IMA - Indian Agri - Opportunities and Challenges

India’s Agriculture Sector:
Opportunities and Challenges
-1-
TABLE OF CONTENTS
I. Introduction and Overview Page 1
II. Global Mega-Trends in Agriculture Page 7
III. Output and Yield Page 20
IV. Moving From Constraint to

Opportunity
 1: The Input Side Page 34
o A: Land Fragmentation Page 35
o B: Water and Irrigation Page 41
o C: Farm Mechanisation Page 48
o D: Soil Health Page 54

o E: Crop Protection Page 61
o F: Rising Input Costs Page 65
 2: Credit and Insurance Page 69
o A: Access to Credit Page 70

o B: Insurance Page 77
 3: Market Linkages Page 84

o A: Marketing Regulations Page 85
o B: Minimum Support Prices Page 92
o C: Cold Chain and Logistics Page 100
V. Looking Ahead Page 102
ANNEXURES Page 109
-2-
I. INTRODUCTION AND OVERVIEW
-1-
India’s farm sector is in distress – the one weak link in a wider story of growth. For decades, not
only has it grown slower on average than the rest of the economy, it has also experienced
massive volatility. In the present decade, it has under-shot non-agricultural growth by as much as
7 percentage points, though in some years
it has nearly equalled it – usually on the Chart 1: Agricultural vs non-agri growth
Agri Non-agri
back of a low base from the previous year 10
(Chart 1). On net, the GDP share of 8
% change
agriculture, livestock and fisheries 6
4
(‘agriculture’ for short) has dropped from
2
18.5% in 2012-13 to an estimated 14.9% in 0
2018-19. On current trends, we estimate -2
FY14
FY12
FY13
FY15
FY16
FY17
FY18
FY19
that by 2025 it will fall further, to about
12% (Chart 2). Source: CSO, IMA analysis; FY19 is projected growth
A declining GDP share is not, in itself, an issue: the developed countries made the transition to
manufacturing and services decades ago while most developing ones are undergoing this process
today. However, in most of these cases, the workforce transitioned in step with GDP
composition. In India, agriculture has rapidly lost share in output but continues to employ nearly
half of the country’s workforce. For
varying reasons, neither manufacturing nor Growing more slowly than the rest of the
services can create enough jobs to absorb economy for years, agriculture’s share of
the millions who would want to move out GDP may drop to ~12% by 2025. However,
of agriculture. This means that vast the sector continues to employ nearly half of
numbers of people are and probably will India’s work-force, implying that many people
remain trapped in low-income farm work. remain trapped in low-value work
In 2015-16, the count stood at 214.5
million people, or 46% of India’s total
workforce (see insert on next page: A shifting farm workforce).
While the number of cultivators has

Chart 2: Agriculture as a share of GDP
declined over time, land holdings have 20
simultaneously fragmented and 18
% of GDP
consequently decreased in size. Today, 16

marginal or small holdings (<2 ha) make 14
up almost half (47.4%) of India’s 12
agricultural land, and over 85% of all 10
FY20
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY21
FY22
FY23
FY24
FY25
landholdings. This not only pushes up the

demand for agricultural labourers, it also Source: CSO, IMA analysis; FY19 onwards are projections
makes it more expensive for individual
farmers to implement farm mechanisation.
-2-
What ails the farm sector is an interconnected mix of poor incentives, rising production costs,
low yields, underdeveloped land markets, low levels of farmer awareness and challenges in terms
of farm-to-market linkages. In some major farming states, crop production has actually declined
in the last few years, while farmer indebtedness is on the rise. Low-value foodgrain continues to
occupy most of the country’s cultivated land – rice alone covers almost a quarter of all farm land.
Adding in wheat, coarse cereals, pulses and oilseeds, the ratio swells to 81%, a number that has
barely moved in the last decade (Table 1).
Table 1: Area under major crops, 2006-07 and 2016-17

Cropping area (million ha)
Share of total area in % change - FY07
FY07 FY17 FY17 to FY17
Rice 43.8 43.2 22.6% -1.4%
Wheat 28.0 30.6 16.0% 9.3%
Coarse Cereals 28.7 24.8 13.0% -13.7%
Pulses 23.2 29.5 15.4% 27.0%
Oilseeds 26.5 26.2 13.7% -1.1%
Cotton 9.1 10.9 5.7% 18.7%
Jute & Mesta 0.9 0.8 0.4% -18.1%
Sugarcane 5.2 4.4 2.3% -14.8%
Fruits 5.6 6.4 3.3% 14.8%
Vegetables 7.6 10.2 5.4% 35.0%
Flowers 0.1 0.3 0.2% 112.5%
Spices 2.4 3.7 1.9% 50.0%
Source: Department of Agriculture and Cooperation; IMA Analysis
A shifting farm workforce

Chart 3: A slowly-declining farm
workforce
Agri workers (% of total
Between 2001 and 2016, the share of India’s 238.2 268.3

Workers in agriculture and allied
300 70%
workforce that worked in agriculture – full- 60%
workforce)
250 214.5
time and part-time combined – fell sharply, 61% 50%
activities (million)
200 57%
from 61% to 46%. Moreover, in the five years 46% 40%
150
30%
to 2016, on net, 54 million people moved out 100 20%
of farm employment (Chart 3). However, the 50 10%
2016 numbers may not be comparable, since 0 0%
2001 2011 2015-16
one is taken from the Census, and the other
Source: Census of India (2001, 2011), NSSO (2015-16)
from an NSSO survey.
In the decade to 2011, there were other important compositional shifts in the farm workforce that have
probably only accelerated in subsequent years:
• The number of children (below-14s) working in agriculture fell by 3.5 million, from 9.8 million to
6.3 million. Their share of the total fell nearly in half, from 4.1% to 2.3%. This is a positive trend.
• By 2011, there were 6.9 million fewer cultivators in total. Cultivators are typically those that own
-3-
land so a decline in their numbers would suggest a voluntary desire to move out of farming,
presumably by selling or leasing their land to others.
• Conversely, there were 39 million more agricultural labourers employed in the sector in 2011,
compared to a decade previously. 40% of them worked for less than 6 months a year, a share
that remained constant. An increasing number of agricultural labourers signals both, the lack of
alternate employment opportunities for people and the slow pace of adoption of mechanised
farming which would have rendered human labour redundant.
There is also another, more hopeful side to this story. The higher-value-add parts of the farm
sector, while still small, are growing strongly. In the last ten years, more land has come under
fruits, vegetables, flowers, spices and cash crops like cotton. UP and MP have seen a big jump in
the land under fruit and vegetables. Jammu & Kashmir has recorded a boom in flower-growing,
and now accounts for ~15% of India’s total flower production. (See Annexures I and II for
crop-wise and state-wise trends in cropping patterns.) Livestock, poultry and fisheries now make
up over half of the total value-add in the sector and production value is rising quicker (and with
less volatility) than the rest of the farm sector. In some states, including Andhra Pradesh and
Madhya Pradesh, agriculture, instead of exerting a drag on growth, is actually powering it. In AP,
the sector is dominated by horticultural
crops, livestock and fisheries. In MP, It is not all doom and gloom: higher value-
soybean and wheat production have driven add parts like fruits, vegetables, flowers,
double-digit agricultural growth over 8 spices, cash crops like cotton, and meat and
years, more than twice as fast as the India poultry, are growing fast. In states such as
average. Gujarat has been a major Andhra Pradesh and Madhya Pradesh,
agricultural success story, led by crops like agriculture actually powers growth
cotton and good transport infrastructure
allowing for strong farm-to-market linkages.
Clearly, what farmers choose to grow/raise, how they do it, and the support they receive at the
policy level make a big difference to outcomes.
This report provides a deep-dive look at the state of Indian agriculture today: what is produced,
and where; the input side; and the state of farmer livelihoods. It also offers a forward view on
what may be expected, in the coming years, in terms of agricultural policy. The remainder of the
report is organised as follows:
 Part 2: Global mega-trends in agriculture: India’s farm sector both shapes and is
shaped by global developments in agriculture, including demand and supply conditions,
technological change, and emerging best practices. This section looks at evolving
production, consumption and trade patterns, as well as the input side – technology,
fertilisers, pesticides and water.
-4-
 Part 3: Output and yield: This chapter discusses trends in all-India and state-level
output and yield for crops as well as for meat, poultry, fisheries and dairy. Global
comparisons are also presented.
 Part 4: Moving from constraint to opportunity: On the input side, in terms of market
linkages and at the retail end, Indian farmers face myriad challenges. This impacts not just
what they choose to produce but how much output they can generate from their land and
what they receive as income. Far-sighted policy can change this reality, turning today’s
constraints into tomorrow’s opportunities. This section examines the present state and
likely direction of the farm sector, in
On the input side, Indian agriculture is
key impact areas:
constrained by issues around landholding size,
rainfall-dependence, mechanisation, soil
The input side:
health/fertiliser usage, pesticide usage, and by
1. Small landholdings: Most
rising input costs – which eat into the
farmers in India operate off small
profitability of farm-work
and increasingly fragmented
holdings. By inhibiting scale
economies, this is a constraint on growth. Better land records and the ability to pool
land or contract it out would, however, make a big difference.
2. Rain-dependence: Roughly half of all farmland in India is still watered primarily by
rainfall, which is becoming more erratic. Large irrigation projects have so far under-
delivered, but there has been some forward movement in recent years, and micro-
irrigation has big potential.
3. Low levels of mechanisation: Compared to other major farming countries, Indian
farming is under-mechanised. Emerging new business models, including contract
hiring, can bring change, and reforms in other areas – e.g., land pooling – could shift
the equation.
4. Poor soil health: Over the decades, bad farming practices and adverse environmental
factors have caused widespread degradation of soil quality in large parts of India. More
judicious use of fertilisers would help restore the balance and recent government
initiatives, including the Soil Health Card scheme, are a step in that direction.
5. Inappropriate pesticide usage: India has a reputation for ‘over-using’ pesticides.
The reality is that while the overall market for crop protection is huge, farmers actually
use less of it than they should – and rely heavily on the more harmful varieties that are
banned elsewhere. Shifting market and regulatory conditions could, however, change
this in the years ahead.
6. Rising input costs: In many regions and for some of the most critical food-crops,
input costs (labour, seeds, fertilisers, pesticides etc) are rising faster than end-prices.
-5-
Credit and insurance:

1. Poor access to credit: Low levels of savings and a long gap between sowing and
price realisation mean that Indian farmers must rely heavily on credit (whether formal
or informal) to keep their operations going. However, there are gaps in existing credit
mechanisms. Fixing this will
require wider reforms to make Access to formal, institutional credit remains
farming more viable, as well as weak, and for many, non-existent. This is now
specific interventions in the starting to change, albeit slowly. Crop
credit market. insurance is an under-penetrated area, but
2. Low insurance penetration: recent initiatives could see it make a step-
Farming is an inherently risky change in the years ahead
business. Well-functioning
insurance markets can help
mitigate these risks but India has some way to go in this respect.
Market linkages:
1. Over-regulated markets: Designed to protect farmers, the APMC (Agriculture
Produce Market Committee) Acts have actually achieved the opposite. States have
started to reform their laws but ground-level progress has been slow.
2. Flawed pricing systems: The government tries to correct for price-cost gaps, both
at the state and the central level,
such as through minimum
On the marketing side, farmers are limited by
support prices (MSPs). These
the APMC (Agriculture Produce Market
efforts have generally proved
Committee) Acts, while the MSP system
ineffectual. tends to distort incentives, and therefore
3. A weak cold chain: India loses production decisions. Weak cold chains lead
huge quantities of food to to considerable wastage each year
wastage each year. One of the
primary causes for this is an
underdeveloped cold chain network. As with other issues around the farm sector,
there has been progress in the last few years, but at a slow pace.
 Part V: Looking ahead: This chapter offers a summary and overview of what might be
expected in the years ahead, especially at the policy level. It also looks at emerging areas of
opportunity for the private sector.
C
-6-
II. GLOBAL MEGA-TRENDS IN
AGRICULTURE
-7-
II. GLOBAL MEGA TRENDS
IN AGRICULTURE
Worldwide, the farm sector is in the midst of transformative change. Agriculture accounts for a
shrinking share of global GDP but at a socio-economic level, its importance is undiminished.
Feeding a growing population – approaching 8 billion in the next 3 years – will require not just
the intensive use of existing techniques and technology but continuous innovation as well.
AGRICULTURE’S SHARE OF GDP: FALLING

In recent decades, and across countries, agriculture has tended to grow more slowly than the
overall economy. Between 1970 and 2016,
according to the UN Food and Agriculture The farm sector’s importance can hardly be
Organisation (FAO), its share of world overstated: it need to feed a global population
GDP fell from 4.9% to 3.9%. However, approaching 8 billion, plus countless farm
this varied sharply by region. In Europe and animals. Yet its share of GDP continues to
America, the share has been stable and well shrink everywhere, ranging from well below
below 5% for the last decade, while in 5% in Europe and America to 20% in Africa
Africa, it has actually gone up slightly, to
~15%. Asia as a whole has seen a slow decline but in India and China, it has been more
pronounced (Chart 1). Accompanying this change, farm workers are migrating to other parts of
the economy: in Africa, for instance, their share of the agricultural workforce has halved between
2005 and 2017, from 42% to 20% (Chart 2).
Chart 1: Agriculture's share in GDP (%)

25%
20% India
Africa
15%
a China
10% Asia
5% Oceania
0% Europe
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Africa Americas Asia Europe Oceania India China
Source: FAO
-8-
IN AGRICULTURE
Chart 2: Employment in agriculture (% of total employment)

45%
40% Africa
35%
30%
25% Asia
20%
15% Oceania
10%
Americas
5% Europe
0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Africa Americas Asia Europe Oceania

Source: FAO
CHANGING PATTERNS OF FOOD PRODUCTION, DEMAND AND TRADE

In the decade ahead, global farm-output growth is projected to slow and – given that no major
increases in agricultural land are likely – will be driven mainly by productivity enhancements.
Sustainability challenges will also impose constraints on growth, particularly for South and East
Asia – which produces 40% of the world’s cereals and meat, 50% of its vegetable oil and 70% of
all seafood. Consumption growth, which remained strong over 2007-17, is expected to moderate
as the per-capita consumption of many commodities levels off. Notably, in many countries, the
consumption of staple foods such as cereals is close to saturation point. Meat consumption, too,
is reaching that stage in several regions, but
growing in others as preferences change
Farm-output and consumption growth are
and disposable incomes rise. Dairy
both expected to slow in the decade to 2027.
consumption, by contrast, is projected to
Most of the incremental consumption will
grow fairly quickly. comes from the emerging markets. Output
growth will be driven mainly by rising
Slowing production and consumption productivity, led by technological change
growth means that the global agriculture
trade will grow at half the rate seen in the
last decade. Land-abundant countries, such as the Americas, will see rising net exports, while
those with high population density/growth, such as Sub-Saharan Africa (SSA), Middle East and
North Africa (MENA) and Asia, will see widening food-trade deficits. A relatively small group of
countries will continue to be net exporters of food, making world markets more susceptible to
supply shocks.
The production side: driven by efficiency gains

Global crop and meat production is forecast to rise by 16% on aggregate over 2018-2027. The
biggest increases are set to come from South and East Asia, and the SSA and MENA regions, the
latter largely because of its low base. In contrast, agricultural output will expand more slowly in
the developed world, notably in Western Europe (Chart 3). Given that worldwide, limited new
land will be brought under agriculture, most of the net increase will come from efficiency gains
-9-
IN AGRICULTURE
and crop intensification. The use of high-quality seeds and fertilisers, and technological advances,
will be key.
Chart 3: Regional Trends in Production

3,500
3% 282
3,000
11%
274 14% 199
2,500
174 708
billion USD
14%
2,000 620 123
16%
1,500 106
17%
1,000 1,584
1,349
500
30%
- 178 232
2015-17 2027
Sub-Saharan Africa South and East Asia
Middle East and North Africa Americas
Eastern Europe and Central Asia Oceania
Western Europe
Source: OECD Agriculture Database, FAO
Demand growth: likely to flatten

