Economic Reforms: Economics

Table of Contents
1. Economic Reforms
2. Agriculture in India
3. Green Revolution in India
4. Agricultural Credit and Insurance
5. Agricultural Schemes and Programmes
6. Irrigation
7. Agricultural Marketing
8. Organic Farming
9. Other Schemes and Recent Initiatives
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Economic Reforms

The process of economic reforms was launched on 23 July 1991 in response to a fiscal and balance of payments crisis. The immediate trigger was the first Gulf War (1990-91), which had two principal negative impacts:

• Increased oil prices that led to rapid depletion of foreign exchange reserves;
• Decline in private remittances from Indians working in the Gulf region, reducing external receipts.

The balance of payments crisis exposed deeper structural problems: rising foreign debt, a fiscal deficit of over 8% of GDP, and high inflation (noted around 13% at the time). India negotiated support under the IMF Extended Fund Facility, which provided external currency support subject to certain policy conditions.

IMF's Conditions (1991)

• Devaluation of the rupee by about 22%;
• Sharp reduction in peak import tariff (from about 130% to 30%);
• Increase in excise duties (now CENVAT) by around 20% to offset revenue shortfalls from customs cuts;
• Reduction in government expenditure-a general target to bring down public spending growth, including proposals to cut certain items of government expenditure by around 10% annually.

Liberalisation, Privatisation and Globalisation (LPG)

• Liberalisation: Shifting policy stance towards market-based allocation of resources, reducing state controls and permitting private sector entry.
• Privatisation: Transfer of state ownership or control of public sector undertakings to the private sector, including through disinvestment.
• Globalisation: Integration of the Indian economy with the world economy through liberal trade and investment policies.

First-Generation Reforms (1991-2000)

• Promotion of private sector: De-licensing and de-reservation of industries, abolition of restrictive provisions under the MRTP Act.
• Public sector reforms: Measures to improve performance of PSUs, including disinvestment and corporatisation.
• External sector reforms: Abolition of many quantitative restrictions on imports, greater current account convertibility for transactions, and permissions for foreign direct investment.
• Financial sector reforms: Reforms in the banking sector, development of capital markets, and deregulation of interest rates.
• Tax reforms: Simplification and modernization of tax administration, broadening the base and measures to check evasion.

Second-Generation Reforms (2000-01 onwards)

• Factor market reforms: Dismantling the Administered Price Mechanism (APM) and bringing regulated items (e.g., petroleum products, sugar, certain drugs) under market pricing.
• Public sector reforms: Greater functional autonomy, international tie-ups, and encouragement for Greenfield ventures and public-private partnerships.
• Reforms in government and public institutions: Reorienting the role of government from controller to facilitator, improving governance and service delivery.
• Legal sector reform: Amendments and updates in labour laws, company law reforms, and the introduction of cyber laws to support a changing economy.
• Reforms in critical infrastructure: Reforms in power, roads, telecommunications, education and healthcare to facilitate private participation and improve efficiency.

Third-Generation Reforms (early 2000s onwards)

• Initiatives around the launch of the 10th Five Year Plan (2002-07) emphasised local governance and delivery mechanisms.
• Commitment to strengthening Panchayati Raj Institutions (PRIs) so that benefits of schemes and reforms reach the grassroots level with better accountability.

Agriculture in India

• Agriculture remains the most important sector in terms of employment and rural livelihoods. India is a leading country in farm output. In 2009, agriculture and allied sectors (forestry and fisheries) accounted for about 16.6% of GDP while providing employment to nearly 50% of the total workforce.

• The contribution of agriculture to GDP has declined over time with broad-based economic growth, yet agriculture remains the largest employer and a critical sector for food security.
• An estimated 65-70% of India's population depends directly or indirectly on agriculture; it is the largest unorganised sector, accounting for over 90% of the unorganised labour force.
• Agricultural goods account for around 10.23% of India's export earnings and about 2.74% of imports (figures as presented).

Agrarian Reform in India

Agrarian reform in India was adopted to reallocate agricultural resources and establish greater equity among people directly connected with agriculture. After independence the Government initiated measures to improve rural equity, employment, and agricultural productivity. Agrarian reform policies differed across states according to local conditions and political economy.

Reasons Behind Agrarian Reform

• Historical layers of rule and changing rural property regimes left a legacy of exploitative agrarian relations.
• During the colonial period the zamindari system concentrated land rights in the hands of intermediaries (zamindars) who extracted rents and created insecurity for cultivators.
• Post-independence, land reforms aimed at abolishing intermediaries and securing cultivator rights, but redistribution across a large and diverse country proved challenging.

Objectives of Agrarian Reform

While specific measures varied by state, the common objectives were:

• Establishing proper land records and land management;
• Abolition of intermediaries (zamindars, jagirdars, inamdars, etc.);
• Preventing further fragmentation of holdings and consolidating land;
• Tenancy reform to secure rights of actual tillers.

