Features of Indian agriculture, Indian Economy | Indian Economy - B Com PDF Download

Introduction

Agriculture plays a vital role in India’s economy. Over 58 per cent of the rural households depend on agriculture as their principal means of livelihood. As per the 2nd advised estimates by the Central Statistics Office (CSO), the share of agriculture and allied sectors (including agriculture, livestock, forestry and fishery) is estimated to be 17.3 per cent of the Gross Value Added (GVA) during 2016-17 at 2011-12 prices.

The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year due to its immense potential for value addition, particularly within the food processing industry. The Indian food and grocery market is the world’s sixth largest, with retail contributing 70 per cent of the sales. The Indian food processing industry accounts for 32 per cent of the country’s total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth. It contributes around 8.80 and 8.39 per cent of Gross Value Added (GVA) in Manufacturing and Agriculture respectively, 13 per cent of India’s exports and six per cent of total industrial investment.

Market Size

India's GDP is expected to grow at 7.1 per cent in FY 2016-17, led by growth in private consumption, while agriculture GDP is expected to grow above-trend at 4.1 per cent to Rs 1.11 trillion (US$ 1,640 billion).$ It ranks third in farm and agriculture outputs. As per the 2nd Advance Estimates, India's food grain production is expected to be 271.98 MT in 2016-17. Wheat production in India is expected to touch an all-time high of 96.6 MT during 2016-17.! Production of pulses is estimated at 22.14 MT.

India has been the world's largest producer of milk for the last two decades and contributes 19 per cent of the world's total milk production.

India is emerging as the export hub of instant coffee which has led to exports of coffee reaching 177,805 tonnes valued at US$ 447 million between April-August 2017, as against 162,641 tonnes valued at US$ 363.1 million during the same period last year.

India topped the list of shrimp exporters globally, as the value-added shrimp exports rose 130 per cent year-on-year to 23,400 tonnes in 2016.

The production of food grains in India reached a record 275.68 million tonnes (MT) during FY 2016-17, as per the Fourth Advance Estimates (AE) released by the Department of Agriculture, Cooperation and Farmers Welfare, Government of India.

The total sown area for kharif crops was 68.53 million hectares as on July  2017, compared to 67.34 million hectares on July, 2016.

India is the second largest fruit producer in the world. India's horticulture output, is estimated to be 287.3 million tonnes (MT) in 2016-17 after the first advance estimate. 

Agricultural export constitutes 10 per cent of the country’s exports and is the fourth-largest exported principal commodity. Agricultural exports from India reached US$ 24.66 billion during April-November 2017 with exports of basmati, buffalo meat reaching US$ 2.61 billion and US4 2.76 billion, respectively.

India is the largest producer, consumer and exporter of spices and spice products. Spice exports from India grew by 6 per cent year-on-year between April-September 2017 to US$ 1.37 billion.

Dairy sector in India is expected to grow at 15 per cent CAGR to reach Rs 9.4 trillion (US$ 145.7) billion by 2020.

The online food delivery industry grew at 150 per cent year-on-year with an estimated Gross Merchandise Value (GMV) of US$ 300 million in 2016. The sector grew 15 per cent every quarter during January-September 2017.

Investments

According to the Department of Industrial Policy and Promotion (DIPP), the Indian agricultural services and agricultural machinery sectors have cumulatively attracted Foreign Direct Investment (FDI) equity inflow of about US$ 1.99 billion and US$ 466.31 million, respectively, during April 2000 to September 2017. The food processing sector attracted FDI of US$ 8 billion in the same period.

Some major investments and developments in agriculture are as follows:

• In January 2018, India Agri Business Fund II (IABF-II), co-sponsored by Rabobank, the UK’s CDC Group and Asian Development Bank (ADB), made an investment worth US$ 10 million for a minority stake in Global Gourmet Pvt Ltd, a frozen food products exporting company.
• In December 2017, a mobile application which can forewarn farmers about diseases affecting the livestock has been launched by the Ministry of Agriculture and Farmers Welfare, Government of India.
• A loan agreement of US$ 318 million was signed between the Government of India, Government of Tamil Nadu and the World Bank in December 2017 for the ‘Tamil Nadu Irrigated Agriculture Modernization Project' through which is expected to benefit around 500,000 farmers in the state.
• Sugar production in India is expected to grow 23 per cent to reach 25 million MT in sugar year 20183.
• Cotton output in India is expected to increase by 9 per cent in 2017-184 to 37.7 million bales.
• In December 2017, India and Colombia signed a Memorandum of Understanding (MoU) for cooperation in the fields of agriculture and fisheries.

