry. In return, industry provides inputs by
developing new implements and tools for agriculture. The agro-based industries depend on the agricultural sector
for their main raw materials.

Limitations of New Agricultural Strategy

Introduction of modern technology in agriculture has made India self-sufficient in food grains to a large extent.
Increases in output have been more due to improvement in productivity than in increase in acerage. In order to
fully reap the benefits of modern technology in agriculture the government should have played a complementary
role by undertaking a sustained level of public investment in infrastructure, marketing and storage of agricultural
produce and ensured provision of institutional credit to ease the adoption of new technology for cash-trapped
farmers. This is the reason that the benefits of green revolution have been distributed more in favour of large
farmers than small and marginal or medium farmers. Not only has the distribution of benefits across farmers
been asymmetric but also it has also been skewed across regions and crops. Intensive use of pesticides and
fertilizers has resulted in soil and water pollution which in turn has a negative impact on the health of the local
population.
 Indian Agriculture is still a gamble in monsoon
The new technology is also known as the ‘seed-water-fertilizer package’ and depends on assured water supply
for best results. However, vast tracts of agricultural land are still deprived of irrigation facilities and depend on the
rains. As a result, in the year of good monsoon, there is a bumper crop and if the rains fail we have a lean crop.
In 1950-51, gross irrigated area as a percentage of gross cropped area was only 17 percent. Despite massive
investment in irrigation projects over the planning period gross irrigated area has increased to 45 percent in
2009-10. Thus, even now 55 percent of gross cropped area depends on rains. That is why Indian agriculture is
called “a gamble in monsoon.”
 Growth of capitalist farming
The new Agricultural Strategy, although neutral to scale, has an important aspect which does not allow small and
marginal farmers to reap its benefits. The three critical inputs need to be purchased from the market as they are
not available within the rural households. This requires cash which is a problem for the small and marginal
farmers. Given the paucity of institutional credit only the large farmers manage to have access to HYV seeds,
fertilizer and an assured water supply. This has been further complicated by the capacity of the large farmers to
mechanise various farm activities which is not neutral to scale. This results in a larger share of marketable
surplus and hence agricultural income in the hands of large farmers. This enhances their ability to implement the
new technology and appropriate its benefits further. Thus new technology. In other words, only the big farmers
have financial ability to undertake investment in modern technology. Consequently, income inequalities between
small and big farmers have widened overtime.
A study reveals that big farmers of Punjab invested more and resulted in more wealth. They are referred to as the
“gentlemen or progressive farmers.” Gentlemen farmers comprise ex-servicemen, retired civil servants,
businessmen etc. Regions which have been well endowed with resources (like Punjab, Haryana and western
U.P.) have benefited the most from the use of modern technology. Other regions remain backward and
underdeveloped. Regional disparities have thus increased.
 Neglect of Institutional Reforms
New Agricultural Strategy has not laid stress on institutional reforms. As a result land reforms have not been
implemented properly and thus remain a distant dream. Other areas of neglect include provision of irrigation
works, institutional credit, insurance, marketing and warehousing facilities. Our policy-makers thought that green
revolution would be panacea for all evils in agriculture, but it was proved ill-conceived idea.
 Widening Disparities in Income
Technological changes in Indian agriculture have resulted in greater income inequalities. C.H. Hanumantha has
opined, “Technological changes have contributed to widening the disparities in income between small and large
farms and between landowners on the one hand and the landless on the other.”2
 Problems of labour displacement
Under the garb of green revolution mechanisation of agricultural activities has resulted in the displacement of
labour. However, a number of agriculture experts believe other way round. C.H. Hanumantha Rao bring out
favourable and unfavourable effects of new technology on employment: “if the green revolution is regarded as a
package consisting of HYVs and fertilisers, its contribution to employment has been substantial.......” However,
“the net use of tractors may turn out to be negative.....”3
 Impact on socio-economic relations in rural areas
A number of the studies have been done on the impact to of green revolution on socio-economic relations in
India. The studies may be summarised as follow:
(a) Small and medium farmers have benefited the least. They have very small holdings. These farmers invested
a little in their farms, hence increase in production is also small. Sometimes these farmers take land on lease
from large farmers and cultivate on them, but high rentals, leave them with a pittance amount of grains. Thus,
their condition has not improved.
(b) Large farmers with surplus capital to invest have benefited the most from the green revolution.
V.K. R.V.Rao once said that it is now well known that the so-called green revolution which helped the country to
raise its output of foodgrians has also been accompanied by a widening of the range of inequality in rural
incomes, the loss of their status as tenants by a number of small farmers and emergence of social and economic
tensions in the countryside....the challenges which Indian agriculture faces is not only of production but also that
of distribution, and in our anxiety to concentrate on production problems, we should not forget the human and
social implications of agricultural developments.

Green Revolution: The Future Prospects

Green Revolution was initiated in mid 1960s with the objective of improving the production and productivity of
agricultural produce. The success of green revolution is discernible to all. India’s agricultural production has
increased by multiple times and we have become self-reliant in foodgrains. The key role has been played by the
HYVs, along with chemical fertilisers, pesticides and irrigation facilities. Nowadays, a number of agricultural
scientists have been talking about the exhaustion of potential of New Agricultural Strategy and they suggest need
to do new to improve the production and productivity further.
The future prospects in Indian agriculture may be underlined in the following manner:
(a) Despite the use of modern technology in agriculture productivity in Indian agriculture is still very low. Our
productivity in comparison to developed countries is quite low.

(b) Even, within the Indian economy, there is a gap between potential and actual. There is no denying the fact
that after green revolution, total production and productivity in agriculture has increased, but there is an ample
scope to improve it further. The above table reveals that actual productivity is far below the potential.
(c) As we studied earlier that spread of green revolution has been skewed, confined to Punjab, Haryana and
Western U.P. These areas benefited from HYVs of crops because they had ample facilities of irrigation and other
relevant inputs. However, rest of the country could not avail of the benefits of green revolution.

It is a formidable challenge before the policy- makers to spread the benefit to other parts of the country. Most
challenging task would be to bring green revolution to rain-fed areas of the country. A vast tracts of land in India
fall under these categories. These rain-fed areas have huge potential to increase total production and
productivity.
(d) Contract farming in Indian agriculture may bring high tech inputs due to corporate players. However it remains
to be seen whether farmers would also get a
remunerative price for their produce. The potential of contract farming has not been
utilised.
(e) More public investment in agriculture is the key to promote more private investment.
(f) Insurance in agriculture is absent. At the current juncture of climate change, the vagaries of monsoon and
brunt of weather has to be borne by the farmers. Here insurance can play the role of savior.
(g) Despite government’s efforts the presence of middlemen in agriculture has not been reduced. These
middlemen buy grains and other crops especially the perishable vegetables and fruits at throw away prices and
sell the same at a very high margin in urban areas. Thus on the one hand the producer or the farmer fails to
benefit from getting a price which will help him recover his costs and induce him to remain in agriculture on the
other hand the consumer in the nonagricultural sector, at the mercy of these middlemen, end up facing the brunt
of food inflation curtailing their purchasing power for other manufactured products. This has a direct implication
for demand for these products and industrial recession. Regulated and co-operative marketing are important
steps that the government can take, but there is still a long way to go.
(h) Credit facilities are also a crucial missing link. Large farmers manage to appropriate a large share of
institutional credit where as the small and marginal farmers fail to benefit from any concessional loan facility as
they cannot furnish the requisite collateral. Hence, they have to resort to the local money lender or the informal
loan providers. They charge exorbitantly high interest rate. Generations after generations remain indebted to the
money lender. Such extent of exploitation and dearth of institutional credit adversely affects private investment in
farm development.

Government should provide research and extension activities, subsidized inputs particularly to the small and
marginal farmer, and support via the MSP and procurement of excess output to stabilize farmers’ income and
prices. For the development of high yielding varieties and GM crops, research institutions in both private and
public sector would play the dominant role subject to approvals from government. It is true that R&D has done
commendable act, but more to be done to ensure food security to the nation. Although a caveat must be added
here regarding GM crops. These GM seeds are not self-propagating seeds where by every time the farmer has
to grow the crop he has to buy the seed from the market for cash. Given a large mass of farmers comprises small
and marginal farmers with limited cash or credit available to them the use of these seeds will only increase the
vulnerability of the poorer farmers.

Second Green Revolution in India

While the first Green Revolution was to ensure food security as there was severe scarcity of food in the country,
the second Green Revolution should aim at creating sustainable livelihood security for the poor and eradication
of poverty by generating gainful self-employment. While the first Green Revolution was aimed at undertaking
mass
production, the second Green Revolution should be to promote production by the masses.
This is in line with the Gandhian philosophy of involving the poor in development for equitable distribution of our
prosperity.
Thrust areas for second green revolution
(a) Second green revolution may focus on fruits and vegetables can double agricultural growth to 4% per year.
(b) Contract farming may be the key modus operandi. It has potential to attract from corporate capital and
technology. It could also ensure handsome remunerative price for farmers.
Land reform laws ban corporates from farming. But contract farming is possible: corporates contract to provide
high-tech farm inputs on credit, and lift the output at guaranteed prices.
The biggest rural initiative comes from ITC, whose e-choupals cover over lakhs of villages over the period,
accounting for two-thirds of rural GDP. E-choupals are electronic buying and selling centres, which also provide
information to farmers on prices, weather, and scientific farming practices. By cutting out middlemen, e-choupals
can pay farmers a higher price than they get in mandis, yet lower ITC’s procurement costs. The company started
with soyabeans, wheat and shrimps, and is now diversifying into oilseeds, spices and fruit.
FieldFresh, run by Sunil Mittal of Bharti Telecom, already has 1000 acres under horticulture in Punjab. Pepsi and
McDonalds have started contract cultivation of citrus fruit and lettuce respectively.
But these illustrations are baby steps and a lot more needs to be done.
(c) Back-end infrastructure development would be a formidable challenge for the government. There is a huge
shortage of warehousing, resulting in wastages of foodgrain. India is facing dearth of supply-chain. As a result
deficit regions a donot benefit from surplus regions. Rural India needs warehousing facilities for storing produce.
At present only a few warehousing facilities are present.
Warehousing, cold storage and logistics network need huge investments and that is the vital missing link in the
conventional system leading to huge crop losses. Here again, the organised retail along with government/ public
sector agencies is expected to pump capital to augment capacity. A better policy option would be to have the
new overseas players mandated to invest a portion of their capital for augmenting our warehousing, supply chain,
logistics through a public-private partnership model. The augmenting of logistics capacity will in turn benefit the
entire stakeholders in the agriculture supply chain. (d) The second Green Revolution should focus on generation
of employment for the
small and marginal farmers and the landless, while enhancing agricultural production. As these families mostly
own degraded and low fertile lands, deprived of irrigation, the focus should be on efficient use of such lands. As
such lands are not suitable for intensive cropping of high yielding food and cash crops, priority should be given to
dryland horticulture and agri-silvi pastures. Tree crops have the ability to withstand the vagaries of nature without
causing heavy losses. Tree farming can also provide year-round employment while protecting the soil from
erosion and runoff of rain water. Promotion of tree farming will also enrich soil fertility and increase the water
table. Therefore, such programmes can improve the quality of life and protect the environment.
(e) Traditionally, Indian farmers engage in livestock tendering and management to supplement their income.
However, livestock caring is not done in scientific manner as a result; sometimes it becomes their liability rather
than asset. The need of the time is to promote livestock with some professionalism and technology.
Fortunately, in India we have the largest population of livestock in the world and the demand for livestock
produce is increasing steeply. While the present milk production is 98 million tons, the demand in the year 2022
is likely to rise to 180 million tons. This will provide greater opportunity to small farmers to expand their dairy
husbandry programme.
(f) To ensure better result, involving rural masses particularly those at the bottom of the pyramid, is necessary to
build the capabilities of the participant farmers, particularly, the women. As they are semi-literate with lack of
confidence, it is necessary to provide mentoring services at their doorsteps by posting well-trained para
extension workers selected within the community.
So, while the potential for a second green revolution is huge, the hurdles are high too. High-tech farmers with
assured irrigation will surely link up with the best companies. But progress will be slow in rain-fed areas, and for
small and marginal farmers. Here, government has to play proactive role to materialise second green revolution
in letter and spirit.

 Economy’s health of any country is reflected by Infrastructure development because infrastructure varies
directly with the development and growth of the nation.
 Transportation is an important part of any economy. It includes roads, bridges, railways, ports & airports.
 The energy provision in India is a major limitation to the country’s economic infrastructure.
 Indian telecom industry went through a high pace of market liberalisation and growth since the economic
reforms of 1990s and now has become the world's most competitive and one of the fastest growing telecom
markets.
 According to research done by Infrastructure Development Finance Co. the infrastructure sector of India
contributes more than 8% of the country’s GDP.
 Indian port sector is ready to make huge success in the forthcoming years. It has been estimated that till 2017
end port traffic will sum to 943.06 MT for India’s major ports and 815.20 MT for its minor ports
Economic Infrastructure in India
Transportation:
Transportation is an important part of any economy. It includes roads, bridges, railways, ports & airports. India’s
primary mode of transport is the public transport which is used in the world to a considerable extent.
 Railways: Indian railways have been supporting the economic and industrial landscape for over 150 years.
India today supports the 4th largest railway network in the world employing about 1.6 million people and spreads
across more than 65000 km. There are several constraints in connectivity and Indian Railways is now looking for
private partnership to modernize railways and bring it to world-class levels.

 Roads: The most prominent part of India’s economic infrastructure development in recent years is the spread
of road network across the country; per sq. km. of surface area in India is now bestowed with roadways of one
km. One of the largest road networks in the world is in India. The road network of country consists of
Expressways, National Highways, State Highways, Major District Roads, Other District Roads and Village Roads.
However India has a congested network of roads, which are not in very good conditions. The estimated increase
in road traffic is about 15% in passenger movement every year. Efforts are being made to make the road
connectivity better. India now has a large network of National Highways which is connecting all major cities and
capitals forming a strong economic support of the country. India had a total of 70,934 km of National Highways in
2013.
 Ports: India has 12 major ports that are managed by the Port Trust of India and regulated by the central
government. These ports handle 95% of foreign trade in quantity and 70% in terms of value. Of these
Vishakapatnam is the largest port in India. India also has 187 non-major ports. Inspite of having sufficient
capacity and modern facilities the average turnaround is 3.5 days as compared to 10 hours in Hong Kong, which
greatly hinder Indian goods competitiveness. Congestion is mainly due to slow evacuation of cargo rather than
poor management, as the ports are not well connected with the hinterland.

 Aviation: Air India is India's national flag carrier after integrating with Indian airline in 2011 and now plays a
significant role in connecting India with the rest of the world. IndiGo, Jet Airways, Air India, Spicejet and GoAir
are the significant carriers in order of their market share. These airlines connect over 80 cities all over India and
also operate routes which are overseas after the liberalization phase of

Indian aviation. Many other foreign airlines connect Indian cities with other eminent cities all over the world. But,
a major section of country's air transport potential remains untapped, despite the fact that Mumbai-Delhi air
corridor was ranked 10th by Amadeus in 2012 among the world's busiest routes.

 Waterways: India has a widespread network of inland waterways constituting rivers, canals, backwaters and
creeks. 14,500 kilometers is the total navigable length, out of which about 5,200 km of river and 485 km of canals
are used by mechanized crafts. Freight transport by waterways is largely underutilized in India ralative to other
big countries. In totality, the cargo moved by inland waterways is merely 0.15% of the total inland traffic in India,
compared to the corresponding figures of 20% for Germany and 32% for Bangladesh. Cargo which is transported
in an organized manner is limited to a few waterways in Goa, West Bengal, Assam and Kerala. The statutory
authority which is in charge of the India waterways is the Inland Waterways Authority of India (IWAI). It plays the
role of building the required infrastructure in these waterways, examining the economic feasibility of new projects
and also administration and regulation.
Power and Electricity
The energy provision in India is a major limitation to the country’s economic infrastructure. The increasing
manufacturing activities and the growing population has led to a surge in demand for power. The installed
capacity is 275.912 GW as on July 2015. Renewable Power plants account for 28% of the total capacity and
Non-Renewable Power Plants accounts for 72%.
Telecommunications and the Internet
Indian telecom industry went through a high pace of market liberalisation and growth since the economic reforms
of 1990s and now has become the world's most competitive and one of the fastest growing telecom markets.
From under 37 million subscribers in 2001 to above 846 million subscribers in 2011, this Industry has grown over
twenty times in just ten years. Indian telecommunication industry’s major sectors are telephony, internet and
television broadcast Industry in the country which is in an continuing process of transforming into next generation
network, employs a widespread system of modern network elements e.g., digital telephone exchanges, mobile
switching centres, media gateways and signaling gateways at the core, interconnected by a large variety of
transmission systems using fibre- optics or Microwave radio relay networks. It is now the world's second-largest
mobile phone user base with more than 929.37 million users as of May 2012. It has the world's second-largest
Internet user-base with over 300 million as of June 2015.
Banking & Financial Services
The Indian banking sector is broadly classified into scheduled banks and non-scheduled banks. The scheduled
banks are the banks which are included under the 2nd Schedule of the Reserve Bank of India Act (1934). The
scheduled banks are segmented into: nationalised banks; State Bank of India and its associates; Regional Rural
Banks (RRBs); foreign banks; and other Indian private sector banks. The term commercial bank include both
scheduled and non-scheduled commercial banks, that are regulated under Banking Regulation Act, 1949.
4. Role of Economic Infrastructure
The link between infrastructure and economic development is not a once and for all affair. It is an ongoing
process and developmental progress has to be preceded, accompanied, and followed by infrastructure progress,
if we want to realize our declared objectives of generating a self-accelerating process of economic development.
Some of the reasons development of infrastructure is crucial is
1. Large public investment raises aggregate demand of the economy and gives short-term impetus to growth.
2. It serves as an input to private investment and encourages productivity and output.
3. A country with good infrastructure facilities attracts foreign capital, which further raises demand and productive
capacity. In a country like India where the market has huge potential it is important to attract capital both
domestic and foreign in order to ensure economic growth.
4. Development of transport enables easier and quicker movement of goods, which increases efficiency and also
reduces freight costs.

5. Financing & Foreign Investment

Historically, it was the public sector that financed infrastructure spending almost entirely.
Today, India requires $1 trillion for its development in infrastructure sector, with private capital to contribute half
of it. In 2010, India partnered with the United States to launch the $10 billion dedicated Infrastructure Debt Fund.
But despite that the country still faces shortage of huge funds that has most recently been filled by its neighbors.
In early 2014, China had offered to finance 30 percent of targeted infrastructure plan of India—this proposal if
accepted, would spot China largest single foreign investment in this infrastructure sector. The offer is
contentious, given Delhi's bad history with Beijing; India has in the past refused Chinese investment over national
security concerns. It has also been in competition with China over growth, juggling an uneasy rapport of rivalry
and partnership. Before Chinese President Xi Jinping's first official visit to India in mid-September 2014, India
was expecting a pledge of $100 billion investments. However, China finally made a moderate commitment of only
$20 billion over five years, principally devoted to the modernization of India's railway and the development of two
industrial parks.
Conversely Japan, which has enjoyed good relations with Delhi, has emerged as a robust investor. Two-thirds of
the Delhi metro investment was financed via loan granted by Japan International Cooperation Agency, which also
funded more than half of the $7.7 billion Delhi-Mumbai Dedicated Freight Corridor project. Japan has also
contributed to the Delhi-Mumbai Industrial Corridor, as well as city roads and urban projects. Prime Minister
Shinzo Abe continued the flow of funding in early September 2014, during a five-day visit by Modi, with a pledge
of $33.8 billion to fund various infrastructure needs over the next five years—a deal that could prove lucrative for
Japan's high speed rail companies, which face competition Chinese counterparts hoping to penetrate into the
market. While the United States has policy tools in place to promote investment in India, its commitments are
way lesser in comparison to those made by the world's second and third largest economies. In late September
2014, Modi made a landmark visit to the United States to meet with both President Obama and top American
business leaders with the intention of restablishing confidence in India's economy and attracting foreign
investment.
Yet challenges for attracting foreign direct investment (FDI) remain. Inspite of the huge triumph for Modi's party
that many view as an authorization for sweeping economic reform, FDI remains politically divisive. Rigid FDI
policies had been a significant hindrance until the government liberalized them in 2005, allowing 100 percent FDI
in a broad range of sectors and expediting approvals. The U.S.-India Business Council recently compiled a list of
initiatives, including a resolution to outstanding issues around the civil nuclear deal and an increase in FDI that
would help the United States hit its target of $500 billion per year in bilateral trade. But recently domestic and
foreign firms have been driven away from long-term projects due to high inflation and interest rates. Commercial
banks hit their liable limits for the sector, and have even been discouraged from investing further by the Reserve
Bank of India. $225 billion—or roughly 12 percent of GDP have been invested by private sector in India's
infrastructure between 2007 and 2012, largely through PPPs, which have proliferated. Yet these projects have
suffered myriad dysfunctions due to poor structure. In 2013, the London-based private equity, infrastructure, and
debt management firm 3i, which has the world's largest India-dedicated infrastructure fund, exited all its portfolio
companies in the country after investments faultered in meeting investor expectations. India, which barely has a
municipal bond market, also needs capital markets reformation to create a source of long-term debt. But a recent
ban by the Reserve Bank of India on bank purchases of new infrastructure bonds has handicapped new Prime
Minister Narendra Modi's efforts of raising funds through the bond market.

Social Infrastructure is one of the infrastructure sector and typically includes assets that accommodate social
services. It includes Social Infrastructure Assets include schools, universities, hospitals, prisons and community
housing. Social Infrastructure does not typically extend to the provision of social services, such as the provision
of teachers at a school or custodial services at a prison.
Social infrastructure is a subset of infrastructure sector which includes road, railways, building, heath, sanitation,
school, airports, etc. Social infrastructure caters to the social needs of the society such as education, health,
housing etc. Infrastructure by its basic definition means something that helps in production, here social
infrastructure relates to the betterment of the society. For example good students will ultimately tend to become
good citizens as well.
Growth with equity has been the focus of Indian economic policy since the 1960s. By 2020, India is projected to
be the youngest nation in the world in terms of size.
The given expansion of working age population due to India being in the second stage of demographic dividend,
is both a blessing as well as a problem for India. India can achieve greater benefits which will dynamically keep
on increasing if this bulge is used efficiently and effectively. But if this dividend goes waste will never be able to
recover this credit and hence will have to bear its curse for a very long period
Despite global shocks, India has not substituted much on the expenditures on welfare activities, especially for the
vulnerable population. The success of programmes and policies of the government lies in the strength of
institutional structures with strong public delivery systems as well as in the attitudes and mindset of the people.
To ensure conversion of outlays into outcomes the role of Panchayati Raj institutions is crucial.
Though significant outcomes have been achieved in the areas of poverty reduction, health, and education, more
remains to be done. The government in India should work to weaken the patriarchal mindset of the society. This
can be done with the help of media, civil society and others. The efforts should be made to empower women to
realize the untapped potential and to help them fulfill their ambitions.

The provisional results from the 2011 census, the first decade of India’s declining population along with the
declining fertility has dampened the pace of net additions to population. Thus, the net addition (between 2001-
2011) is less than that of the previous decade by 0.86 million. The proportion of economically active population
(15-59 years) or, India’s ‘demographic dividend’, has increased from 53.4 to 56.3 per cent during 1971 to 1981
and from 57.7 to 63.3% during 1991 to 2013. On the health and education front, the percentage of older
population that above 60 years of age has increased from 5.3% to 5.7%.
The main problem to address here is that by just providing the employment will not increase the employability of
the labor force. It is based upon many other factors such as knowledge, skills developed by providing higher
education and training. The problem of low employability levels owing to poor quality of education is accentuated
by the fact that fewer students opt for higher education. While economic infrastructure is important for improving
productive capacity of a nation, social infrastructure is required to improve the quality of human capital.
This consists of facilities like health, education, housing, medical facilities, sanitation, drinking water etc. In
economic terms, educated and healthy people build a healthy nation with a healthy growth rate. Yet social
infrastructure in India does not receive the importance it should.