In the last 10 years, there has been strong demand growth across a wide range of commodities,
including for non-food uses such as feedstock for biofuel and animal feed. Demand for meat in
particular intensified with rising incomes in emerging economies, especially China. This boosted
livestock production, which in turn drove
up demand for feedstock. India and Sub-Saharan Africa drove much of
the demand growth for cereals over 2008-17,
Food demand: led by population and income growth and will continue to do so over 2018-27.
Between 2008 and 2017, India and SSA India is also forecast to lead on dairy and oils.
drove global demand for cereals – a trend China powers ahead in terms of meat and
that is expected to sustain in the period demand, though its growth is now slowing
through 2027. Much of the future demand
growth for cereals, however, will be driven
by animal-feed requirements rather than by human food demand, as in many regions, per-capita
cereal consumption is now approaching saturation point. Wheat and rice continue to dominate,
except in SSA, where white maize plays a major role in caloric intake (Table 1). India will also
continue to drive world demand for fresh dairy and vegetable oils. On the other hand, China has
and will continue to lead the chart on meat and fish, though at a declining rate. Sugar
consumption growth is forecast to remain steady and balanced across regions (Chart 4). An
interplay of regional variations in population and income growth as well as dietary preferences
will shape both the global and regional markets for individual commodities.
- 10 -
IN AGRICULTURE
Table 1: Per capita food consumption: Cereals (kg/cap)

Other coarse
Wheat Rice Maize
grains
2017 2027 2017 2027 2017 2027 2017 2027
India 58.6 60.3 70.7 72.8 7.1 7.3 11.2 11.5
China 62.7 62.6 77.6 77.6 6.1 6.1 3.1 3.1
SSA 19.9 21.1 28.7 30.4 45.7 48.6 32.5 34.5
MENA 155.2 153.7 27.7 27.4 11.2 11.1 17.3 17.1
OECD 91.3 90.9 14.2 14.1 24.3 24.2 6.2 6.2
World 64.5 65.8 54.2 55.2 19.0 19.4 10.8 11.0
Source: OECD, FAO
Chart 4: Regional contribution to incremental food demand

160
140
120
Million tonnes
100
80
60
40
20
0
2008-17 2018-27 2008-17 2018-27 2008-17 2018-27 2008-17 2018-27 2008-17 2018-27 2008-17 2018-27
Cereals Meat Fish Fresh dairy Sugar Vegetable oil
OECD Sub-Saharan Africa India China MENA Rest of World

Source: OECD, FAO
Dairy: Driven by India

In most countries, consumption of fresh and processed dairy is near saturation levels and
forecast to grow only slowly in the coming decade (Table 2). In contrast, India, which is already
the world’s biggest consumer of fresh dairy, will continue to see strong growth (36% increase in
per capita consumption in the next 10 years) driven by more consumers, higher incomes and
changing nutritional preferences. Its consumption of butter, too, will rise strongly, overtaking
OECD levels by 2027.
Table 2: Per capita food consumption: Dairy (kg/cap)

Skim milk Whole milk
Fresh dairy Cheese Butter
powder powder
2017 2027 2017 2027 2017 2027 2017 2027 2017 2027
India 16.79 22.83 - - 0.13 0.18 - - 2.36 3.21
China 2.55 3.13 0.14 0.18 0.21 0.26 1.17 1.44 0.11 0.14
SSA 3.32 3.08 0.12 0.11 0.14 0.13 0.26 0.24 0.11 0.10
MENA 6.64 6.77 2.28 2.32 0.89 0.91 1.18 1.20 1.04 1.06
OECD 8.34 8.59 7.41 7.63 1.46 1.50 0.61 0.63 2.59 2.66
World 8.75 9.89 1.60 1.81 0.52 0.59 0.65 0.73 1.22 1.37
Source: OECD, FAO
- 11 -
IN AGRICULTURE
Meat and fish: slow global convergence

Consumption of meat and fish varies significantly across regions. India, where dietary
preferences are a key factor, and the SSA region, where per-capita incomes put a limit on growth,
are both below the world averages on
On a per-capita basis, meat and fish
major categories and are forecast to stay
consumption ranges widely across regions.
that way through 2027 (Table 3). China
Some degree of catch-up growth will drive
leads the way on fish and pig meat, which
consumption patterns in the next 10 years,
is central to most Chinese diets. In both
but dietary preferences will also be a key
India and China, per-capita meat
determinant, especially in places like India
consumption will grow more strongly, 12%
and 13% respectively, than in other
regions, driven by rising income levels.
Table 3: Per capita food consumption: Meat (kg/cap)

Poultry Pig meat Beef and veal Sheep meat Fish
2017 2027 2017 2027 2017 2027 2017 2027 2017 2027
India 2.6 2.9 0.2 0.3 0.7 0.8 0.5 0.5 6.4 7.2
China 14.1 15.9 37.1 41.9 6.0 6.8 3.6 4.0 42.4 48.0
SSA 4.9 4.8 1.6 1.6 4.7 4.5 1.9 1.8 8.6 8.3
MENA 17.9 19.0 0.1 0.1 6.9 7.3 4.7 5.0 12.5 13.2
World 16.2 16.7 15.2 15.7 9.2 9.4 2.0 2.1 20.7 21.3
OECD 34.7 35.7 28.9 29.8 20.6 21.2 1.6 1.6 24.6 25.3
Source: OECD/FAO 2018 Agricultural Outlook; IMA Analysis
Sugar and vegetable oil: Consumption rising despite health concerns

Alongside dairy, sugar and vegetable oil are the two major food items that are forecast to grow
strongly in the next decade on a per-capita consumption basis. Urbanisation and income growth
in the developing world are the key drivers, pushing up demand for processed and convenience
foods, which are characterised by their high sugar and oil content.
Table 4: Per capita food consumption (kg/cap): sugar and vegetable oil
Sugar Vegetable oil
2017 2027 2017 2027
India 18.6 21.1 17.3 24.2
China 11.5 14.0 25.4 28.4
SSA 10.7 11.5 10.7 11.4
MENA 31.9 34.8 19.1 22.2
OECD 33.5 32.8 27.9 28.5
World 22.4 23.7 20.6 23.1
Source: OECD/FAO 2018 Agricultural Outlook; IMA Analysis
Sugar consumption is expected to remain stagnant in the OECD countries and rise only mildly in
the SSA region, but demand will grow strongly in India (13%), China (22%) and the MENA
region (9%) region. China and India will also see strong growth in vegetable-oil consumption
(Table 4).
- 12 -
IN AGRICULTURE
Non-food: Feed and fuel rising fast

Animal feed primarily consists of maize, protein meal, other coarse grains (especially barley and
sorghum), wheat and by-products of cereal processing such as cereal bran. The global demand
for feed touched 1.6 billion tonnes in 2017 and is forecast to rise to 1.9 billion tonnes by 2027.
China will continue to lead it – accounting for about a third of the total – but growth is projected
to slow in the years ahead as its meat consumption plateaus.
The demand for cereals, vegetable oil and

Animal-feed and bio-fuel crops both saw a sugar as inputs for the production of
major surge in consumption over 2008-17. biofuels such as ethanol and biodiesel will
Chinese meat demand drove the former, and rise more slowly than in the previous
mandatory blending requirements in major decade. This is because mandatory blending
countries drove the latter. However, both are requirements, which were ramped up in
expected to slow in the period to 2027 many countries over 2008-2017, are not
expected to intensify much further. In the
last 10 years, the global production of ethanol grew at 3.9% a year, to ~140 billion litres, while in
the next 10 years, it is expected to rise at a more modest 0.7% per annum, translating to an
additional 12 billion litres annually. For biodiesel, the next decade is forecast to see 5 billion litres
of net addition, compared with 29 billion litres added between 2008 and 2017.
Agriculture Trade: Slowing

Agricultural trade flows are driven by
factors such as population growth/density, Led by rising consumption, trade volumes
land use, climate, geography and farm- grew strongly in the last decade, but are
sector policies. Compared to the past expected to now slow across segments, with
decade, when commodities like cereals, bio-fuel crops likely to decline. China will
soybean and skim-milk powder saw strong remain a major importer, while the Americas
growth, trade volumes across segments are and Oceania will continue to be net-exporters
expected to slow over 2018-2027; biofuels
will likely see negative growth in trade
(Chart 5). The region-wise evolution of trade balances, both historic and projected (Chart 6),
reflects these dynamics. Traditionally, Oceania (powered by Australia and New Zealand) and the
Americas have been the net exporters of agricultural products, while South and East Asia, SSA,
Western Europe and MENA have been net importers. Going forward, the Americas are forecast
to see a rising trade surplus, led by commodities like maize, soybean and meat. Russia and
Ukraine – which until recently imported food – turned into net exporters in 2013 and are
projected to see gains in the decade ahead. Within Asia, China is and will remain the main
agricultural importer, accounting for ~60% of the region’s overall trade deficit in this area.
- 13 -
IN AGRICULTURE
Chart 5: Growth in trade volumes, by commodity 2008-17 2018-27

10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
Protein meals
Biodiesel
Raw sugar
Ethanol
Beef
Sheep
Fish
Cheese
Maize
Cotton
Butter
Other coarse grains
Rice
Other oilseeds
White sugar
Poultry
Wheat
Soybean
Pork
Vegetable oils
Skim milk powder
Whole milk powder

Cereals Oilseeds Sugar Meat Dairy Biofuels
Source: OECD Agricultural Statistics, FAO
Chart 6: Agricultural trade balances by region

200
150
100
USD billion
50
0
-50
-100
-150
-200
1997 2007 2017 2027
Americas South and East Asia Eastern Europe and Central Asia
Western Europe Sub-Saharan Africa Middle East and North Africa
Oceania
Source: OECD Agriculture Statistics, FAO
AGRICULTURAL INPUTS: FERTILISERS, PESTICIDES AND WATER

Fertilisers, pesticides and water are three of the most critical inputs in the farming process and
their usage has intensified in recent years.
Asia accounts for a bulk of the world’s China leads the world in consumption of
fertiliser market in absolute terms (Chart 7), fertilisers, particularly nitrogenous ones. It
led by India and China. Nitrogenous uses >2x than India per hectare of farmland.
fertilisers drive both the overall market and China also leads the way on pesticide usage.
consumption in individual countries and India’s farm sector is more water intensive
region. On the whole, they account for than in most other countries
~55% of fertiliser use on a per-hectare basis
(Chart 8). China’s consumption of nitrogen-
based fertilisers remains the world’s highest, at 225 kg/ha per hectare of cropland, but is down to
- 14 -
IN AGRICULTURE
a decade-ago level. This was mainly on account of an aggressive push for organic fertilisers.
India, on average, used 98.7 kg/ha, up 21% from 2006 (Chart 9).
Chart 9: Nitrogenous fertilisers usage, per hectare of land

300
250
Kgs/hectare
200
150
100
50
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Africa Americas Asia Ocenia Europe India China

Source: FAO
Source: FAO
Chart 7: Fertiliser usage (2016) Chart 8: Global fertiliser usage per

hectare
120 140
Nitrogen Phosphate
Nitrogen Potash
100 120
Phosphate
80 100
Billion kg
Potash
60 80
kg/ha
40 60
20 40
20
0
Americas
Oceania
Asia
Africa
Europe
0
2006 2011 2016
Source: FAO Source: FAO
- 15 -
IN AGRICULTURE
In terms of pesticides, too, Asia drives the Chart 10: Pesticide usage
global market with China alone consuming 1.7 (metric tonnes)
MT of the continent’s total of 2.1 MT (Chart 4500
10). While the use of pesticides per hectare of 4000
3500
cropland has been largely stable across regions,
3000
China’s usage (13 kg/ha) has decreased from its
2500
peak level of 14.8 kg/ha in 2012 (Chart 11). 2000
This is attributed to the growing use of 1500
genetically modified crops, especially cotton, 1000
which accounts for a third of pesticides use in 500
China. 0
2005 2016
Africa Americas Asia Europe Oceania
In the last 100 years, agricultural water usage Source: FAO
has surged. Estimates vary, but according to the
World Bank, it today accounts for roughly 70% of the world’s total freshwater withdrawal,
mainly via irrigation. India tops the list (Chart 12), with 90% of its total water withdrawal going
into the farm sector – far higher than in China (65%) or Brazil (55%).
Source: FAO Source: FAO
FARM MECHANISATION AND TECHNOLOGICAL CHANGE

Agricultural technology-intensity varies enormously across regions. At one end of the scale,
farms in America, Western Europe and Japan are almost fully mechanised1 (Chart 13) and are
working to automate a range of operations, including with the use of IoT and AI devices and
commercial drones. Brazil, with its aging population, is rapidly adopting digital farm technologies
such as geo-referenced soil sampling for mapping the fertility of crop fields. At the other end of
1
Defined as the replacement or supplanting of human/animal labour with machine power.
- 16 -
IN AGRICULTURE
the spectrum is SSA, where just 5% of the land is cultivated by tractors. India, which is just 40%
mechanised, and China (57%), also lag behind on this score though recently, the Indian tractor
market has surged. In fact, it is today the world’s biggest market for these machines with demand
flattening in the US, Europe, Brazil and Russia (Chart 14).
AGRICULTURE 4.0: KEY TRENDS

Technology will continue to play a big role
in the farm sector’s evolution. According to Technology is expected to drive the wholesale
the World Bank, cereal yields rose ~300% re-engineering of the agricultural value chain.
between 1961 and 2004, enabled by In the last half-century, it enabled a huge
modern farming techniques including increase in cereal yields. Going forward, both
irrigation, the use of fertilisers and ‘traditional’ technologies (tractors, harvesters)
pesticides, and the development of new and cutting-edge ones will play a role
crop varieties. However, yield
improvements have slowed in recent years
and sustained growth will require both the maximisation of older technologies and the generation
of new ones. These will include soil and moisture sensing, drones and GPS technology. More
generally, technology can play a part in re-engineering the entire agricultural value-chain.
Chart 13: Levels of farm Chart 14: Tractor sales

mechanisaton (2017)
700
US 97% 600
2015 2016 2017
500
Thousand units
Western Europe 95%

400
Russia 80%
300
Brazil 75% 200
100
China 48%
0
Western
Brazil
US
Russia
India
China
Europe
India 40%
Source: Industry reports Source: Agrirevolution database
New farming techniques

To tackle sustainability pressures, modern farms will need to be less water-, fertiliser- and
pesticide-intensive. Farmers will need to grow crops in arid areas and use renewable resources,
ranging from sun- and wind-power to seawater, in the farming process. Hydroponics, for
instance, may allow plants to grow without soil, using mineral nutrient solutions in a water
solvent. The technique requires 90% less water than conventional soil-based farming and at the
same time, allows plants to grow faster and yield more. Sundrop Farms, a company located in the
- 17 -
IN AGRICULTURE
Australian desert, uses solar power to heat seawater from the nearby gulf, generating electricity
from the resulting steam and thermal heating for the glasshouse. Sustainability is ensured, since
the system does not require fossil fuels and produces as much food as with conventional
techniques.
Vertical/indoor farming is also gaining traction in challenging environments, such as in urban

areas that lack adequate land. By producing food in vertically-stacked layers, in an environment
with controlled temperature, light and
humidity conditions, this enables year- Environmental sustainability will be a major
round production while minimising the use imperative for the farm sector, which tends to
of water and energy (including for be resource intensive. New techniques like
transportation). The Netherlands is seeing hydroponics and vertical/indoor farming are
an indoor-agricultural boom, with such gaining ground, particularly in the West,
farms now producing 35% of the country’s where space is at a premium
vegetables while occupying less than 1% of
its ‘farmland’.
Driving efficiency levels

Technology is also driving ‘precision agriculture’ and connected farms. According to Business
Insider Intelligence, by 2020, over 75 million IoT devices will be in use in agriculture. OnFarm,
which makes a connected IoT platform, expects the average farm to generate 4.1 million data
points per day in 2050, up from 190,000 in 2014. Farmers have already started using
sophisticated farming techniques to improve efficiency and productivity. For instance, field-level
sensors allow farmers to obtain detailed topographical maps as well as data on parameters such
as soil quality, moisture levels and temperature. Using their smartphones, farmers can monitor
their equipment, crops and livestock, and run predictive models. Using drones, they can survey
their land to generate crop data, understand production inefficiencies and conduct field health
assessments.
Blockchain, the distributed ledger behind