Government Initiatives

Given the importance of the agriculture sector, the Government of India, in its Budget 2017–18, planned several steps for the sustainable development of agriculture-

• Total allocation for rural, agricultural and allied sectors for FY 2017-18 has been increased by 24 per cent year-on-year to Rs 1,87,223 crore (US$ 28.1 billion). A dedicated micro-irrigation fund will be set up by National Bank for Agriculture and Rural Development (NABARD) with a corpus of Rs 5,000 crore (US$ 750 million). The government plans to set up a dairy processing fund of Rs 8,000 crore (US$ 1.2 billion) over three years with initial corpus of Rs 2,000 crore (US$ 300 million).
• The participation of women in Mahatma Gandhi National Rural Employment Gurantee Act (MGNREGA) has increased to 55 per cent and allocation to the scheme has been increased to a record Rs 48,000 crore (US$ 7.2 billion) for FY2017-18.
• Short-term crop loans up to Rs 300,000 (US$ 4,500) at subsidised interest rate of 7 per cent per annum would be provided to the farmers. An additional incentive of 3 per cent is provided to farmers for prompt repayment of loans within due date, making an effective interest rate for them at 4 per cent.

Some of the recent major government initiatives in the sector are as follows:

• The Government of India is going to provide Rs 2,000 crore (US$ 306.29 million) for computerisation of Primary Agricultural Credit Society (PACS) to ensure cooperatives are benefitted through digital technology.
• Around 100 million Soil Health Cards (SHCs) have been distributed in the country during 2015-17 and a soil health mobile app has been launched to help Indian farmers.
• With an aim to boost innovation and entrepreneurship in agriculture, the Government of India is introducing a new AGRI-UDAAN programme to mentor start-ups and to enable them to connect with potential investors.
• The Government of India has launched the Pradhan Mantri Krishi Sinchai Yojana (PMKSY) with an investment of Rs 50,000 crore (US$ 7.7 billion) aimed at development of irrigation sources for providing a permanent solution from drought.
• The Government of India plans to triple the capacity of food processing sector in India from the current 10 per cent of agriculture produce and has also committed Rs 6,000 crore (US$ 936.38 billion) as investments for mega food parks in the country, as a part of the Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters (SAMPADA).
• The Government of India has allowed 100 per cent FDI in marketing of food products and in food product e-commerce under the automatic route.
• A new platform for selling agricultural produce named e-RaKam has been launched by the Government of India and will operate as a joint initiative of Metal Scrap Trade Corporation Limited and Central Railside Warehouse Company Limited (CRWC).
• According to the Agriculture Ministry, 50,000 hectares of area is available for coconut cultivation in Bihar, the Coconut Development Board plans to equip the farmers thus making India the world leader in production, productivity, processing for value addition and export of coconut.

Road Ahead

India is expected to achieve the ambitious goal of doubling farm income by 2022. The agriculture sector in India is expected to generate better momentum in the next few years due to increased investments in agricultural infrastructure such as irrigation facilities, warehousing and cold storage. Furthermore, the growing use of genetically modified crops will likely improve the yield for Indian farmers. India is expected to be self-sufficient in pulses in the coming few years due to concerted efforts of scientists to get early-maturing varieties of pulses and the increase in minimum support price.

India's Gross Value Added (GVA) at basic prices increased by 6.1 per cent during the July-September 2017 quarter, driven by agriculture and government spending. GVA from agriculture, forestry and fishing sector grew 1.7 per cent in this July-September 2017 quarter.

The government of India targets to increase the average income of a farmer household at current prices to Rs 219,724 (US$ 3,420.21) by 2022-23 from Rs 96,703 (US$ 1,505.27) in 2015-16.

Going forward, the adoption of food safety and quality assurance mechanisms such as Total Quality Management (TQM) including ISO 9000, ISO 22000, Hazard Analysis and Critical Control Points (HACCP), Good Manufacturing Practices (GMP) and Good Hygienic Practices (GHP) by the food processing industry will offer several benefits. 

Exchange rate used: INR 1 = US$ 0.0155 as of January 04, 2018.