The land policies of states sometimes produced uneven outcomes; in some places reforms were subverted by politically powerful large landowners. However, agrarian reform established important legal and institutional foundations for rural socio-economic change.

Principal Measures of Land Reform

• Abolition of intermediaries between the state and cultivator;
• Tenancy reforms and reconstruction of land ownership systems;
• Fixation of ceiling on holdings and distribution of surplus land among landless agricultural labourers;
• Consolidation of fragmented holdings and prevention of further fragmentation;
• Promotion of cooperative farming and cooperative village management systems.

Review of Land Reform Measures

Reasons for Low Progress of Land Reforms

The Task Force on Agrarian Relations set up by the Planning Commission identified several reasons for poor performance of land reform measures:

Lack of political will

There has often been a large gap between policy pronouncements and actual implementation. Without strong political commitment, legislative measures alone proved insufficient.

Absence of pressure from below

Except in limited pockets, poor peasants and agricultural labourers were often unorganized and unable to press for reform. Beneficiaries of land reforms did not always form a cohesive, politically effective group.

Negative attitude of the bureaucracy

Implementation was impeded where administrative officials were indifferent or had close links with powerful landowners, leading to slow or evasive execution.

Legal hurdles

Protracted and porous legal processes, precedent in civil and criminal laws favouring private property, and loopholes in legislation weakened the effectiveness of reform laws.

Absence of correct and up-to-date land records

Accurate cadastral records and records of rights are essential for enforcing tenancy protection and land ceilings. Many areas lacked recent surveys, standardised record-keeping systems, or reliable official records.

• Many regions were never cadastrally surveyed;
• Where surveys existed, resurvey and updating were often not done;
• No uniform machinery existed for maintaining village records;
• Even official records in many cases were inaccurate or incomplete.

Lack of financial support

Land reform programmes often received inadequate budgetary allocation; essential activities such as preparation and updating of land records were postponed or funded from non-plan budgets, constraining effective implementation.

Land reform implementation is not merely an administrative task but a political process that requires removal of political and economic obstacles. Without addressing these underlying hurdles, creating an efficient administrative machinery alone would not produce substantial improvement.

Green Revolution in India

Components of the Green Revolution

High Yielding Varieties (HYV) of Seeds

• Development and dissemination of HYV seeds for wheat, paddy and other cereals was a core technical change enabling intensive agriculture.
• Area under HYV seeds expanded rapidly: in 1966-67 about 1.89 million hectares were under HYV seeds; by 1986-87 this rose to 56.18 million hectares. Figures cited for later years include 64.7 million hectares (1991-92) and 79.0 million hectares (2000-01).

Chemical Fertilisers

• Increased use of chemical fertilisers accompanied the HYV programme. The National Commission on Agriculture noted the global correlation between higher fertiliser consumption and increased agricultural production.
• Fertiliser production capacity expanded from 0.31 million tonnes (1950-51) to 9.04 million tonnes (1990-91) and further figures are cited such as 15.23 million tonnes (2002-03).
• Consumption of fertilisers rose from low levels in the 1950s to about 5.51 million tonnes (1980-81), 12.9 million tonnes (1990-91), and figures such as 17.3 million tonnes (2001-02) have been recorded.

Irrigation

• Irrigation-through surface and groundwater-along with HYV seeds and fertilisers is a critical input in raising yields. More than 70% of Indian agriculture depends on rainfall; the monsoon is concentrated from June to September.
• Where rainfall or soil moisture is inadequate to support multiple cropping, assured irrigation is essential for sustaining Green Revolution technologies.

Pesticides and Plant Protection

• Adoption of HYV varieties increased the need for plant protection measures. Estimates indicated about 10% crop loss annually due to inadequate plant protection.
• Central and regional insecticide laboratories and centres were set up to ensure availability of effective plant protection products and guidance for cultivators.

Credit Facilities

• Access to timely and affordable credit enabled farmers to adopt HYV seeds, fertilisers, machinery and minor irrigation. The expansion of institutional credit reduced dependence on moneylenders for many cultivators.

Impact of the Green Revolution on the Indian Economy

The Green Revolution produced both economic and sociological effects.

Economic Effects

• Increase in agricultural production and productivity: Adoption of HYV technology led to a large increase in foodgrain output. The document cites wheat production rising from 8.8 million tonnes (1965-66) to 184 million tonnes (1991-92) and reports large percentage increases in productivity for cereals, wheat and paddy over the stated period. (Figures are presented as cited.)
• Employment: New agricultural technology and multiple cropping created increased labour demand in rural areas.
• Market orientation: Greater surplus production encouraged farmers to sell in markets, integrating agriculture with markets.
• Forward and backward linkages: Rising demand for fertilisers, pesticides and farm machinery stimulated industrial linkages; increased production required transport, storage and marketing services.