The 2030 Agenda for Sustainable Development as reflected in the 17 Sustainable Development Goals (SDGs)
and 169 targets, calls for global partnership to ensure peace and prosperity for people and the planet, now and
into the future. It is recognized that ending poverty and other deprivations must go hand-in-hand with strategies
that improve health and education, reduce inequality and spur economic growth in a sustainable manner.
India is committed to achieve these SDGs and a strong social infrastructure is key to achieve them. The
government has been focusing on provisioning of assets such as schools, institutes of higher learning, hospitals,
access to sanitation, water supply, road connectivity, affordable housing, skills and livelihood opportunities. This
gains significance given the fact that India is home to the world’s youngest population as half of its population is
below the age of 25. It has also been estimated that demographic advantage in India is available for five decades
from 2005-06 to 2055-56, longer than any other country in the world. This demographic advantage can be reaped
only if education, skilling and employment opportunities are provided to the young population.
What is Social Infrastructure?
Infrastructure can broadly be defined as long-term physical assets that operate in markets with high barriers to
entry and enable the provision of goods and services. Social services include, education, sports, art and culture;
medical and public health, family welfare, water supply and sanitation, housing; urban development; welfare of
Schedule Castes (SCs), Schedule Tribes (STs) and Other Backward Castes (OBCs), labour and labour welfare;
social security and welfare, nutrition, relief on account of natural calamities etc. Expenditure on ‘Education’
pertains to expenditure on ‘Education, Sports, Arts and Culture’.
Status of Social Sector in India
The expenditure on social infrastructure like health and education is a critical indicator of the commitment of the
government towards these sectors. Public investment in social infrastructure has a critical role in providing
access to social services for the people, especially the marginal and vulnerable sections of the society. The
expenditure on social services by the Centre and States as a proportion of Gross Domestic Product (GDP) has
registered an increase of more than 1 percentage points during the period 2014-15 to 2018-19 (BE), from 6.2 per
cent in 2014- 15 to 7.3 per cent in 2018-19 (BE). The increase was witnessed across all social sectors especially
education where the public expenditure as a per cent of GDP increased from 2.8 per cent in 2014-15 to 3 per
cent in 2018-19. The share of expenditure on social services out of total budgetary expenditure increased from
24.9 per cent in 2013-14 to 26 per cent in 2018-19.
Education in India: As per Educational Statistics at a Glance (ESAG), 2018, the thrust on providing primary
education has yielded results across social categories and gender in Gross Enrolment Rate (GER). Over the
years, remarkable progress has been made in respect of female participation up-to secondary level and GER for
girls has exceeded that of boys. But girls’ enrolment rate is lower than that of boys at the higher education level.
At this level, the gap is visible across the social categories too. The Pupil Teacher Ratio (PTR) at national level
for primary schools is 23, 17 for upper primary, 27 for secondary and 37 for senior secondary schools.
Gender Parity Index (GPI) based on GER: GPI based on GER indicates increasing trend of female participation
at all levels. At the higher education level the GPI is low. Although, enrolment of girls is higher than that of boys in
government schools, the pattern gets reversed in private schools. The gender gap in enrolment in private schools
has consistently increased across age groups.
Status of Health: Public health expenditure (centre, states and local bodies), as a percentage of Total Health
Expenditure (THE) increased from 22.5 per cent in 2004-05 to 30.6 per cent in 2015-16. The National Health
Mission (NHM), with its two sub-missions National Urban Health Mission (NUHM) and National Rural Health
Mission (NRHM) envisages achievement of universal access to equitable, affordable and quality healthcare
services that are accountable and responsive to peoples’ needs. Under this Mission, support is provided to
States/UTs to provide accessible, affordable, accountable and effective healthcare up to District Hospital level.
Major programme components under NRHM are Reproductive-Maternal- Neonatal-Child and Adolescent Health
and Communicable and Non- Communicable diseases.
Skill Development: The schooling system improves the educational level of the population. It is skill training that
equip the youth to enter the labour market and improves their employability. According to NSSO Report 2011-12,
only 2.3 per cent of the total workforce in India had formal sector skill training. Keeping in view the predominance
of young population, the government had formulated the National Policy on Skill Development &
Entrepreneurship, 2015 under which the Skill India Mission by 2022 was formulated.
Human Development Index
India’s Human Development Index (HDI) has improved significantly over the years between 1990 and 2017. The
country’s HDI value increased from 0.427 to 0.640, but its position is still lowest among its peer countries (Asian
and developing economies). As per the UNDP Human Development Index (HDI), India is ranked 130 among 189
countries. Moreover, India also reflects inter-State disparities in regional and human development which are
reflected by state level HDIs.
The Key Announcement of Union Budget 2019
Naari Tu Narayani/Women: Approach shift from women-centricpolicy making to women-led initiatives and
movements. A Committee proposed with government and private stakeholders for moving forward on Gender
Budgeting.
New National Education Policy: It proposed, major changes in both school and higher education, Better
governance systems and greater focus on research and innovation. 'Study in India' proposed to bring foreign
students to study in Indian higher educational institutions.
Pradhan Mantri Awas Yojana – Urban (PMAY-Urban): Under this scheme, over 26 lakh houses completed of
which nearly 24 lakh houses delivered to the beneficiaries.
 More than 95% of cities also declared Open Defecation Free (ODF).
 Target of achieving Gandhijis resolve of Swachh Bharat to make India ODF by 2nd October 2019. To
mark this occasion, the 'Rashtriya Swachhta Kendra' to be inaugurated at Gandhi Darshan, Rajghat on
2nd October, 2019.
Grameen Bharat / Rural India: Ujjwala Yojana and Saubhagya Yojana have transformed the lives of every rural
family, dramatically improving ease of their living. Electricity and clean cooking facility to all willing rural families
by 2022.
Under Pradhan Mantri Awas Yojana – Gramin : Eligible beneficiaries to be provided 1.95 crore houses with
amenities like toilets, electricity and LPG connections during its second phase (2019-20 to 2021-22).
Pradhan Mantri Matsya Sampada Yojana (PMMSY)
 A robust fisheries management framework through Pradhan Mantri Matsya Sampada Yojana (PMMSY)
to be established by the Department of Fisheries.
 To address critical gaps in the value chain including infrastructure, modernization, traceability,
production, productivity, postharvest management, and quality control.
Pradhan Mantri Gram Sadak Yojana (PMGSY)
 Target of connecting the eligible and feasible habitations advanced from 2022 to 2019 with 97% of such
habitations already being provided with all weather connectivity.
 30,000 kilometers of PMGSY roads have been built using Green Technology, Waste Plastic and Cold
Mix Technology, thereby reducing carbon footprint.
 1,25,000 kilometers of road length to be upgraded over the next five years under PMGSY III with an
estimated cost of Rs. 80,250 crore.
Government Initiatives
The government has been committed to provision of social security which is evident in the initiation of major
social sector schemes by the Government of India during the last five years given below:
Pradhan Mantri Suraksha Bima Yojana, 2015 - It offers a one-year accidental death and disability cover with
annual premium of Rs. 12. It is available to people in the age group 18 to 70 years.
Pradhan Mantri Jeevan Jyoti Bima Yojana, 2015 - It is government-backed life insurance scheme with annual
premium of Rs. 330. It is available to people between 18 and 50 years of age.
Pradhan Mantri Vaya Vandana Yojana, 2018 - It is a pension scheme exclusively for the senior citizens aged
60 years and above.
PM-KISAN, 2019 - It offers income support of Rs. 6000 per annum in three equal instalments to all eligible
farmers irrespective of land holdings.
National Nutrition Mission (POSHAN Abhiyaan) - It ensure attainment of malnutrition free India by 2022.
Targeted intervention in areas with high malnutrition burden.
Mission Indradhanush (MI) and Intensified Mission Indradhanush (IMI) - To vaccinate unreached/ partially
reached pregnant women and children so as to reduce vaccine preventable under-5 mortality rate. The drive is
foucused on pockets of low immunization average and hard to reach areas where proportion of unvaccinated and
partially vaccinated children and pregnent women is high.
Samagra Shiksha - A comprehensive programme subsuming Sarva Shiksha Abhiyan (SSA), Rashtriya
Madhyamik Shiksha Abhiyan (RMSA) and Teacher Education (TE). For first time, it also includes provisions for
support at preschool level, library grants and grants for sports and physical equipment.
ICT Driven Initiatives - Shaala Sidhi (to enable all schools to self-evaluate their performance), e-Pathshala
(providing digital resources such as textbooks, audio, video, periodicals etc.) and Saransh (an initiative of CBSE
for schools to conduct self-review exercises).
LaQshya - 'LaQshya - Quality Improvement Initiative' was launched in December, 2017 with the objectives of
reducing preventable maternal and new born mortality, morbidity and stillbirths associated with the care around
delivery in Labour room and Maternity OT (Operation Theatre) and to ensure respectful maternity care.
Pradhan Mantri Surakshit Matritva Abhiyan (PMSMA): PMSMA was launched in 2016 to provide
comprehensive and quality Ante- Natal Care (ANC) to pregnant women on the 9th of every month. Under
PMSMA, doctors from both the public and private sector examine pregnant women on 9th of every month at
Government health facilities.
Skilling Ecosystem - Skilling ecosystem in India is equipping the youth to meet the challenges of a dynamic
labour market by providing various short term and long term skilling under programmes like 'Pradhan Mantri
Kaushal Vikas Yojana' (PMKVY). PMKVY has had positive impact on employment and incomes of the youth as
per evaluation studies.
Rural Infrastructure - Connectivity is critical for rural areas to improve quality of lives of the poor by enhancing
access to various social services, education, health and access to markets. PMGSY has played a crucial role in
connecting the unconnected in rural India and enhanced their livelihood opportunities. Government has accorded
highest priority to rural housing, by providing dwelling with all basic facilities to the most needy under Pradhan
Mantri Awas Yojana (Gramin) (PMAY-G). Government has also prioritized employment programmes like
MGNREGS which is reflected in the upward trend in budget allocation and release of funds to the States in the
last four years.
Financial Inclusion - Financial inclusion of women is considered as an essential tool for empowerment of
women as it enhances their selfconfidence and enables financial decision-making to a certain extent. As far as
financial inclusion in India is concerned, significant progress has been made during the last decade. At all India
level, the proportion of women having a bank or saving account that they themselves use have increased from
15.5 per cent in 2005-06 to 53 per cent in 2015-16.
Way Forward
India's development trajectory is critically intertwined with the investments in social infrastructure. To reap the
benefits of demographic dividend, the government is committed to improve the outcomes in education and
skilling and to provide employment and affordable healthcare to all. Scaling up development programmes for
improving connectivity, providing housing and bridging gender gaps in socio-economic indicators is of paramount
importance for sustainable development. India's march towards achieving SDGs is firmly anchored in investing in
human capital and inclusive growth.
Inclusiveness has been the cornerstone of India’s development agenda. As India is a developing economy with
resource constraints, we have to prioritize and optimize the expenditure on social infrastructure to promote
sustainable and inclusive growth.
The outlook for India on the human development front could be positive given the large demographic dividend
waiting to be tapped. This demographic dividend will benefit India if its population is healthy, educated and
adequately skilled.
Unleashing the time-bound potential of demographic dividend is the bigges`t challenge for India. This calls for
massive investment in social infrastructure, skill development and empower ment of women. One
of the challenges is to deal with multiple and sometimes overlapping programmes.
A mere mark up each year in the Budget for existing programmes or starting some new programmes will not
suffice. What is needed is a ‘zero budgeting’ approach with a revamp, reorganization and convergence of social-
sector schemes with a minimum size prescribed for the schemes. Better service provision can only come about
with better maintenance and greater expansion of infrastructure.
Greater infrastructure however would require greater allocation of public funds. These funds need to come from
the centre or the state. Local governments are unlikely to generate enough funds to serve the purpose. Overall
social infrastructure— health and education—requires (i) greater decentralization within the government, (ii)
greater public–private partnerships, (iii) greater involvement of consumers and local governments and
associations either through e-Governance or sample surveys in the decision making process.
Education as well as the urban health care, it is poor delivery of the services that has exacerbated the
consequences of poor infrastructure. This is mainly the symptons of delivery at the institutional level, at execution
level as well as at eh delivery level. Thus to alter or to bring about better result it is required to effectively change
these levels. The failure at any end can bring about failure of the whole process and hence the motive in itself.
The continuation of both private and public set-ups providing services should be encouraged.
This should not mean that public delivery should be at the cost of the private or private delivery at the cost of the
public. It is important to ensure that public delivery mechanism is strengthened. Whatever be the difficulties in
doing so, this is a necessary criterion for the welfare of the underprivileged segments of the society.
This requires that appropriate incentives be built in. A system of rewards and incentives needs to be introduced
at all levels of the delivery hierarchy. Local government needs to be given the adequate task of regularly assess
the responsibility of both health and education. They should be rewarded for good results and rebuked for bad
as well. Both in the health and education sectors, responsibilities have not been adequately assigned.

AGRICULTURAL CREDIT
In the zeal to push through financial sector reforms and to turn the sector into a handmaiden of industry and trade
(Narayana, 1993) government and the pro-reform academics seem to be ignoring the crucial role banks have
played in promoting private capital formation in agriculture. What is most disturbing is that while the need for
quickening the pace of financial sector reforms is emphasized not even a beginning has been made in working
out alternatives in the sphere of agricultural credit.
There is another side of the story, an aspect related to the political economy of lending. Cole (2008) observed
that government-owned bank lending follows the electoral cycle. Agricultural credit increases by 5-10 percentage
points in an election year. Large increases in agricultural lending takes place in districts in which the election is
particularly close. Interestingly, this targeting does not exist in non-election years, or in private bank lending. He
demonstrated adverse impact of election on loan repayment on the one hand and insignificant impact of credit
boom in election year on agricultural. The issue is to how make government owned banks engage in meaningful
agricultural lending, without being high jacked by narrow interests of industry, trade and political elite in power.
 A lot of efforts have been made since independence to address the problem of agricultural credit
 A number of committees and task forces have been constituted, which duly submitted their reports.
 No meaningful dent could be made on the problem, despite repeated attempts by the state.
 Financial reforms bypassed agricultural credit.
 Policy makers need to factor in new realities.
 A complete re-orientation of banks is a must.
 The political economy of rural credit needs to be understood.
Agricultural credit in India
Agricultural credit is considered as one of the most basic inputs for conducting all agricultural development
programmes. In India, there is an immense need for proper agricultural credit as Indian farmers are very poor.
From the very beginning, the prime source of agricultural credit in India was moneylenders.
 After independence, the Government adopted the institutional credit approach through various agencies
like co-operatives, commercial banks, regional rural banks etc. to provide adequate credit to farmers, at
a cheaper rate of interest. Moreover, with growing modernisation of agriculture during the post-green
revolution period, the requirement of agricultural credit has increased further in recent years. India’s
agrarian crisis has deepened in the past several years, contributing to the slowdown of the economy.
Amongst the most crucial factors affecting the country’s agricultural sector is financial inclusion. Over
the years, India has attempted various measures to narrow the gap in financial inclusion for its farmers,
yet the goal continues to elude the country. The trend of declining growth in the agricultural sector is not
new. This is exhibited by the stark difference between the growth rates of the industry and the services
sectors at about nine percent per annum for the 10th Five Year Plan (2002–07) on the one hand, and
the agriculture sector at around 2.3 percent per annum, on the other. Even in the five years that
followed, the per annum growth rate of agriculture stayed below the target rate of four percent.
 The primary causes of this chronic agrarian crisis include the following: (1) heavy dependence on
monsoons and the inability to mitigate uncertainty associated with the vagaries of nature due to,
amongst others, poor irrigation facilities; (2) lack of access to suitable technology; (3) anomalies and
inefficiencies in agricultural markets and the marketing ecosystems; and (4) lack of institutional credit at
affordable rates. The last of these causes must be emphasised more than the others given its ability to
contribute in tackling the remaining causes. Revival of growth or even sustaining it requires falling back
on the virtuous cycle triggered by investment; and as such private investment in agriculture demands
financial inclusion farmers.
 It is widely recognised that there is a positive relationship between agricultural credit and agricultural
growth. For a farmer, access to affordable institutional credit becomes crucial to start and sustain a
good crop cycle based on quality inputs such as seeds, fertilisers, machinery and equipment, and
sufficient supply of water and power. In an indirect manner, credit facilitates other important agricultural
functions such as marketing, warehousing, storage and transportation, all of which are crucial to
productivity. Agricultural credit plays an important role in providing essentials during adversity. To be
able to absorb the shock of crop failure due to reasons such as drought and pest infestation or loss
incurred due to price crash, the farmers must be financially equipped.
 Financial Inclusion of Farmers in India: A Brief Profile
 Access to institutional credit demands the ownership of assets and income that evaluates the
creditworthiness of a potential borrower. Lack of such creditworthiness implies access exclusion. As per
latest Agricultural census, 87 percent of agricultural households possess land which is less than or
equal to two hectares. This means that in accordance with the definition of the Reserve Bank of India,
87 percent farmers are either small or marginal. The size of income varies positively with the size of
landholdings.
 The primary sources of investment in agriculture are personally owned funds and those acquired from
institutional sources. The reliance on non-institutional sources decreases with an increase in the size of
land possessed.
 The above analysis reveals that in order to increase investment in highvalue agricultural assets, which
drives agricultural productivity, farmers’ household incomes must be increased and access to
institutional credit, encouraged

 Types of agricultural credit

Considering the period and purpose of the credit requirement of the farmers of the country, agricultural
credit in India can be classified into three major types
 Short term credit: The Indian farmers require credit to meet their short term needs viz., purchasing
seeds, fertilizers, paying wages to hired workers etc. for a period of less than 15 months. Such loans are
generally repaid after harvest.
 Medium-term credit: This type of credit includes credit requirement of farmers for a medium period
ranging between 15 months and 5 years and it is required for purchasing cattle, pumping sets, other
agricultural implements etc. Medium-term credits are normally larger in size than short term credit.
 Long term credit: Farmers also require finance for a long period of more than 5 years just for the
purpose of buying additional land or for making any permanent improvement on land like the sinking of
wells, reclamation of land, horticulture etc. Thus, the long term credit requires sufficient time for the
repayment of such loan.