IoT devices, including ‘connected’ field Bitcoin, can be applied to agriculture to
sensors, as well as smartphones and drones, reduce inefficiencies and fraud and improve
will enable ‘precision agriculture’. Blockchain
food safety and transaction times. With
will help reduce inefficiencies and wastage.
blockchain, farmers and others in the supply
Gene editing is also expected to break new
chain can access all the information they
ground in the years ahead
require, reducing waste by detecting
bottlenecks. An Uber-like model that
enables the sharing of farm equipment – already in operation in India via companies such as
Trringo – can be powered by the blockchain, as can fractional ownership and multi-party
financing models. Ultimately, this can help raise mechanisation rates. Blockchain-like
- 18 -
IN AGRICULTURE
mechanisms might also be leveraged, in conjunction with new banking technologies, to better
manage farm subsidy payments.
CRISPR (clustered, regularly interspaced, short palindromic repeat) technology is an important

new approach to genome-editing, facilitating the production of engineered animal products.
Cultured meat is currently a niche area, but has enormous potential in terms of food security,
disease-control and animal welfare. A Dutch startup, Mosa Meat, is working on an industrial
process to produce lab-grown meat by 2021. Should this prove viable for large-scale production,
it would dramatically change land-use patterns globally.
3D printing, already popular in manufacturing, is being applied to food production. The

technology uses a base food ingredient such as microalgae to create edible foods like carrots or
vegetables. However, the most exciting – and technically challenging – application of 3D printers
may be meat products, where ongoing research is focused on using lab-grown animal cells to
make meat.
Finally, precision farming will be facilitated by nanotechnology, such as GPS-linked biosensors

that enable real-time monitoring. Nanotech-linked smart devices will allow farmers to identify
plant-health issues early on, while nano-delivery systems for fertilisers and pesticides can allow
for the slow, sustained and precise release of nutrients and agrochemicals.
INTRODUCTION
- 19 -
III. OUTPUT AND YIELD
- 20 -
III. INDIA: FARM PRODUCTION
AND YIELD
By dint of its sheer size, India is among the globe’s largest producers of wheat, rice, pulses,
sugarcane and cotton. It is also the biggest producer of milk, the second-biggest in terms of fruits
and vegetables, and either first or second in commodities like groundnut, soybean and banana.
Its output of meat, poultry and fish rank among the world’s largest. However, crop-yields and
meat and fish productivity are generally lower than in other major producer countries, including
Brazil, China and America. The causes for this vary from fragmented landholdings and low levels
of mechanisation to poor infrastructure, sub-optimal cropping practices and the improper usage
of fertilisers and pesticides. Were India to implement focused and wide-ranging reforms across
the farm sector, yields can rise significantly. This would allow it not only to achieve self-
sufficiency in many areas but also to become a net exporter of food. These issues are covered in
depth in separate chapters; the present chapter looks at the overall trends in output and yield in
recent years.
Table 1: Output, yield and area under major crops

Production Yield Area
(million tonnes) (kg/hectare) (million hectares)
10-year 10-year 10-year
2016-17 CAGR 2016-17 CAGR 2016-17 CAGR
Rice 110.2 1.7% 2550.0 1.8% 43.8 -0.1%
Wheat 98.4 2.6% 3216.0 1.7% 30.6 0.9%
Coarse cereals 44.2 2.7% 1784.0 4.2% 24.8 -1.5%
Pulses 23.0 4.9% 779.0 2.4% 29.5 2.4%
Foodgrains 275.7 2.4% 2153.0 2.1% 128.0 NA
Oilseeds 32.1 2.8% 1225.0 2.9% 26.2 -0.1%
Sugarcane 306.7 -1.5% 69886.0 0.1% 4.4 -1.6%
Cotton@ 33.1 3.9% 519.0 2.1% 10.8 1.7%
Fruits 92.9 4.6% 14.6 NA 6.4 1.4%
Vegetables 17.8 NA 17.4 NA 10.2 NA
Source: Department of Agriculture, Cooperation & Farmers Welfare, IMA analysis; @ Millions of bales of 170kg each
OUTPUT: RISING AT A STATELY PACE…

Chart 1: Foodgrain production
India’s total foodgrain production went up
280
from 192 million tonnes (MT) in 1998 to 260
about 276 MT in 2017, growing at a 240
Million tonnes
compounded annual growth rate (CAGR) of 220

just under 2%. Underscoring how rain- 200
dependent the Indian farm sector still 180
160
remains, output tends to dip sharply in
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
drought years, including 2003, 2010 and

2015 (Chart 1). Source: Agricultural Census, IMA Analysis
- 21 -
AND YIELD
Over the last decade, growth in foodgrain output has accelerated to a compounded 2.4% pa, with
rice growing slower than average and pulses faster (Table 1). Fruits, cotton and oilseeds have also
seen reasonably fast growth, while sugarcane is the only major crop to record a decline. (See
Annexure III for detailed state-wise data on crop output and yields.)
…BUT YIELDS REMAIN LOW

For the vast majority of crops, Indian yield
levels are low by global standards. China India is a massive producer of most crops in
and India, for example, are the world’s top volume terms, but its yields are. China and
producers of rice and wheat but the yield- India are the world’s two biggest producers of
gap between the two is large. For both rice and wheat, but Chinese productivity
crops, India in 2017 had more area under levels are much higher. Guiding this is
cultivation than China but its output was differences in such factors as pesticide use
significantly lower (Table 2). Indian paddy
yields are also lower than those of
Australia (9.8 tonnes/ha), the United States (8.41) and Brazil (6.2). Crucially, rice yields have risen
at just 1.5% a year in the last two decades – slightly below overall output growth. Wheat has a
similar story: China produces 26% more on 25% less land, implying a 41% gap in yields.
Moreover, India’s yield growth over 1997-2017 was just 0.9% annually, half the rate of output
growth. A key difference between the two countries is their fertiliser usage: India uses just 168
kg/ha, compared to China’s 503 kg/ha.
- 22 -
AND YIELD
Table 2: Indian output and yield – global comparisons, 2017

Brazil China Egypt India
Wheat
Area harvested (million ha) 1.90 24.51 1.34 30.60
Production (MT) 4.3 134.3 8.8 98.5
Yield (tonnes/ha) 22.8 54.8 65.5 32.2
Paddy
Production (MT) 12.47 212.7 6.4 168.5
Yield (tonnes/ha) 62.1 69.2 93.0 3.9
Banana
Production (MT) 6.7 11.4 1.2 30.5
Yield (tonnes/ha) 14.3 29.9 42.9 35.4
Groundnut
Production (MT) 0.6 17.2 0.2 9.2
Yield (tonnes/ha) 3.5 3.7 3.2 1.7
Sugarcane
Production (MT) 758.6 104.8 15.3 306.1
Yield (tonnes/ha) 74.5 76.1 112.7 69.7
Source: FAO
Other crops – including groundnut and sugarcane – follow the same pattern of high aggregate
output but low yields. One exception to this general trend is banana, where India is far and away
the world’s largest producer, with an annual output of 30.5 MT, and has high yields. It produces
more than the entire continent of the Americas (29.9 MT) and Africa (20 MT), and yields are
double that of Brazil (14.3) and the US (15.8).
STATE- AND CROP-WISE TRENDS IN OUTPUT AND YIELD

Wheat
Punjab and Haryana are India’s two
standout states in terms of wheat, with Wheat yields are highest in Punjab and
yields of 4,596 and 4,407 kg/ha, Haryana, while Madhya Pradesh and Uttar
respectively – well above the all-India Pradesh, though big in aggregate terms, have
average of 3,216. This is the result of three lower yields. Partly, this comes down to
factors: high levels of irrigation, positive differences in farm size (and thus
legacy issues (the region was a key focus mechanisation) and irrigation intensity
area for the Green Revolution), and –
especially in Punjab – larger average farm
sizes, which, by enabling greater mechanisation, drive economies of scale. Uttar Pradesh and
Madhya Pradesh are bigger wheat producers on aggregate but their yields are relatively low.
- 23 -
AND YIELD
Chart 2: Wheat production – yield and area across states
Paddy
Punjab has the highest yield for paddy (3,974 kg/ha), closely followed by Tamil Nadu (3,918),
compared to a national average of 2,416 kg/ha. West Bengal and UP, though, produce more rice
Chart 3: Rice production – yield and area across states
and cover larger areas under the crop. Interestingly, with paddy, yields across India tend to be
more closely clustered together – with variations in irrigation intensity and mechanisation levels,
for example, balancing each other out. Some states may be high on one score and low on the
other, or vice versa.
- 24 -
AND YIELD
Coarse cereals
India’s coarse cereal production is
concentrated in 4 major states: Rajasthan, As with wheat, Punjab leads the way on rice
Karnataka, UP and Tamil Nadu. Rajasthan yields, while West Bengal and UP are big on
is by far the biggest producer (5.9 MT) aggregate output but small on yield. Rajasthan
though its average yield (1,014 kg/ha) is is by far India’s biggest producer of coarse
well below the national average and those cereals, while in pulses, Madhya Pradesh is
in the other three major producers. West the standout producer
Bengal, with a tiny output of 0.7 MT,
reported the highest yields (4,305 kg/ha),
suggesting that it is growing such crops in the most suitable tracts of land. A large number of
states report similar trends: small output from a limited area but very high yields, indicating that
these crops are being grown on land that suits them and/or with the use of better farming
practices/inputs.
Chart 4: Coarse cereals production – yield and area across states
Pulses
At 5.1 MT, Madhya Pradesh alone produces almost a third (32%) of India’s total output of pulses
and accounts for 40% of the country’s entire area under the crop. With a relatively high yield
(888 kg/ha, compared to the national average of 703), it has historically led in this area. Other
leading producers include Rajasthan (1.9 MT), Maharashtra (1.4) Karnataka (1.4) Andhra Pradesh
(1.2) and UP (1.2).
- 25 -
AND YIELD
Chart 5: Pulses production – yield and area across states
Sugarcane
UP and Maharashtra dominate India’s sugarcane sector, accounting for 42% and 21%,
respectively, of total output. However, yields are lower than those in Karnataka (11% of the
total) and Tamil Nadu (8%), suggesting that large tracts of land in these states may be less than
ideal for sugarcane. In Maharashtra in particular, water is diverted in massive quantities for this
purpose, boosting output at the expense of other crops and alternative uses, including for human
consumption. In comparison, Tamil Nadu has higher-than-average yields (102 tonnes/ha,
compared to 73 across India) and also allocates more land to the crop – suggesting optimal land
use. West Bengal has the highest yield (119 tonnes/ha) but grows relatively little sugarcane on
aggregate.
Chart 6: Sugarcane production – yield and area across states
- 26 -
AND YIELD
Cotton
Gujarat is India’s biggest cotton producer,

with 9.7 million bales, well ahead of By a long distance, Gujarat is India’s biggest
second-ranked Maharashtra (6.5 million cotton producer, followed by MP. GM crops
bales) and with more than double the per- have enabled a massive jump in yields since
hectare yield. Other major producers 2002, when they were introduced. UP and
include Telangana, Madhya Pradesh and Maharashtra dominate in sugarcane, but their
Andhra Pradesh. India’s cotton production yields are low
jumped more than 2.5 times between 2002,
when genetically modified cotton seeds
were introduced, and 2016-17, by when it touched 351 MT. Since then yields and output have
declined mildly on the back of weather-related issues and growing resistance among pests. Over
90% of cotton farmers now use hybrid seeds, compared to 40% before the Bt variety was
introduced. However, since 2016, Bt seeds have been brought under the purview of the Essential
Commodities Act, enabling the government to impose price controls on it. Individual state
governments – notably Gujarat, Maharashtra and Andhra Pradesh – have also passed price-
control legislation. By disincentivising seed companies from introducing new seed varieties in the
future, these steps cast a shadow over the longer-term prospects for Indian cotton.
Chart 7: Cotton production – yield and area across

states
Oil seeds
75% of India’s oil-seed production comes from four states: Madhya Pradesh (25%), Rajasthan
(23%), Gujarat (17%) and Maharashtra (10%). India remains heavily import-dependent in this
area, meeting over 60% of its consumption from imports. The government announced a plan in
2016-17 to double the output of oil-seeds but achieving this demands action on multiple fronts.
- 27 -
AND YIELD
Yields remain low, largely owing to the usage of older seed varieties and sub-optimal farming
techniques.
Chart 8: Oil seeds production – yield and area across states
Fruits and vegetables

For fruits and vegetables, there is generally
a stronger correlation between yield and India’s fruit and vegetable cropping patterns
acreage than for foodgrain. In other words, are generally in line with yields. Low levels of
these crops are being grown (mainly) where mechanisation and high rates of post-harvest
they should be. At the extreme end of the wastage – the result of poor storage facilities
scale are UP (both fruits and vegetables), and an under-developed food processing
Andhra Pradesh (fruit) and West Bengal industry – are both a challenge and a business
(vegetables). Other major producers opportunity
include Bihar, Gujarat, Maharashtra,
Karnataka, Tamil Nadu and Madhya Pradesh. The two key issues with this segment are the
currently-low levels of mechanisation and post-harvest processing; and high rates of post-harvest
wastage owing to storage and other supply-chain issues. If these problems are addressed, the
value-add from fruits and vegetables can be expected to grow sharply.
- 28 -
AND YIELD
Chart 9: Fruit production and yields and area across

states
Chart 10: Vegetable production – yield and area across states
DAIRY: A MAJOR SUCCESS STORY

The right mix of policy, leadership and private participation have together made a success story
of the Indian dairy sector. In the 1970s,
facing acute milk shortages, India launched The White Revolution made India self-
its ‘White Revolution’. Since then, annual sufficient in dairy, with output and per-capita
milk production has gone up from about 25 availability both multiplying since the 1970s.
MT to a world-leading 176 MT in 2017-18. Most milk production remains small-scale and
Per-capita availability has more than unorganised, though the cooperative
trebled, from 110 gm to 375 gm, and India movement also exerts a significant hold
currently has the world’s largest cattle
population. Most of its milk is produced by
- 29 -
AND YIELD
small, marginal farmers and landless labourers but roughly 15.5 million farmers have been
brought under the ambit of some 162,600 village-level dairy cooperative societies. Production is
concentrated geographically, with 9 states – led by UP (16.5%) and Rajasthan (12.7%) –
accounting for 76.8% of the total. The so-called ‘cow-belt’ states of Northern and Western India
dominate, and Rajasthan, MP and Haryana have all managed 5%+ compounded rates of growth
over the decade to 2018 – that, too, from a high base.
Chart 11: Statewise milk production and decadal growth
35 7.9% 10.0%
6.5% 8.0%
30 4.9% 5.5% 4.9%
Million tonnes
4.1% 4.5% 4.6% 4.6% 6.0%

25 4.0% 3.7%
2.6% 2.7% 3.2%
3.5% 3.1%
2.4% 4.0%
20 1.5% 1.5%
0.5% 2.0%
15 0.0%
10 -2.0%
-4.7%
5 -4.0%
0 -6.0%
Andhra Pradesh
Tamil Nadu
Delhi
Gujarat
Bihar
West Bengal
Orissa
Assam
Punjab
Haryana
Rajasthan
Karnataka
Kerala
Jharkhand
Chhattisgarh
Uttarakhand
Himachal Pradesh
Uttar Pradesh
Maharashtra
Jammu & Kashmir

Madhya Pradesh
2008-09 2017-18 CAGR - 10 years (%, RHS)

Source: National Dairy Development Board, IMA Analysis
Going forward, India can consolidate its

gains in dairy: exports and Value Added Exports and especially value-added dairy
Dairy Products (VADPs) are both products (VADPs) represent major growth
potentially high growth areas. In 2017-18, opportunities, the latter driven by rising
India’s total dairy exports were just USD incomes and changing preferences. However,
185 million but with the right policies, there India will need to address various issues that
is scope to ramp this up sharply. VADPs impact productivity and quality
are an even bigger opportunity. In the last
decade, India has started consuming more
‘Western’ VADPs, particularly cheese and flavoured yogurt. Demand has jumped (17% CAGR
since 2009), but from a low base, since VADPs are still just 34% of the total dairy market,
compared to ~80% in Europe. Margins in the VADP segment are twice that in the liquid-milk
segment so the opportunity for catch-up growth is large. On both counts, growth will depend
on how India addresses several key problem areas. The White Revolution boosted India’s
processing infrastructure and distribution network, and pushed up productivity. Yet most milk
producers continue to have small or marginal holdings and employ traditional knowledge and
practices. Reproductive health remains poor, vaccination and disease-control is sporadic,
antibiotic usage is unregulated and contagious disease is common. Resultantly, yields are low by
global standards: in 2017, the average Indian cow produced 4.5 kg of milk a day, a third less than
the global average (6.7 kg). Cows in New Zealand and America produced several times more
- 30 -
AND YIELD
milk: 11.6 kg and 28.7 kg, respectively. Correcting this will mean implementing new standards for
dairy-farming practices and launching training programmes that can bring farmers on level with
the global competition in terms of cattle nutrition, health and hygiene. Finally, encouraging the
consolidation of millions of small farmers into fewer, larger operations – such as through
financial support and tax breaks – would enable the type of scale economies that can take
production and efficiency to another level.
MEAT AND POULTRY: THE NEXT GROWTH AREAS