Sociological Effects

• Personal inequalities: Gains were often concentrated among richer and better-irrigated farmers; small and marginal farmers were slower to benefit, producing greater income inequalities and sometimes class conflict in rural areas.
• Regional inequalities: The Green Revolution was more successful in irrigated, high-potential areas (wheat belt) than in rainfed regions, widening regional disparities.

Positives

• Substantial increase in production and yields;
• Economic benefits to many farmers and improved working conditions via mechanisation;
• Better land use through multiple cropping;
• Application of scientific methods and development of higher yielding, disease-resistant seed varieties.

Negative effects

• Soil degradation due to intensive cropping and excessive chemical use;
• Decline in soil organic carbon from heavy fertiliser application;
• Weed and pest problems arising from continuous cropping and resistance to pesticides;
• Loss of biodiversity because of monoculture and chemical inputs;
• Groundwater depletion from intensive irrigation-water tables falling substantially in many regions;
• Loss of traditional seed varieties as HYV seeds became dominant, narrowing the genetic base.

Minimum Support Price (MSP)

The Minimum Support Price (MSP) is the price at which the government purchases crops from farmers to protect them against sharp fall in market prices. MSP for wheat was announced for the first time in 1966-67 in the context of the Green Revolution to safeguard farmers' incomes.

Since then MSP has been extended to several crops and is announced annually for a number of Rabi and Kharif crops.

Main objectives of MSP

• To prevent a fall in prices when production is high;
• To protect farmers by ensuring a minimum return for their produce;
• MSP recommendations are made by the Commission for Agricultural Costs and Prices (CACP), which considers input costs and reasonable returns to farmers.

Agricultural Credit and Insurance

Kisan Credit Card (KCC)

• Launched in 1998 to provide short-term formal credit to farmers.
• Simple and flexible procedures to meet seasonal agricultural credit needs such as purchase of seeds, fertilisers and other inputs.
• Operated by major nationalised and other banks; often includes personal accident insurance coverage.

National Agricultural Insurance Schemes

National Agricultural Insurance Scheme (NAIS) / Rashtriya Krishi Bima Yojana (RKBY)

• Programme details cited include a relaunch/version in 2008 in the document; schemes provide insurance against crop failure due to natural causes, pests and diseases.
• Coverage typically includes food crops, oilseeds, cotton, sugarcane and potato; programmes are joint between Centre and State with subsidies for small and marginal farmers.
• Implementation and delivery involve specialised agricultural insurance agencies or consortia of public sector insurers and financial institutions.

Livestock Insurance Scheme

• Launched in 2005 to protect farmers and cattle rearers against loss due to animal death.
• Covers crossbred and high-yielding cattle and buffaloes; typically subsidised and implemented through state livestock development agencies.

Rainfall Insurance / Varsha Bima

• Launched in 2004 to provide protection against shortfalls in crop yield due to deficit rainfall; implemented by Insurance agencies such as the Agriculture Insurance Company of India.

Weather Based Crop Insurance Scheme (WBCIS)

• Launched in 2003 to cover losses due to adverse weather events (rainfall, frost, temperature extremes etc.); funding is typically shared between Centre and States with subsidies for farmers.

Rainfall Insurance Scheme for Coffee Growers (RISC)

• Launched in 2009 to protect coffee growers (Robusta/Arabica) against deficit or excess rainfall during critical periods; subsidised and implemented by relevant boards and insurers for specified states.

Agricultural Schemes and Programmes

Agriculture is central to India's economy and livelihoods. The government has launched numerous schemes to increase productivity, ensure sustainability and improve farmer incomes.

Soil Health and Micronutrients

Soil Health Card Scheme

• Initiated by the Government of India in 2015.
• Provides farmers with detailed information on soil nutrient status and recommendations to improve soil health and fertility.
• Aims to encourage balanced fertiliser use, sustainable agriculture and higher farm productivity.

Neem Coated Urea (NCU)

• Introduced to regulate urea use and improve nitrogen use efficiency.
• Neem coating slows nutrient release and reduces diversion of urea for non-agricultural uses.
• Mandatory for domestically manufactured and imported urea; expected savings in urea use and improvement in soil health are among the objectives.

PM-PRANAM

• Encourages states and UTs to adopt alternative fertilisers and balanced fertiliser practices to reduce over-dependence on chemical fertilisers and promote environmental protection.
• Incentivises eco-friendly farming practices and better nutrient management.