Sources of agriculture credit

Apart from the moneylenders, cooperative credit sources and the government, nowadays, the long term and
short term credit needs of institutions are also being met by National Bank for Agricultural and Rural
Development (NABARD).
Sources of agricultural credit can be broadly classified into institutional and non-institutional sources. Non-
Institutional sources include moneylenders, traders and commission agents, relatives and landlords, but
institutional sources include co-operatives, commercial banks including the SBI Group, RBI and NABARD.
Commercial banks
In the initial period, the commercial banks of our country have played a marginal role in advancing rural credit.
With the help of “village adoption scheme” and service area approach the commercial banks started to meet the
credit and other requirements of the farmers. They also sponsored various regional rural banks for extending
credit to small and marginal farmers and rural artisans just to save them from the clutches of village
moneylenders.
Commercial banks are finding difficulty in advancing loans to the farmers particularly in respect of lending
techniques, security, recovery etc. and are expected to overcome these gradually. But the commercial banks are
not very much interested to advance loan to small and marginal farmers.
Government:Another important source of agricultural credit is the Government of our country. These loans are
known as taccavi loans and are lend by the Government during emergency or distress like famine, flood etc. The
rate of interest charged against such loan is as low as 6 per cent. During 1990-91, the state Governments had
advanced nearly Rs 350 crore as a short-term loan to agriculture. But the taccavi loan failed to become very
much popular due to official red-tapism and corruption.
Credit facility to farmers:
Kissan credit card: The Kissan Credit Card (KCC) scheme was launched in 1998 with the aim of providing
short-term formal credit to farmers. Owner cultivators, as well as tenant farmers, can avail loans to meet their
agricultural needs under this scheme at attractive rates of interest. The government has also simplified the
application process to increase interest among farmers. Repayment is also simplified and dependent on the
harvesting season, reducing the farmers’ debt burden.
Investment loan: Loan facility to the farmers is available for investment purposes in the areas viz. Irrigation,
Agricultural Mechanization, Land Development, Plantation, Horticulture and Post-Harvest Management.
Interest subvention scheme: The interest subvention scheme for farmers aims at providing short term credit to
farmers at the subsidised interest rate.  The policy came into force with effect from Kharif 2006-07. The scheme
is being implemented for the year 2018-19 and 2019-20.
The interest subvention will be given to Public Sector Banks (PSBs), Private Sector Banks, Cooperative Banks
and Regional Rural Banks (RRBs) on use of own funds and to NABARD for refinancing to RRBs and
Cooperative Banks.
The Interest Subvention Scheme is being implemented by NABARD and RBI.
Problems regarding Agricultural credit in India
 Insufficiency: In spite of the expansion of rural credit structure, the volume of rural credit in the country
is still insufficient as compared to its growing requirement arising out of the increase in prices of
agricultural inputs.
 Inadequate amount of sanction: The amount of loan sanctioned to the farmers by the agencies is also
very much inadequate for meeting their different aspects of agricultural operations. Considering the
amount of loan sanctioned as inadequate and insignificant, the farmers often divert such loan for
unproductive purposes and thereby dilute the very purpose of such loan.
 Lesser attention of poor farmers: Rural credit agencies and its schemes have failed to meet the
needs of the small and marginal farmers. Thus, lesser attention has been given on the credit needs of
the needy farmers whereas the comparatively well-to-do farmers are getting more attention from the
credit agencies for their better creditworthiness.
 Inadequate institutional coverage: In India, the institutional credit arrangement continues to be
inadequate as compared to its growing needs. The development of co-operative credit institutions like
Primary agricultural credit societies, land development banks, commercial banks and regional rural
banks, have failed to cover the entire rural farmers of the country.
 Red tapism: Institutional agricultural-credit is subjected to red-tapism. Credit institutions are still
adopting cumbersome rules and formalities for advancing loan to farmers which ultimately force the
farmers to depend more on costly non-institutional sources of credit.
Solutions
 To monitor the taccavi loan offered by the Government in a serious manner.
 Co-operative credit societies should be organised to make it efficient and purposeful for delivering the
best in terms of rural credit. Moreover, these societies may be transformed into a multi-purpose society
with sufficient funding capacity.
 Middlemen existing between credit agencies and borrowers should be eliminated.
 Reserve Bank of India should arrange sufficient fund so that long term loans can be advanced to the
farmers.
 Power and activities of the Mahajans and moneylenders should be checked so as to declare an end to
the exploitation of farmers.
 The banks should adopt procedural simplification for credit delivery through rationalisation of its working
pattern.
 In order to check the fraud practices adopted by the farmer, for getting loans from different agencies by
showing same tangible security, a credit card should be issued against each farmer which will show the
details about the loans taken by them from different agencies.
  Credit should also monitor the actual utilisation of loans by developing an effective supervisory
mechanism.
 Before delving into various measure for improving the access of financial inclusion especially for small
and marginal farmers, we need to change the paradigm under which the concept of financial inclusion is
understood.
 Towards a New Understanding of ‘Financial Inclusion’
Based on the definitions proposed by the committees chaired by Dr. C. Rangarajan and Dr. Raghuram Rajan,
financial inclusion is considered a welfare-oriented exercise that involves improving access and affordability of
various financial products and services such as payment services, savings products, insurance products and
inflation-protected pnesions.
 Viewing the problem of financial exclusion as a market failure with no market-oriented solutions is no
longer true, given the emergence of several alternative financial models. Financial exclusion must also
be clearly defined; an exercise that will highlight what needs to change and give insights for appropriate
solutions. It refers to the barriers or limitations that prevent people from using financial services. It
ranges from not having access to a bank account, to financial illiteracy. Several dimensions of barriers
have been identified, including: physical exclusion, caused by the problems of travelling to avail
services; access exclusion, caused by processes of risk assessment; condition exclusion, when the
conditions attached to products are unsuitable or unacceptable to the consumers; price exclusion, when
the price of products is unaffordable; marketing exclusion, where certain consumers are unaware of
products due to marketing strategies that target others; and, self-exclusion, when people decide to
exclude themselves voluntarily on the basis of past rejections or fear that they would be rejected.
 Focus on the Ability to Repay rather than Collateral
 The variables of financial inclusion—namely savings, investment and even credit—are determined to a
significant degree by the size of landholdings and the level of income of agricultural households. In
aspiring to double farmers’ incomes and rescue those in a debt trap, India has to change this reality,
especially as regards credit. Dependence of access to credit on the level of income and landholdings
defeats the purpose of financial inclusion.
 On average, approximately 50 percent of agricultural households have availed credit. Furthermore, will
the 50 percent who are indebted be able to pay back the loans in time? Reeling under the burden of the
debt trap has led several farmers to commit suicide, the most horrific manifestation of the agrarian
distress in the country.
 There is a dire need to replace existing collateral requirements and assessments of creditworthiness
with systems that measure repayment capacity on the basis of optimum utilisation of disbursed credit;
an agricultural credit system based on the productive capacity of the borrower and not on securities as
collateral. The success of such a credit system is deemed to rely upon the monitoring of credit utilisation
so as to ensure appropriate and efficient utilisation of credit resources.
 Leverage the ‘Ruralisation’ of the Manufacturing Sector
 The strong reliance of agricultural households’ incomes on casual wage labour needs to be replaced by
formal earnings. This will help tackle the problems of irregularity of income and lack of reliable income
documentation which adversely affect access to credit. India’s industrialisation in recent times has
become rural in nature. With organised large-scale manufacturing sector which accounts for about 80
percent of the total manufacturing output shifting to rural areas in order to leverage cheap land and
labour, an avenue is opened to correct the spatial and regional disparities confronting the nation.
 This trend of a ruralising manufacturing sector can be capitalised upon to generate greater formal
employment in the rural areas so that the share of casual wage labour is reduced and that of formal
income increases. Hence, the policymakers need to understand this trend and steer it according to their
own development agenda. It must be ensured that deficiencies in infrastructure, power and connectivity
should not impede this ruralisation phenomenon. Policymakers need to investigate the factors that can
catalyse this process and identify measures that can create an enabling environment for the same.
 Tap Impact Investments for Sustainable Access to Credit in India
 Conventional economic theory presumes that the economic behaviour of the homo economicus, the
rational economic man, has being driven solely by self-interest. Empirical evidence suggests the
contrary. Humans are altruistic, they care about being fair, their choices are motivated by reciprocity,
and they adhere to social norms.
 To give an example in the Indian context, consider the Ujjwala scheme in association with which PM
Narendra Modi appealed to the public to give up their LPG subsidy if they were in a position to do so.
Standard economic theory would predict that no one would give up their subsidy. However, many did
give it up. To be exact, since the launch of the scheme in 2016, 1.03 crore people have given up their
subsidy (as of December 2018).
 In the context of investments, those who are driven purely by the motive of higher returns are catered to
by conventional investments. But what about those who wish to employ their investible resources to
achieve some social outcomes besides earning a return? Impact investments are the answer. Impact
investment lies between pure philanthropy and exclusively commercial investments.
 Impact investments in India have gained a lot of traction and have a bright future as well. It has been
received in the form of debt investment in co-operatives and food enterprises, equity investments in
retailers and ag-tech firms that seek to achieve optimal utilisation of input factors and energy, efficient
 management of scarce resources etc. They are referred to as ‘patient’ capital, in that it is patient about
the size of the return as well as the tenure after which this return can be expected. Given that impact
investors are interested in the social impact (of course different investors have different preferences for
social versus financial return), the returns can be tied to the realisation of the social outcome being
promised. For example, in the face of subsequent droughts, successive crop failures, the farmer would
find it very difficult to pay back the loan. In such cases, the social impact could be freeing the farmer
from the debt trap. The payment of the rate of return could be tied to this objective. As such, ‘patient’
capital relieves the farmer of the pressures surmounting as a result of accumulating debt burden.
 Therefore, impact investment ecosystem needs to be further developed by initiating measures related to
tax and regulatory regimes, measures for encouraging, incubating and nurturing social enterprises,
transparency and accountability measures by formulating robust methods of measuring social impact,
steps to secure investor protection and public trust.
 Philanthropy as a Source of Affordable Credit
 Charitable donations which have no obligation of returning the money attached to them provide greater
flexibility in designing credit instruments for small and marginal farmers in India. A revolving fund can be
created to park the donations, repaid loans and the interest paid on loans. Given evidence of arbitrage
exploitation in the past, interest-free loans are not a good idea. Also, credit instruments can be
sympathetic to farmers in deep debt crisis and waive off loans. However, to avoid wilful default driven by
the expectation of loan waivers, such waivers cannot be blanket announcements and must be provided
on a case by case basis. High-risk low-quality credit assets can be financed by philanthropic sources.
Hence, these resources have the potential of extending credit access to the underserved.
 Enrolling Fintech Players to Solve the Problems of Assessing Credit Worthiness of Small and
Marginal Farmers
 Conventional methods of assessing lending risks will almost always deem small and marginal farmers
as highrisk, low-quality credit assets. What worsens the matter is the lack of reliable income
documentation and proper record of land titles. FarmDrive in Kenya has championed an interesting
alternative for assessing creditworthiness of small landholding farmers. The enterprise has developed a
farm management application which helps maintain appropriate records of farming activities. Along with
this data, FarmDrive collects social, economic, agronomic, satellite and environmental data pertaining to
the farmer and aggregates them by employing some machine learning algorithm which, in turn,
generates a credit score.
 With mobile phone penetration among agricultural households in India being as high as 89.1 percent,
the prospects of replicating the FarmDrive model in the nation must be assessed. In India also firms like,
farMart has disbursed INR 1.5 crore reaching about 2,500 farmers and is active in areas in Uttar
Pradesh, namely Hardoi, Barabanki, Ayodhya and Raebareli. Given the agricultural market anomalies in
India, farMart has introduced market linkage programmes which help farmers to get better rates for their
produce and convert them into cash for repayment of loans.
 There is a need to scale efforts such as farMart in which the government needs to play a decisive role.
There is a need to build an enabling ecosystem for enterprises such as farMart to flourish. Tax
concessions, investment flows and infrastructural requirements which form a part of such enabling
ecosystem must be strengthened by policy intervention or even public private partnership (PPP)
models. Here, the gains from collaboration between the government, impact investors and fintech
players need to be emphasised.
 Conclusion
 Ensuring food security, practising climate smart agriculture and achieving the broader goal of
sustainable agriculture has a bearing upon the achievement of the Sustainable Development Goals
agenda of 2030. Each of these objectives in turn depends crucially upon access to agricultural credit.
This emphasises the importance of solving outstanding issues in the context of agricultural credit
disbursement in India.
 The agricultural crisis is India is deepening. It has in recent times pushed the economy in the direction of
a slowdown. While it is equally true that the economy needs land and labour reforms, it needs to be
innovative in solving longstanding problems like financial xeclusion.
 The perception towards the poor farmers in the country needs to change. Instead of looking at them as
high-risk, low-quality credit assets, they must be viewed as an untapped credit market. The features of
this market, more specifically, the character of the demand of this market, need to be understood to
develop tailored products that cater effectively to this market.
 An important reason why poor farmers in India are high-risk, lowquality assets is because they are not
insulated from the vagaries of nature and do not have the wherewithal to reduce the risk of loan failure.
Therefore, financial inclusion cannot stop at providing capital. It has to ensure that the probability of loan
failure is minimised.
NABARD is a development bank focussing primarily on the rural sector of the country. It is the apex banking
institution to provide finance for Agriculture and rural development. Its headquarter is located in Mumbai, the
country’s financial capital.
 It is responsible for the development of the small industries, cottage industries, and any other such
village or rural projects.
  It is a statutory body established in 1982 under Parliamentary act-National Bank for Agriculture and
Rural Development Act, 1981.
Functions
 NABARD’s initiatives are aimed at building an empowered and financially inclusive rural India
through specific goal oriented departments which can be categorized broadly into three
heads: Financial, Developmental and Supervision.
 It provides refinance support for building rural infrastructure.
 It prepares district level credit plans to guiding and motivating the banking industry in achieving these
targets.
 It supervises Cooperative Banks and Regional Rural Banks (RRBs) and helping them develop
sound banking practices and integrate them to the CBS (Core Banking Solution) platform.

o Core Banking Solution (CBS) is networking of branches, which enables Customers to

operate their accounts, and avail banking services from any branch of the Bank on CBS
network, regardless of where he maintains his account. The customer is no more the customer
of a Branch. He becomes the Bank’s Customer.
 It is involved in designing Union government’s development schemes and their implementation.
 It provides training to handicraft artisans and helps them in developing a marketing platform for
selling these articles.
 NABARD has various international partnerships including leading global organizations and World
Bank-affiliated institutions that are breaking new ground in the fields of rural development as well as
agriculture.

oThese international partners play a key consultant’s role in providing advisory services as
well as financial assistance designed to ensure uplifting of rural peoples as well as
optimization of various agricultural processes.
NABARD and RBI
 Reserve Bank of India is the central bank of the country with sole right to regulate the banking industry
and supervise the various institutions/banks that also include NABARD defined under Banking
Regulation Act of 1949.
 Many developmental and regulatory works are done by RBI and NABARD in co-operation.

o RBI provides 3 directors to NABARD’s Board of Directors.

 NABARD provides recommendations to Reserve Bank of India on issue of licenses to
Cooperative Banks, opening of new branches by State Cooperative Banks and Regional Rural
Banks (RRBs).
Contribution
The NABARD has touched almost every aspect of rural economy in terms of Financial, Developmental and
Supervision functions
Financial Contribution
 Refinance - Short Term Loans: Crop loans are extended to farmers for crop production by financial
institutions, which support in ensuring food security in the country.
 Long Term Loans: NABARD's long-term refinance provides credit to financial institutions for a wide
gamut of activities encompassing farm and non-farm activities with tenors of 18 months to more than
5 years.
 Rural Infrastructure Development Fund (RIDF): It was set up with NABARD in 1995-96 by the RBI
out of the shortfall in lending to priority sector by scheduled commercial banks for supporting rural
infrastructure projects.
 Long-Term Irrigation Fund (LTIF): The LTIF in NABARD was setup with an initial corpus of Rs 20,000
crore for funding 99 irrigation projects during 2016-17 following announcement in the Union Budget.
 Pradhan Mantri Awaas Yojana - Grameen (PMAY-G).
 NABARD Infrastructure Development Assistance (NIDA): NIDA has been designed to complement
RIDF.
 Warehouse Infrastructure Fund (WIF): Union government created WIF in the year 2013- 14 with
NABARD with a corpus of Rs 5,000 crore for providing loans to meet the requirements for scientific
warehousing infrastructure for agricultural commodities in the country.
 Food Processing Fund
 Direct Lending to Cooperative Banks
 Credit Facility to Marketing Federations (CFF):
 Producer Organizations Development Fund (PODF) for POs & PACS:

o NABARD set up Producer Organizations Development Fund (PODF) with an initial corpus of
Rs 50 crore to support and finance Producer Organizations (POs) and Primary Agriculture
Credit Societies (PACS) to operate as Multi Service Centres.
  Producer Organisation (PO): it is a legal entity formed by primary producers, viz.
farmers, milk producers, fishermen, weavers, rural artisans, craftsmen. A PO can
be a producer company, a cooperative society or any other legal form which provides
for sharing of profits/benefits among the members.
 Primary Agricultural Credit Society (PACS) is a basic unit and smallest co-
operative credit institution in India. It works on the grassroots level (gram panchayat
and village level). It provides credit to farmers in the form of term loans and recovers
the amount after harvesting of crop from the cultivator.
Developmental Contribution
 Kisan Credit Card Scheme for Farmers: The Kisan Credit Card (KCC) scheme was designed by
NABARD in association with the RBI in August 1998 for providing crop loans.
 RuPayKisan Cards (RKCs): NABARD has been at the forefront of technology revolution by helping
rural financial institutions in providing RuPayKisan Cards (RKCs) to all their farmer clients.
 Tribal Development: the Tribal Development Programme
 Climate Resilient Agriculture
 Umbrella Programme on Natural Resource Management (UPNRM):

o The UPNRM started in 2007, works at enhancing investments in rural areas, creating

business opportunities and enabling rural communities to sustainably utilise their natural
resources.
 Microfinance Sector:

o NABARD had launched the Self Help Group-Bank Linkage Programme (SHG-BLP) in 1992.
Over 23 lakh SHGs were credit-linked during 2017-18 financial year.
 EShakti: In a bid to digitise SHGs, project EShakti was launched on 15 March 2015.
 Skill Development: Promoting an entrepreneurial culture among the rural youth and encouraging
them to start enterprises in the rural off-farm sector has been NABARD’s strategy for over three
decades.
 Marketing Initiatives: For providing marketing opportunities to rural artisans and producers, NABARD
has traditionally facilitated their participation in exhibitions across the country.
Incubation Centres
 To commercialise innovations and to shape agricultural entrepreneurship in the country, NABARD
extended support to Chaudhary Charan Singh Haryana Agricultural University, Hisar and Tamil
Nadu Agricultural University, Madurai for establishing Agri Incubation Centres with a total financial
commitment of Rs 23.99 crore.
Challenges
 As an offspring of the RBI, NABARD shares the work culture, ethos and development orientation of
its parent institution.

o Snapping of this link (the transfers of 0.4 per cent equity of RBI in NABARD to the Union
Government under NABARD Act 2017) has led to a great disadvantage for both the RBI and
NABARD.
o This has weakened any role or participation RBI can have over its activities.
o A strong relationship between the central bank and the development institution will help the
cause of agriculture and rural development at a critical juncture when the country is faced with
a serious agrarian crisis.
 Cost of financing has gone up since market borrowings of NABARD add up to 80 per cent of its
resources. Member-driven and de-bureaucratised cooperative structures have to fill-in the gaps of
institutional credit left open by commercial banks.
 The north-eastern states has been getting little share of the NABARD’s credit funds. The northeast
gets 1% of the credit, leading to farmers trapping in the net of money-lenders.
 The penetration of banks in insurgency-hit state is less and it should be stepped up.
Conclusion
More than 75 per cent people of India depend on agriculture. Rural infrastructure investments help in raising the
socio-economic status of the rural people through increased income levels and quality of life.
NABARD being an apex institution for providing credit facilities and capacity building to Indian rural economy, it
has great a opportunity for poverty reduction and socio-economic empowerment of rural India.

FOOD SECURITY AND AGRICULURE SUBSIDIES

 The Public distribution system (PDS) is an Indian food Security System established under the
Ministry of Consumer Affairs, Food, and Public Distribution.
 PDS evolved as a system of management of scarcity through distribution of food grains at affordable
prices.
 PDS is operated under the joint responsibility of the Central and the State Governments.
 o The Central Government, through Food Corporation of India (FCI), has assumed the
responsibility for procurement, storage, transportation and bulk allocation of food grains to the
State Governments.
o The operational responsibilities including allocation within the State, identification of eligible
families, issue of Ration Cards and supervision of the functioning of Fair Price Shops (FPSs)
etc., rest with the State Governments.
 Under the PDS, presently the commodities namely wheat, rice, sugar and kerosene are being
allocated to the States/UTs for distribution. Some States/UTs also distribute additional items of mass
consumption through the PDS outlets such as pulses, edible oils, iodized salt, spices, etc.
Evolution of PDS in India
 PDS was introduced around World War II as a war-time rationing measure. Before the 1960s,
distribution through PDS was generally dependant on imports of food grains.
 It was expanded in the 1960s as a response to the food shortages of the time; subsequently, the
government set up the Agriculture Prices Commission and the FCI to improve domestic procurement
and storage of food grains for PDS.
 By the 1970s, PDS had evolved into a universal scheme for the distribution of subsidised food
 Till 1992, PDS was a general entitlement scheme for all consumers without any specific target.
 The Revamped Public Distribution System (RPDS) was launched in June, 1992 with a view to
strengthen and streamline the PDS as well as to improve its reach in the far-flung, hilly, remote and
inaccessible areas where a substantial section of the underprivileged classes lives.
 In June, 1997, the Government of India launched the Targeted Public Distribution System
(TPDS) with a focus on the poor.

o Under TPDS, beneficiaries were divided into two categories: Households below the poverty
line or BPL; and Households above the poverty line or APL.
 Antyodaya Anna Yojana (AAY): AAY was a step in the direction of making TPDS aim at reducing
hunger among the poorest segments of the BPL population.

o A National Sample Survey exercise pointed towards the fact that about 5% of the total
population in the country sleeps without two square meals a day. In order to make TPDS more
focused and targeted towards this category of population, the "Antyodaya Anna Yojana” (AAY)
was launched in December, 2000 for one crore poorest of the poor families.
 In September 2013, Parliament enacted the National Food Security Act, 2013. The Act relies largely
on the existing TPDS to deliver food grains as legal entitlements to poor households. This marks a shift
by making the right to food a justiciable right.
How PDS system functions?
 The Central and State Governments share responsibilities in order to provide food grains to the
identified beneficiaries.
 The centre procures food grains from farmers at a minimum support price (MSP) and sells it to states
at central issue prices. It is responsible for transporting the grains to godowns in each state.
 States bear the responsibility of transporting food grains from these godowns to each fair price shop
(ration shop), where the beneficiary buys the food grains at the lower central issue price. Many
states further subsidise the price of food grains before selling it to beneficiaries.

Importance of PDS
 It helps in ensuring Food and Nutritional Security of the nation.
 It has helped in stabilising food prices and making food available to the poor at affordable prices.
 It maintains the buffer stock of food grains in the warehouse so that the flow of food remain active
even during the period of less agricultural food production.
  It has helped in redistribution of grains by supplying food from surplus regions of the country to
deficient regions.
 The system of minimum support price and procurement has contributed to the increase in food grain
production.
Issues Associated with PDS System in India
 Identification of beneficiaries: Studies have shown that targeting mechanisms such as TPDS are
prone to large inclusion and exclusion errors. This implies that entitled beneficiaries are not getting
food grains while those that are ineligible are getting undue benefits.

o According to the estimation of an expert group set up in 2009, PDS suffers from nearly 61%
error of exclusion and 25% inclusion of beneficiaries, i.e. the misclassification of the poor as
non-poor and vice versa.
 Leakage of food grains: (Transportation leakages + Black Marketing by FPS owners) TPDS suffers
from large leakages of food grains during transportation to and from ration shops into the open market.
In an evaluation of TPDS, the erstwhile Planning Commission found 36% leakage of PDS rice and
wheat at the all-India level.
 Issue with procurement: Open-ended Procurement i.e., all incoming grains accepted even if buffer
stock is filled, creates a shortage in the open market.
 Issues with storage: A performance audit by the CAG has revealed a serious shortfall in the
government’s storage capacity.

o Given the increasing procurement and incidents of rotting food grains, the lack of adequate
covered storage is bound to be a cause for concern.
 The provision of minimum support price (MSP) has encouraged farmers to divert land from production
of coarse grains that are consumed by the poor, to rice and wheat and thus, discourages crop
diversification.
 Environmental issues: The over-emphasis on attaining self-sufficiency and a surplus in food grains,
which are water-intensive, has been found to be environmentally unsustainable.

o Procuring states such as Punjab and Haryana are under environmental stress, including rapid
groundwater depletion, deteriorating soil and water conditions from overuse of
fertilisers.
o It was found that due to cultivation of rice in north-west India, the water table went down by 33
cm per year during 2002-08.
PDS Reforms
 Role of Aadhar: Integrating Aadhar with TPDS will help in better identification of beneficiaries
and address the problem of inclusion and exclusion errors. According to a study by the Unique
Identification Authority of India, using Aadhaar with TPDS would help eliminate duplicate and ghost
(fake) beneficiaries, and make identification of beneficiaries more accurate.
 Technology-based reforms of TPDS implemented by states: Wadhwa Committee, appointed by the
Supreme court, found that certain states had implemented computerisation and other technology-based
reforms to TPDS. Technology-based reforms helped plug leakages of food grains during TPDS.

Tamil Nadu implements a universal PDS, such that every household is entitled to subsidised
o
food grains.
o States such as Chhattisgarh and Madhya Pradesh have implemented IT measures to
streamline TPDS, through the digitisation of ration cards, the use of GPS tracking of delivery,
and the use of SMS based monitoring by citizens.
Technology-based reforms to TPDS undertaken by some states

Type of reform Benefits of reform States implementing

reforms

Digitisation of  Allows for online entry and verification of Andhra Pradesh,

ration cards beneficiary data Chhattisgarh, Tamil Nadu,
 Online storing of monthly entitlement of Madhya Pradesh,
beneficiaries, number of dependants, Karnataka, Gujarat, etc.
offtake of food grains by beneficiaries
from FPS, etc.

Computerised  Computerises FPS allocation, Chhattisgarh, Delhi,

allocation to FPS declaration of stock balance, web-based Madhya Pradesh, Tamil
truck challans, etc. Nadu, etc.
  Allows for quick and efficient tracking of
transactions

Issue of smart  Secure electronic devices used to store Haryana, Andhra Pradesh,
cards in place of beneficiary data Odisha etc.
ration cards  Stores data such as name, address,
biometrics, BPL/APL category and
monthly entitlement of beneficiaries and
family members
 Prevents counterfeiting

Use of GPS  Use of Global Positioning System (GPS) Chhattisgarh, Tamil Nadu
technology technology to track movement of trucks
carrying food grains from state depots to
FPS

SMS based  Allows monitoring by citizens so they can Chhattisgarh, Uttar

monitoring register their mobile numbers and Pradesh, Tamil Nadu
send/receive SMS slerts during dispatch
and arrival of TPDS commodities

Use of web-based  Publicises grievance redressal Chhattisgarh

citizens' portal machinery, such as toll free number for
call centres to register complaints or
suggestions

PDS vs. Cash Transfers

 National Food Security Act,2013 provides for reforms in the TPDS including schemes such as Cash
transfers for provisioning of food entitlements.
 Direct Benefit Transfer (DBT) aims to:

o reduce the need for huge physical movement of foodgrains

o provide greater autonomy to beneficiaries to choose their consumption basket
o enhance dietary diversity
o reduce leakages
o facilitate better targeting
o promote financial inclusion
Advantages and disadvantages of PDS and other delivery mechanisms

Machanism Advantages Disadvantages

PDS  Insulates beneficiaries from  Low offtake of food grains

inflation and price volatility from each household 
 Ensures entitlement is used for  High leakage and diversion of
food grains only subsidised food grain 
 Well-developed network of FPS  Adulteration of food grain
ensures access to food grains  Lack of viability of FPS due to
even in remote areas low margins

Cash  Cash in the hands of poor  Cash can be used buy non-
transfers increases their choicess food items
 Cash may relieve financial  May expose recipients to price
constraints faced by the poor, volatility and inflation
make it possible to form thrift  There is poor access to banks
societies and access credit and post offices in some areas
 Administrative costs of cash
transfer programmes may be
significantly lesser than that of
other schemes
 Potential for making electronic
transfer
 Food  Household is given the freedom to  Food coupons are not indexed
coupons choose where it buys food for inflation; may expose
 Increases incentive for competitive recipients to inflation
prices and assured quality of food  Difficult to administer; there
grains among PDS stores have known to be delays in
 Ration shops get full food grains issuing food coupons and
from the poor, no incentive to turn reimbursing shops
the poor away

Way Forward
 PDS is one of the biggest welfare programmes of the government, helping farmers sell their produce at
remunerative prices as well as the poorer sections of society to buy food grains at affordable rates.
 Its effectiveness can be enhanced with technology based solutions as is evident from some of the
states’ successes towards the same. Shifting towards DBT is another idea, but with caution.

o In its report on State finances, the Reserve Bank of India (RBI) has advised States that are
planning to shift to cash transfer to be cautious while effecting the migration.
o Economic survey 2016-17 also highlighted the need for more caution and better infrastructure
while replacing subsidised PDS supplies with DBT.
 Strengthening of the existing TPDS system by capacity building and training of the implementing
authorities along with efforts to plug leakages is the best way forward.
 It can be further strengthened by the increased public participation through social audits and
participation of SHGs, Cooperatives and NGOs in ensuring the transparency of PDS system at ground
level.
 To enhance the nutritional level of masses, bio-fortified foods need to be distributed through the PDS
that will make it more relevant in the backdrop of prevalent malnutrition in India.