With rising incomes and demographic and
lifestyle changes, India’s consumption of Domestic consumption of meat, poultry and
meat, poultry and fish is rising fast. The fish are rising fast. India has the world’s
demand for processed and hygienically- largest livestock population, but meat remains
packaged meat, in particular, will grow a mainly unorganised activity. There are very
strongly, driving the overall market. A few licensed slaughter houses, and only a
favourable policy environment (for details, handful that meet export quality standards
see insert: Food processing: current
incentives) should also help. Rough
estimates place the industry at USD 31 billion in 2018 and forecast to double to USD 65 billion
by 2022. Currently, though, as much as 90% of the market is handled by the unorganised sector,
though this varies by category.
Food processing: current incentives
India offers a fairly attractive set of policies and incentives for investors in food processing units,
which includes the processing, preservation and packaging of fruits, vegetables, meat, meat
products, poultry, marine and dairy products. It also includes the handling, storage and
transportation of foodgrains. The current incentives are as follows:
 100% FDI is permitted in food processing units via the automatic route, with
concessional custom duties for the import of equipment.
 100% income tax exemption is available to new food processing, preservation and
packaging units for the first 5 years of operation. For the next five years, they pay
concessional rates of 25%, or 30% for registered companies.
 NABARD has been mandated to extend affordable loans to designated food parks. 35
such parks have been approved, of which 17 were operational as of March 2019 and
another 11 were expected to be operational within the next one year. In total, they will
include about 1,200 leased plots, each roughly 1 acre in size, with basic infrastructure in
place for setting up food processing and ancillary units.
Meat
The Indian meat industry is large but mostly unregulated. India has the world's largest population
of livestock, with a total headcount of 512 million in 2012, including 299 million cattle and 200
- 31 -
AND YIELD
million sheep and goats. It is the world’s biggest buffalo-meat producer and second in terms of
goat-meat, with a total output of 5.3 million tonnes of meat annually. (India exported 1.7 million
tonnes of meat in 2017-18, up three-fold since 2009-10.) However, only 6% of the total is
processed by the organised sector. India has just 4,000 slaughter houses registered with local
bodies but over 25,000 unregistered ones. Only 27 export-oriented abattoirs meet the Hazard
Analysis and Critical Control Points (HACCP) and ISO certification standards. Particularly in
states like UP, the unorganised sector has come under the scanner, with many slaughter houses
being closed over licensing/hygiene issues. In the short term, this will constrain growth but over
a longer horizon, it may push producers to enact better safety and environmental standards.
Poultry
Compared to the meat segment, poultry in
India is a vertically-integrated industry, in Recent decades have seen the poultry
many ways matching global efficiency segment transform from a backyard activity
levels. Currently, India has a poultry into a strongly vertically-integrated industry.
population of over 725 million, producing Per-capita availability/demand has surged,
roughly 75 billion eggs a year. It has seen a though they remain below world averages –
paradigm shift in recent decades, limited mainly by dietary choices
transforming from a backyard activity into a
major commercial sector. Producers have
increasingly adopted the high-yielding (310-340 eggs a year) and broiler (2.4-2.6 kg at 6 weeks)
varieties of poultry and have standardised their nutrition, housing, management and disease-
control practices. This has yielded sustained annual rates of growth of 4-6% in eggs and 8-10% in
poultry over 40 years. Consequently, India’s annual per-capita availability of eggs and poultry
now stands at 60 and 2.5 kg, respectively. However, this is still below the recommended 180 and
10 kg levels. In the developed world, the average adult consumes roughly 240 eggs and 20 kg of
chicken annually. This implies huge upside growth potential in India, though dietary preferences
will likely put a cap on how far the two will rise.
Fish
India’s overall fisheries sector is the world’s
third-largest, while its aquaculture segment India has the world’s third-biggest fish
ranks second. Total production in 2017-18 output, but most of it comes from inland
was 12.6 MT (up 10% over the previous farming. Yields are low, and fishing is mainly
year), of which 65% came from inland small-scale and unorganised, though it does
fishing and the balance from ocean fishing. employ millions. Per-capita consumption is
Exports that year totalled 1.3 MT, valued at still low by global standards
USD 6.8 billion. On aggregate, fishing
provides employment to an estimated 15
million people. The Draft National Policy on Marine Culture targets 18 MT of seafood
- 32 -
AND YIELD
production by 2030, with aquaculture production targeted at 12 MT, from 4.9 MT today.
Average fish consumption across India stood at 5-6 kg/person in 2013-14, varying from next to
nothing in some mountainous states all the way to 22.7 kg/person in Kerala.
Even as output growth has been robust in

recent years, a number of serious issues Over-fishing, low levels of technology and
impact the development of the fisheries limited post-catch processing all get in the
sector. These include over-fishing, low way of sustainable development. There are
levels of technology and weak processing also issues with inland-water contamination
capacity. Yields – whether measured per and insurance coverage. Government policy
fishermen or boat – are a fraction of those aims to sharply ramp up output in the near
in Europe, mainly because the industry term
remains small-scale and low-tech. Inland
fishing also faces problems around high levels of contamination, including from pesticide run-off
and disease. Further, inland fishermen receive none of the benefits that farmers do in terms of
taxation, electricity tariffs, etc. Nor – with the exception of Madhya Pradesh – are there any
provisions for relief to fishermen in the event of droughts and other natural calamities. The few
who buy insurance are not covered against such risks as large-scale decline in fish stocks, damage
to their crops, etc.
Chart 14: Growth of fish production across states - FY08-17

3.0 11.8% 15.0% 16.0%
2.5
11.7% 14.0%
Million tonnes
8.8% 8.8% 9.0% 12.0%

2.0 7.4% 7.2% 10.0%
1.8% 6.3% 8.0%
5.3% 5.4%
1.5 4.0% 6.0%
1.3%
1.0 2.0% 2.0% 4.0%
0.5 -1.0% 2.0%
0.0%
0.0 -2.0%
West Bengal
Gujarat
Bihar
Goa
Odisha
Kerala
Tamil Nadu
Chhattisgarh
Assam
Karnataka
Jharkhand
Haryana
Punjab
Andhra Pradesh
Maharashtra
Madhya Pradesh
Uttar Pradesh
2007-08
2016-17(P)
CAGR - FY08-17
Source: Ministry of Agriculture and Farm Welfare, IMA Analysis (%, RHS)
In 2016, the government announced a so-called ‘Blue Revolution’, with an initial investment of
Rs 30 billion. Focusing on intensive fish-farming and better fishing practices, it aims to boost
production and productivity across segments, including inland and marine, through a series of
interventions. The scheme aims to raise production to 15 million tonnes by 2019-20 and to
double the income of fish farmers. Preliminary data suggests that overall production has gone up
by roughly 20% since the scheme’s launch.
- 33 -
IV. MOVING FROM CONSTRAINT
TO OPPORTUNITY
- 1. THE INPUT SIDE
- 34 -
1.A LAND FRAGMENTATION
Small and fragmented land holdings

represent one of the most serious longer- Over time, land-holding sizes in India have
term constraints on India’s farm sector. reduced, driven by earlier ‘land reforms’,
According to the 2015-16 Agriculture shifting demographics, and poor incentives.
Census, small and marginal farmers (those By 2030, the government expects, small and
marginal farmers (those with <2ha of land)
who hold less than 2 hectares of land) make
will make up 91% of the total
up 86.2% of India’s farmers (Chart 1), but
they own just 47.3% of its farmland (Chart
2). The size distribution has been worsening over the years and, alarmingly, the government
forecasts that by 2030, small and marginal farmers will constitute 91% of the total in India. On
the flip side, large farmers – those with holdings larger than 10 ha – make up 0.6% of the total,
but hold 9% of all land by area. (See Table 1 for definitions of landholding classifications.)
Chart 1: Distribution of farmers by Chart 2: Share of total farmland by

landholding size landholding size
100% 100%
90% 9.5% > 10 ha 13.2% 9.0% > 10 ha
12% 90%
80% 17.7% 80% 20.0%
70% 19% 4 to 10 ha 24.0% 4 to 10 ha
70%
60% 60% 23.7%
50% 2 to 4 ha 50% 24.0% 2 to 4 ha
40% 40%
63% 68.5% 23.2%
30% 1 to 2 ha 30% 20.2% 1 to 2 ha
20% 20%
10% < 1 ha 10% 18.7% 24.2% < 1 ha
0% 0%
2001 2016 2001 2016
Source: Agricultural Census, IMA Analysis Source: Agricultural Census, IMA Analysis
This skewed distribution means that small and marginal Table 1: Landholding size
farmers are unable to achieve economies of scale. classifications
Typically, they make sub-optimal usage of factor inputs
and earn lower overall returns. For instance, the total <1 ha Marginal
time taken to travel to, and sell produce at, a wholesale 1 to 2 ha Small
market is roughly equal, regardless of the quantities 2 to 4 ha Semi medium
involved. Valuable space gets wasted along land 4 to 10 ha Medium
boundaries which cannot be properly cultivated; small > 10 ha Large
farmers are unable to invest adequately in crop
monitoring; and they cannot afford to use certain types of machinery, such as harvesters. Studies
find, for instance, that India’s smaller farms use 25 times the water per tonne of cotton output
than Egypt’s larger ones, which can afford to invest in drip-irrigation.
- 35 -
SMALL LAND HOLDINGS – AND GETTING SMALLER

At 1.1 ha, India’s average landholding size is a fraction of Brazil’s or America’s, but bigger than
China’s2 (Table 2). Correspondingly, a much bigger share of the population of both India (54%)
and China (35%) is engaged in agriculture, compared to just 10.3% in Brazil and 2.5% in the
United States. Over time, the situation has only worsened,
Table 2: Average farm sizes
with the size of the average Indian farm declining by more
Country Average (ha)
than half since 1971, from 2.28 ha to 1.1 ha.
China 0.7
The primary causes of fragmentation are population India 1.1
growth, shifting demographics (families are splitting into Brazil 64
smaller units), and limited off-farm employment
United States 198
opportunities. Tellingly, in the 40 years to 2010-11, the
number of farms and the rural population both roughly Source: World Bank, IMA Analysis
tripled, growing by 194% and 189%, respectively. In the
decade to 2016, while India’s total agricultural land area shrank marginally (0.75%), its farming
population grew by 12.8%. Accompanying this, the number of medium and large landholdings
fell, while the number of smaller ones increased sharply (Charts 3 and 4).
Chart 3: Change in number of land Chart 4: Change in the overall land

holders of different sizes, 2006-16 area by holding size, 2006-16
< 1 ha 19.3%
< 1 ha 3.9%
1 to 2 ha 7.7%
1 to 2 ha 2.3%
2 to 4 ha -2.5%
2 to 4 ha -0.3%
4 to 10 ha -14.0% 4 to 10 ha -3.1%
> 10 ha -24.2% > 10 ha -2.8%
Source: Agriculture Census, IMA Analysis Source: Agriculture Census, IMA Analysis
2
Private land ownership is banned in China, and all rural land is owned by collectives, which allocate contract rights
to eligible households, currently renewable for 30 year periods. Chinese farmers can decide what (and how) to plant,
to keep any returns they earn and to lease their land to other farmers. They cannot however convert agricultural land
to other uses; leave their land uncultivated for more than two years; or legally resist land acquisition. The majority of
land transfers are between farmers, such as migrants leasing out land to their friends or relatives. These kinds of
transfers often rely on informal agreements and usually involve zero or very low payments. This lays the ground for
the future development of the rental market by consolidating small plots and making them attractive for large-scale
farming.
- 36 -
REDISTRIBUTIVE LAND REFORMS ENCOURAGED LAND FRAGMENTATION

A major causal factor of land fragmentation was the land reforms of the 1970s, wherein states
like Kerala and West Bengal set ownership ceilings and redistributed surplus land. In Kerala,
96.3% of landholders today are marginal farmers, owning 58.6% of all land, while the
corresponding figures for West Bengal are 82.2% and 52.5%, respectively. In contrast, in Punjab,
which followed a less radical course, the numbers are 15% and 2.5%, with correspondingly more
large and mid-sized farmers.
These cross-state differences also show up

as variations in landholding sizes. In Bihar, In the 1970s, several major states set
Goa, Kerala and West Bengal, the average ownership ceilings and/or redistributed
land parcel is below the all-India average, ‘surplus’ land – and the impact of this is
both on the aggregate and within each size increasingly clear. Huge gaps in land-holding
category (Table 3). Interestingly, the size exist between states like Punjab and
average large farm (>10 ha) in three of these Kerala, which followed very different paths
states – Bihar is the exception – is bigger
than the national average. This is because a
higher proportion of such farms are plantations. This highlights the disparity of land holdings in
these states wherein small farmers are very small and the larger ones, much larger. In Punjab,
average landholdings are bigger in all categories.
Table 3: Average landholding size (ha) by size category

West
All India Bihar Goa Kerala Punjab Bengal
Overall 1.15 0.39 0.81 0.18 3.62 0.76
< 1 ha 0.39 0.25 0.29 0.12 0.60 0.49
1 to 2 ha 1.42 1.25 1.23 1.34 1.40 1.6
2 to 4 ha 2.71 2.6 2.57 2.54 2.67 2.74
4 to 10 ha 5.76 5.29 5.57 5.32 5.67 4.81
> 10 ha 17.38 14.48 20.27 51.04 14.85 361.08
Source: Agricultural Census, IMA Analysis
THE POLICY CONTEXT: MUCH ROOM FOR CHANGE

So far, governments, both at the Centre and in the states, have been slow to drive through the
types of policies needed to reverse, even arrest land fragmentation – namely those around land
ownership, leasing and consolidation.
- 37 -
Weak land ownership records and titles

In India, land ownership is presumptive Land ownership in India is presumptive
rather than absolute, and must be rather than absolute. Meanwhile, the land
established via a chain of historical transfer records system is generally poor and yet to
fully transition to a digital form. Both factors
documents linking current ownership all the
make it harder to transact in land deals – and
way back to the first owner. The Centre
also affect farmers’ access to formal credit
drafted a Model Land Titling Bill in 2011 to
introduce absolute titles but states have
been slow to adopt it. Rajasthan now has an equivalent, but only for urban areas, while
Maharashtra’s more ambitious law remains stuck. For the most part, a multitude of documents
are used to verify ownership, including the record of rights, property tax receipts and survey
documents. Typically, these records are maintained by different agencies at the village and district
levels and since they tend to operate in silos, cross-department data is seldom if ever updated,
giving rise to discrepancies. If surveys are incomplete or maps are not updated, it becomes
difficult to establish on-ground property boundaries – which also discourages land pooling or
leasing. Most critically, poor land records affect property transactions, both by creating
uncertainties around ownership and by making it cumbersome and time-consuming to verify
information. They also make it difficult to access bank credit since the collateral value of dubious
land records is low.
A major hurdle in this regard is the yet-

incomplete process of digitising land The Digital India initiative could provide
records. As of end-2018, only two states some forward movement to the process of
(Karnataka and Odisha) and three union updating and digitising land records. Enabling
territories had fully digitalised their land fundamental change in the land market,
records, while four states3 were yet to even however, requires a clear shift to a system
begin the process. In the remaining states, based on absolute ownership rights
the work was 80-90% complete.
Worryingly, however, just 21% of Indian villages currently update their records in real time
implying that in most cases, even where records are digitised, they may not be up-to-date. Some
forward movement might come from the Digital India initiative. In 2016, the erstwhile National
Land Records Modernisation Programme (NLRMP) was renamed Digital India Land Records
Modernisation Programme (DILRMP), and will now be entirely funded and implemented by the
Central government. Yet, in the absence of absolute ownership rights, initiatives like these can at
best serve as stop-gap measures.
Restrictions on land leasing and pooling

Most Indian states either restrict or – in the case of Kerala, Jammu & Kashmir and Manipur –
have outright banned the leasing of agricultural land. Many allow leasing only for certain
3 Arunachal Pradesh, Meghalaya, Mizoram and Nagaland
- 38 -
categories of landowners or restrict the process in other ways (Table 5). As a result, concealed
tenancy is a reality across much of the country. This means that, instead of banking on legally-
enforceable contracts, smaller farmers must depend on oral promises to collect their rent.
Moreover, since they cannot show rental income, they find it harder to access institutional
finance and must rely instead on private money lenders, who often charge exorbitant rates. Also,
to avoid ceding occupancy rights – which, under state law, is automatically granted after a period
of continuous possession – landowners are forced to frequently change their tenants. In turn,
this disincentivises tenants from making productivity-enhancing investments in the land.
Table 5: State-wise land-leasing policies