Agricultural and Livestock Insurance - Recent Schemes

Pradhan Mantri Fasal Bima Yojana (PMFBY)

• Launched for Kharif 2016 to provide comprehensive crop insurance against non-preventable natural risks across the crop cycle (pre-sowing to post-harvest stages).
• Premium rates cited are: 2% for Kharif crops, 1.5% for Rabi crops, and 5% for annual commercial and horticultural crops. The remaining actuarial premium is typically shared between Central and State governments.
• Participation by states is voluntary; loanee farmers are usually covered mandatorily, while non-loanee farmers can join voluntarily in specified areas and crops.

Scheme for Livestock Insurance

• Designed to provide protection to farmers against loss of animals and to popularise livestock insurance as a risk management tool.

Irrigation

Pradhan Mantri Krishi Sinchai Yojana (PMKSY)

• Objective: Provide assured irrigation to all agricultural farms and improve water use efficiency.
• Aims to enhance crop productivity and promote rural prosperity through comprehensive planning at district and state levels.
• Focuses on end-to-end irrigation solutions including sources, distribution, farm-level application and extension of new technologies.

Micro Irrigation Fund (MIF)

• Government established a dedicated Rs. 5,000 crore fund under NABARD to expand micro-irrigation (drip and sprinkler) coverage.
• Objective: Promote efficient water use and increase farmer incomes by supporting states with concessional funding for micro-irrigation projects.
• Current usage is estimated on several million hectares with potential to expand to much larger areas.

Agricultural Marketing

Agricultural Marketing Infrastructure (AMI) Scheme

• Implemented by the Ministry of Agriculture and Farmers Welfare as part of the Integrated Scheme for Agricultural Marketing (ISAM).
• Combines earlier schemes to strengthen storage, grading, standardisation and marketing infrastructure to reduce post-harvest losses and distress sales.
• The Grameen Bhandaran Yojana (GBY) supports creation or renovation of rural storage infrastructure to improve capacity and enable better prices for farmers.

E-NAM (National Agriculture Market)

• Launched in 2015 to create a pan-India electronic trading portal for agricultural commodities.
• A web-based platform across regulated markets aims to increase price discovery, reduce information asymmetries and improve market access for farmers.

Formation and Promotion of Farmer Producer Organisations (FPOs)

• Central sector scheme to form and promote 10,000 new FPOs, implemented through agencies such as SFAC, NCDC and NABARD.
• FPOs are intended to strengthen farmers' collective bargaining power, input procurement, processing and market linkages to improve incomes.

Organic Farming

Paramparagat Krishi Vikas Yojana (PKVY)

• Under the Soil Health Management component of the National Mission for Sustainable Agriculture (NMSA), PKVY promotes cluster-based organic farming blending traditional practices with scientific inputs.
• Aims at sustainability, long-term soil fertility, resource conservation and producing safe food while supporting value addition and direct marketing by farmers.

Mission Organic Value Chain Development for Northeastern Region (MOVCDNER)

• Central sector scheme to develop certified organic production in a value chain mode in North Eastern states, supporting inputs, collection, processing and market development.

National Mission on Natural Farming (NMNF)

• Aims to encourage adoption of chemical-free farming practices; scaled up from Bhartiya Prakritik Krishi Paddhati (BPKP).
• Focuses on training, awareness, and handholding to enable a behavioural shift towards locally generated inputs and sustainable practices.

National Project on Organic Farming (NPOF)

• Since 2004, aims to promote organic farming through capacity building, technology transfer, quality assurance (including PGS-India), and financial support for key activities.

Other Schemes and Recent Initiatives

• Pradhan Mantri Kisan Samman Nidhi (PM-KISAN): Direct income support to small and marginal farmers. Eligible farmers (up to 2 hectares) receive Rs. 6,000 per year in three instalments through Direct Benefit Transfer.
• National Mission for Sustainable Agriculture (NMSA): Focuses on increasing productivity in rainfed areas through integrated farming, water use efficiency, soil health management and livelihood diversification.
• National Scheme on Welfare of Fishermen: Financial support for housing, community infrastructure and relief mechanisms during lean periods.
• Rashtriya Krishi Vikas Yojana - RKVY-RAFTAAR: Aims to enhance farm profitability, promote agribusiness incubators (ABI) and support entrepreneurship in agriculture and allied sectors.
• Atmanirbhar Clean Plant Programme: Led by the National Horticulture Board to improve horticulture planting material, quality, productivity and exports.
• Transition to Natural Farming: Plans to support one crore farmers in transitioning to natural farming practices, with establishment of Bio-Input Resource Centres for decentralised input production.
• PM Matsya Sampada Yojana - Sub Scheme: Investment to strengthen fisheries value chains, support fishermen, fish vendors and MSMEs in the fisheries sector.
• Digital Public Infrastructure for Agriculture: Developing open, interoperable digital infrastructure to support farmer-centric solutions and agri-tech innovation.