What is Targeted PDS?

Targeted Public Distribution System (TPDS) is jointly operated by Central and State Governments. The Targeted
Public Distribution System (TPDS) came into operation on June 1997 under the Government of India with a focus
on the poor. Under the operations of TPDS, the beneficiaries were divided into two categories:
1. Households Below the poverty line (BPL)
2. Households Above the poverty line (APL)
Central Government is responsible for
1. Procurement of food grains
2. Allocation of food grains
3. Transportation of food grains to designated depots of Food Corporation of India (FCI).
State Government is responsible for
1. Allocation and Distribution of foodgrains within the state.
2. Identification of eligible beneficiaries.
3. Issuance of ration cards.

The subsidy is derived from the Latin word “subsidium", which implies assistance from behind. A subsidy is often
viewed as the
converse of a tax and an instrument of FIscal policy.
The rationale behind subsidies
The economic justiFIcation of subsidies lies in incentivizing the producers to invest in productive activities and
increase
production leading to a high Gross Domestic Product growth rate
The social rationale of subsidies lies in reducing inter-personal income inequality and inter-regional development.
If subsidies are provided in the agriculture sector, it will promote agricultural development besides equitable
distribution of
income.

Types of subsidies:
The subsidies may be classified as
1. Based on the mode of payment
Direct subsidies and Indirect subsidies
For example, Direct benefit transfer for fertilizers.
Merits of direct subsidies are
There would be no problem of identification, as through JAM trinity or Aadhar, payments can be made directly
to the beneficiaries.
It will reduce the problem of ghost beneficiaries.
It is likely to control infiation and decrease the price of fertilizer, and other agricultural products as well
B. Indirect subsidies
Indirect subsidies are provided through a price reduction, welfare, and other ways but do not include a direct
cash
payment.
They reach the farmers, along with the use of input. Therefore, these are directly proportional to the amount of
use of
inputs by farmers.
Generally, more the use of inputs required higher the subsidies they enjoy.
Explicit subsidies and implicit subsidies
Explicit input Subsidies are payments made to the farmers to meet a part of the cost of input. These are like
explicit
payments made to the farmer. For example, subsidy on improved or high yielding variety seeds, fertilizers, and
plant
protection chemicals for certain crops.
Implicit input subsidies are hidden in nature. In the implicit input subsidies, prices of inputs used are
administratively
determined and priced low as compared to their economical cost.
2. Based on inputs, subsidies can be classified as
A. Irrigation and power subsidy
Irrigation facilities are available to the farmers at a cheaper rate under the umbrella scheme of Pardhan Mantri
Krishi Solar pumps are provided at the subsidized rate to the farmers.
Power subsidy implies that the government charges low rates for the electricity supplied to the farmers. Power
subsidy acts as an incentive for farmers to invest in pumping sets, bore-wells, tube-wells, etc. This subsidy is
used to
draw groundwater.
B. Fertilizer subsidy
Disbursement of cheap chemical or no-chemical fertilizers among the farmers.
Urea is being provided to the farmers at a statutorily notified Maximum Retail Price.
These subsidies are provided to the farmers in the form of direct benefit transfers.
In some cases, this kind of subsidies are granted through lifting the tariff on the import of fertilizers
Neem coated urea is being provided to farmers at the subsidized rates. Earlier, 35% of the total urea production
is
neem coated, which is now increased to 75%.
The government rationalizes the urea subsidy bill with the new Urea policy, 2015.
C. Seed Subsidy
Seed subsidy is granted through the distribution of high-quality seeds at a price less than the market price of the
seeds.
D. Credit Subsidy
Credit subsidy is the difference between the interest charged from farmers and the actual cost of providing credit
Loans to farmers are included in the priority sector lending.
Interest subvention schemes are there, which aims at providing short term credit to farmers at the subsidized
interest rate.
Kisan credit cards are made available to the farmers for easy availability of credit to the farmers. It also helps in
reducing the middlemen.
E. Subsidy to farmers for crop loss
cropped areas due to the notified natural calamity.
Pardhan Mantri fasal bima yojana is a flagship scheme of the government which is used to incentivize the farmer
by
providing loss in case of disaster.
2% Interest subventions to the farmers affected by natural calamities.
F. Agriculture Marketing infrastructure subsidy
Agriculture Marketing Infrastructure (AMI), sub-scheme of an integrated scheme for Agriculture Marketing, is a
demand-driven scheme for assisting in the creation of agri-marketing infrastructure including storage.
G. Minimum Support Price
The minimum support price is the price the government agrees to buy all the grain offered for sale at this price.
It assures farmers that in case of excessive production leading to oversupply in the market, the government will
procure the food grains at the predetermined price.
PM-AASHA scheme is there, which aims at ensuring remunerative price to the farmers and is comprised of Price
support scheme, price de􀁽ciency payment scheme, Pilot of Private Procurement, and stockiest scheme.
Various schemes of the state government such as Bhavantar Bharpayee yojana and Bhavantar Bhugtan yojana
are
there intending to pay the de􀁽cit amount to the farmer or the procuring person.
H. Direct subsidy to the farmer in the form of cash
Pardhan Mantri Kisan Samman Nidhi is a central sector scheme with 100% funding from the government of
India.
Under the scheme, income support of Rs 6000 per year is provided to all the farmer's families across the country
in
three equal instalments of Rs 2000/- each every four months.
I. Agriculture Extension
Subsidies are provided for the agriculture extension, warehouse, and other storing facilities. Kisan Vigyan
Kendra,
through Kisan call centres, provides free assistance to the farmers.
J. Export Subsidies
This subsidy is provided to farmers who export agriculture products in the foreign market. Farmers earn money
for Government is providing subsidies to the farmer under the national livestock mission
National livestock mission is organized into the following four sub-missions 1) Sub-mission on livestock
development. 2)
Sub mission on pig development in northeastern region 3) Sub-mission on fodder and feed development 3) Sub-
mission
on skill development, technology transfer, and extension.
Further subsidies are provided for the indigenous breed of cattle
Similarly, subsidies are provided for the development of inland fisheries in the country.
Reasons in favour of agriculture subsidies
Fertilizer subsidy is a development subsidy. It accelerates the fertilizer use and promotes agriculture production.
In 2003
agriculture subsidies were reduced as a result of production also decreased.
Seeds are distributed for subsidized rates, and subsidies are also provided for farm mechanization to boost the
agriculture
productivity
Subsidies offer employment to the unskilled workforce and contribute to the human capital for agriculture needs.
In India, nearly 50 % of people are involved in the agriculture sector. Subsidies help them in reducing
inequalities.
Reasons against agriculture subsidies
Farmers are using excessive fertilizer than required that are harming not only the soil but the whole environment,
including the health of farmers itself.
Subsidies given to farmers for electricity has resulted in the drawing of groundwater in huge excess. This has
resulted in
the lowering of the water table and soil salinity in the area. For example, Punjab
Rich Farmers get the most benefit of the subsidies instead of small marginal and landless farmers.
The excess subsidies come at the cost of public investment in agriculture research.
Environmental effect and decline in soil fertility.

What is the current subsidy share?

 The government spent about Rs. 2.56-lakh crore on various subsidies for the farm sector in 2018-19.
 This is an increase of 43% over the previous year; the rise is primarily due to the higher MSP on crops.
 For 2019-20, farm subsidies are set to increase further to Rs.2.77-lakh crore.
 An Indian farmer enjoys numerous subsidies ranging from free power, water, to heavily discounted
fertilizer.
 They also extend to interest subvention on loans, discounted premium on crop insurance and minimum
support prices for crops.
What are the implications?
 Capital Investment - Farm subsidies are a drain on public finance.
 Subsidies are reducing the share of money that goes for capital investment.
 This, in turn, is a key reason for the sufferings of farmers.
 It’s so because, offsetting high cost on inputs and helping farmers produce and earn more, initially
creates an illusion of a healthy farm sector.
 But eventually, problems arising from lack of infrastructure and market inefficiency show its own
negative impact.
 [Today, only about 15% of the APMCs have cold storage facilities.
 Also, less than 50% of mandis in the country have weighing machines.]
 Unregulated use - The other concern due to input subsidies for agriculture is the unmindful use of
resources such as water and power.
 Input subsidies including those on urea have resulted in overuse of nitrogenous fertilisers and spoilt soil
health.
 Likewise, subsidies on power have resulted in depletion of the groundwater.
 Cropping pattern - Subsidies have also skewed the cropping pattern, which has, in the process, taken
a toll on the environment as well.
 Monoculture has resulted in an increase in pest and disease attacks on crops and higher usage of
chemical fertilisers.
 Evidently, subsidy-driven agriculture is not sustainable.
What could be done?
 Rationalizing subsidies - Subsidising the cost of inputs is not going to end the problems of the
marginal farmers of India.
  Completely stopping subsidies may not be possible now given its reach and popularity; but it can be
rationalised.
 Subsidies could be linked to the size of the farm-holding, rather than offering them to every other farmer.
 Direct transfers - The government can see if these subsidies can be paid via DBT (Direct Benefit
Transfer) so as to plug leakages.
 Capital Investment - Gradually, the government should withdraw subsidies and possibly convert them
to capital investments in the sector.
 The impact of capital investment on both agricultural yield and poverty will be far higher than that of
subsidies.
 The promised investments in agriculture (Rs. 25-lakh crore over 5 years) can be made in -
i. building a national-level warehousing grid with smaller warehouses near the farm-gate
ii. setting up of agri-processing centres
iii. providing assaying and grading machinery at mandis
 Exports - There is the need for long-term policies on export trade, for the government departments to
engage with exporters on a regular basis.
 This can help keep farmers aligned with the global demand/supply and price situations.
 Technical committee - There are talks about a technical committee with ICAR-NIAP as knowledge
partner to work on building an agri-market intelligence system.
 This process needs to be fast-tracked.
 The system will put out price and demand forecasts for various major foodgrains and price-sensitive
horticulture crops.
 Land - The government should look at ways of aggregating the small land-holdings and help farmers
draw benefit from farm mechanization.

The food security promised by the FSA, 2013 envisages a bill of Rs. 1,20,000 crore besides other expenditure for
67-70% of the population to eliminate hunger and poverty. Opposition to the provision of agricultural subsidies in
line with the amber and blue box subsidies under the aegis of the WTO is not suited to the needs of developing
countries. There is need to expand the scope of green box subsidies to include land reform measures and allow
crop-specific subsidies. The current WTO arrangements constrict the policy space of developing countries to take
concrete steps to reduce hunger.
Food security is possible if there is adequate food availability. In more recent times food habits have diversified
which requires a change in the cropping patterns. This requires public investment, technology, credit and land
and water management. Economic and physical access needs to be ensured which requires generation of
productive employment opportunities than one time subsidy transfer. A more severe problem that needs to be
addressed is the issue of malnutrition. Unless there is concerted effort on part of the state to make agriculture an
attractive economic option, food resources will continue to dwindle. With large masses of land being converted
into residential concrete jungles, land productivity, using viable, sustainable and environment-friendly technology,
must be increased. All of this requires state support, both institutional and financial, given the large mass of small
and marginal farmers who are cash-constrained. Subsidies to agriculture, particularly food subsidies, help
provide the social safety net. Without food and input subsidies high production and distribution costs will exert
inflationary pressures and have a spiral effect on wages and prices of other goods. This will cut into the
purchasing power of the most vulnerable groups pushing them further into destitution and malnutrition. A poor, ill-
fed and under-nourished population is more of a drag on the economy. To free the people of a country from
hunger, malnutrition and any deprivation associated with the lack of food, the Right to Food Act must work on
nutrition schemes for children, the PDS, assistance to vulnerable groups and any other intervention. This
requires institutional and legal support from the state. Right to Food requires availability, accessibility, adequacy
and sustainability.
The MDG of eradicating hunger and poverty is far from being met in India. Food security entails availability,
physical and economic access and nutritional adequacy. In India availability has been achieved but PDS has not
reached in rural areas. Even in urban areas the resident BPL population avails of the subsidy but the migrants,
living in slums with no security net are at the mercy of the market for their needs. They have to pay market price
for their daily food needs as their BPL cards are left behind in the village for the remaining members of the family.
The PDS has concentrated on procuring wheat, rice and coarse cereals but pulses have not been included in the
procurement drive. Hence the PDS ensures availability at subsidized price but does not ensure nutritional
adequacy. Many important micro nutrients in pulses, milk, eggs, etc are available at market prices. Moreover
excess procurement, much above the norms, is not used to curb inflationary pressures in urban areas. The
producer subsidy is availed of by the large and medium farmer while the small and marginal farmers are unable
to generate sufficient market surplus to avail of this subsidy. The very poor in rural areas are the landless who
have very little opportunities of productive employment in rural areas and constitute the large proportion of
migrants. A large mass of under-fed and under-nourished population cannot constitute the ‘human capital’ to
bear the responsibility of growth and development in India.

Agriculture: Introduction
Definition:
 Agriculture is a primary economic activity. It includes growing crops, fruits, vegetables, flowers and
rearing of livestock.
  Agriculture is the science and art of cultivation on the soil, raising crops and rearing livestock.
 Agriculture is the process of producing food, feed, fibre and other desired products by plant-cultivation
and rearing of domesticated animals.
Significance:
 At independence, 75% of Indian population was agriculture dependent. Today, 45.7% of Indian
workforce employed here.
 Besides food grains, agriculture also produces raw material for various industries.
 Export of tea, coffee, spices etc. helps earning foreign exchange for a country.
 Modi-Target: Doubling farmers’ income by 2022-23 compared to 2015-16. (Indian farmers’ Annual
Median Income is less than 20,000 rupees)
 SDG#2: Doubling agriculture productivity and farmer incomes by 2030. Eliminate global hunger, protect
indigenous seed and crop varieties etc. Hence Sustainable agriculture gains significance.
 (Definition) Sustainable agriculture is the usage of environmentally safe yet economically viable
agricultural practices that benefit farmers, laborers, entrepreneurs and consumers in the entire food
system, without exhausting soil fertility or doing irreversible damage to the ecology.
 Sir Arthur Lewis’ dual economy model : economic development always entails movement of labour
from agriculture sector to the more productive industrial sector and the agriculture sector becomes over
time a less important part of the economy in terms of its share of GDP.  This is true for India- with
Agriculture now accounting for less than 1/5th of GDP. Nonetheless, for a country as large and unique
as India, agriculture is important both for employment & food security.
 “Most of the world’s poor people earn their living from agriculture, so if we knew the economics of
agriculture, we would know much of the economics of being poor.” (Economist Theodore Schultz).
Agriculture Inputs
 Post-Green Revolution, Indian agriculture has become cereal-centric, regionally biased and input-
intensive of land, water, and fertilizer.
 Since industrialization is leading to scarcity of land and water, we’ve to focus on cultivating ‘more from
less’ (inputs).