State Policy
Kerala, Jammu & Kashmir and Manipur Complete ban
Bihar, Karnataka, Madhya Pradesh, Allowed only to certain categories of landowners – those
Chhattisgarh, Uttar Pradesh, Uttarakhand, suffering from a physical or mental disability, widows,
Himachal Pradesh, Tripura, Telangana and unmarried, separated or divorced women, members of armed
Odisha forces
Punjab, Haryana, Gujarat, Maharashtra and No explicit ban on leasing, but the tenant acquires a right to
Assam purchase the leased land from the owner after a specified period
of tenancy
Andhra Pradesh, Tamil Nadu, Rajasthan and Restrictive clauses: specified types of leasing that are permitted;
West Bengal caps on rent payable
Source: NITI Aayog, IMA Analysis
In 2016, a NITI Aayog committee

prepared a Model Agricultural Land Laws around land-leasing and pooling vary
Leasing Act. Its aim is to formalise land greatly across the country. A push from the
leasing, ensuring not only security of Centre could help change this, though it has
ownership but also allowing farmers been trying for the last few years, including by
greater access to institutional credit and drafting a Model Agricultural Land Leasing
insurance, and tenants the assurance of Act
relatively long tenures. Several states,
including UP, MP, Rajasthan and
Telangana have shown interest in moving forward with laws of their own but none has yet
passed the necessary legislation. If implemented, this should give the agricultural sector a fresh
impetus by addressing inter-related issues around land fragmentation and low productivity. There
has also been some forward movement on land pooling – Andhra Pradesh, for example, is using
the mechanism to develop its new capital city, Amravati; while Rajasthan has passed a law
allowing land pooling in urban areas.
- 39 -
THE OUTLOOK: SLOW CHANGE AHEAD

The recent land-leasing/pooling initiatives could serve as models for other states to follow and if
their use eventually expands to rural areas, it would even help small and marginal farmers move
off the land into more productive professions elsewhere and at the same time, give an impetus to
larger-scale farming. All of this, however, will take time – and crucially, will require certain states
to blaze a trail. Change, in any event, will be slow: it will be at least 3-5 years before the results of
digitisation start to become visible but plainly, this is a programme that deserves prioritisation.
The Centre could play a part in catalysing change by fostering dialogue between states on such
issues as corporate farming (possibly also by inviting industry to participate in these discussions)
and by encouraging states to move forward on various issues that are exclusively in their domain.
- 40 -
1.B WATER AND IRRIGATION
As an input, water lies at the very heart of

Chart 1: Sector-wise water usage
agriculture. In India, the farm sector is
particularly water-intensive, and accounts for a Industry, Others, 3%
3% Energy, 6%
whopping 83% of the country’s total water usage
Household
(Chart 1) – over 8 times as much as in France, s, 5%
which deploys only 10% of its total water in

farming. It is also higher than in the US (36%),
Brazil (60%) or China (64%). Poor water
Farm, 83%
resource management – a mix of irrigation
development and maintenance, water-use
practices and the development (or lack thereof)
of watersheds and water bodies – is a key driving
factor. According to a 2018 NITI Aayog study, Source: Parliamentary Q&A; IMA analysis
some of India’s biggest agricultural states,
including Haryana, Bihar and Uttar Pradesh, do badly on this score, while several of the more
water-scarce states, including Gujarat, Madhya Pradesh and Andhra Pradesh, fare relatively
better.
In India, inefficient water management goes

hand in hand with high rainfall dependence. Water lies at the very heart of agriculture, but
Roughly 44% of the country’s overall in India, inefficient water management goes
foodgrain production is rainfed, and this hand in hand with high rainfall dependence.
ratio rises to over 80% for coarse cereals and Some of the biggest states are the most
pulses, 73% for oilseeds and 68% for cotton inefficient water users, and farms account for
(Chart 2). (As an aside, even the rearing of 83% of India’s total annual consumption
livestock is heavily rain-dependent, with
most farm animals being left free to graze
the ‘commons’, rather than receiving specific
feed.) However, rainfall tends to be erratic Chart 2: Crop-wise rainfed area (%)
and has only become more unreliable with 83 80 73 68
time. Between 1997 and 2016, India’s
40
monsoon rainfall was below the long-term 14
average in 12 years with a mildly-negative
Pulses
Cotton
Rice
Coarse cereals
Wheat
impact on farm output (see Chart 3).

Oilseeds
Considering that an estimated 600 million

Indians face high-to-extreme water stress, Source: NITI Aayog; CRIDA; IMA analysis
efficient agricultural-water management is absolutely critical, with implications that spill well
beyond agriculture. Irrigation – whether in the form of mega projects or at the micro level – has
- 41 -
a central role to play. Historically, India’s record on this front has been poor but there has been
some forward movement in recent years, particularly in the area of micro-irrigation.
POOR COVERAGE, SKEWED USAGE

Over the last few decades, India has been slow to create new irrigation capacity and to diversify
the water sources used in irrigation. Equally worrying, there are major state- and crop-wise
disparities in access to irrigation.
Chart 3: Output and rainfall
Irrigation potential: below par 130 10
120
Between 1951 and 2017, India expanded its 0
110
irrigation potential – the total area of -10
100
-20
agricultural land that can be irrigated when 90
80 -30
the existing infrastructure is used to its full
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
capacity – from 23 million hectares (mha) to
Kharif output (million tonnes)
114 mha. Most of this (~66 mha) was in the Deviation from normal rainfall (%) (RHS)
form of minor irrigation projects, while the Source: Department of Agriculture and Cooperation; India Meteorological
Department; IMA analysis
remaining ~48 mha came from major
projects. At first glance, this seems Chart 4: Total irrigation potential
150
Major and medium projects
impressive, given that India’s ultimate 103 109 114
Million hectares
irrigation potential (the theoretical 100 81 86 94

65
57
maximum reach of such projects) is 37 44
estimated at ~140 mha. The implication is 50 23 26 29
that India has already created ~81% of the 0

potential irrigation coverage that it can
Upto 1951
1951-56
1956-61
1961-66
1969-74
1974-79
1980-85
1985-90
1992-97
2002-07
2007-02
2012-17
1997-02
possibly support.
Source: Parliamentary Q&A; IMA analysis
However, potential is not the same as utilisation – and by all accounts, the existing infrastructure
is severely under-utilised (see discussion Chart 5: State-wise potential created
33.6
below on net irrigated area). Moreover, Major and medium projects
Minor projects
capacity addition occurred at an annualised
Million hectares
2.5% – hardly remarkable, given the size of 7.6 6.2 6.0 5.1
8.8 7.5 4.0 3.5 2.7 1.3
6.1 5.7 4.6
the deficit that India started with. There are 3.6 2.7 1.9 1.3
also stark regional disparities in this regard.
Bihar
Gujarat
J&K
UP
West Bengal
Odisha
Kerala
AP
Tamil Nadu
Rajasthan
Chhattisgarh
Assam
Punjab
Haryana
Karnataka
MP
Jharkhand
Maharashtra
Uttar Pradesh alone accounts for ~30% of

all new capacity addition while the next 4
states (Bihar, Maharashtra, Andhra Pradesh
and Punjab) make up ~26% of the overall
mix (Chart 5).
- 42 -
Net irrigated area (NIA): largely stagnant

More than irrigation potential, what matters to ground-level farming outcomes is Net Irrigated
Area (NIA), or the area irrigated through
Chart 6: Net irrigated area
any source at least once a year for a 70 Net irrigated area
55%
particular crop. As Chart 6 illustrates, 65 % of net sown area (RHS) 50%
'000 hectares
India’s cumulative NIA grew at an annual
60 45%
rate of just 1.4% between 2000-01 and
2016-17. Further, as a share of net sown 55 40%
area (NSA), NIA remains under 50%. 50 35%
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
State-wise, net irrigated area as a share of
cultivable land (Chart 7) ranges all the way
Source: MOSPI; IMA analysis
from nearly 100% in Punjab to about a
third of the total in Telengana and Tamil
Nadu, and a measly 9% in Jharkhand, India’s net irrigated area (NIA) – which
where unfavourable geographical factors measures how much land receives irrigation at
combine with weak investment in water- least once a year – has grown exceedingly
harvesting bodies and the like. Punjab’s slowly. Less than half the net sown area is
‘out-performance’, moreover, is the result presently covered, and there are huge
not of far-sighted public investment in disparities in access across states and crops
irrigation systems but its severe over-
pumping of ground water, the result of
offering free power to farmers.
Heavy dependence on groundwater

Long and massive irrigation canals once
provided two-fifths of India’s total Chart 7: NIA as % of agricultural land
irrigated water supply but today, many of Punjab 98.2
Haryana 80.4
these canals lie in disrepair, receive scant Uttar Pradesh 74.0
river-water, or are silted over. Instead, the Madhya Pradesh 54.8
West Bengal 54.7
majority – over 60% (Chart 8) – of all Bihar 44.6
irrigation water is now pumped up from Andhra Pradesh 33.9
Gujarat 33.4
wells. With extraction vastly exceeding Telangana 33.0
Tamil Nadu 33.0
recharge from rainfall and other sources,
this over-dependence on groundwater is Source: Parliamentary Q&A; IMA analysis
plainly unsustainable. According to the Central Ground Water Board (CGWB), 8,785 wells (or
61% of the total it surveyed) posted a decline in water levels between 2007 and 2017.
- 43 -
Crop-wise disparities
A handful of crops receive the lion’s share of
Chart 8: Irrigation sources, FY15
India’s total irrigated water. Just two – paddy
and sugarcane – account for ~60% of the
overall supply of water; including wheat, the
share goes up to ~80%. Even more worrisome Wells,
63%
is the misalignment of cropping patterns and the Tanks,
corresponding inefficiency of water usage. 3%
Punjab and Haryana report some of the highest
rice yields but their irrigation-water productivity
rates are among the lowest in India (Chart 9), Canals,
Other
suggesting a high degree of inefficiency. Again, 24%
sources,
this owes largely to indiscriminate groundwater 11%
exploitation, stemming from free or nearly-free Source: MOSPI; IMA analysis

power in these two states. High land
productivity, coupled with cheap water, Chart 9: Rice yield vs water productivity
encourages farmers to keep growing paddy 4,000 0.8
despite rising water stress. At the other end
kg/cubic metres
3,000 0.6
kg/ha
of the scale, Jharkhand and Chhattisgarh 2,000 0.4

use the little irrigated water they receive far 1,000 0.2
more productively, even as their yield is
0 0
considerably lower.
Odisha
MP
AP
Guj
Punjab
T'gana
UP
TN
Bihar
C'garh
Assam
Maha
K'taka
J'khand
WB
Haryana
Yield (kg/ha) Water productivity (RHS)

Similarly, in states like Tamil Nadu,
Source: NABARD; IMA analysis
Karnataka and Maharashtra, sugarcane
production and yields are artificially Chart 10: Sugarcane yield vs water
150 productivity 15
bumped up by large-scale diversion of
Yields ('000 kg/ha)
kg/cubic metre
irrigated water to the crop. In comparison, 100 10
Bihar, UP and Uttarakhand – which are 50 5

more naturally suited to sugarcane
0 0
production – receive little irrigated water
MP
Guj
U'khand
AP
TN
UP
K'taka
Maha
Bihar
Haryana
for the crop and thus produce far less than

they otherwise might (Chart 10). Yield ('000 kg/ha) Water productivity (RHS)
THE PMKSY: A SHOT AT REDEMPTION

Globally, mega irrigation projects are going out of fashion. The realisation is that such projects
tend to be inefficient and financially unviable over a longer timeframe. Their sheer size also
makes it a challenge to ensure equitable water distribution. Often, they leave adjoining areas with
either severe scarcity or an over-abundance of water, both of which depress output. In India,
cost and time overruns are routine. In 1996-97, the government launched its Accelerated
- 44 -
Irrigation Benefits Programme (AIBP) to speed up project implementation. Ironically, as a recent

report by the CAG (Comptroller and Auditor General of India) finds, the cost overrun of major
and medium-sized irrigation projects under the AIBP itself was a staggering Rs 1.2 trillion. The
CAG found several issues with these projects, including:
 Weak planning and monitoring by Mega irrigation projects are going out of
fashion globally. India is now working
central and state agencies
towards more sustainable solutions, including
 Poor implementation, including issues
through the PMKSY programme, which
with land acquisition; an inability to looks to revive stalled projects as well as fund
obtain clearances; changes in the new, smaller-scale initiatives
design and scope of work; and
inefficient works management (delays
in awarding the work, improper work Chart 11: Status of projects under
phasing, subs-standard work etc) AIBP (% of projects)
To be
 Inadequate financial management, completed
by Completed,
including non-release or delayed release December 29%
2019, 41%
of funds
These problems manifested themselves in

different ways across states, but the results were
similar: cost overruns, and project delays.
To be
Aiming to create more sustainable alternatives, completed
by June
the government in 2015 launched the Pradhan 2019, 30%
Mantri Krishi Sinchai Yojana (PMKSY), which Source: PMKSY-AIBP; IMA analysis
builds on and seeks to revive elements of the
AIBP. With an outlay of Rs 500 billion over five Chart 12: State-wise capacity
years (FY16-FY20), it seeks to enhance farm created under AIBP
water availability and achieve greater output Gujarat 1,625.3
efficiency (‘Per Drop More Crop’) by promoting UP 753.8
MP 721.6
sustainable agricultural practices, such as micro-
Maharashtra 502.0
irrigation. It also looks to address long-running Telangana 320.6
project delays, stemming from funding Odisha 142.9
Rajasthan 315.6
shortages, land acquisition issues and AP 201.7
bureaucratic hurdles. Karnataka 238.9
Jharkhand 107.3
Assam 108.6
Of 326 stalled major and medium-sized water- Punjab 92.0 '000 hectares
resource projects, the PMKSY aims to complete J&K 21.9
99, spread across 18 states, with an irrigation Source: PMKSY-AIBP; IMA analysis
potential of 7.6 mha, by December 2019. About
- 45 -
a third each of these projects have either been completed or will be completed by June 2019, and
the remaining ~40% are slated for completion by December (Chart 11). Gujarat leads the way in
terms of creating new capacity (1.6 mha), followed by UP (0.8 mha) and MP (0.7 mha – see
Chart 12). Within the PMKSY’s broader ambit, two components deserve attention: micro-
irrigation and watershed management.
Micro-irrigation: A potential game-changer

Drop for drop, micro-irrigation is known to boost output and reduce costs, relative to other
forms of irrigation. In the Indian context, several studies have confirmed that adopting the
technology can cut agricultural water consumption by as much as 50%, reduce labour costs by
40% and fertiliser usage by 28%, while
Currently just 7% of India’s total irrigation
enhancing farm productivity by up to 52%.
coverage, micro-irrigation has potential to
India has been using micro-irrigation since
scale up rapidly – as it has in countries like
2005-06. But according to the International
Brazil and South Africa. Since 2008, India has
Commission on Irrigation and Drainage
been collaborating closely with Israel, a
(ICID), it still accounts for only about 7%
pioneer in micro-irrigation, in this area
of the country’s total irrigation coverage,
compared to ~77% in Brazil and South
Africa, 57% in Russia and 13.7% in China. Since 2015-16, the PMKSY has created an additional
3.3 mha of micro-irrigation capacity, with five states – Gujarat, Karnataka, Andhra Pradesh,
Maharashtra, and Telangana – accounting for ~72% of the total (Chart 13).
In this context, India has since 2008

Chart 13: Micro-irrigation coverage
worked closely with Israel, a pioneer in the 1,400 Post PMKSY
field of agricultural water management. 1,200
'000 hectares
Pre PMKSY
1,000
With 60% of its land covered by desert, 800
600
Israel has championed the re-use of 400
200
domestic wastewater for irrigation and 0
MP
Gujarat
AP
Telangana
Maharashtra
UP
Rajasthan
Karnataka
Chhattisgarh
Tamil Nadu
remarkably, 99.6% of its irrigated land is

under micro-irrigation. Together, the two
countries have established 28 Centres of
Excellence (CoE) in 6 states: Punjab,
Haryana, Rajasthan, Tamil Nadu, Gujarat and Maharashtra. Of these, 7 each are dedicated to
mangos and vegetables, 4 to citrus fruits, 3 are for pomegranates, 2 each are for dates and palms,
and 1 each for beekeeping, dairy and olives.
Watershed management: an important piece of the puzzle

Watersheds are critical. They enable rainwater to drain into specific locations, typically a stream,
lake or wetland, thereby averting wastage and allowing groundwater supplies to recharge. The
government sanctioned 8,214 watershed development projects across 576 districts in 28 states
- 46 -
between 2009-10 and 2014-15, covering an area of 39.1 mha. Subsequently, the scheme was
subsumed into the PMKSY. However, just 849 projects have been completed to date.
POLICY ACTION: THE FORWARD VIEW