Agri-Input#1: Agriculture Credit

 Credit enables the farmer to purchase inputs before it gets paid for his paid for previous season’s
produce. Therefore, credit is an important mediating input for agriculture to improve productivity.
 But, Local / informal  moneylenders account for more than 1/4th of total agricultural credit. They lend
money at significantly higher interest rate, they use highhanded and illegal methods to extract their
dues, leading to debt-trap, perpetual poverty and farmer suicides.
 The formal credit’s penetration in north-eastern and eastern India is very low. This is one of the many
reasons for their regional backwardness.
 ES16 found an inverse relation between size of landholding vs. Indebtedness of farmers i.e.
small/marginal farmers are more indebted than big farmers.
Agri Credit: Government | RBI Initiatives
1. Setting up of Regional Rural Banks (RRB), NABARD, Small Finance Banks, Payment Banks,
Microfinance & Self-help groups. They directly / indirectly help the farmers / those involved in agriculture
sector.
2. RBI requires commercial banks to setup 25% of their new branches in unbanked rural areas.
3. Kisan Credit Card, PM Jan Dhan Yojana for financial inclusion.
4. Interest Subvention Scheme (ISS): crop loans up to Rs. 3 lakh at 7% interest with 3% interest
subvention to those who repaid their loans promptly. Meaning actual interest rate is 4% [Alternate
Suggestion: Instead of ISS, Government should give universal crop insurance subsidy. Because many
farmers take loans @4% but redeposit as Fixed Deposit to earn rate arbitrage.]
 5. Priority Sector Lending (PSL): RBI has earmarked 10% for Agriculture and 8% for small and Marginal
Farmers. Definitions:
1. Marginal farmer upto 1 ht. landholding
2. Small farmer more than 1 but upto 2 ht. of landholding.
6. Agriculture income is exempted from union income tax. [More under black money segment in pillar-2]
7. Budget 2017:
1. Has given public sector banks (PSBs) a target of Rs.10 lakh crores agriculture credit.
2. Has given 60 days interest waivers to farmers on account of demonetization.
3. Primary agriculture cooperative societies (PACS) to be linked with District Central Cooperative
Banks (DCCB) using Core Banking Solution (CBS). This will i) reduce money laundering ii)
ensure that actual beneficiaries receive the crop loans and subsidies.
This credit initiative list is not exhaustive. But these many points sufficient to fill a 200 words answer.
Agriculture Loan Waiver: to give or not to give?
Some of the state governments have initiated loan waivers to address the problems of farmer suicide and
agriculture distress.
But, RBI, SBI and economists are opposed to this because:
 Government is paying farmers’ dues to the banks. This raises fiscal deficit. High level of fiscal deficit is
harmful for any economy.
 Such loan write-offs encourage a culture of indiscipline among borrowers. It creates moral hazard. i.e.
other borrowers choosing not to repay in the hope of similar loan waivers in the future, especially during
election years.
 Subsequently, NPA problem will get aggravated. Then banks will raise non-agriculture loan rates to
offset the losses. This will indirectly hurt households and business firms.
 Government’s loan waivers covers only the loans taken from formal financial intermediaries. Small and
marginal farmers, who usually owe money to informal lenders,  don’t benefit from this exercise.
 Farmer suicide is a result of
1. Lack of marketable surplus produce (because they’ve small landholding, lack of irrigation, high
yielding seeds and other inputs,  lack of coaching (=extension service) on best farming
practices.);
2. Lack of remunerative prices (because of issues in APMC, MSP and transport-storage
infrastructure.)
3. Lack of financial inclusion and financial planning. (Because even after good monsoon and
good harvest, money may get wasted on social events and pilgrimage,  if not saved and
invested properly.)
Hence Debt waiver is at best a short-term remedy that can’t prevent farmer suicide until above three issues are
addressed.
Agri-Input#2: Irrigation
 Definition: The supply of water to crops at different intervals is called irrigation.
 Water is the most critical input and main reason for agriculture distress in India,  because >50% of
Indian agriculture is rainfall dependent, droughts and floods are twin menace in Indian agriculture.
 Due El Nino and other climate change events, India received less than normal rainfall in 2014 and 2015 
leading to food inflation and agriculture distress.
 To earn 2x (double) income, a farmer must __:
o cultivate multiple crops annually. But in India, a second crop is grown on <40% of cultivated
area. Main constrain? Water access in Rabi season.
o cultivate high yield crop varieties. But they require constant (and higher) moisture in the soil.
So, again water / irrigation is crucial.
Why Micro Irrigation
 Irrigation is needed because of spatio-temporal variability in rainfall India. but, India’s irrigation
infrastructure mostly consists of i) public (canal irrigation) and ii) private (tube wells). In both cases,
water deployed via “flood” irrigation, which is an extremely inefficient use of water.
 Hence, India uses 2 to 4 times more water to produce a unit of major food crop than does China and
Brazil. This leads to soil salinity,  fluoride contamination, declining water table and drought conditions.
 Therefore, we must invest more into Micro-irrigation technologies such as sprinkler, raingun and drip
irrigation.
Benefits of micro-irrigation
 Water soluble fertilizers can be delivered directly to root system via fertigation. This reduces fertilizer
usage, associated cost & soil contamination problems.
 Less water evaporation, less electricity / diesel consumption, and higher yields than traditional flood
irrigation.
Challenges in Micro-irrigation
 small / marginal farmers feel discourage because of initial high cost of purchase and the skill required
for repair and maintenance
 Trampling by wild animals damages the equipment. Repairman not available locally and repair costs not
covered in crop insurance. Hence mostly big farmers near urban areas adopt microirrigation system.
Irrigation: Govt Initiatives
  Drought prone area program, Haryali watershed development program, construction of large dams and
canals, Crop Diversification programme to encourage Punjab, Haryana and in western UP farmers away
from rice and other water intensive crops etc.etc.etc. I’ll ignore these because such “pre-Modi” schemes
are less important for the competitive exams now.
 2015: Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) launched to increase irrigation area and
effective use of water in irrigation. It has four components:
1. Accelerated Irrigation Benefits Programme (AIBP),
2. Har Khet Ko Pani,
3. Per Drop More Crop
4. Watershed Development. Desilting of water bodies/canals using MNREGA Labour.
 Budget-2017: NABARD given funds for long term irrigation infra (20kcr) and Micro Irrigation (5kcr)
NITI/ES16 suggestions on irrigation:
1. Increase funds for PMKSY. In Assam and other states, even shallow tube wells should be allowed in
this scheme.
2. River inter Linking project.
3. Water intensive crops like sugarcane/cereal/grain need to be shifted to less water-stressed regions. And
encourage pulses cultivation in the drought prone areas.
4. Cost based water pricing. Stop canal water theft. [Although unlikely because of vote bank politics]
5. Encourage Micro Irrigation, drip / sprinkler irrigation (फव्वारे दार सिं चाई!) since they give better efficiency
than conventional irrigation.
6. Rain water harvesting i.e. capture and store rain water. It helps in: i) agriculture ii) recharging
groundwater aquifers iii)household/ industrial purpose.
7. Watershed management i.e. building percolation tanks, recharge wells, etc. with community
participation. It helps in conservation of rain, surface and groundwater resources.
8. and finally, a National level dedicated agency to push above things.
Agri-Input#3: Seeds
 Since we can’t drastically increase the area under cultivation or area under irrigation, therefore,
agriculture yield improvement depends greatly on seed quality and other inputs.
 Hybrid seeds in cross-pollinated crops give higher yields, esp. rice, wheat, pulses and oilseeds.
 Disease resistant and pest resistant seeds don’t require so much pesticide. This protects both the
environment and farmer’s wallet.
 For best yield, hybrid seeds must be replaced every year, and non-hybrid must be replaced every three
years. But in India, seeds are replaced at rates below the optimum because of 1) affordability issues
and 2) availability issues.
Seeds: Government initiatives?
1. Under Green Revolution, High Yielding Varity (HVY) seeds esp. wheat and rice were promoted.
2. 100% automatic FDI in Seed development.
3. Simplified rules for inclusion of new varieties from OECD.
4. NITI/ES16 suggested Reforms? increase seed-research, third party quality certification system, private
participation and competition; reduce price control order of seed and other restrictions discouraging
private investment.
5. GM crops etc. under next part of the article i.e. “Agriculture Research, Development & Extension
Services.”
Agri-Input#4: Fertilizers
 Definition: Fertilizers are commercially produced substances, which are applied to soil to promote
healthy growth of plants. [be careful in the choice of English words. ‘commercially produced’, else we’d
have called them ‘manure’. And fertilizer is ‘applied’ to soil. Cement is ‘poured’,  water is ‘sprinkled’ .]
 Fertilizers restore the lost plant nutrients in the soil by supplying three critical elements: Nitrogen (N),
Phosphorous (P) and Potassium (K).
 Problem? Ideal N:P:K mix= 4:2:1. but in Indian soil contains excess “N” due to overuse of subsidized
urea. This hurts crop-yield, increases soil and water contamination.
 India is largely import dependent for its potassic (K) and phosphatic (P) fertilizer requirements, because
our mines alone are not sufficient for their domestic production.
ES15 and ES16 Observations / Suggestions:
 Chakravyuh Challenge: Government gives production subsidies to sick / less efficient fertilizer
companies. So, instead of shutting down these companies continue to run on public money.
 Free market principle: Fertilizer and other input subsidies should be DBT’ed to farmers’ bank account.
Then purchase choice will be in the hands of consumer (Farmer). This will encourage seed, fertilizer,
farm machine companies to design more efficient and customized products as per agro-climatic
requirements of the country, while the non-performer companies will collapse, just like Gurmeet
RamRaheem’s empire.
 Biofertilizers: They’re the living or biologically active products, made up of bacteria, algae and fungi.
When applied to soil, they fix atmospheric nitrogen, solubilize phosphorus, decompose organic material
thereby enhancing growth and yield of crops, improving soil fertility and reducing pollution.
Fertilizer: Government initiatives
  2010: Government shifted from a product-based subsidy (PBS) to nutrient-based subsidy (NBS).  [What
was that scheme, why it didnt deliver result etc. I’m ignoring because it’s a “Pre-Modi” thing. Some
overenthusiastic candidates…if they see some random outdated policy mentioned in Hindu/EPW etc.
with a columnist suggesting that it should be revived, then these candidates start researching and
dissecting things in PHD level details. That approach has a very poor cost:benefit].
 2015: Core Scheme “Soil Health Card”: Farmer can know which nutrients are missing in his land, so he
can decide the appropriate mix of fertilizer, instead of blindly using urea. Agriculture extension workers
can also provide him customized suggestions on further productivity, because soil health card also
contains data on soil PH and other physical parameters.
 2015: Neem coating of urea to 1) reduce diversion of subsidized urea to chemical industry. 2) reduce
Nitrogen loss from the soil.
 2016: Pilot Projects for Fertilizer DBT in selected districts.
 Joint Ventures with other countries for natural gas exploration. [Natural gas is required in the chemical
process during urea production.]
 2016: Target for 10 lakh compost pits for organic manure. Benefits? Manure is prepared by the
decomposition of animal excreta and plant waste. Hence environment friendly. It improves soil with
nutrients, soil texture, soil aeration and water holding capacity.
Agri-Input#5: Pesticides
 (Definition) Pesticides and weedicides are chemicals which are used for killing / controlling pests and
weeds respectively.
 None of the documents (survey, NITI, SDG) give any specific points for pesticide. Just bolbachchan:
o 25% crop loss on account of pests, weed, diseases but India’s per ht. pesticide consumption is
far less than first world.
o Encourage organic pesticides and biocontrol agents. Adopt integrated pest management (IPM)
approach i.e. rather than eradicating pest population to 100%, just try to keep crop damage to
economically tolerable level. Because even pests are important for biodiversity protection and
food chain balance.
o Spread awareness about proper use of chemical pesticides (esp. Endosulphan) so it doesn’t
contaminate food / land / water / human bodies excessively.
Agri-Input#6: Land
Once you’ve gathered above five inputs, you need land to plant them for cultivation…. That’s for understanding,
but if asked any land related question in exam, how will you ‘begin’ the answer? You can start with its origin /
significance to agriculture i.e.
 Agriculture is a purely land based activity unlike secondary and tertiary economic  activities. Hence size
and quality of land has direct bearing on agriculture productivity and farmers’ income. Land ownership
serves as social value, security against credit, contingencies and natural hazards.
 Only the state legislatures can enact laws related to land ownership and tenancy. But their archaic
nature and redtapism has led to litigation, fragmentation of farms, low productivity of land and poor
targeting of agriculture subsidies and relief measures during disasters.
 Solution: NITI prepared model land leasing law- all states should adopt it.
Digitization of land records
 2008: National Land Records Modernization Programme launched. But funding conditions were such
that most states avoid it. Hence, NITI suggested technical reforms in revamping that scheme. Once that
is done, and land records are digitized using high-resolution satellite imagery and ground truth data
collection then it’ll help in following ways:
o Reduce land related litigation during sale and inheritance.
o Reduce money-laundering through agriculture Income tax exemption, reduce land
encroachment
o Better targeting of farm subsidies and calamity relief
o Easier land acquisition for infrastructure projects. [because government will know who is the
original owner,-he’ll get the money. His cousins and uncles can’t file frivolous litigations at that
time to delay the acquisition process.]
Soil Erosion
Definition:
 Destruction of the soil cover is described as soil erosion.
 Soil degradation is the decline in soil fertility, due to soil erosion and land misuse.
Origin / why soil erosion happens?
 Soil is the mixture of rock debris and organic materials which develop on the earth’s surface. Soil is a
living system. It takes millions of years to form soil upto a few cm in depth. But human factors such as
grazing & deforestation; and natural factors such as wind, water, ice lead to soil erosion, and thereby
hurting farm-productivity.
Farm soil Erosion how to reduce?
 Contour ploughing: To decelerate the flow of water down the slopes.
 Terrace cultivation: In Himalayan region to restrict erosion by running water.
  Strip Cropping: Divided large fields into strips, and allow grass to grow between the crops. This breaks
up the force of the wind, and reduces soil erosion
 Shelter Belts: Planting lines of trees to create shelter against wind.
Agri-Input#7: Farm Mechanization
Examples?
 water pump, ploughs, combine harvesters, land levelers, cultivators, power operated tractor sprays,
reapers, threshers, trolleys and mechanical pickers etc.
Benefits:
 Agricultural mechanization increases productivity of land and labour by meeting timeliness of farm
operations and increases work output per unit time.
 mechanization also enables efficient utilization of inputs such as seeds, fertilizers, and irrigation water.
 Employment opportunities to rural youth and artisans for the production, operation, and maintenance of
machines.
 In developing countries agriculture, machines fill up for the scarcity of agri-labourers. In India, rich states
also facing similar issue because of MNREGA. Plus, doubling the income of farmer, requires that some
of the small / marginal farmers should leave agriculture for industrial / service sector jobs, and resultant
land consolidation and mechanization will boost income for the rest of the farmers to double.
Challenges:
 Customized machinery required because of India’s soil and climatic diversity. Related Schemes: 1)
Make in India. 2) Unnat Bharat Abhiyan by HRD to encourage IIT/NIT etc to innovate rural-Indian
friendly technologies.
 Small size of landholdings where machinery usage difficult.
 Farmers lack financial resources. Not even 3% of total agri. credit flows towards farm mechanization.
 Suggested reform: App based renting of farm machinery and tractors similar to ola and uber.
Agri-Input#8: Insurance against calamities & Disasters
 Though agriculture sector is a minor contributor to India’s GDP, but large proportion of our population
depends on it for their livelihood.  Agriculture itself depends on monsoon, and other vagaries of nature.
 This makes India one of the world’s most vulnerable countries to climate change. India losses ~$10
billion annually because of extreme weather events like drought, hailstorm, cold wave, landslides etc.
 But compared to other economies of similar sizes, the insurance penetration is low in India. Indians buy
life insurances but are usually passive about general insurance of agriculture, cattle, property and
business.
 Hence whether its floods in Kashmir or Cyclone Hudhud in Southern India, it takes heavy toll on the
rural households’ financial wellbeing, especially those dependent on agriculture.
 2002: Agriculture Insurance Company of India Ltd. (AIC) was setup, to improve the penetration of
agriculture insurance. It had even launched tailor made products for mango and rubber plantation,
potato contract farming etc. still not even 1/5th of the farmers could be covered. Hence Modi govt came
up with a new scheme that is….
Pradhan Mantri Fasal BimaYojna (PMFBY)
 Launched in 2016, Kharif season. [when was it launched exactly? that is not important for descriptive
exams, but I’ve mentioned so you’ve atleast a chronological sequence in mind, when attempting an
agriculture essay.]
 Farmer has to pay only a part of the crop-insurance premium: 1.5% for Rabi, 2% for Khari and 5% for
commercial and horticultural crops. Government bears the remaining insurance as subsidy.
 Scheme provides for satellite / smartphone based assessments, compensation DBT to farmers’ bank
account, it covers both pre-harvest and post-harvest losses as well.
NITI suggested reforms in PMFBY:
 Farmers has to contribution hardly 1.5 to 5% of premium. The government pays the remainder of the
premium as subsidy. This model results in larger absolute subsidy amounts for bigger farmers who are
actually less vulnerable during disasters than small/marginal farmers. So there should be a ‘cap / ceiling
on premium subsidy’ system per farm.
 Policy should provide 3-5 years coverage, else 1) some remote area farmers may not renew it; 2)
companies will go slow in selling policies during years that droughts / El-Nino are predicted.
 Subsidy premium should be DBT’ed to farmers’ account so he can buy policy from a company which is
giving best value for the money.
 At any given location, minimally two companies should offering insurance to ensure competition,
efficiency and lower premiums for farmers.
 Effective use of weather-climate forecasts and crop models. And communicate such advisories to each
and every farmer.
Delay in general insurance claim settlement could arise from:
 Insurance agent did not submit premium or documents to company.
 Field inspection related problems. May be weather is so bad or area is so remote/hostile that
assessment officer’s personal visit is difficult.
 Accounting and disbarment related problems/ technical rules and redtapism at headquarter.
Possible reforms can be:
  IRDAI and Government should take cognizance of the problems and issue appropriate guidelines. (After
all, insurance is a financial product, so there ought to be a regulator.)
 Farmers should be made aware of insurance ombudsman and / or there should be separate insurance
ombudsmen for agriculture insurance policies to protect farmers from malpractices of agents and
companies. (from my prelim series financial inclusion lecture, you should know that both insurance and
banking sectors have ombudsman for customer grievances)
 Lack of digital and conclusive land ownership records could have impeded the claim settlement. So
states should adopt model NITI law on land leasing, and digitize the land records.
Now what are the “actual” reasons
 State / union government has not paid their share of premium. Hence companies delay settlement.
 Under this scheme, state Government officials have to prepare crop-loss assessment reports, send to
company and company compensates the farmer. But some state Government  officials don’t even
bother to visit the field and write reports sitting in their AC chambers (probably through
‘guessmastergiri’).
 State governments decide the agriculture yield thresholds, which are very low; and sometimes not done
scientifically for horticulture crops. Hence farmer doesn’t get large amount of money in compensation,
even in genuine loss.

Hybrid / GM Crops: Introduction

 Hybrid crops -> by cross-breeding / cross-pollination with other plants.
 Genetically modified (GM) crops -> by modifying / mixing of the genetic material (DNA) of plants with
natural organisms.
Hybrid / GM Crops: Benefits
 Enhanced nutritional value of food e.g., Vitamin ‘A’ enriched rice, higher baking quality of wheat,
protein quality in pulses, oil quality in oilseeds and preserving quality in fruits and vegetables.
 Shorter maturity duration to allow farmers to grow multiple rounds of crops in a year
 Uniform maturity period to make harvesting process more efficient, by ensuring economies of scale.
 Better agronomic characteristics: Tallness and profuse branching in fodder crops. Dwarfness in
cereals, so that less nutrients are consumed by branches, leaves and stems.
 Longer shelf life, moisture retention, fungal resistance etc. to reduce post-harvest losses.
 Plant’s mineral usage efficiency improved to prevent early exhaustion of fertility of soil.
 Create tailor-made plants for industries to produce starches, fuels and pharmaceutical chemicals.
 Higher resistance against abiotic factors like drought, salinity, water logging, heat, cold and frost.
(GMO specific benefits)
 Higher resistance against biotic factors like diseases, pests and insects, thereby reducing chemical
pesticides requirement. Example, Bacillus thuringiensis bacteria’s Bt toxin gene is inserted into plants to
provide resistance to insects without the need for insecticides. examples are Bt cotton, Bt corn, rice,
tomato, potato and soyabean etc.[रोग तथा नाशीजीव रोधी]
 It’s difficult to create hybrids from self-pollinating flowers like Mustard, but GM technology makes it
possible.
I’ve copied these factors from NCERTs only. No point in further Internet Research and PHD-giri over it. This
much content sufficient for descriptive exams.
Criticism and Apprehensions
 Biosafety:
o Genetic modification of organisms can have unpredictable results when introduced into the
ecosystem.
o Such food crops may be unsafe for human and animal consumption.
o They may harm the soil bacteria, bees and other important organisms, thereby affecting entire
food web and biodiversity.
o GM crop may eliminate the wild/indigenous species by cross-pollination.
 Biopiracy
o MNCs are using genetic materials which have been long identified by farmers and indigenous
people, without paying them any compensation or share in royalty. So, just like software piracy,
movie piracy, most of the GM technology is ‘biopiracy’.
 Bioprofiteering
o MNCs introduce terminator gene in their GM seeds. This makes the resultant plant sterile,
thereby requiring farmers to repurchase seeds for every cropping seasonAnd since GM crops
will make wild / indigenous varieties extinct by cross-pollination, so farmer will be at the mercy
of these MNCs for the future seeds.
GM Crops: NITI/Survey stand
 (Origin) In India, the introduction of High Yielding Variety (HYV) and Genetically Modifed (GM) Seeds
has been stuck in controversies over decades. Despite their numerous benefits, Indian farmers allowed
GM seeds in only one crop i.e. Cotton.
 Economic Survey 2016-17 has suggested following matrix for decision making:
 Allow GM seeds which don’t have terminator Gene or high cost.
  Allow GM seeds have following properties: 1) Disease and pest resistant 2) Resistant to variation in
moisture and soil 3) Longer shelf life 4) Shorter crop duration 5) Nonfood / Tree format crops.
 To prevent MNC monopoly on GM seeds, we’ve to encourage domestic institutions & companies to
pursue GM research. (says NITI3YR)
 Besides, we’ve a robust regulatory framework with GEAC (Genetic Engineering Approval Committee) to
oversee safety GM technology. So, mischief is unlikely.
GM Crops Adoption: Conclusion
let’s prepare both type of conclusions:
~Pro-GM conclusion:~
 Self-sufficiency agriculture is tantamount for India because of 1) SDG ~goal~ of ZERO HUNGER 2)
Economic ~goal~ of low food inflation.
 Genetic engineering is useful in increasing crop yields, reducing post-harvest losses and making crops
more tolerant of biotic and abiotic stresses.
 Therefore, given the lack of evidence on negative consequences from GM Crops, vs. its potential utility
in the aforementioned national ~goals~ and the robust regulatory framework that we have, a positive
consideration should be given to the adoption of GM technology in India. (Observe the choice of words-
no absolute fanaticism that GM MUST BE INTRODUCED.)
~Anti-GM conclusion:~
 India is a signatory to Cartagena protocol to protect biodiversity.
 SDG Goal (#2.5) also requires all nations to protect the genetic diversity of plants and animals.
 Given the concerned raised by experts about the yield claims and biosafety of GM technology, such
crops should not be introduced without due diligence. 
Agriculture Research: Constrains & Reforms
 Indian Council of Agriculture Research (ICAR) is the apex body for Agri-research in India. But ICAR
scientists’ salary structures and promotion rules are time-bound and seniority based.
 Therefore, outstanding Indian scientists opt for foreign assignments or MNC jobs where their talent is
more appreciated (atleast in financial terms). We’ve to create proper incentive structure to prevent
such brain drain. NITI3YR says ICAR has to be augmented on the pattern of IITs and Indian Institutes
of Sciences (IIS). [Meaning, higher funding and autonomy in hiring faculties & researchers at market
rates, offer commercial services similar to ISRO’s ANTRIX to justify higher pay packages and so forth.]
 Most farmhands are women, but women scientists don’t form even 1/4th of the Indian scientists. This
gender imbalance also needs to be addressed, given the greater feminization of agriculture due to male
migration from rural families.
 Presently Agriculture research funding is <1% of GDP. We need to increase it.
Upto above points, you can even reuse for medical / IT research related questions! Now let’s get to specific
agriculture research problems:
Agriculture research should focus on following angles:
 Environmental impact: if new crop variety promises more yield or better quality, but is also input
intensive on water and fertilizer then the agriculture growth will be economic but not sustainable.
 Beyond Cereals: Indian agriculture research has become ‘cereal centric’. We need to focus on
pulses, oilseeds, horticulture and animal husbandry as well.
 Elite consumers’ preferences:  Sarkaari Scientists mainly focus on improving quantitative yields, with
the objective that, “if farmer is able to produce more quantity (of cereals), he can earn more because of
MSP!”. But, if they also focused on aroma, taste, appearance, calorie, nutrient, antioxidants etc. from
wealthy health-conscious urban/foreign consumers’ point of view, then premium prices can be fetched.
Because our goal is 2x farmer income, which doesn’t necessitate 2x production.
 Inflation Targeting: Even if research doesn’t drastically improve the quantitative yield, but improves the
shelf life of onions, potatoes, tomatoes etc. then also food inflation can be controlled by reducing
seasonal variation in the supply.
 Socio-economic constrains of the farmers in adopting the technology. If hybrid/GM seeds are
expensive, small/marginal farmers can’t adopt it. It’ll further expand the rich-poor divide within rural
India. On a lighter note, if one progressive farmer adopts new variety, other jealous neighbors might
vandalize it. So new varieties have to be vandalism-proof also. Imagine tomatoes so tough, that you
need a hammer to squash them, but wait, it’ll run counter to first research angle i.e. elite consumers’
preference!) anyways, I digressed.
Agriculture extension: Introduction
 Definition: Extension service is an informal education process to offer advice, information and training,
usually meant for farmers, villagers and women.
 Purpose: Extension services aim to change farmers’ outlook towards their agricultural problems, and
villagers’ outlook towards economic and health problems.
 Data / Problem: According to NSSO survey, ~60% of Indian farmers do not get much agricultural
technical assistance and know-how from government-institutes. So they rely on progressive farmers,
media, and private sellers of seeds, fertilizers, and pesticides- who may not give them unbiased
advisory because of their own vested commercial interests.
Exto: Channels
Usually there are five types of delivery channels for agri-extension services:
 1. Individual counseling via personal meeting, toll-free Helpline, Letter-FAQ using Krishi Vigyan Kendra’s
extension workers. Problem?
o Geographical each, manpower availability. Barely 1 extension worker available per 800-1000
farmers.
o Individual farmer may not dare to become ‘progressive’ because of tomato vandalism
problem which I mentioned earlier. therefore, we’ve to do…..
2. Group counseling via seminar, workshop, group discussion, field visit. Problem?
o Farmers fear wage loss so need financial motivation e.g. stipend/TA.
3. Magazines Kurukshetra and other govt magazines / periodicals. Problem?
o Illiteracy and poverty. then we’ve to use audio-visual methods such as….
4. Mass Media via Kisan TV (2014-Budget) and Public Radio broadcast. Problem?
o Marginal farmers may not have instruments to watch them.
o Customized / tailermade advisory / information difficult to deliver. therefore, we’ve to explore….
5. E-Technology via E-Krishi (Webportal) ; mKisan (SMS/USSD), Kisan Suvidha App etc. What are the
benefits?
o Mass reach possible because more mobiles than toilets; and jio4G effect.
o Tailor-made advisory can be given.
At district/field level following entities are responsible for extension services:
 1974: Kisan Vikas Kendras under ICAR started.
 1998: Agriculture Technology Management Agencies (ATMAs) under National Agriculture Technology
Project started. ICAR supports them as well.
 2002: Agriclinics by private individuals (usually, agri. Graduates). They receive funding from Agriculture
Ministry.
 Modi-raj is ‘app-raj & portal raj’. So, Kisan Suvidha App, mKisan portal etc.
Years are not important, but I’ve given them just to give you a chronological perspective:
 ‘74: KVK started.
 Mid-70s to mid-80s: Phase-II of Green Revolution Started
 ‘76: RRBs started.
So in the 70s, rural / farm centric reforms were prominent, just like GST, Demonetization and “magnificent targets
for cleanliness, housing, electricity, farm-income etc. @ 2019 & 2022” are prominent in today’s India.
If you’ve to write an essay on post-independent India’s growth story or political economy, then chronology |
clubbing | categorization | critically analysis skills are as important as the memory-recalling power.
Exto: NITI/Survey suggestions:
 To increase the spread of extension services: use ICT & Mobile technology to ensure last mile
connectivity. (haa bhai but that is already being done, read the fifth point above!)
 ICAR provides extension service to farmers via its Krishi Vigyan Kendras (KVK) at district level. But
ES16 hints that research, education, and extension should be separated. Perhaps in following manner
o ICAR focus only on research work in Agriculture
o UGC ( or the proposed Higher Education Empowerment Regulation Agency (HEERA) should 
look after higher education in Agriculture
o State government look after extension services and KVKs.
 Use Skill India mission funds to impart agricultural skills.
 Involve local participation of progressive farmers, self-help groups (SHG) and Primary Agricultural
Cooperative societies (PACS) and seed/fertilizer traders. (Good thing they did not say NGO. May be
afraid of another Srijan scam!)
Related Topic: Precision farming
 Definition? It involves technologies like laser land levellers, self-propelled sprayers, precision seeders
and planters, transplanters for rice and vegetable seedlings and multi-crop threshers and harvesters.
 Benefit? Precision farming allow highly efficient farming and resource conservation.
 Problem? But it also requires high skill and large capital.
 Therefore, NITI3YR recommended Government to only create awareness about this technology among
farmers, instead of actually financing it.
Agriculture education
 State Agriculture universities are not under ICAR’s regulatory domain. This has led to proliferation of
self-financed private colleges without sufficient faculties, proper labs or infrastructure. Now some of
them even struggling to fillup the seats (just like Engineering and PTC colleges) and therefore, offering
fashion design and other courses!
 ES16 suggested we’ve to re-examine this relation between ICAR & private agri. colleges. In other
words,
o either states should get strict with pvt colleges or
o ICAR should have UGC like powers or
o UGC should regulate them.
 There are over 50 agriculture universities in India! Perhaps, some of them require ‘merger‘ similar to
public sector bank, to ensure consolidation of funding and manpower for better quality of research
output. Even, NITI3YR suggested: Instead of creating more institutions, focus on quality of research
 and infrastructure in existing bodies. At least two agricultural universities should be given large grants so
they can achieve global status.
Why do we need MSP?
The markets for agriculture inputs and outputs are ‘inefficient’, because of speculation, hoarding and leakages.
They result into high input cost and low output price. India farmers have very low resilience to such uncertainties
because :
1. Individually, most Indian farmers produce very little marketable surplus due to small landholdings,
and don’t own cold storage infrastructure, hence they can’t command the commodity prices unlike the
Saudi princes’ oil wells and OPEC cartel.
2. Traders occupying cold storage space for hoarding potatoes and onions.
3. Commodity market players protect themselves from price fluctuations by purchasing call options and put
options. But, small farmers can’t do it.
Hence, agriculture is usually a loss making business for farmer without government intervention. Unless he’s
compensated by the means of subsidy on fertilizer, electricity and water; and MSP for the produce, he’ll be
ruined
MSP: Problems
While Government announces Minimum Support Price (MSP) for 23 crops to cover the price risks faced by the
farmer, but this system has following problems:
1. MSP procurement excessively focus on the wheat, rice and sugarcane. This has led to depletion of
water resources, soil degradation and deterioration in water quality in some states, especially in the
north-western India.
2. MSP procurement of rice & wheat distorts cropping patterns, because farmers avoid pulses, oilseed
and coarse grains. This result is inflation, especially in pulses and edible oil.
3. They don’t reflect the social and environmental costs. e.g rice and sugarcane consume high amount of
water, versus Pulse cultivation consumes less water, helps in nitrogen fixing and pulses are the primary
source of protein for vegetarian population of India. But the Commission for Agricultural Costs and
Prices (CACP) recommends the MSPs to government only based on the economic terms such as
production cost, international prices, supply vs demand vs inflation. So, present MSP system is not
aligned with SDG goals.
4. Many farmers lack awareness about MSP or they are far away from FCI procurement areas.
5. MSP further aggravates the backwardness of eastern states, where procurement at the MSP is
minimal or non-existent.
6. MSP doesn’t cover perishables.
Replace MSP with PDP: why?
To solve above problems in MSP, Both NITI and Economic Survey recommend Price Deficiency Payment
(PDP).

 Declare MSP for all types of crops.

 Each farmer would register his crop and acreage sown with the nearest APMC mandi.
 If the market price then falls below the floor price, the farmer would be given DBT of the difference up to
a maximum of, say, 10% of the MSP-linked price, into his Aadhaar-linked bank account.
Benefits of PDP system?
1. Leakage reduced
2. WTO’s Subsidy restriction norms complied.
3. All crops and all farmers can benefit in all regions.
4. FCI’s “open ended” procurement will stop. This will reduce grain-spoilage in godowns.
5. Counter-cyclical sowing:
 Farmer’s response to price uncertainty comes only after the lag of year. E.g. in Year#1, if tomatoes are
selling at over Rs.100 per kilo due to shortage, then next year all farmers will shift from onions to
tomatoes cultivation to fetch better returns, leading to excess production and drastic fall in the tomato
prices may be Rs.5 per kilo; while simultaneously onion reaches at Rs.100/kg.
  A farmer in the above scenarios can benefit, only if his pattern of sowing is contra-cyclical, akin to
trading in the stock market.
 Agriculture extension workers have to educate farmers on this, to adopt a stable sowing pattern so that
in the long run farmer receives the average price of the produce.
APMC act: problems and remedies
Introduction (Origin)
 In the post independent India, despite the abolition of zamindari, the farmers were not ‘liberated’ from
exploitation. Because the goons of local bainyaa or moneylender would (often forcibly) take away the
produce to recover their dues without adequate compensation to the farmer.
 To address this nuisance, state governments began enacting laws to provide that “first sale of
agriculture produce can occur only at the government notified market yards only”.
 Such laws are known as “APMC Acts”.
 Under these acts, agricultural produce market committees (APMC) are formed, who are responsible for
the operation of the local mandis / market yards. [APMC: कृषिगत उत्पाद विपणन समिति]
APMC Problems?
 APMC office bearers are politically influential persons. They enjoy a cozy relationship with the
licensed commission agents. These agents then form cartel, manipulate prices and deprive farmers of
remunerative prices.
 APMC office bearers lack corporate skill for vertical integration with food processing
industries. [because their only skill is ‘politics.’]
 While these Mandis charge multiple entry, exit and other fees. But money is siphoned off hence
they’ve poor infrastructure, lack of cold-storage and transport facilities esp. for fruits and vegetables.
This leads to substantial waste of the produce despite bumper harvests during good monsoon years.
 Thus, APMC’s cartelization and poor infrastructure leads to artificial or real shortage of food supply in
the retail market, thereby driving up the food inflation.
APMC Reforms?
Since agriculture is a state subject, ultimately state governments have to reform their archaic laws. Union
Government already circulated a model APMC Act, but most states have implemented it only half-heartedly.
Hence, Both Niti3YR & ES16 have recommended following:
1. Replace the APMC ‘licensed’ intermediary system with open registration backed by bank guarantees.
So that entrepreneurs without political clout, can also enter this game.
2. Such Non-APMC registered buyers should have right to
o Setup alternate marketplace.
o Buy produce directly from the farmer.
3. This will create competition and pave the way for the farmer to receive lucrative prices.
4. For small farmers it is neither feasible nor profitable to take their produce to markets, so governments
should allow for “aggregators” who would collect produce from farmers for sale in competitive
marketplaces.
5. Exempt perishables from the APMC acts.
6. Promote farmer cooperatives for direct retailing to customers.
7. Encourage contract farming.
E-NAM: Feature & PRoblems
 2016: Electronic-National Agricultural Market (e-NAM) was launched to unify mandis across the nation
into a single national market through electronic trading
 Any registered buyer located anywhere in India can buy from any farmer anywhere in in India.
 In theory, E-NAM is to reduce the asymmetry of information between buyer and seller; as well as the
cartelization among buyers. But….
 Buyers (especially food processing companies) have a strong preference for physical inspection of grain
(instead of online purchase), but sellers (Farmers) fear this will reduce the prices, as buyers will make
frivolous complaints about poor-quality.
 Ultimately, both big buyers (such as food processing companies, big retailers etc.) and small farmers
feel hesitant in opting for E-NAM online trading.
 Suggested Reforms in E-NAM? Third party assaying and quality certification mechanisms, dispute
settlement mechanisms, systems for forwarding goods to buyers etc….only then both buyer and seller
can trade confidently.
Food Management
It involves following stages:
1. Procure food grains from farmers at remunerative prices / Minimum Support Price (MSP). For cereals,
FCI conducts open ended procurement i.e. all farmers can sell any amount of quantity, no quota system
or upper ceiling. (Even if FCI doesn’t have enough storage capacity!)
2. Store food buffer to ensure food security and price stability. FCI also keeps 5 million tones of food
grains as “Strategic reserves” for extreme situations.
3. Sell/ Distribute the food grains to consumers, especially poors, at affordable prices [=Central Issue
Price (CIP)]. It’s not open ended. Here, “state wise, beneficiary wise” allocation depends on various
rules and laws.
OMSS
By default, the food grains procured by FCI are to be sold at the PDS outlets. However, if there is rise in food
inflation, FCI would also sell the grains in open market to increase supply and curb price rise. This is called Open
Market Sale Scheme OMSS benefits:
1. Increases food grains supply @lean season, thereby moderating the inflation.
2. Excess stocks offloaded so, FCI’s godown/storage cost is reduced.
3. Saves food grains from deteriorating in public godowns.
Price Stabilization Fund-2014
Objective is similar to OMSS i.e. curb food inflation.
 Union Government gives interest free advances to various central/state/UT agencies to procure food
from local and foreign farmers and sell it to aam-aadmi at reasonable prices.
 The losses during sale are borne by Union and State. (Ratio is different for ordinary and special
category states but we are not preparing for MCQs so let’s not bother.)
 Eligible items are pulses and perishable agri-horticultural commodities
DCP-1997
 Food corporation of India (FCI) is responsible for procurement, storage and distribution of food grains.
 But since FCI alone can’t reach all farmers, Government launched a scheme Decentralized
Procurement (DCP) Wherein State Government themselves procure and distribute the wheat and rice.
Union will bear the costs.
DCP benefits:
1. More farmers covered
2. Saves transit losses and costs
3. Procurement of foodgrains more suited to local taste for distribution under the targeted public
distribution system (TPDS)
NFSA-2013
 1997: Department of Food & Public Distribution started Targeted Public Distribution System (TPDS) to
provide affordable food grains to poor Indians.
 2013: National Food Security Act (NFSA) was enacted to make TPDS a ‘legal right’ for 50% of urban
and 75% of rural population.
 Union procures the foodgrain and supplies to the states. State identify the beneficiaries and provide
them food (or cash, if they don’t have distribution mechanism.)
 NFSA has lifecycle approach i.e.
1. For children: nutritional meal at school
2. For pregnant and lactating mothers: cash transfer + food grain.
3. For others: food grains at subsidized prices: coarse grains @Rs. 1/kg, Wheat @ Rs. 2/kg,Rice
@Rs.3/kg with quota limits, viz.
 For priority households: 5 kg per person per month
 For antyodaya Anna households i.e. poorest of the poor: 35 kg per family per month.
 2016: All States/UTs have implemented this NFSA act.
 Chandigarh, Puducherry, Dadra & Nagar Haveli have started DBT of NFSA food subsidy, so beneficiary
can buy food grains from open market.

Agricultural diversification is one of the essential components of economic growth. It is the stage where traditional
agriculture is transformed into a dynamic and commercial sector by shifting the traditional agricultural product mix
to high standard products, that has a high potential in stimulating production rate. Here, the agricultural
diversification is supported by a change in technology or consumer demand, trade or government policy, and by
transportation, irrigation, and, other infrastructures development.
Two aspects of Diversification
 The change in the cropping pattern
 The transformation of the manpower from agriculture work to other associated activities like poultry,
livestock, fisheries, etc. and also non-agriculture sector
For rural people, diversification or focusing on associate activity is important as it gives them an opportunity to
earn extra income and overcome poverty.
Poultry and Livestock
 Animal Husbandry- Most of the farmers use mix crop-livestock system to increase their standards of
living and income. Animal Husbandry is an agricultural branch that deals with the practices of farming,
breeding, and care of farm animals such as cattle, dogs, sheep, and horses. In India, about 70 million
small, and medium farmers, labours, and a large number of women are dependent in the livestock
sector.
 Fisheries- Aquaculture or fisheries is an important part of food production providing economic security
to the millions of people besides livelihood support. In India, the total fish production contribution from
inland sources is about 64 percent and 36 percent from the marine sector (sea and oceans). Today,
fisheries contribute a total of 0.8 percent of the total GDP.
 Horticulture- It is agriculture that deals with plantation of the garden crop, especially vegetables, fruits,
flowers, tuber crops, species, and ornamental or medicinal plants, etc. These plants provide food and
 nutrition besides providing employment. In India, the horticulture sector contributes six percent of GDP
and one-third of agriculture output.

Types of Non-Farm Employment in Rural Areas

CROP DIVERSIFICATION IN INDIA
Major crops cropping patterns in various parts of the country, different types of irrigation and irrigation systems storage,
transport and marketing of agricultural produce and issues and related constraints; e-technology in the aid of farmers.
 Crop diversification refers to the addition of new crops or cropping systems to agricultural production on a
particular farm taking into account the different returns from value-added crops with complementary marketing
opportunities.
 The introduction of new cultivated species and improved varieties of crop is a technology aimed at enhancing
plant productivity, quality, health and nutritional value and/or building crop resilience to diseases, pest
organisms and environmental stresses.
 Commercial agriculture not only catered to the domestic market but has also been one of the major earners of
foreign exchange for the country.
 Crop diversification is intended to give a wider choice in the production of a variety of crops in a given area so as
to expand production related activities on various crops and also to lessen risk. Crop diversification in India is
generally viewed as a shift from traditionally grown less remunerative crops to more remunerative crops.
FACTORS AFFECTING CROP PATTERN CHANGES:
 Resource related factors covering irrigation, rainfall and soil fertility.
 Technology related factors covering not only seed, fertilizer, and water technologies but also those related to
marketing, storage and processing.
 Household related factors covering food and fodder self-sufficiency requirement as well as investment capacity.
  Price related factors covering output and input prices as well as trade policies and other economic policies that
affect these prices either directly or indirectly.
 Institutional and infrastructure related factors covering farm size and tenancy arrangements, research, extension
and marketing systems and government regulatory policies.
MAIN CAUSES FOR THE CROP DIVERSIFICATION:
 The uncertain weather, especially the erratic rainfall. In the areas where the variability of rainfall is high and
adequate sources of irrigation are not available, farmers grow several crops in a season, requiring different
quantities of moisture. It is being done mainly to get something from their fields even in the case of extreme
weather (drought or deluge) conditions.
 In the tradition bound subsistent farming systems the farmers grow several crops to meet the family
requirements. In such areas one may find a high degree of crops diversification.
 Diversification has usually been done by the farmers to enhance nitrogen in the soil and to replenish the soil
fertility. It has been established by the agricultural scientists that crop specialization and monoculture for several
years lead to soil depletion. In other words crop diversification increases the sustainability of arable land.
 The diversification of crops also generates more employment as the farmers and agricultural workers remain
busy in the sowing, weeding, harvesting and marketing of different crops throughout the year.
 Diversification of crops also enables the farmers to provide a reasonable quantity of the costly inputs to their
crops as different crops need different quantities of inputs (chemical fertilizers, insecticides, pesticides and
irrigation). In the case of crop specialization the inputs are required at a specific time and many of the farmers
may not be in a position to provide the required inputs at the appropriate time owing to their high cost.
CONSTRAINTS IN CROP DIVERSIFICATION:
 Sub-optimal and over-use of resources like land and water resources, causing a negative impact on the
environment and sustainability of agriculture.
 Inadequate supply of seeds and plants of improved cultivars.
 Fragmentation of land holding less favouring modernization and mechanization of agriculture.
 Poor basic infrastructure like rural roads, power, transport, communications etc.
 Inadequate post-harvest technologies and inadequate infrastructure for post-harvest handling of perishable
horticultural produce.
 Very weak agro-based industry and research-extension-farmer linkages.
 Inadequately trained human resources together with persistent and large scale illiteracy amongst farmers.
 Host of diseases and pests affecting most crop plants.
 Poor database for horticultural crops.
 Decreased investments in the agricultural sector over the years.
GOVERNMENT INITIATIVES TOWARDS CROP DIVERSIFICATION:
 National Mission on Oilseeds and Oil Palm (NMOOP) programme is under implementation since 2014-15. The
various interventions of this Mission are implemented through the State Government. Under this programme the
Transfer of Technology (TOT) component, the assistance is provided to states for conducting Farmers Training
and Trainers Training programme, in which training is provided to the farmers and extension workers educating
the farmers to avail the benefits of the NMOOP programme.
 The Mission for Integrated Development of Horticulture (MIDH), envisages production and productivity
improvement of horticulture crops like fruits (including Apple) and vegetables through various interventions.
Activities such as production of planting material, vegetable seed production, coverage of area with improved
cultivars, rejuvenation of senile orchards, protected cultivation, creation of water resources, adoption of
Integrated Pest Management (IPM), Integrated Nutrient Management (INM), organic farming, including insitu
generation of organic inputs are taken up for development of fruits and vegetables. Capacity buildings of farmers
and technicians are also provided for adopting improved technologies. Scheme also envisages creation of
infrastructure for post harvest management (PHM) and marketing for better price realization of produce.
 Sub Mission on Agro Forestry: The policy recommends for setting up of a Mission or Board to address
development of agroforestry sector in an organised manner. The Sub-Mission on Agroforestry (SMAF) under
National Mission for Sustainable Agriculture (NMSA) is an initiative to this end. The aim of the submission is to
expand the tree coverage on farmland in complementary with agricultural crops.
 Technology Mission on Cotton: The scheme aims at improving production, productivity and quality of cotton, and
seeks to enhance Research and Development on cotton and Dissemination of Technology to farmers.
  Jute Technology Mission (JTM) as a major initiative for overall development of the jute industry and growth of
the jute sector. National Jute Board and Jute Corporation of India work on projects with National Institute of
Research on Jute & Allied Fibre Technology (NIRJAFT) and Central Research Institute for Jute and Allied Fibres
(CRIJAF) to develop better jute seeds and to improve agronomical practices for jute cultivation.
Commercialisation of Agriculture during British Period:
The commercialisation of Indian agriculture started post 1813 when the industrial revolution in England gained pace. It
became prominent around 1860 A.D (during American Civil War which boosted demand of Cotton from India to Britain as
America was not able to export Cotton).
1. Its aim was not to feed the industries of India because India was far behind in industrial development as
compared to Britain, France, Belgium and many other European countries of eighteenth century.But was done
primarily to feed the British industries.
2. It led to production of only those agricultural products which were either needed by the British industries or
could fetch cash commercial gain to the British in the European or American market.For example, several efforts
were made to increase the production of cotton in India to provide raw and good quality cotton to the cotton-
textile industries of Britain which were growing fast after the Industrial Revolution in Britain. Therefore, cotton
growing area increase in India and its production increased manifold with gradual lapse of time.
3. Indigo and more than that, tea and coffee plantation were encouraged in India because these could get
commercial market abroad.
4. Most of the plantations for commercial crops were controlled by the English. Jute was another product that
received attention of the English company because the jute made products got a ready market in America and
Europe.
5. Cash transactions become the basis of exchange and largely replaced the barter system.
6. The new land tenure system was introduced in the form of permanent settlement and Ryotwari Settlement had
made agricultural land a freely exchangeable commodity.The Permanent settlement by giving ownership right to
the zamindars created a class of wealthy landlords; they could make use of this ownership right by sale or
purchase of land.
7. The agriculture which had been way of life rather than a business enterprise now began to be practiced for sale
in national and international market.
8. Crops like cotton, jute, sugarcane, ground nuts, tobacco etc. which had a high demand in the market were
increasingly cultivated. The beginning of the plantation crops like Tea, coffee, rubber, indigo etc heralded a new
era in agricultural practices in India. These were essentially meant for markets and thus commercialisation of
agriculture took to new heights with the expansion of the British rule.
9. The commercialisation of agriculture was a forced and artificial process for the majority of Indian peasants. It was
introduced under coercion of the British and not out of the incentive of peasantry at large. The peasantry went
for cultivation of commercial crops under duress. He had to pay the land revenue due to the British government
in time. Moreover, he had to grow commercial crop on a specified tract of his land under the oppression of
planters.
Negative Impacts of Commercialisation of Agriculture:
1. Led to inequalities-It should have acted as a catalyst in increasing agricultural productivity. But, in reality this did
not happen due to poor agricultural organization, obsolete technology, and lack of resources among most
peasants. It was only the rich farmers; who benefited and this in turn, accentuated inequalities of income in the
rural society.
2. Benefited rich-The commercialisation of agriculture beneficial to the British planters, traders and manufacturers,
who were provided with opportunity to make huge profits by getting the commercialised agricultural products at,
throw away prices. The commercialisation of Indian agriculture also partly benefited Indian traders and money
lenders who made huge fortunes by working as middlemen for the British.
3. Exploitation of poor-The poor peasant was forced to sell his produce just after harvest at whatever prices he
could get as he had to meet in time the demands of the government, the landlord, the money lender and his
family members’ requirements. This placed him at the money of the grain merchant, who was in a position to
dictate terms and who purchased his produced at much less than the market price. Thus, a large share of the
benefit of the growing trade in agricultural products was reaped by the merchant, who was very often also the
village money lender.
4. Loss of land-Indian money lenders advanced Cash advances to the farmers to cultivate the commercial crops and
if the peasants failed to pay him back in time, the land of peasants came under ownership of moneylenders.
 5. Increased miseries of Indian farmers-Most of the Indian people suffered miserably due to the British policy of
commercialisation of Indian agriculture. It resulted in reduced area under cultivation of food crops due to the
substitution of commercial non-food grains in place of food grains. This had a devastating effect on the rural
economy and often took the shape of famines. The misery was further enhanced became the population of India
was increasing every year, fragmentation of land was taking place because of the increasing pressure on land and
modern techniques of agricultural production were not introduced in India. Thus, the commercialisation of
agriculture in India by the British was also one of the important causes of the impoverishment of the Indian
people.
6. Regional Specialisation-Regional specialisation of crop production based on climatic conditions, soil etc., was an
outcome of the commercial revolution in agriculture. Deccan districts of Bombay presidency grew cotton, Bengal
grew jute and Indigo, Bihar grew opium, Assam grew tea, Punjab grew wheat, etc.
7. Impacted indian market-Another important consequence of the commercial revolution in agriculture was linking
of the agricultural sector to the world market. Price movements and business fluctuations in the world markets
began to affect the fortunes of the Indian farmer to a degree that it had never done before. The farmer in his
choice of crops attached greater importance to market demand and price than his home needs. The peasant class
got adversely affected owing to imbalances in market condition.
8. Decreased self sufficiency-Commercialisation of agriculture adversely affected self sufficiency of village economy
and acted as major factor in bringing the declining state in rural economy.Commercialisation effected traditional
relations between agriculture and industry. In India, traditional relations acted as factors for each other’s
development which were hampered.
9. Assisted Britain’s industrialisation on the cost of India’s growth-The commercialisation of agriculture had mixed
effects. While it assisted the industrial revolution in Britain, it broke the economic self-sufficiency of villages in
India.
Positive Impacts of Commercialisation of Agriculture:
1. Encouraged social exchange-In spite of having many negative effect commercialisations in one sense was
progressive event. Commercialisation encouraged social exchange and it made possible the transformation of
Indian economy into capitalistic form.
2. Linked indian economy with global economy-Commercialisation linked India with world economy. It led to the
growth of high level social and economic system. The important contribution of commercialisation reflected in
integration of economy.
3. Growth of national agriculture-It also created a base for growth of national economy commercialisation of
agriculture led to growth of national agriculture and agricultural problem acquired national form.It also brought
about regional specialisation of crops on an efficient basis.
4. New commercial crops– It led tointroduction of a large number of commercial crops such as tea, coffee, indigo,
opium, cotton, jute, sugarcane and oilseed.
5. Capitalism-It made possible the transformation of Indian economy in to capitalistic form. Commercialisation of
Indian agriculture also partly benefited Indian traders and money lenders who made huge fortunes by working as
middlemen for the BritishIntegration of economy took place which also created for the growth of national
economy.
The commercialisation of agriculture was a new phenomenon in Indian agriculture scene introduced by the British. While
the upper class and British industries benefitedfrom it, the Indian peasants’ life was tied to remote international market.
The worst effect of commercialisation was the oppression of Indian peasants at hands of European. This found expression
in the famous Indigo revolt in 1859. Moreover, commercialisation of Indian agriculture got manifested in series of famines
which took a heavy toll of life.