Looking ahead, in addition to the work already being done under the PMKSY, two areas that
could see meaningful policy action include water pricing and the use of public-private partnership
(PPP) models in irrigation, particularly micro-irrigation.
On the pricing front, a recent Ministry of

Water Resources report argues that the PPP models, including in micro-irrigation,
current charges for irrigated water are too and more effective water-pricing policies are
low to cover the cost of operating and likely to see greater action. The Ministry of
maintaining such projects. It also calls for a Water Resources has made a push for
paradigm shift to break the vicious cycle of rationalising user charges, while the NITI
low water rates leading to low revenue and Aayog has unveiled a draft policy for PPPs
lack of funds for operation and
maintenance, which leads to poor quality
and unreliable water delivery service and creates farmer reluctance to pay higher water rates. It
suggests that state governments periodically rationalise their water rates, charge farmers on a
volumetric basis and link it to ‘reliability, timeliness and adequacy of irrigation water supplies.’ It
remains to be seen how seriously such proposals get taken up, given that agriculture is a state
subject and a highly politicised one.
In terms of building new capacity, in light of the inefficiencies seen in purely public-sector
projects, agencies like the World Bank have been pushing for a PPP approach. Indeed, NITI
Aayog has recently issued a paper – the Draft Model PPP Policy Guidelines in Integrated Micro-
irrigation in India. Under such a framework, farmers would pool their land – NITI Aayog
suggests a combined area of between 1,000-10,000 hectares – to enable economies of scale.
Private players would then bid for concessionary rights and would design, build, finance,
maintain and eventually transfer the infrastructure to the state. It is still early days in this regard,
but Maharashtra, for one, has two operational PPP concessions in the mainstream irrigation
space.
- 47 -
1.C FARM MECHANISATION
Farm mechanisation and crop productivity are strongly correlated. Mechanisation4 saves time
and labour, lowers the long-term cost of production, reduces post-harvest losses and ultimately
boosts output and income. According to the 2017-18 Economic Survey, compared to the current
(baseline) levels, mechanisation can raise farm productivity by up to 30% and bring down
cultivation costs by as much as 20%. In the last few decades, India has mechanised but slowly.
Today, its overall level of mechanisation at 40% of labour input is lower than China’s 57%, and
less than half of America’s 95% (see Table 1). Moreover, ‘mechanisation’ in India is still primarily
about ‘tractorisation’. Though the country does manufacture a wide range of agricultural
machinery, including land-development, field-preparation, plant-protection, harvesting, threshing
and irrigation-related products, it has emerged more as a global supplier of such equipment, than
a large-scale user of it.
By 2050, the World Bank estimates, India’s

population will reach 1.65 billion from 1.36 Farm mechanisation levels in India remain
billion at the end of 2018. To indigenously low by global standards, though they are
meet its rising food demand, India will have rising. Tractor demand has surged, but that
to produce more than 330 million tonnes of for other types of machinery remains below
foodgrain by mid-century, up from 275 potential. Ramping this up will be key to
million tonnes in 2017 – i.e., a 20% increase raising overall farm productivity
over 30 years. During this period, more and
more people will move to the cities: the
urbanisation rate is forecast to rise to 50.3% from 34.8% in 2015, while the agricultural
workforce will shrink from 40.6% to 25.7% of the total. Thus given that India’s farmland cannot
grow much (if at all), and that its agricultural labour will fall, all of the required production
growth will have to come from efficiency and productivity gains. This makes mechanisation a key
part of the puzzle. Chart 1: Power sources on Indian
farms
100%
POWER AVAILABILITY AND PRODUCTIVITY 90% 22.3
% of total power availability
24.1
A good proxy for mechanisation is the total 80%
availability of power on farms5. Empirically, studies 70% 16.8
21.6
60%
confirm that this is connected strongly and positively 50% 78.0
with yield. In 2016-17, average farm power 40% 25.2
49.3
availability across India stood at 2.03 kW/ha, up 30%
20% 21.7
17% from 1.73 kW/ha just 3 years before and 10% 14.7 7.0
several-fold higher than the 0.32 kW/ha levels of 0% 7.4 4.7
1960-61. (In comparison, the average Chinese farm 1960-61 1990-91 2013-14
Electric motors Diesel engines
in 2011 had a power availability of 3.56 kW/ha.) Tractors and power tillers
Human labour
Draft animals
Source: Agricultural Machinery Manufacturers' Association

4Defined as the replacement or supplanting of human/animal labour with machine power.
5‘Farm power availability’ is defined as the total energy equivalent (in kilo-watt hours) provided by all sources of
energy, including human labour, drought animals, tractors and power tillers, diesel engines and electric motors.
- 48 -
Qualitatively, too, there has been a major shift. In 2013-14 – the latest year for which comparable
data is available, 88% of all energy came from machines; in 1960-61, the situation was reversed,
with almost all ‘farm power’ coming from human (14.7%) or animal (78%) labour (Chart 1).
Expectedly, power availability varies widely across states, corresponding directly to variations in
farm productivity (Chart 2). It goes all the way from 4.3-4.4 kW/ha in Haryana and Punjab down
to less than 1 kW/ha in the North-Eastern states. In an effort to change this, the Centre in 2014-
15 launched a Sub Mission on Agriculture Mechanisation (SMAM), which aims to boost the
aggregate figure to 2.5 kW/ha by 2022. (The longer-term target is 4 kW/ha by 2030.) SMAM
seeks to create institutional arrangements including custom-hiring, village-level mechanisation
and subsidies for machine procurement that benefit small and marginal farmers. The early results
seem promising, with catch-up growth occurring in some of the more power-deprived states, but
it remains to be seen if this can be sustained.
Chart 2: Farm power availability and productivity, 2016-17

5.0 5.0
4.5 Power availability (kwh/ha) Foodgrain productivity (tonnes/ha, RHS) 4.5
4.0 4.0
3.5 3.5
tonnes/ha
Kwh/ha
3.0 3.0
2.5 2.5
2.0 2.0
1.5 Average power availability 1.5
1.0 2.02 kwh/ha 1.0
0.5 0.5
0.0 0.0
All India
Sikkim
Gujarat
Telangana
Maharashtra
Jharkhand
Tripura
Rajasthan
Odisha
Bihar
Uttar Pradesh
Punjab
Meghalaya
Arunachal Pradesh
Nagaland
Assam
Jammu & Kashmir
Chhattisgarh
Andhra Pradesh
Karnataka
Uttarakhand
Manipur
Kerala
Mizoram
Himachal Pradesh
Madhya Pradesh
West Bengal
Tamil Nadu
Haryana
Source: Department of Agriculture, Cooperation & Farmers Welfare, IMA Analysis; This data is available in tabular form in Annexure IV
TRACTORS: POWERING MECHANISATION IN INDIA

Sales of tractors, the most visible sign of
mechanisation in India, have grown at a India leads globally in terms of tractor sales,
compounded 7-8% over the last four but is likely to remain behind the curve in
decades (Chart 3). This was triggered initially adopting cutting-edge technology. Industry
by the Green Revolution, which aimed to projections are that tractor sales will continue
make India self-reliant in terms of food. to grow by 8-9% a year in the medium-term,
From less than 60,000 units a year in 1979, making India a 1-million tractor market
India is now the world’s largest tractor
market, with 800,000 units sold in 2018.
Region-wise, the market is highly skewed. Four states – Uttar Pradesh, Rajasthan, Madhya
Pradesh and Maharashtra – account for over half of all sales and the next four, another 27%
- 49 -
(Chart 4). Correspondingly, the average area sown per tractor has dropped from 487 ha to 27 ha
today, while the use of drought animals has declined sharply: from 80 million such animals in
1960, there were just 50 million in 2010.
In the medium-term, credit-rating agency Chart 3: Tractor sales, 1979-2018

ICRA forecasts that tractor sales will grow 1,000 14.3% 16%
Sales
at a compounded 8-9%, taking the market 14%
800 Decadal CAGR
12%
past the 1 million mark in the next 3-4
CAGR (%)
Sales (`000)
600 8.4% 10%
7.8%
years. Even though the average 4.5% 8%
400
landholding size is small (86.2% of Indian 7.2% 6%
4%
farmers are classified as small or marginal) 200
2%
and affordability is a major issue, the sheer 0 0%
size of the farming population ensures a 1979 1989 1999 2009 2018
big market. Source: SIAM, Tractor Manufacturers Association, IMA Analysis
That said, India is likely to remain behind the curve in terms of adopting cutting-edge
Chart 4: State-wise tractor sales, 2016-17 technology. Globally, GPS-guided ‘precision
tractors’ have become common and
autonomous tractors are rapidly being
Others
adopted. India is perhaps not yet ready for
Uttar
20% Pradesh such products: it is unfeasible for most
17% farmers to buy ‘regular’ tractors let alone
Haryana autonomous ones. This also limits the
6% Rajasthan
15%
market for specialised equipment. For
Madhya instance, sales of tilling machines, which are
Karnataka Pradesh
6% 11%
small, handheld devices that have a single
Gujarat Bihar purpose, are under 70,000 units a year, a
7% 8% Maharashtr third of which are imported, mainly from
a
10% China. High costs – a domestically-
manufactured entry-level tiller costs at least
Source: Ministry of Road Transport and Highways, IMA analysis
Rs 150,000 after subsidies while imported
ones are about 20% less – mean that the average farmer cannot afford them, especially given the
limited utility they offer.
Chart 5: Mechanisation by activity, 2014-15
Mechanised (%) Non-Mechanised (%)
STAGE- AND CROP-LEVEL Harvesting, threshing 65% 35%

MECHANISATION
Irrigation 37% 63%
The scope for mechanisation remains huge
Plant protection 34% 66%
across different stages of farm activity. Land
preparation, seeding and planting, most Seeding, planting 29% 71%
elements of plant protection (such as Soil work, seed bed prep 40% 60%
pesticide spraying) and irrigation are still
largely manual, whereas most harvesting and Source: Indian Council of Food and Agriculture , IMA Analysis
- 50 -
threshing work is machine-aided (Chart 5). Crop-wise, mechanisation varies sharply. Seedbed
preparation has generally been mechanised across crops, as have some elements of weed and pest
control. On the other hand, activities like sowing, planting and transplanting, and harvesting and
threshing see wide disparities (Table 2). For paddy and vegetables, the sowing/planting stage is
done almost entirely by hand though paddy
harvesting is largely mechanised, whereas
Across crops and farming stages, there are
vegetable harvesting is not. For cotton, the
huge variations in mechanisation levels. Some
drop-off in mechanisation across farming
stages are now handled almost entirely by
stages is starker, from 90-95% (seedbed
machines, whereas in others – cotton
preparation) all the way to 0% (harvesting).
harvesting, for instance – there is almost zero
These variations are largely explained by
mechanisation
economic feasibility, which is guided mainly
by small landholdings.
Table 2: Crop/stage-wise levels of mechanisation (%)

Sowing/
Seedbed planting / Weed and pest- Harvesting and
preparation transplanting control threshing
Paddy 85-90 5-10 80-90 70-80
Wheat 90-95 80-90 70-80 80-90
Potato 90-95 80-90 80-90 70-80
Cotton 90-95 50-60 50-60 0
Maize 90-95 80-90 70-80 50-60
Gram (chickpea) 90-95 50-60 60-70 30-40
Sorghum 80-90 30-50 60-70 20-30
Millets 80-90 30-40 60-70 20-30
Oilseeds 80-90 30-40 60-80 20-30
Sunflower 80-90 40-50 80-90 60-70
Fodder crops 80-90 20-40 80-90 10-20
Vegetable crops 70-80 5-10 80-90 <1
Horticultural crops 60-70 30-40 40-50 <1
Source: Agriculture Machine Manufacturers Association, IMA Analysis
THE POLICY ANGLE…

Over the years, India has made farm Mechanisation is integral to several recent
mechanisation an integral part of several policy ‘missions’. Currently, the biggest push
Centrally-sponsored programmes, including in this area is through the custom hiring
the National Food Security Mission, the centre (CHC) route, which is also being
Rashtriya Krishi Vikas Yojana, a dovetailed into the Centre’s employment and
horticultural-specific mission (MIDH), and entrepreneurship programmes
most recently, the National Mission on
Agricultural Extension and Technology
- 51 -
(NMAET), of which SMAM is one sub-mission. SMAM aims to increase the reach of
mechanisation to small and marginal farmers by promoting Custom Hiring Centres (CHCs),
which rent out agricultural machinery and implements at a viable price. SMAM also promotes
rural entrepreneurship by offering subsidies and discounts to local youth who set up CHCs. The
subsidies range from 30% to 80% for individual farmers, co-operative societies, Self Help
Groups and Farmer Producers Organisations (FPOs). As of 2018, over 7,000 CHCs had been
established.
…AND THE PRIVATE SECTOR’S ROLE

In the longer term, the sheer size of the
Indian market creates potential for India- Private players have entered the CHC market
specific product innovation. There is also in a big way. This will provide an impetus to
great scope for mechanisation in the non- mechanisation, without requiring farmers to
crop segments – especially dairy and invest huge amounts in machinery. Trringo
fisheries (see insert: Mechanisation in the and JFarm are two of the leading platforms
dairy and fishery segments). for tractor rentals currently
Affordability and suitability to Indian
conditions will be the main prerequisites.
From a shorter-term perspective, though, rental/CHC models will be the main driver of
mechanisation. In the last three years, several private players have begun offering tractors to
smaller farmers on an hourly rental basis. This allows for flexibility and cost-effectiveness,
without the burden of capital investment or maintenance costs and likely underutilisation.
Trringo, a rental platform created by Mahindra & Mahindra, India’s largest tractor manufacturer,
uses a mobile app to connect farmers to their nearest CHC. Today, it operates across Karnataka,
Maharashtra, Gujarat, Rajasthan and Madhya Pradesh, with over 100 Trringo hubs and
cumulative hiring exceeding 100,000 hours. For rural entrepreneurs willing to invest Rs 3-5
million in a CHC, Trringo offers a franchise model. Similarly, TAFE, the country’s second-
biggest tractor-maker, has created a similar platform, JFarm. Operating on a non-profit, CSR
basis – it is funded wholly by TAFE – JFarm charges no commission or fees on rentals. Through
a pilot roll-out covering Rajasthan, Madhya Pradesh, Uttar Pradesh, Gujarat and Bihar, it has
directly impacted around 85,000 users, delivering over 405,000 hours in hired farm machinery
usage as of February 2019. One of the main benefits of JFarm is that it allows existing owners to
rent out their machinery, thus increasing utilisation rates and generating additional income.
Mechanisation in the dairy and fishery segments
India is the world’s largest milk producer and also has the largest bovine population. However, 60% of
its dairy supply comes from small and marginal farmers who own 3 or fewer milch animals. Typically,
dairy provides supplemental income rather than being the main source of earnings for such farmers.
Expectedly, mechanisation levels are negligible. According to NABARD (National Bank for
- 52 -
Agriculture and Rural Development), automatic milking machines are viable only for herd sizes of 20
or above and milk-cooling and auxiliary power-supply infrastructure are needed for herd sizes
exceeding 50. Recent decades have seen an increasing number of organised dairy farmers. The National
Dairy Research Institute (NDRI) has imparted training to tens of thousands of new dairy
entrepreneurs, and since 2005-06, NABARD has been funding dairy entrepreneurs to set up or
mechanise existing dairy farms. Indicatively, in the April 2018-February 2019 period, NABARD
approved over 3,000 such loans.
The fisheries sector is also dominated by marginal and small farmers. Although several subsidy schemes
exist to promote aquaculture as a whole, there are no specific programmes around mechanisation.
Further, inland fishing is growing faster than ocean fishing and today accounts for over 65% of the
market. Since it occurs mainly in small ponds or state-contracted lakes, and is run largely by
unorganised players, mechanisation/automation are economically unviable. Going forward, however,
there is scope for technology companies to offer solutions to inland farmers, such as real-time tracking
and monitoring of pond health and fish activity using IoT devices.
Aside from these, about a dozen start-ups

have entered the farm equipment-rental Roughly a dozen start-ups have entered the
market. According to Mahindra & equipment-rental market, which M&M
Mahindra, this mostly unorganised market estimated to be worth over USD 2 billion.
is currently worth over USD 2 billion and Firms such as ITC are also playing a role,
growing fast. More broadly, ITC is such as through the e-Choupal platform
widening the scope of its 20-year-old e-
Choupal platform to include a bouquet of
farm-focused services including crop
management, farm mechanisation, healthcare and banking and insurance, under a single
umbrella. With the entry of major organised players and start-ups, the market will increasingly
formalise, which will also push many small and marginal farmers to start hiring machines instead
of relying on manual labour. The efficiency and time savings this will generate could prove to be
the ‘silent revolution’ that India has been waiting for.
- 53 -
1.D SOIL HEALTH
Agricultural yields are a direct function,

among other things, of soil health. In India, Poor farming practices, including the
soil quality has been a perennial challenge. indiscriminate use of fertilisers, is a leading
Poor farming practices, a short-sighted cause of India’s generally-poor soil health.
approach to land and forest conservation Environmental factors also play a role, and an
and various environmental factors have estimated 45% of India’s land area suffers
together come in the way of sustained, from some form of physical or chemical
high-yield farm production. According to a limitation
government Soil and Land Use Survey, 45%
of India’s overall land area has severe physical or chemical limitations from a soil-health point of
view, while another 20% is entirely unsuited to cultivation. According to the Centre for Science
and Environment, the average organic-matter content, a key measure of the water-holding and
nutritive capacity of soil, is a meagre 0.4%, well below the global average of 3.8% 6. Further,
Indian soil varies greatly in type, quality and suitability for different crops (Table 1). It also tends
to be poor in terms of key micro-nutrients like boron, zinc, iron and sulphur (see Appendix for
maps on micro-nutrient health at the block level).
Table 1: Region-wise soil type and crops
Soil type Regions Rich in Lacking in Crops cultivated
Alluvial Gujarat, Punjab, Haryana, UP, Potash and Lime Nitrogen and Wheat, rice,
Bihar, Jharkhand Phosphorous sugarcane, cotton,
jute
Black Deccan plateau: Maharashtra, Lime, Iron, Phosphorous, Cotton, sugarcane,
MP, Gujarat, AP, Tamil Nadu, Magnesia and Nitrogen and jowar, tobacco, wheat,
Valleys of Krishna and Alumina, Potash organic matter rice etc.
Godavari
Red Eastern and Southern Deccan Iron and Potash Nitrogen, Wheat, rice, cotton,
Plateau, Orissa, Chhattisgarh, Phosphorous sugarcane and pulses
and parts of the Gangetic plain and humus.
Laterite Karnataka, Kerala, Tamil Nadu, Iron oxide and Organic matter, Cashew-nut, tea,
MP, Assam and Orissa potash Nitrogen, coffee, rubber
Phosphate and
Calcium
Arid and Western Rajasthan, North Soluble salts, Humus, Drought resistant and
Desert Gujarat and Southern Punjab phosphate Nitrogen salt tolerant crops
such as barley, rape,
cotton, millets maize
and pulses
Saline and Western Gujarat, deltas of Sodium, Nitrogen and Unfit for agriculture
alkaline Eastern coast, Sundarbans, Potassium, Calcium
Punjab and Haryana Magnesium
Indiscriminate and imbalanced fertiliser usage is one of the primary causes of declining soil
health. Land degradation also continues apace. An ISRO survey found that in the decade to
2013, the country lost ~0.76 million hectares of agricultural land to factors such as salinity, water
6 Uta Stockmann et al, ‘Global soil organic carbon assessment’, Global Food Security, 2015
- 54 -
1.D SOIL HEALTH
logging and erosion. Desertification is another threat, constantly encroaching upon farmland. All
of this makes effective soil management a critical imperative. What is needed most of all is a
sustainable approach to fertiliser use, which is the one aspect of soil quality that can be directly
tackled. For decades, the government has worked in that direction but with mixed results.
FERTILISERS: A HUGE, GROWING MARKET…

India is the world’s second-largest consumer and third-largest producer of agricultural fertilisers,
with an output of ~18 million tonnes in FY18 (Chart 1). Broadly, there are three main categories
of fertilisers: nitrogen-based (N), phosphorus-based (P) and potassium-based (K), and mixes
thereof. India has virtually no domestic potash reserves and only limited ones of fertiliser-grade
phosphorous. It thus imports all of its potassium chloride (MOP), most of its dammonium
phosphate (DAP), and some of its urea requirements (Chart 2).
20 Chart 1: Fertiliser production Chart 2: Fertiliser imports

20
MOP DAP Urea
15
Million tonnes
15
Million tonnes
10
10
5
5
0
FY03 FY05 FY07 FY09 FY11 FY13 FY15 FY17 0
P (Complex) P (Straight) N (Complex) N (Straight) FY12 FY13 FY14 FY15 FY16 FY17 FY18
Source: Fertiliser Association of India; IMA analysis Source: Department of Fertilisers
However, with domestic urea output rising, the overall volume of imports has declined in recent
years. Nitrogen-based fertilisers account for about three-fourths of domestic production with P-
based ones making up the rest. The industry Chart 3: Major fertiliser producers (% of
pegs the overall market value of agricultural total), FY17
fertilisers at Rs 4.7 trillion in 2017, rising to an
estimated Rs 10 trillion in 2023, at a CAGR of
Others, 22% IFFCO, 23%
~13%. Five companies account for over half Indo
Gulf Fertilisers,
of all domestic production (Chart 3). 3%
Paradeep National
Phosphates, 4% Fertilisers, 10%
CONSUMPTION PATTERNS ARE SKEWED… Gujarat State
Fertilisers and
India’s fertiliser usage patterns are far from Chemicals, 4%
Nagarjuna
optimal. Accounting for the fact that most Fertilisers &
Chemicals, 4% Rashtriya
Chemicals &
Indian soil is nitrogen-deficient7, and that Tata Chemicals ,
4%
Fertilisers, 8%
KRIBHCO, 6%
Chambal Coal India*, 6%
Fertilisers, 5%
Source: Fertiliser Association of India, IMA analysis; *Through JVs
7Approximately 81% of all soil in India has low/very low nitrogen content, with major agricultural states like
Haryana (99.8%), Uttar Pradesh (98.2%), Tamil Nadu (97.6%), Punjab (84.7%) and Gujarat (84.0%) doing even
worse.
- 55 -
1.D SOIL HEALTH
nitrogen’s use-efficiency is low8, the Indian Council of Agricultural Research (ICAR)

recommends an ideal N:P:K ratio of 4:2:1. In practice, farmers are using far more N (primarily
urea) than recommended and very few deploy complex fertilisers that are fortified with micro-
nutrients. The overall ratio has moved around over the years but is currently (2017-18 data) at an
unhealthy 6.1:2.5:1 (Chart 4). Comparing across states, Andhra Pradesh (4.6:2.1:1) and Odisha
(4.5:1.9:1) come closest to the ideal, while Rajasthan (a highly imbalanced 41.8:16.2:1) and
Haryana (32.9:9.9:1) are the farthest away (Chart 5). Crop-wise, land under wheat and cotton
tends to see the most nitrogen-intensive fertiliser use, while for other major crops, the situation is
slightly less imbalanced (Table 2).
Table 2: Crop-wise N:P:K splits

Crop N P K
Wheat 13.2 5.5 1.0
Cotton 6.6 2.5 1.0

Maize 5.6 2.6 1.0
Rice 4.9 2.1 1.0

Sugarcane 3.4 1.9 1.0
Groundnut 3.1 2.6 1.0
Source: Agricultural Input Survey (2011-12); IMA analysis
Chart 4: All-India N:P:K ratio

…BECAUSE OF POOR POLICY CHOICES 100%
The roots of the problem lie in flawed 80%
policies around pricing and subsidies. For 60%
decades, the fertiliser market has been 40%
tightly controlled (see insert at the end of 20%
this chapter: Fertiliser subsidies: an 0%
FY15
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY16
FY17
FY18
overview). In 1992, India decontrolled the

prices of phosphatic and potassic (P&K)
Source: Fertiliser Association of India; IMA analysis N P K
fertilisers, including DAP and MOP, but
not urea. Subsidies for decontrolled fertilisers are fixed on a per-kg rate annually rather than
moving around dynamically, so their retail prices also fluctuate, often sharply. In contrast, urea-
subsidy payments are determined at the production-unit level, and since 2012, the retail price of
urea been fixed at Rs 5,360 per tonne. Moreover, since 2011, there has a big jump in the input
costs of DAP and MOP globally. As a result, even with subsidies, DAP and MOP prices are
several-fold higher than those of urea, which is now cheaper even than household salt (Chart 6).
For farmers, who already operate on thin margins, the choice is clear: use more N, and less of
8A significant share of the nutrient escapes into the atmosphere in the form of ammonia or nitrous oxide. However,
owing to its usefulness, nitrogen is indispensable as an agricultural input.
- 56 -
1.D SOIL HEALTH
everything else. The result is a massive imbalance of fertiliser usage, which has impacted soil
productivity over time.
Chart 5: State-wise N:P:K splits Chart 6: Fertiliser prices
30,000
100%
Urea
Rs/metric tonne
80%
20,000 DAP
60%
40%
20% 10,000
0%
Maharashtra
MP
Ar P
AP
J&K
Gujarat
Punjab
Kerala
Assam
TN
Odisha
HP
Jharkhand
Rajasthan
Uttarakhand
UP
Bihar
WB
Karnataka
C'garh
Meghalaya
Nagaland
Haryana
Mizoram
Tripura
Manipur
0
FY16
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY17
FY18
Source: Department of Agriculture Source: Ministry of Chemicals and Fertilisers, Parliamentary Q&A; IMA
and Cooperation; IMA analysis N P K analysis
From relatively low levels, India’s overall fertiliser subsidy bill surged in 2008-09 – the result of a
spike in global fertiliser prices. It has since then stabilised at only slightly lower levels in nominal
terms, but has trended downwards as a share of agricultural GDP (Chart 7). The bulk (~60%) of
this money goes to urea, rather than to P and K fertilisers (Chart 8), which reflects the continued
consumption skew towards nitrogen-based chemicals (Chart 9).
Chart 7: Fertiliser subsidy expenditure Chart 8: Shares of subsidy bill

900 7.0% 100%
% of agricultural GDP
800 6.0%
700 80%
600 5.0%
Rs billion
500 4.0% 60%

400 3.0%
Subsidy amount 40%
300 2.0%
200 % of agri GDP (RHS) 20%
100 1.0%
0 0.0% 0%
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY07
FY18
FY03
FY04
FY05
FY06
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY19
Source: Department of Fertilisers; IMA analysis Source: Parliamentary Q&A; IMA Urea P&K fertilisers
analysis
MULTIPLE EFFORTS TO FIX THE PROBLEM…

Broadly, India has been focusing on issues
around soil quality/fertiliser usage since at Chart 9: Fertiliser consumption
28.1 27.8
least the 1950s. Table 3 below documents 30 24.9
26.5 25.5 24.5 25.6 26.8 25.9
21.7 22.6
25 20.3
some of the more important initiatives.
Million tonnes
18.4
20 16.1 16.8
Arguably, the most far-reaching of these 15

has been the ongoing Soil Health Card 10
5
(SHC) scheme, which was rolled out four 0
years ago.
FY05
FY03
FY04
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
Nitrogen Phosphate Potash

The SHC scheme aims to more accurately Source: Department of Fertilisers; IMA analysis
assess soil quality at the farm level and recommend specific nutrient dosages that boost fertility.
- 57 -
1.D SOIL HEALTH
With the help of GPS tools and revenue

maps, soil samples are drawn and tested on India has been focusing on issues around soil
12 parameters, including primary-, health since at least the 1950s, but to little
secondary- and micro-nutrient content, pH avail. The 4-year-old Soil Health Card (SHC)
levels, conductivity and levels of organic scheme is the latest such effort, though the
carbon. This data (or ‘soil card’) is to be size of its roll-out is on an entirely different
refreshed in a 3-yearly cycle and made scale from previous initiatives
available to farmers, giving them a rough
‘snapshot’ of the health of their soil. Subsequent samples will record changes in soil quality.
In many ways, the SHC scheme is similar to the National Project on Management of Soil Health
and Fertility (NPMSF) and also borrows from earlier, state-level soil-health programmes such as
Gujarat’s Krishi Mahotsav and Karnataka’s Bhoochetana. The difference is the scale of the roll-out.
Since 2015, over 192 million cards have been distributed and close to 50 million soil samples
tested. Nearly 11,000 new testing laboratories have been sanctioned and over 1,500 village-level
soil-testing projects have been initiated. Most promisingly, the government has started linking
Aadhaar cards with soil health cards. This should improve subsidy targeting, plug leakages and
build a better understanding of fertiliser usage patterns across India. Additionally, POS machines
have been installed at various retail outlets with the capacity to recommend fertiliser dosages for
specific types of soil.
…but much remains to be done

Although well-intended, the SHC scheme has certain limitations, including sampling issues, the
fact that it misses several parameters of soil health and – perhaps most important – its
complexity. On the first count, the SHC employs a grid system to analyse soil samples. A single
sample is taken for tracts as large as 10 ha for rain-fed areas and 2.5 ha for irrigated land.
Considering that the average Indian landholding is less than 2 ha and that nutrient content can
vary even across small, adjoining plots, this method can often yield inaccurate results. On the
second count, the system misses such factors as soil-water relationships and management
systems. Thirdly, the system may be too complex for most farmers who are often unfamiliar with
the details (nutrients, micronutrients, etc) listed on the cards.
Table 3: A timeline of India’s soil-conservation efforts

1953 Central Soil Conservation Board established
1958 First integrated, all-India Soil Conservation and Land Use Survey
1959 The Central Arid Zone Research Institute established, with the aim of promoting research on
sustainable farming in arid regions
1950s-1980s Multiple soil-testing laboratories established across India
- 58 -
1.D SOIL HEALTH
1986 A Blue Green Algae Sub-centre created to encourage the use of bio-fertilisers
1991-92 Balanced and Integrated Use of Fertilisers programme – an effort to build farmer awareness,
and to promote more sustainable usage patterns
2008-09 The National Project on Management of Soil Health and Fertility (NPMSF) rolled out, with a
dual focus on balanced nutritive use and soil testing
2015 Soil Health Card (SHC) scheme launched
Nevertheless, the SHC is a step in the right direction. Although hard data on outcomes is not
available yet, according to estimates by NAAS (National Academy of Agricultural Sciences), it
can potentially create per-hectare fertiliser-cost savings of up to Rs 1,000 and boost the value of
crop output by as much as Rs 17,000/ha. However, to fully reap these dividends, the testing-and-
monitoring system will need to be strengthened, other gaps (e.g., farmer awareness) plugged and
the Aadhar-SHC linkages ramped up.
More generally, India’s policy choices in the

interlinked areas of soil health and fertiliser The SHC suffers a number of serious
usage will need to sync better. The limitations, including sampling techniques and
overarching goal may be to promote its overall complexity. Nonetheless, it is a big
balanced fertiliser use but the fact is, market step in the right direction, and is expected to
signals distorted by policy choices, often drive gains in yield in the years ahead,
point the other way. It will be difficult to especially once linked more fully with Aadhar
bring meaningful change unless the entire
matrix of fertiliser pricing, subsidies and
production aligns around this one critical goal. Crucially, India’s fertiliser policy will also need to
dovetail into bigger issues around land/chemical use, crop choices, and so on. A niche but
increasingly important area is organic farming. It currently occupies just 0.1% of India’s arable
land but the practices/techniques it involves – including bio-fertilisers, which are more
environmentally sustainable – could help soil regenerate in small patches. In time, as ‘100%
organic’ states like Sikkim have demonstrated, it might even be expanded to cover a wide swathe
of India’s farmland9.
9
In 2015-16, the government launched the Paramparagat Krishi Vikas Yojana (PKVY) with the objective of promoting
chemical-free organic farming. Its progress has been encouraging, with 237,820 hectares of additional land brought
under organic farming as of FY18, exceeding the target of 200,000 hectares.
- 59 -
1.D SOIL HEALTH
Fertiliser subsidies: an overview
The Centre introduced the Retention Price cum Subsidy scheme (RPS) for nitrogenous fertilisers in
1977 and extended the policy to complex fertilisers in 1979. Under the RPS system, the retail price of
fertilisers was fixed and kept consistent throughout the country. The difference between the retention
price and the selling price was paid back to the manufacturer as subsidy. Put simply, the government
fixed the consumer price of fertiliser and then compensated manufacturers for the difference between
retail prices and production costs. Since all fertilisers were sold at controlled prices, imported fertilisers
were subsidised as well. The RPS system faced criticism for its ‘cost plus’ nature, which did not
incentivise efficiency.
In August 1992, phosphatic and potassic fertilisers were removed from the RPS system. Subsequently
in October 1994, ammonium chloride, ammonium sulphate and calcium ammonium nitrate were also
removed, leaving only urea. Based on the recommendations of a government committee report, the
RPS was discontinued in 2003, and replaced by the New Pricing Scheme (NPS). Instead of covering
the gap between the government controlled end-price and the cost of production (plus profit), pay-outs
under the NPS were a set amount based on several factors, including the age of the plant and the
amount of feedstock used.
In 2007, the government introduced the Fertiliser Monitoring System (FMS), with the objective of
monitoring the production, import and sale of fertilisers up to the wholesale level. Subsequently, with
the subsidy bill rising sharply, the government set up the Nutrient Based Subsidy (NBS) programme in
2010. Its aim was two-fold: to bring down the overall bill on subsidies and to encourage more balanced
fertiliser usage. Unlike in the past, subsidies on a range of P&K fertilisers were to be paid on the basis
of their nutrient content, while factoring in global prices, exchange rates, inventory levels and prevailing
prices. Separately, subsidies were provided for micronutrients such as boron and zinc. A fatal flaw with
the programme is that urea was kept outside its ambit, and in fact, the government continued to focus
on boosting domestic urea production, such as through its new urea policy of 2015. In 2017, it infused
fresh equity in 5 stalled urea-factory projects. As a result, fertiliser consumption in India remains
Nitrogen-intensive, undermining one of the basic objectives of launching the NBS in the first place.
- 60 -
1.E CROP PROTECTION
India is one of the world’s biggest

consumers and producers of agro-chemicals Chart 1: India - total pesticide
70,000 consumption
as well as a major exporter of pesticides. In 60,000
Metric tonnes
50,000
terms of production, it ranks fourth, behind 40,000
the US, Japan and China. CARE Ratings 30,000
20,000
estimates the overall market to be worth 10,000
0
USD 4.9 billion in 2016-17, including about
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
USD 2 billion of exports. By 2025, it is
projected to grow to USD 8.1 billion. On the
Source: Directorate of Plant Protection, Quarantine , IMA analysis
consumption side, although India is a huge
and growing market on aggregate (Chart 1), Chart 2: Pesticide consumption: global
its per-hectare consumption, at a mere 0.6 comparisons 17.0
kg per hectare of farmland, is a fraction of 12.0 13.0
that in other countries (Chart 2).
Kg/ha
7.0 7.0
5.0 5.0
Myriad issues – including the widespread use 0.6
of spurious products, low levels of