The Digital India initiative is one of the major breakthrough programmes of the NDA government. It was launched
with three main objectives: (1) to develop a secure and stable digital infrastructure across the country (2) use this
digital infrastructure to make government services reach nuke and corner of the country in a hassle free manner
(3) to spread digital literacy in the country to enable people to reap the benefits of this digital infrastructure. In the
entire initiative, making digital infrastructure reach the rural areas, which are one of the most neglected and
backward areas of the country. Since 70 per cent of the population of India is dependent on agriculture,
introducing the digital infrastructure in this sector will be the starting point of the campaign.
Advantages of IT in Agriculture
Information Technology or e-technology can be of huge benefit to the agricultural sector. It can be both direct and
indirect.
Direct benefits
Technology here plays a direct role to enhance agricultural productivity. One such mechanism is precision
farming, which is mostly common in the developed countries. It is a capital intensive form of farming in which
large tracts of land have to be utilized. Some of the technology used in this form of farming is: remote sensing
satellite technology, theories of agronomy and soil sciences, geographical information systems etc. But this
facility is less suitable for a country like India where agriculture is largely a source of livelihood for the poorest
strata, capital intensive development by the government involves huge cost of maintenance that the exchequer
cannot afford currently. Nonetheless, some technology is being adopted that promote precision farming but more
in the fashion of a welfare state which is labour intensive.
Indirect benefits
IT indirectly allows the farmers to gather quality information so that they can make an informed choice while
carrying out agriculture and allied activities. In India, till date only conventional sources of information have been
accessible to the farmers in the less remote villages. They are in need of timely and reliable sources of
information. Further, the dynamic and competitive market today requires farmers to have quality information
round the clock from a cost-effective and reliable resource. India has been working in this regard.
WTO and E-Technology for Indian Farmers
Recently, WTO efforts on agriculture have also necessitated the extensive use of e-technology in agriculture. It
has started deregulating the sector to a great extent and any form uncompetitive regulation can affect India’s
popularity as a founding nation of WTO as well as its economic credibility among the members. Some of the
steps in e—technology that needs to be taken are:
Awareness database
This is a mechanism by which the rules and regulations of WTO are simplified. The language used in the
provisions of WTO involves a large number of technical jargons, beyond the capacity of interpretation of ordinary
agriculturalists. So, this database will interpret these provisions in a simple and unambiguous form to help all
stakeholders understand the implications of WTO norms on Indian agriculture. It is of great significance because
several government policies like tariffs, import quotas etc. are the primary means by which the agricultural sector
has been surviving and growing. If they have to be phased out following WTO norms they will greatly lead to a
collapse of this sector. This problem can be addressed by involving the stakeholders in the study of implications
and taking suggestions from them. If the farmers get an analytical input on how their life is to be affected, they
can make informed choices on the techniques used or the which crop to grow when. Moreover, analysis done by
agriculturalists on the basis of this database can help improve agriculture without being affected by the norms.
Decision support system for farmers
Currently, Indian agriculture is not very competitive in terms of export. The WTO stipulations on export subsidies
can improve the quality of farm products. But this benefit cannot be reaped if traditional methods of information
dissemination and farming continue. Rather, there is a requirement of proper SWOT (Strengths, Weaknesses,
Oppurtunities and Threats) that has been used currently by only big business houses. The asking and answering
of relevant questions that generate meaningful information for each activity will help in comparison with the
conventional forms and help understand the means to gain competitive advantage. For assessing the strengths
one needs have access to data on cost of cultivation, efficient agricultural practices and the better quality of
inputs, which will be compared with the indigenous products or the ones being used now. Weaknesses can be
accessed through the above information and corrective measures can be taken on the basis of it. Opportunities
can be availed of by making the strong sectors even more competitive, which are cotton, milk products, fruits and
oil seeds in case of India. It can be done through better forecast on the threats, macro-economic conditions in
other countries etc. In this age of technology, all this is best done through the help of internet.
Systems allowing collective benefits
In order to exploit the export potentials provided by WTO norms there is a need to have huge size of
landholdings. In fact, precision farming is possible through this. But in Indian villages landholding is divided into
many small parts. So, the farmers need to be organized in cooperative alliances. The major hindrance to this is
the geographical barriers which can be done away with through virtual settings like disposal of agricultural
produce at attractive prices through online portal. Online bidding is also an effective mechanism but the same
requires complicated IT systems with post harvest technologies, storage etc.
Value additions
One of WTO’s main focus has been value addition to agriculture as a means of reform. Therefore, farmers in
India should be equipped to add more value to the agricultural output. It can be done by integrating the
industries, aqua culture units, farms etc. through information technology. It will also be a source of information
with respect to betterment of units, procedures for export, norms related to packaging etc.
Monitoring
This is required to maintain strong vigilance on external shocks in the economy related to export of agricultural
products. A system will be required to monitor the international market status, international supply, demand,
political disruptions etc. There needs to be a warning system to inform the farmers of any shocks in advance. It
will provide data, periodic analytical reports and advanced alerts.
Constraints of Effective Dissemination
Some of the major setbacks in bringing e-technology to rural areas are:
Unorganized development
In case of implementation of every scheme, a delay and half-hearted development takes place in the rural areas.
This scheme is no exception to it. Long back initiatives had been made to introduce IT services to the agricultural
community. But there is a lot of red-tapism and duplication of efforts. There is a lack of coordination mechanism
that will help in reaching the services to the grassroot level in the villages.
User-friendliness
 For the success of this scheme, the rural population has to be comfortable with the new developments.
Graphic based presentation is important for enhancing this.
 Local language-India has a variety of local languages with several regional dialects. So, creating an
exhaustive database of languages is a tedious task. There is a need to employ language experts from
every area to develop this database, but getting such experts is again a difficult task given the size of
the country.
 Electricity-This is the basic requirement for e-technology. But due to frequent power cuts it is difficult to
achieve at present. There is still no strong scheme for ensuring 24/7 electricity supply in all remote
villages.
E-Agriculture Initiatives
E-technology in agriculture cannot be regarded solely as an initiative under the Digital India campaign, similar
steps although at a small level were taken up earlier also. Some of the initiatives taken by the government to
introduce e-technology in agriculture are:
Agriculture Marketing Information Network (AGMARKNET)
 The Union Ministry of Agriculture had launched this scheme as early as in the year 2000. The objective
was to link the 7000 agricultural wholesale markets of India with the Agricultural Marketing Boards and
Directorates of the states through a website. This would assist in exchange of effective information. The
portal is brought out by the National Informatics Centre (NIC) and provides information regarding
following: generation and transmission of prices, arrival of commodity from the agricultural produce
markets. The beneficiaries of this website are farmers, policymakers, consumers, traders, academic
institutions and the industries. The dissemination of information is further facilitated by the availability of
information in 8 regional languages along with English. It provides segment-wise information and
currently contains information about 300 commodities and 2000 varieties.
Agricultural Technology Management Agency (ATMA)
 It may be referred to as a group of people who are involved in agricultural activities and are interested in
sustainable development of agriculture in the districts. It takes the responsibility of technology
dissemination in the districts. In this way it promotes further research and extension activities in this
sector. It ensures that the quality and types of technology used in agriculture is improved and promotes
shared ownership for agricultural technology system by key stakeholders. For this purpose, it develops
tie-ups with private institutions and NGOs.
National Mission on Agricultural Extension and Technology (NMAET)
 This was implemented during the 12th Plan period. It has four sub missions which are related to:
agricultural mechanization, plant protection and plant quarantine, agricultural extension and seed and
planting material. Its main aims include extensive and interactive methods of dissemination of
information, using ICT, popularizing the modern and appropriate technologies, strengthening institutions
that promote mechanization, making available quality seeds etc. All this being done by organizing the
famers into interest groups that form Farmer Producer Organizations (FPOs).
Voice Krishi Vigyan Kendra
 It is an extension of the Krishi Vigyan Kendra (KVK) by greater emphasis on the aspect of e-technology.
The voice KVKs are group of advisors who remain connected through mobile and internet technologies.
Two parties interact through the means of this technology. It is done through the agropedia platform that
facilitates interaction through amplification i.e. either one person talking to many or many to one person
and persistence i.e. storing the messages sent and allowing them to be retrieved, monitoring the
developments and other facilities of electronic storage and semantic technology.
Agropedia
 It is an initiative by ICAR to use social networking technology to spread agricultural information.
Sanchar Shakti Scheme
 It was launched in 2009 by the Universal Service Obligation Fund (USOF) in the form of a wireless
broadband scheme. Its main target is to help the women self-help group members who are involved in
agricultural activities in rural areas. It is a kind of Mobile Value Added Services (VAS) that provides
customized information related to the diverse activities to these women through easier accessibility and
effective assimilation.
Sandesh Pathak
 An app that was developed by C-DAC Mumbai, IIT Madras, IIT Kharagpur, IIT Hyderabad, C-DAC
Thiruvananthapuram to facilitated reading out of messages for the benefit of farmers, is now being
provided by the App store of Mobile Seva project of the Government of India.
M-Kisan SMS Portal
 It enables the organizations of the central and state governments relating to agriculture and allied
sectors to provide information or advisories or services to the farmers through the method of text
message or SMS in the native language of the farmers. It boosted the Kisan Call Centre where farmers
are now comfortable to call up to get any additional information.
National Agriculture Market
 This project was announced under the budget of 2014-15 and is actually a pet project of under the
Digital India Campaign. It was launched on 14th April 2016 in a phased manner. Its aim is to set up a
pan-India electronic trading portal to link the existing APMCs and other market yards for creating unified
 national market for all agricultural commodities. It has a physical market behind this virtual market. The
process of implementation is still going on, with the first phase connecting 250 mandis across eight
states. It is a joint initiative by the Agri-Tech Infrastructure Fund (ATIF), Department of Agriculture and
Cooperation (DAC) and the Ministry of Agriculture. The facilities will be disseminated through the Small
Farmers Agribusiness Consortium (SFAC). The Central government will bear the cost of software as
well pay Rs 30 lakhs per mandi per market for the required infrastructure development. By opening this
portal for trading, the farmers have access to the national markets, giving more options for sale. It also
helps the bulk buyers, exporters etc to participate directly in trading at the local mandis and get the
required produce without having to involve intermediaries. It will also promote scientific storage and
movement of the agriculture goods.
Future Prospects
With the Bharat Net Project due to be completed by March 2019, technological development of agriculture is
going to be highly feasible. User friendly systems incorporating local languages of farmers are the recent priority.
With IT parks mushrooming all over the country, it is not impossible to develop a database involving all the
aspects of Indian agriculture. A Long Term Agricultural Policy has been developed that provides an exhaustive
list of the areas to be covered by e-technology.  Upgrading the specialized institutions with e-technology is further
helping in revolutionizing the system.  It will facilitate modularization of the task, better control and help in 
achieving quick results. In fact, digitization has already occurred in most of the agricultural research institutes.
With the development of business process outsourcing, the software companies can also take up the task of
developing suitable modules for farmers and persons involved in agriculture and the results can be achieved at a
relatively quicker pace. A coordinating agency must be set up at the centre to provide an advisory role and also
evolving a standard interface for the users, broad designing and monitoring of the progress.
State of the art technologies like geographical information systems (GIS), bio-engineering, remote sensing etc.
coupled with satellite technology needs to be incorporated as soon as possible to promote export advantage
post-WTO regime.
While we talk of technology development, it must not be forgotten that the target groups are hardly friendly with
computers or latest technology. Thus, there is a need to promote education to make them reap maximum
benefits. Some aspects of the education involve using touch screen kiosks, better learning of computer language,
reading applications etc. After this, care needs to be exercised to disseminate useful information through the
mechanisms stated above like the Krishi VIgyan Kendra, ATMA etc

 Pricing and marketing issues are more closely linked to each other in case of agriculture as compared to
manufacturing.
 The objectives of market intervention through pricing have been multiple and are often conflicting. This is
because the issues involving pricing issues in Agriculture are complex.
 The objective of intervention in agricultural marketing is creation of efficient agricultural markets.
 Agricultural Pricing Policy began evolving since the colonial era. Setting up CAPC and FCI constitute the
inflexion point in the post-independence period.
 A number of instruments are used by Agricultural Price Policy to protect the interest of both producer and
consumer.
 The net impact of Agricultural Pricing Policy is difficult to assess as it involves inter-related issues.
 The least is needed is revamping of both CAPC and FCI.
 Agricultural marketing in India is plagued by inefficiency, and devoid of any link between between the prices
received by producers and the prices paid by consumers. Nevertheless, some steps have been adopted to
improve the system of Agricultural Marketing.
 Non availability of primary data from different market functionaries and secondary data of time series nature
from public sources has limited the scope of research in this field.

Agricultural marketing covers all the activities in the movement of agricultural products from the farms to the
consumers.
Why is agricultural marketing so important?
 Advanced agricultural practices resulted in the surplus production which changed the subsistence face
of Indian agriculture.
 Approximately 33% of the output of food grains, pulses and nearly all of the productions of cash crops
like cotton, sugarcane, oilseeds etc. are marketed as they remain surplus after meeting the consumption
needs of the farmers.
 As agriculture sector produces raw materials for many of the other industries, marketing of such
commercial products assumes significance.
 Increased efficiency of the marketing mechanisms would result in the distribution of products at lower
prices to consumers having a direct bearing on national income.
 An improved marketing system will stimulate the growth in the number of agro-based industries mainly
in the field of processing.
History of Agricultural Marketing in India
For a long time, a traditional market system was existent in India. It was characterized by the village sales of
agricultural commodities, post-harvest immediate sale by farmers etc. In 1928, the Royal commission has
pointed out the problems of traditional marketing such as high marketing cost, unauthorized deductions, and
prevalence of various malpractices. This led to the demand of having regulated markets in India.
What is a regulated market?
The regulated market aims at the elimination of unhealthy and unscrupulous practices, reducing market costs
and providing benefits to both producers as well as the sellers in the market.
Post the independence period in the sixties and seventies, most of the states enacted the Agricultural Produce
Market Regulation Acts (APMR Acts). It authorized the States to set up and regulate marketing practices in
wholesale markets. The objective was to ensure that farmers get a fair price for their produce.
Drawbacks of regulated markets
However, regulated markets had some drawbacks such as:
 Under this regulation, no exporter or processor could buy directly from farmers. It discouraged
processing and exporting of agricultural products.
 Under the act, the state Government could only set up markets, thus preventing private players from
setting up markets and investing in marketing infrastructure.
 Formation of cartels with links to caste and political networks resulting in price variations.
 An increased number of middlemen formed a virtual barrier between the farmer and the consumer.
 The licensing of commission agents in the state regulated markets has led to the monopoly of the
licensed traders acting as a major entry barrier for new entrepreneurs.
 The fragmentation of markets within the State hinders the free flow of agro- commodities from one
market area to another and multiple handling of agri-produce and multiple levels of mandi charges end
up escalating the prices for the consumers without commensurate benefit to the farmer.
Solution: Amendments in APMC Acts
 Consequently, the inter-ministerial task force on agricultural marketing reforms (2002) recommended
the APMC Act be amended to allow for direct marketing and the establishment of agricultural
markets by the private and co-operative sector to provide more efficient marketing and creating an
environment conducive to private investment.
 In response, the Union Ministry of Agriculture proposed a model act on agricultural marketing in
consultation with State governments for adoption by the States. (Here, you should note that agriculture
is a state subject and hence Central government can only give guidelines. It is within the powers of state
government to decide whether to make amendments or not.)
Model APMC Act 2003 – Salient features:
 As per the act, the State is divided into several market areas, each of which is administered by a
separate Agricultural Produce Market Committee (APMC) which impose its own marketing regulation
(including fees).
 Apart from that, legal persons, growers, and local authorities are permitted to apply for the
establishment of new markets for agricultural produce in any area.
 There will be no compulsion on the growers to sell their produce through existing markets administered
by the Agricultural Produce Market Committee (APMC).
 Separate provision is made for notification of ‘Special Markets’ in any market area for specified
agricultural commodities.
 Provision for Contract Farming, allowing direct sale of farm produce to contract farming sponsor from
farmer’s field.
 Single point levy of market fee on the sale of notified agricultural commodities in any market area.
 Provision made for resolving disputes arising between private market/ consumer market and Market.
 Provides for the creation of marketing infrastructure from the revenue earned by the APMC.
National Agriculture Market (NAM)
The motivation for a unified market platform can be traced to the Rashtriya e-Market Services (ReMS), an
initiative of Karnataka State Agricultural Marketing Board with National e-Markets Limited (NeML), erstwhile
National Commodity and Derivatives Exchange (NCDEX) Spot Exchange.
NAM, announced in Union Budget 2014-15, is a pan-India electronic trading portal which seeks to connect
existing APMCs and other market yards to create a unified national market for agricultural commodities.
Features of NAM:
 NAM is a “virtual” market but it has a physical market (mandi) at the back end
 NAM creates a unified market through online trading platform both, at State and National level and
promotes uniformity.
 The NAM Portal provides a single window service for all APMC related information and services.
 While the material flow of agriculture produce continues to happen through mandis, an online market
reduces transaction costs and information asymmetry.
However, in order for a state to be part of NAM, it needs to undertake prior reforms in respect of
 A single license to be valid across the state.
 Single point levy of market fee.
 Provision for electronic auction as a mode of price discovery.
Persisting Challenges
 The model APMC act that promoted the participation of private sector has not been implemented by all
the states and the monopoly of APMC continues.
Summary
In current days of mass production and marketing which is being replaced by customer-based or market-driven
strategies, an effective marketing extension service is the need of the hour. This has added significance in the
light of post-WTO scenario. If the Indian farmers have to withstand the possible onslaught of international
competitors, both in domestic as well as overseas markets, agricultural marketing services have to be
strengthened.

AGRICULTURAL MARKETING
Agricultural Marketing System in a country like India must satisfy the following three objectives:
1. Ensure a remunerative price for the farmer.
2. Narrow down the difference between the price that a farmer gets and the price at which it is sold to
consumers.
3. Minimize the role of middlemen.
In India, agricultural marketing poses various problems for farmers when they wish to sell their produce
in markets away from their villages. These problems are as follows:
1. Lack of warehousing and storage facilities due to which they are forced to sell their produce as soon as
it is ready because they cannot store it for want of these facilities and thus cannot hold and wait to fetch
better prices .
2. Inadequate and inefficient transportation which prevents them from taking their produce to mandis. Not
only that there is lack of motorable and mechanized transport but also most of the connecting roads are
Kuccha and unpaved roads.
3. Lack of grading and standardization facilities due to which they are not able to get better price and it
weakens their bargaining power.
4. Use of substandard weights and measures due to which their produce may be underweight.
5. Presence of a large number of middlemen who change several unauthorized commissions due to which
the price that the farmer gets is depressed.
6. Lack of credit facilities due to which a farmer has to sell his produce immediately after the crop is ready.
Adequate credit facilities can enable him to withhold his produce and run his household till he gets a
better price.
7. Lack of market information by way of prevailing condition in the market as well as prices prevailing .
Over the years, the government has tried to address these problems by adopting the following measures:
a. Provision of warehousing facilities.
The government set up Central Warehousing Corporation in 1957 with the purpose of constructing and running
godowns and warehouse. The States have set up corresponding State Warehousing Corporations. Also a
network of rural godowns has been setup. In recent years. The FCI has taken up construction of its own network
of rural godowns.
b. Grading and standardization has been facilitated by enacting Agricultural Produce (Grading and
Standardization) act. Grading Standards have been laid down for nearly 180 agricultural and allied
commodities. The graded goods are stamped with the seal of “AGMARK”.
c. Promoting Cooperative, marketing by setting up National Cooperative Development Corporation and
NAFED.
d. Special Boards have been set up for commodities like rice, pulses, jute, millets, cotton, oilseeds,
tobacco, sugarcane etc.
e. Boost to export of agricultural commodities through incentives provided in successive Exim policies and
setting up of Export Promotion Council as well as Agricultural and Processed Food Export Development
Authority, Also, the Centre has been allocating funds to assist States for the development of Agro
Export Zones.
f. Buffer stocks and procurement policy of the government has helped farmers to market their produce to
the government at the price fixed by the government.
g. Futures Trading has been permitted in various agricultural commodities. Also in 2003-04 the
government took a significant initiative towards futures trading in all commodities by setting up national
level commodity exchanges like for wheat, cotton, soya oil, jute, rubber, pepper, turmeric etc.
h. Enactment of model APMC act 2003 by the Centre with a view to urging States to amend their
respective APMC Acts in accordance with this Act. Salient features of this Act are given later in this
chapter.
i. Setting up of Regulated markets has been the most significant and landmark step taken by the
government in the field of agricultural marketing.
REGULATED MARKETS

A regulated market is set up under the law either for a specific commodity or a group of commodities. These
markets are set up under the APMC Acts of State governments.
This market is administered by a market committee which consists of representative of the State Government,
the legal bodies (like the District Board), the traders and the farmers themselves. The committee is appointed by
the government for a fixed period for management of the market. The committee fixes the market charges like
the commission etc. it ensures that no ‘dalal’ represents either the buyer or the seller. The prevents unauthorized
deductions from the price paid to the farmer and ensures that correct weights and measures are used.
The committee is responsible for the licensing of brokers and weighmen and is empowered to punish anyone
found guilty of dishonest and fraudulent practices. It hears all the complaints and in case of disputes, it arranges
for arbitration.
The chairman and Vice-Chairman of the Committee are from the farming community. The regulated market
system has proved a good source of generating income for the marketing boards and this income is used for
creating rural infrastructure.
Regulated markets predominate in areas where commercial or non traditional crops are grown. Cooperative
marketing and distribution and banking are also linked with the regulated markets. At present, nearly 80 per cent
of agricultural produce is sold in regulated markets.
Defects of Regulated Markets

These markets have proved a boon for farmers over the years even since they are being set up since
1951. There are nearly 8,500 such markets in the country However, with changing times, these markets
have been exposed to some serious limitations as follows.
a. Failure to adopt new innovative market technologies.
b. They have not helped in exchange of market information.
c. They have restricted smooth supply of raw materials for agro producers.
d. They have restricted development of alternative form of markets.
e. They have become too monopolistic in the sense that the authorities do not permit alternate and
competitive markets in an area where there is regulated market.
f. Also, no transaction is permitted outside the regulated market. For any such transaction, one has to
obtain a licence and pay requisite fee to the market committee.
g. Cold storage facilities exist in less than 10 percent of these markets which implies poor infrastructure.
h. Grading, cleaning and standardization facilities exist in just one third of these markets.
In view of these limitations and problems relating to regulated markets, the centre set up Shankar Guru
Committee in 2001 and also set up an inter-ministerial expert group to review the system of regulated markets.
These committees, inter-alia, made the following observations and recommendations.
(i) These markets have become too restrictive and instead of promoting free and fair play market forces, have
become too monopolistic.
(ii) These markets have failed to reflect situations of scarcity or plenty and particularly in respect of food grains
have led to stock piling by FCI.
(iii) Government intervention in agricultural markets should be selective and confined only to situations of
extreme scarcity.
(iv) Essential Commodities Act should be repealed.
(v) Government should review all the relevant legislations relating to agricultural marketing.
Based on these, the Centre enacted a model APMC Act in 2003 urging State governments to adopt this,
legislation by carrying out suitable amendments in their APMC Acts. The model APMC Act 2003 has three major
objectives viz, deregulation of agriculture markets making these markets competitive and permitting private
sector investment in market infrastructure.
Salient features of the Model Act are as follows:

(i) Farmers and traders should not be permitted to sell their produce in regulated markets.
(ii) Farmers and traders should be permitted to set up purchase centres for direct sale of their produce to
consumers.
(iii) States should encourage farmers, traders, local authorities to set up parallel markets.
(iv) Separate markets should be set up for perishable commodities like fruits and vegetables.
(v) Public private partnership should be encouraged in management and development of agricultural markets.
(vi) There should be regulation and promotion of contract farming.
Regulated markets are dominated by intermediaries and middlemen. The high costs of intermediation have a
cascading effect on prices. The committee on Agriculture Reforms set up in 2013 recommended, inter-alia, a
barrier-free national market for the benefit of farmers and consumers.
The committee noted that by and large, the APMCs have emerged as some sort of government sponsored
monopolies in supply of marketing services/facilities with all drawbacks and inefficiency associated with a
monopoly.
Thus, the APMC Act has not achieved the basic objective of setting up a network of physical markets. There are
some successful initiatives in direct marketing, such as April Mandi In Punjab, Uzhavar Sandhai in Tamil Nadu,
Shetkari Bazaar in Maharashtra, Hadaspur Vegetable market in Pune, Rythu Bazaar in Andhra Pradesh,
Krushak Bazaar in Odisha and Kisan Mandi In Rajsthan.
Some measures that would facilitate the creation of a barrier-free national market are:

a. Permit sale and purchase of all perishable commodities such as fruits as vegetables, milk and fish in
any market. This could later be extended to all agricultural produce.
b. Exempt market fee on fruits and vegetables and reduce the high incidence of commission charges on
agricultural/horticultural produce.
c. Taking a cue from the success of direct marketing efforts of states, the APM/other market infrastructure
may be used to organize farmers markets FPOs/self-help groups (SHGs) can be encouraged to
 organize farmers markets near urban centres, malls, etc that have large open spaces. These could be
organized every day or on weekends, depending on the concentration of footfalls.
d. Include facilitating organization of farmer markets under the permitted list of corporate social
responsibility (CSR) activities under Companies Act 2013 to encourage companies engaged in agri-
allied activities, food processing etc to take up this activity under CSR and also help in setting up supply
chain infrastructure. this would be similar to the e-Choupal initiative of ITC Ltd. but under CSR.
e. All the above facilitators can also tie-up a link to the commodity exchanges’ platform to disseminate spot
and future prices of agricultural commodities.
Recent initiatives by the government has been to urge state governments to keep perishable commodities like
fruits, vegetables, milk and fish out of the purview of regulated markets.

At the dawn of Independence, Indian policymakers faced with the daunting task of poverty alleviation. In this
scenario, land reforms and state-led industrialization were sought to be the prime moving force for the economy.
But both the initiatives failed and India didn't have enough food to feed its population and had to go for the USA's
food assistance program under PL 480.
Post this experience, India went for Green Revolution in the 1960s and 70's to attain self sufficiency in food
production. Since then, successive governments have emphasised raising agriculture production to make India
self-reliant in feeding its growing population. However, agricultural marketing hasn’t received the corresponding
attention, despite having a direct relationship to increased crop production.
What are the issues in agricultural marketing?
 Indian farmers today can their sell their produce at:

o Farmgate or local market (haat) to village aggregators;

o APMC (agricultural produce market committee) wholesale mandi to private traders
o To government at the minimum support price (MSP)
o But all three selling options are marred by several issues.
 MSP

o Announced for 23 crops but given for only 3 crops.

o MSP is given only on produce meeting “fair average quality” norms
o Government procurement facilities are not available throughout the country.
o Also, next phase to growth in agricultural income will come from high yield commodities like
dairy products, vegetables, fruits etc. but the government still providing MSP in cereals
 APMC 

o APMCs technically have multiple buyers, but the system of open auctions for determining
prices through transparent bidding is, in practice, non-existent.
o In most APMCs, buyers have to route all purchases through licenced aadhatiyas(middlemen).

 These middlemen charge a commission for their “services” — many times, both from
the buyer and seller.
 The aadhatiya is also often a moneylender, supplying seeds, fertilisers and pesticides
to farmers on credit. They, then, are forced to sell through him and settle their dues in
perpetuity.
o Also, mandi fees ranges from 0.5% to 5% on the value of the sale, while varying across states
and commodities
o Further mandi fees on inter-state trade amount to double taxation, besides violating the idea of
a single national market.
o Distress sale due to lack of storage infrastructure

 At mandis the lowest prices are during the 3-4 post-harvest months and highest in the
immediate pre-harvest period.
 Farmers undertake maximum sales just after harvest, as they need to purchase inputs
for the next sowing season.
o To rectify this APMC issue:

 The Union Agriculture Ministry has formulated the Model Agricultural Produce and
Livestock Marketing (APLM) Act
 The Act seeks to expand farmers’ marketing choices — by allowing private markets
(as against only APMCs), permitting direct bulk purchases from the farm gate,
declaring warehouses or cold storages as deemed markets, and demolishing the
existing concept of a “market area”
  But APLM act is witnessing opposition, primarily due to the delineation of “market
area”, which has a bearing on the earnings of APMCs.
 Price volatility

o The root cause of price volatility is the uncontrolled cycles of excesses and shortages.
o Price projections in a particular commodity are often made based on previous years’ trends
that may not hold true, leading to excess or low plantings.
What is Market Area as per APMC?
 Currently, an APMC’s purview extends to the entire tehsil and villages in that sub-district, with any trade
undertaken in this so-called market area being liable for payment of mandi fee.
 The Model APLM Act recognises only the market yard, i.e the area within the boundary walls where
actual trade in the mandi takes place
What are the reforms required?
 Uniform mandi fees:

o It is proposed that a uniform mandi fee of 0.25% or 0.50% be levied nationwide for foodgrains,
oilseeds and fruits & vegetables.
o The consequent losses to APMCs may be compensated by the Centre and state governments,
as in the case of the Goods and Services Tax.
 Eliminate Aadhatiya-based trading:

o All trade in APMCs should be through open auctioning, involving multiple bidders for each lot.
Such trades should be directly between buyers and sellers, with no middlemen charging
commission.
o The aadhatiya can participate only as a trader.
 Enable sample-based sales:

o The farmer today brings his whole produce to the APMC and the buyers do the physical
inspection before bidding.
o This results in double transportation — from the farm gate to APMC and from the APMC to the
ultimate destination.
o If grading and sorting facilities exist closer to the farm gate, the farmer needs to take only a
sample of his produce, along with the relevant quality certification documents, to the mandi. It
would save both time and cost.
 Storage and banking facilities near APMCs:

o Distress sales can be avoided if facilities for bagging and storage, along with loans against
warehouse receipts, are available to meet immediate cash requirements. These should exist in
the vicinity of APMCs.
 Promote FPOs in marketing:

o Farmer producer organisations/companies should be encouraged to take up direct marketing

of their members’ produce to large buyers and processors.
o It will result in more competition and better prices at APMCs.
 Relax/abolish Essential Commodities Act(ECA):

o ECA places restrictions on the movement of produce, stockholding, pricing and adoption of
new technologies
o The dismantling of such controls under ECA and other regulations would expand trade and
lead to better realisations for cultivators.
o The narrative of “ease of doing business” is necessary as much for agriculture as other
businesses.
 e-NAM:

o The government has created an electronic national agriculture market (eNAM) to connect all
regulated wholesale produce markets through a pan-India trading portal.
o Its effectiveness is, however, dependent on the participation of traders from these mandis.
 Risk management:

o Crop Insurance schemes offer protection to farmers against weather risks.

o The premium in the Pradhan Mantri Fasal Bima Yojana is largely borne by the Government.
o While still a work in progress, it is a more comprehensive and farmer-friendly scheme than any
other one previously rolled out.
  Increase the number of markets:

o According to Ashok Dalwai Committee, India needs at least 30,000 farms produce markets, as
against the approximately 6,500 now.
o There is a need for a “mini-market” concept to bridge this wide gap.
o Government’s announcement of GRAMs(Gramin rural agricultural market) is a step in the right
direction
o Also with ubiquitous electronic communication and reliable rural roads, GRAMs can become
viable hubs for economic activity and employment generation.
 AgTech startups should be roped in for price discovery mechanism, so that price volatility can be
controlled.
 Producer consolidation:

o Consolidation of small and fragmented farms into more viable holdings will improve producers’
access to finance and quality inputs, besides enabling better price realisations.
o This will also incentivize much-needed investments in land development/ improvement and
farm mechanisation.
Addressing the challenges of the agricultural market is complex, yet doable, as the doubling of farmers income
cannot come without developing a thriving market of agriculture. Hence, it is high time that focus must shift from
agricultural production to agricultural marketing.

The Commission of Agricultural Costs and Prices (CACP) while recommending prices takes into account
important factors, such as:
I. Cost of production
II. Changes in input prices
III. Input/output Price Parity
IV. Trends in market prices
V. Inter-crop Price Parity
VI. Demand and supply situation
VII. Effect on Industrial Cost Structure
VIII. Effect on general price level
IX. Effect on cost of living
X. International market price situation
XI. Parity between prices paid and prices received by farmers (Terms of Trade)
The table given below depicts the minimum support price for different crops for the 2015-16.

Motives (advantages) behind the announcement of Minimum Support Price (MSP):

To secure the interests of the farmers as also the need of self reliance, government has been announcing the
minimum support price for 24 major crops. The main objectives f the MSP are:
I. To prevent fall in the price in the situation of over production.
II. To protect the interests of the farmers by ensuring them a minimum price for their crops in the situation of a
price fall in the market.
III. To meet the domestic consumption requirement
IV. To provide price stability in the agricultural product
V. To ensure reasonable relationship between prices of agricultural commodities and manufactured goods
VI. To remove price difference between two regions or the whole country.
VII. To increase the production and exports of agricultural produce.
VIII. To provide raw material to the different industries at reasonable prices in the whole country.
Disadvantages of the Minimum Support Price:
I. To increase the income of the farmers, the poor of the country have to pay more. This practice will create the
problem to allocate inefficiency in the country.
II. Subsidizing farmers through higher product prices is an inefficient method because it penalizes the consumer
with higher prices. Also it means large farmers will benefit the most. They have received more than they need but
small farmers are still struggling.
III. Farmers use fertilizers in the huge quantity to increase their production but it creates problems for those
peoples who do not get benefits from this increment in the production.

Introduction to Agricultural Policy:

Price policy plays a pioneer role in the economic development of a country. It is an important instrument for
providing incentives to farmers for motivating them to go in for production oriented investment and technology.
In a developing country like India where majority of the population devotes 2/3 of its expenditure on food alone
and where majority of the population is engaged in agricultural sector, prices affect both income and consumption
of the cultivators. The Govt. of India announces each year procurement/support prices for major agricultural
commodities and organizes purchase operations through public agencies.
Need of Agricultural Price Policy:
Undoubtedly, violent fluctuations in agricultural prices have harmful results. For instance, a steep decline in the
price of particular crop in few years can inflict heavy losses on the growers of that crop. This will not only reduce
the income but also dampen the spirit to cultivate the same crop in the coming year. If this happens to be a staple
food item of the people, supply will remain below the demand.
This will force the Govt. to fill the gap by restoring imports (in case of no buffer stock). If, on the other hand,
prices of a particular crop increase rapidly in the particular period, them the consumer will definitely suffer. In
case, the prices continuously increase for the particular crop, this can have disastrous effect on the sector of the
economy.
Objectives of Agricultural Price Policy:
The objectives of agricultural price policy vary from country to country depending upon the place of agriculture in
national economy. Generally, in developed countries, the major objective of price policy is to prevent drastic fall
in agricultural income while in developing economies it is to increase the agricultural production.
However, its main objectives are summarized below:
(i) To Ensure Relation between Prices of Food-grains and Agricultural Goods:
The foremost objective of agricultural price policy is to ensure the appropriate relationship between the prices of
food grains and nonfood grains and between the agricultural commodities so that the terms of trade between
these two sectors of the economy do not change sharply against one another.
(ii) To Watch Interests of Producers and Consumers:
To achieve the balance between the interest of producers and consumers, price policy should keep a close eye
the fluctuations within maximum and minimum limits.
(iii) Relation Between Prices of Crops:
The price policy should be such which may sustain the relationship between the prices of competing crops in
order to fulfill the production targets in respect of different commodities in accordance of its demand.
(iv) To Control Seasonal Fluctuations:
Another object of price policy is to control cyclical and seasonal fluctuations of price rise to the minimum extent.
(v) Integrate the Price:
The agricultural price policy should also aim at to bring the greater integration of price between the various
regions in the country so that regular flow of marketable surplus could be maintained and exports of farm
products stimulated regularly.
(vi) Stabilise the General Price:
To stabilize the general price level, it should aim at increasing the public outlay to boost economic development
in the country.
(vii) Increase in Production:
The agricultural price should aim at to raise the production of various commodities in the country. Therefore, it
must keep balance between output and input required by the cultivations.
Major Objectives:
The important objectives of the new agricultural policy are stated below:
1. Facilities for All-Round Development:
In order to accelerate the pace of development, the new agricultural policy has set an objective to augment
facilities for processing, marketing, storage, irrigation, along with development of horticulture, fisheries, biomass,
livestock, sericulture etc. for all round development of agricultural sector.
2. Infrastructural Development:
The new policy favoured to make the provision for infrastructural development related to agriculture and thereby
to infuse new dynamism through increased volume of public investment.
3. Revising and Strengthening Co-Operatives:
The policy also aims at reviving and strengthening Co-operatives and local communities for the development of
agriculture.
4. Involvement of NGOs:
The policy also aims at involving the nongovernment organisations on a large scale for the development of
agricultural sector.
5. Encouragement:
The policy aims at providing necessary support, encouragement and thrust on farming activities so that rural
people accept it as a noble and viable occupation.
Features of New Agricultural Policy:
The important measures or features of new agricultural policy are summarized as under:
(i) Raising Capital Formation:
The new policy has undertaken a strategy to raise the rate of capital formation in agricultural sector as the same
is maintaining a decreasing trend from 18.7 per cent of total gross capital formation in 1978- 79 to only 9.5 per
cent in 1993-94.
As the invisible resources are being diverted from agriculture to industry and sectors, the new policy, thus
introduces measures to rechnelise available resources for productive investment in the sector. The policy will
focus to create a better investment climate for the farmers by introducing a favourable price and trade regime.
(ii) Enhancing Public Investment:
In order to raise the volume of public investment, new agricultural policy will take steps to create public
investment for building supportive infrastructure for agriculture. Conservation of water and use of alternative and
renewable sources of energy for irrigation and other agricultural works have also been encouraged. Such
enhancement of infrastructural investment will reduce the regional imbalances and generates more value added
exportable surpluses.
(iii) Raising the Flow of Credit:
The policy will make an attempt to enhance the flow of credit to the agricultural sector. In this connection, the Co-
operative credit societies were engaged for such purpose.
(iv) Improving Agricultural Marketing:
An attempt will be made to improve the marketing arrangement of agricultural produce through agro- processing,
marketing and storage.
(v) Ensuring Remunerative Prices:
The new policy has entrusted the Government to undertake responsibility for ensuring remunerative prices of
agricultural produce to the farming community by adopting necessary price support policy.
(vi) Raising Agro-Exports:
The new policy has made an attempt for harnessing the comparative natural advantage in agricultural export of
the country. The policy has laid special thrust on the exports of fruits, vegetables, flowers, poultry and livestock
products so as to raise the share of agricultural exports.
(vii) Land Reforms:
The new policy will make efforts to take land reform measures for the interest of small and marginal farmers and
raise agricultural output.
(viii) Development of Land:
The policy has made an attempt to develop land permanently for cultivation to meet the growing needs of
population. In order to develop rainfed areas of the country watershed management scheme has been given
much importance so as to bring integrated development of the land.
(ix) Treating Agriculture at Par with Industry:
The steps for creating a positive trade and investment climate for agriculture and also to treat agriculture at par
with industry for the purpose will be taken.
(x) Crop Insurance Scheme:
Considering the problems of crop failure and high risk of instability in production, the policy stressed for
redesigning the crop and livestock insurance schemes in a comprehensive manner so that the farmers can
recover their losses arising out of natural disasters.
Types of Agricultural Price Policy:
The prices favourable to the producers of agricultural products may work against the interest of the non-
agricultural sector vice-versa. In fact, this has been one of the major considerations underlying the agricultural
price in various countries during the course of the development of their economies.
Sometimes, the prices of agricultural products as well as the agricultural inputs have been so manipulated and
the ancillary fiscal and administrative policy so devised that the benefits of development of the agricultural sector
were partly or wholly passed on to the industrial sector. Such a policy changed the terms of trade, against
agriculture.
On some other occasions, the price policy has favoured the agricultural sector at the cost of the non-agriculture
sector. The two types of price policy have been called ‘Negative’ and ‘Positive’ price policies respectively.
The following paragraph discuss these two price policies in some detail:
1. Negative Price Policy:
In the context of the policy of accelerating economic growth, a “negative” agricultural price policy has been
practiced by a large number of countries in the early stages of their development.
The main objectives of such a policy was to keep the prices of food and raw materials relatively low (when
compared with the prices of industrial products) so as to facilitate the growth of the industrial and tertiary sectors
and to provide surpluses in the form of savings for these sectors. In other words, the terms of trade were
purposively kept unfavourable for the agricultural sector.
2. Positive Price Policy:
In contrast to the above methods, a number of countries today follow what may be termed as the “positive” price
policy which consists of light taxes on the agricultural sector and also assure the farmer of a fair price for his
produce.
Such a policy is considered necessary in the context of the realisation that unless the agricultural sector attains
some critical minimum rate of growth, it would not be possible to attain the general targets of economic growth
and development.
This is true for a number of reasons, chief among which are:
(i) In most of the developing countries, agriculture continues to be the single most important sector from the
points of view of generating income, employment and exports, and
(ii) The increasing demand for food caused by increasing population and rising money incomes can be met only
by a continuously growing agricultural production.
Evaluation of Agricultural Price Policy:
The draft agricultural policy envisages 3.5 per cent annual growth in agriculture as compared to 2.6 per cent
growth rate registered since independence. The draft of the National Agricultural Policy circulated for comments
has secured broad agreements form all the State Government, central ministries and Agricultural Universities.
But its adoption by the Government at this moment might create new problems for the Union Agriculture Ministry
and the Planning Commission for its inclusion within the already launched Ninth Plan. Thus under the present
circumstances, the adoption of the draft agricultural policy by the Government may take some time for making
necessary adjustment with the agriculture component of the Ninth Plan.
In short the draft agricultural policy has offered a detailed framework of policy initiative required for the
agricultural sector on a long term perspective. By introducing a favourable price and trade regime, the policy has
created a suitable environment for the sector.
The thrust of the policy is to make the sector a viable and profitable for the nation. Thus the new policy is
expected to improve the quality of life in villages and can reduce the gap in the social welfare facilities between
rural and urban areas and create sufficient gainful employment opportunities on a self-sustaining basis.
Moreover, new agricultural policy proposed to accord the status of industry. The new agricultural policy resolution
would bestow the same benefits to agriculture as were being enjoyed by the industry but care should be taken to
ensure that agriculturists were not subjected to the regulatory and tax collection machinery of the Government.
Thus the draft agricultural policy was intended for the progress and welfare of farmers. The Agricultural Ministry
has also given stress on drip irrigation projects so that agriculture did not suffer. Attention was also being paid to
watershed management, soil conservation environment and other aspects which would benefit agriculture.
Besides, the benefits of liberalisation and technology transfer should reach to the farmers.
Effects of Agricultural Price Policy:
It is correctly stated that agricultural price has worked remarkably well to streamline the price stability activities.
However, its effect are shortly mentioned below:
1. Incentive to Increase Production:
Agricultural price policy has been providing necessary incentive to the farmers for raising their agricultural output
through modernisation of the sector. The minimum support price is determined effectively by the government
which will safeguard the interest of the farmers.
2. Increase in the level of income of Farmers:
The agricultural price policy has provided necessary benefit to the farmers by providing necessary
encouragement and incentives to raise their output and also by supporting its prices. All these have resulted in
an increase in the level of farmers as well as its living standards.
3. Price Stability:
The agricultural price policy has stabilized the price of agricultural products to a greater extent. It has successfully
checked the undue fluctuation of price of agricultural products. This has created a favourable impact on both the
consumers and producers of the country.
4. Change in Cropping Pattern:
As a result of agricultural price policy, considerable change in cropping pattern of Indian agriculture is needed.
The production of wheat and rice has increased considerably through the adoption of modern techniques by
getting necessary support from the Government. But the production of pulses and oilseeds could not achieve any
considerable change in the absence of such price support.
5. Benefit to Consumers:
The policy has also resulted in considerable benefit to the consumers by supplying the essential agricultural
commodities at reasonable price regularly.
6. Benefit to Industrials:
The agricultural price policy has also benefited the agro industries, like sugar, cotton textile, vegetable oil etc. By
stabilizing the prices of agricultural commodities, the policy has made provision for adequate quantity of raw
material for the agro industries of the country at reasonable price.
Shortcomings of Agricultural Price Policy:
The major shortcomings of the agricultural price are as under:
1. Inadequate Coverage:
Inadequate coverage of procurement facility has rendered the price ineffective. The facility of official procurement
reaches only a handful of farmers—of the total food gains production, procurement covers hardly 15 per cent.
2. Remunerative Price:
The remunerative price and/or subsidized inputs have failed to keep pace with the rate of increase in costs. It has
had two consequences. The farmer is discouraged from producing the maximum level of output; he tries to
balance his output against the level of costs, and settles for a lower level of output.
3. Ineffective Public Distribution System:
The public distribution has not been very effective. A large section of the poor people are outside the purview of
the system. Even those who are covered under the system do not necessarily get the benefit of issue prices. The
system has absolutely failed to serve the objective. Besides, the burned on the national exchequer is increasing
enormously.
4. Difference in Prices:
There is an important issue of wide difference between prices received by the producers and prices paid by the
consumers. In this context, issues relating to the network of regulations and costs associated with it, incidence of
octroi, increase in transportation costs, over fragmentation of the distribution network etc. require careful study.
5. Unaccompanied by Effective Policy:
The efficacy of the price policy depends on a number of other factors inherent in the system of agricultural
operations like land holding patterns, income distribution, general disparities and cropping pattern. But, it is pity to
say that the price policy has not been accompanied by any effective policy for a total development of agriculture.
A continuous increase in procurement prices may have even an adverse impact on agricultural productivity. Price
increases which over-compensate cost increases can discourage measures to raise agricultural productivity
since such prices automatically lead to higher profits for the farmers.
Suggestions for Reorientation of Agricultural Price Policy:
The adequacy of the present agricultural price policy calls for reorientation in relation to the priority objectives
which are likely to shape the development strategy. Considering the present critical situation in the national
economy, concern with and about broad-based and sustained growth is bound to be a dominant objective. Such
crucial issues relating to the strategy needed to achieve such growth are yet to be settled and focused.
Given the recent thinking in India and outside on the relative roles of government, markets, private enterprise and
non-government organizations, a careful look would have to be given to the issues regarding spheres appropriate
for direct government intervention.
While it is important to explore opportunities to transfer certain takes from the government to others, it would be
equally important to demarcate areas, where the government must act. It would be wishful to assume that
wherever the government performs badly, others would readily take-over and do better.
This means that top priority should be given to national issues rather than ideological issues of different political
parties of the country. There is ample reflection of these broader objective in the recent and continuing
discussion on the yet to be finalized Agricultural Policy Resolution.
Some obvious indications are:
(i) Systematic attempts to orient agricultural planning towards effective use of resource endowments
(ii) A much-expanded employment-cum-investment programme for conservation and upgradation of land and
water resources;
(iii) Greater priority for dry land agriculture,
(iv) A substantial set-up in the proportion of total planned resources earmarked for agriculture/rural sectors; and
(v) Time-bond targets for provision of rural infrastructures, etc.
(vi) Comparative advantages of grow climatic areas of the country,
(vii) Policy regarding growth of inputs and extension services and marketing etc.
Sincere and determined efforts for development of agriculture/rural sectors would have three main implications
for the agricultural price policy.
1. Agricultural growth in the areas, crops and farms which have remained stagnant so far would have the effect of
expanding the boundaries of that part of Indian agriculture which is responsive to agricultural price changes.
2. Improvements in what CACP considers as important ‘non-price’ factors—technology, inputs, marketing etc. —
would add to the effectiveness of price policy as an instrument to promote growth along with efficiency and cost
effectiveness.
3. The most important, if income and welfare support for the poor and the problems of non-viable small and
marginal farmers get priority attention in the overall development strategy, the price policy would be able to focus
itself more pointedly on its primary economic functions.
In view of the above considerations, following suggestions can be made in regard to reorientation of the
agricultural price policy:
1. Minimum Support Prices:
Two economic criteria should govern the operations based on minimum support price. First, it should give
protection only to the efficient producer so that minimum support price promotes growth and efficiency and
merely subsidizes all sections of farmers.
Specifically, it is urgent to realize that non-viable farmers cannot be helped simply by fixing a high enough
minimum support price; the solution of their problems lies in other areas than in policy. Secondly, the protection
should be given only to prevent losses being made by the efficient producer and not to ensure him profits.
2. Maximum Price:
The criteria for fixing a maximum for the prices of a commodity are not equally easy or strength forward to
stipulate.
The primary responsibility of the government in relation to price level is:
(a) To keep in check the inflationary forces bringing about increases—sustained and cumulative—in the overall
price level, and
(b) Elimination of collusive and manipulative practices leading to artificial scarcity and high prices for particular
commodities.
If these two sources of price rise are effectively neutralized, it is difficult to think of any need to match every
minimum support price with corresponding ceiling price. When the stability of the general price level is
maintained; the efficacy of the price mechanism would depend on the extent to which the relative prices are left
free to vary in response to changes in the underlying supply and demand conditions.
3. Balanced and Integrated Price Structure:
A balanced and integrated price structure criteria should be evolved. This type of price structure would help not
so much in price fixation as in monitoring the changes in factors which affect prices. The extent to which an
agricultural price policy would help development strategy and planning for agriculture would depend on its
capacity to extrapolate, forecast and work out the implications of alternative actions.
In a market-based economy, such analytical exercises would need models of interconnected markets based on
the concept of equilibrium and capable of showing the manner in which the markets adjust to policy interventions,
disturbances etc.
Summary of Agricultural Price Policy in India:
The summary of agricultural price policy followed by the Government of India since independence is
stated below:
(i) Setting Institutions:
The Government of India has set up some institutions for the implementation of agricultural price policy in the
country accordingly; the Agricultural Price Commission was set up in 1965 which announced the minimum
support prices and procurement prices for the agricultural products. In 1985, the name of this institution was
changed into Agricultural cost and Price Commission. Moreover, the Food grains policy.
Committee was, appointed by the Government in 1966 which also recommended various measures of price
support. The Food Corporation of India was also set up in 1965 for making necessary procurement, storage and
distribution of food grains.
In 1989-90, total capital employed in FCI was to the Extent of Rs. 5138 crore with its total storage capacity at 18
million tones. The corporation organises the price of food grains at government determined price and sale these
food stocks through the network distribution system. In the year 2009-10 and 16.28 million tonnes of wheat and
4.94 million tonnes rice were distributed to FCI.
(ii) Minimum Support Price:
The government fixes the minimum support prices of agricultural products like wheat, rice, maize, cotton,
sugarcane, pulses etc. regularly to safeguard the interest of farmers. The FCI also make their purchase of food
grains at the procurement prices so as to maintain a rational price of food grains in the interest of farmers.
(iii) Protecting the Consumers:
To safeguard the interest of the consumers, the agricultural price policy has made provision for buffer stock of
food grains for its distribution among the consumers through public distribution system.
(iv) Fixation of Maximum Price:
In order to have a control over the prices of essential commodities the government usually determines the
maximum price of agricultural products so as to protect the general people from exorbitant rise in prices.