Korea
UK
USA
France
India
Japan
China
Taiwan
awareness, poor access to credit among
farmers, supply-side issues and erratic Source: FICCI; IMA analysis
monsoon rainfall – limit consumption, with
consequent implications for productivity. Chart 3: Wheat yields, 2017
Currently, an estimated 15-25% of potential Netherlands 9.1
crop output is lost annually to pests, weeds
Belgium 8.6
and disease, bringing average Indian yields
for most crops down to among the lowest in France 6.8
the world (Chart 3). Crop yields could go up China 5.5

correspondingly with the more intensive and
India 3.2 Tonnes/ha
proper use of crop-protection chemicals but
Source: FAO
this will require concerted policy action.
Chart 4: Domestic pesticide market
MARKET DYNAMICS segmentation
Others, 4%
In India, insecticides – which are particularly
important for cereal crops, as well as Fungicides,
sugarcane and cotton – account for just over 19%
half of all pesticide consumption (Chart 4), Insecticides
down from ~70% two decades ago. Herbicides, , 53%
24%
Herbicides – currently about a quarter of the
market, and a substitute for manual weeding
– are seeing strong demand growth, pushed Source: FICCI
up by rising labour costs and declining
- 61 -
1.E CROP PROTECTION
labour availability.
Fungicides have also seen rapid growth,
given their intensive use in horticulture Insecticides drive the Indian market, but
(mainly fruits and vegetables), while bio- herbicides, fungicides and a variety of bio-
pesticides is a small but fast-growing pesticides are seeing strong growth, driven by
segment, supported by government policy as changing weather conditions, consumer
well as rising awareness of the need for preferences, shifting labour-market dynamics,
and other factors
environmental sustainability. Just six states
account for over 70% of all pesticide
consumption in India (Chart 5). This is a function not only of their physical size and importance
as farming states, but also the type of crops they grow.
Chart 5: Major pesticide consuming states,
Several factors either limit fertiliser usage 2016-17
in India, or lead to poor outcomes: Maharashtra 13.5
 Erratic rainfall patterns: Herbicides UP 10.1
are typically applied at the sowing and Punjab 5.8
pre-sowing stages. When the rains Haryana 4.1 All India:
arrive early, farmers are caught by Telengana 3.8
63,300 MT
surprise and may not have the time or West Bengal 2.6 Metric tonnes ('000)
money to buy and apply these
Source: Ministry of Chemicals and Fertilisers; IMA analysis
chemicals.
 Financial constraints: Other than herbicides, pesticides are the last-mile input into the
farming cycle. By that stage, many farmers will have exhausted their financial resources. In
the absence of ready credit, some are forced to skip this crucial step.
 Low levels of awareness, and spurious pesticides: The majority of farmers has limited
knowledge about the safe and ‘correct’ usage of agro-chemicals. At the same time, the market
is flooded by spurious pesticides, which are either completely ineffective, require massive
(and repeat) application to have any effect or, in some cases, are dangerous to use. Some
farmers have been known to suffer injuries and even fatalities because of the improper use of
such chemicals; many others experience severe soil damage. Such outcomes build fear and
hesitation, suppressing the demand for pesticides.
 Regulatory issues: A draft new law governing the pesticide sector (the Pesticide
Management Bill, 2017) exists, but for now, India continues to be governed by an outdated
law, the Insecticides Act of 1968. As the name implies, the Act focuses mainly on just one
type of agro-chemical. It has no ‘teeth’ when it comes to regulating the sale and manufacture
of other pesticides and on issues around environmental hazards. The result is that India
continues to use 66 types of pesticides that are banned elsewhere, including the highly toxic
DDT. The new law corrects for these shortcomings but is yet to implemented.
- 62 -
1.E CROP PROTECTION
 High working capital requirements: On the supply side, pesticide manufacturers must
contend with demand that is highly seasonal: ~70% of all offtake happens around the kharif
(summer) crop. They must build up inventory well ahead of time and offer long credit
extensions to their financially-strained customers. All of this creates very high working-capital
requirements, straining profitability and the ability to build up strong marketing and
distribution networks.
 Low R&D: Compared to their global Regulatory issues, low R&D and high
peers, which invest 6-7% of revenue in working-capital requirements have all
impeded growth, but the outlook is strong:
research and development, Indian
Farmers will have to use more pesticides to
pesticide manufacturers and MNC
push up yields, and structural changes within
subsidiaries typically spend just 1-2%.
the industry will create new scale economies
Rather than developing new, India-
specific molecules, they focus on
generics and off-patent products.
THE GROWTH OUTLOOK

These negatives notwithstanding, the outlook for pesticide usage in India is generally positive. As
foodgrain and horticultural demand rises, so too must the usage of crop-protection products.
Weather patterns are becoming harder to predict, while a general rise in temperatures and
humidity means faster growth of weeds and fungi. Rising temperatures globally are also driving
up the incidence of devastating pest attacks. Combined with the reality of generally poor yields,
this means that Indian farmers need all the help they can get to ramp up output from their small
and fragmented landholdings. Awareness levels are also rising, driven both by an outreach by
agro-chemical companies and the widespread availability of data and knowledge on mobile
devices. Demand could find additional support as farmers’ access to credit improves and as
income-support schemes – powered by direct bank transfers – kick in.
At the industry level, M&A is intensifying and new strategic alliances are being forged, both in
India and globally. DuPont and Dow merged in 2017, and ChemChina acquired Syngenta in
2008. Bayer and Monsanto, and ChemChina and Sinochem, are both finalising their mergers.
Domestically, UPL has acquired a number of smaller rivals; Crystal Crop Protection has acquired
three of Syngenta’s brands; and global
companies are merging their local operations. Strengthening the regulatory framework will
This process will give rise to companies that be key to enabling more sustainable pesticide
operate at every step of the value chain, from usage. However, the government will also
seeds to pesticides, creating cost efficiencies need to focus on other impediments,
and spurring fresh R&D. Eventually, this including poor farmer access to credit, and
should translate into the wider availability of low levels of awareness
cheaper and better products.
- 63 -
1.E CROP PROTECTION
There is huge potential, too, for export-led growth. Over 2017-22 a total of 26 pesticides will go
off-patent, including an estimated USD 4.1 billion-worth in 2020 alone. India enjoys several
advantages in the generics space including on cost, human resources (expertise with generics),
strong capability in the chemicals-manufacturing space and plenty of untapped capacity. China’s
recent crackdown on smaller, less environmentally-sensitive pesticide manufacturers, gives Indian
firms an additional leg up. This will help create scale, yielding cost efficiencies that will likely spill
over onto the domestic market.
POLICY-SIDE ISSUES
Nevertheless, government support will have to drive pesticide consumption in several ways:
 Strengthening the regulatory framework: Bringing the Pesticide Management Bill into law
will help build a better manufacturing, inspection, testing and distribution regime. It will
become harder to sell spurious chemicals or harmful ones that are no longer used elsewhere.
Eventually, this will help restore consumer confidence in ‘conventional’ (i.e., non-organic)
foodgrains, fruit and vegetables, incentivising farmers to invest in them.
 Farmer income and access to credit: As various income-support schemes take root,
farmers will have more working capital to play with. Forward movement in other areas –
most critically, land-record digitisation – will enable better access to bank credit, by giving
farmers a tangible asset that they can use as collateral. Strengthening the Kisan Credit Card
scheme (see Chapter 4.2.A: Access to Credit) and encouraging micro-loan schemes, would
allow farmers greater flexibility to buy inputs, including pesticides.
 Awareness-building: The government’s ongoing Soil Health Card scheme (see Chapter
4.2.D: Soil Health) focuses on one end of the problem as far as farm yields are concerned.
Something similar – or, at the very least, a ramped up, government-led education/awareness
programme – will be needed in terms of safe and appropriate pesticide usage. Ideally, this
should include elements of the Integrated Pest Management (IPM) approach, which includes
a range of methods that go beyond the blunt application of agro-chemicals. These include,
for instance, better plant spacing, which can inhibit the growth of fungi; and the introduction
of living organisms in fields to control the population of pests.
- 64 -
1.F RISING INPUT COSTS
In the last decade, for a variety of major crops, the value of output has grown barely kept pace
with the overall cost of cultivation. Using the broadest measure of costs, the all-India decadal
increase10 over FY06-16 was anywhere from 113% to 245% (Chart 1). Output value in most
cases has grown at about the same rate –
and in some instances, slower. This has For the most part, cultivation costs in India
impacted the profitability of agricultural are rising as fast – or nearly so – as the value
production, and is the root cause of much of farm output. This varies across regions and
of the farm distress seen in recent years. crops, but on the whole, it makes farming a
Plainly, though, there are major regional less-than-profitable venture
and crop-wise variations: farming is hugely
profitable in some states, while in others, it
is a subsistence activity.
COST AND OUTPUT-VALUE TRENDS: 2006-2016

Broadly, there are two accepted measures of agricultural costs: A2+FL and C2. The former
accounts for all of the main inputs that go into the farming process, plus the value of family
labour; the latter also adds in the real or imputed rental value of land and equipment, even if self-
owned. Using A2+FL as a benchmark, costs rose by a compounded 7.7-11.9% annually over
2006-2016. For nearly all crops (gram is an exception), C2 costs rose as fast or faster. Resultantly,
depending on what measure is considered appropriate in each case, farmers have either seen their
margins erode, or are actually incurring losses (Table 1).
Chart 1: Change in cost (C2) and value of output per hectare,

300% 2006-16 14.0%
Decadal change in cost/value
12.5% 12.0%
250% 10-year CAGRs
10.5% 10.8% 11.0% 10.8%
200% 9.8% 10.0%
8.9% 8.9% 8.6% 8.9%
8.1% 8.0% 8.0%
150%
244.0%
6.0%
178.0%
171.0%
161.0%
155.0%
153.0%
100%
135.0%
134.8%
135.0%
118.0%
113.0%
116.0%
4.0%
50% 2.0%
0% 0.0%
Cost of cultivation
Cost of cultivation
Value of output
Value of output
Cost of cultivation
Value of output
Value of output
Cost of cultivation
Cost of cultivation
Value of output
Cost of cultivation
Value of output
Paddy Wheat Cotton Sugarcane Gram Maize
Source: Ministry of Agriculture, IMA Analysis
10All-India values are weighted averages of state-level numbers, with weights assigned according to the total output
in each state.
- 65 -
Table 1: Change in cost of major crops between 2005-06 and 2015-16

Costs per hectare
A2+FL C2 Value of output per hectare
CAGR CAGR CAGR
2005-06 2015-16 2005-06 2015-16 2005-06 2015-16
(%) (%) (%)
Paddy 16,716 35,111 7.7% 24,008 67,099 10.8% 25,387 64,715 9.8%
Wheat 14,199 32,706 8.7% 22,996 53,969 8.9% 28,031 65,893 8.9%
Cotton 19,100 54,194 11.0% 25,323 71,968 11.0% 30,650 66,843 8.1%
Sugarcane 38,625 81,647 7.8% 59,242 126,114 7.8% 84,984 176,662 7.6%
Gram 7,832 23,453 11.6% 13,583 34,377 9.7% 19,083 41,153 8.0%
Maize 10,689 32,757 11.9% 13,405 46,075 13.1% 16,311 45,278 10.7%
Source: Directorate of Economics and Statistics, IMA analysis
Plainly, profitability varies widely by crop as

well as by region. Table 2 (next page) maps Labour is the single-biggest contributor to
it along a crop- and state-wise matrix. At rising costs. Programmes like the
one end of the spectrum are states like MGNREGA have set a floor on rural wages,
Assam, Bihar and Maharashtra, where the which feeds into the cost of production.
output value of rice is below even the Labour alone accounts for over 50% of the
A2+FL cost, let alone C2. Similarly, cotton overall cost of growing several major crops
farmers in Haryana, Madhya Pradesh and
Punjab are ‘loss making’, as are, for
instance, groundnut farmers in Karnataka and Maharashtra. The implication is that they are
losing money each year on their produce without even accounting for land and capital costs. At
the other end of the scale, farmers in Andhra Pradesh (most crops), Gujarat (rice, wheat, cotton
and groundnut), Punjab and Haryana (rice and wheat) are profitable on a C2 basis, which implies
at least some amount of surplus income.
CHANGING COST DRIVERS

Given that the Centre’s current MSP policy is based around A2+FL (see the more detailed
discussion on this in Chapter 4.3.B: Minimum Support Prices), it is useful to compare costs
and output-value on that basis. Across major crops, the biggest increases in cost have come from
human labour, and for some crops, from machinery and/or fertilisers.
One of the principal causes for the steep rise in people costs is the Mahatma Gandhi National
Rural Employee Guarantee Act (MGNREGA), which came into force in 2006. The MGNREGA
has effectively placed a floor on rural wages and created severe shortages of agricultural workers
in many areas. For several major crops including paddy, cotton and sugarcane, labour is now
over 50% of the total A2+FL cost, while for wheat, it has jumped from 29.1% in 2005-06 to
37% in 2015-16. Machinery costs have risen less quickly, partly because of slow mechanisation,
but also because new business models, such as custom hiring centres (CHCs) have made
- 66 -
machinery more affordable to use. (Annexure V contains data on trends in cost, value and
margin, as well as the changing composition of costs for different crops.)
Table 2: Profitability of major crops – state level

‘Loss-making’ (Cost > Value) ‘Profitable’ (Cost < Value)
A2+FL C2 A2+FL C2
Rice Assam, Bihar, Chhattisgarh, Bihar, Chhattisgarh, HP, AP, Gujarat, Haryana,
Maharashtra, Jharkhand, MP, UP, WB Jharkhand, MP, TN, UP, Karnataka, Kerala,
Odisha WB Punjab, Uttarakhand
Wheat Karnataka, WB HP, Maharashtra HP, Maharashtra Bihar, Gujarat, Haryana,
Jharkhand, MP, Punjab,
Rajasthan, UP,
Uttarakhand
Sugarcane AP, Karnataka,
Maharashtra, TN, UP,
Uttarakhand
Cotton Haryana, MP, AP, Karnataka, AP, Karnataka, Gujarat, Rajasthan, TN
Punjab Maharashtra, Odisha Maharashtra, Odisha
Gram Chhattisgarh, Karnataka, Chhattisgarh, Karnataka, AP, Bihar, Haryana,
UP UP Jharkhand, MP,
Maharashtra, Rajasthan
Maize Gujarat, HP, MP, Maharashtra, Odisha, MP, Maharashtra, Odisha, AP, Bihar, Jharkhand,
Rajasthan Punjab, TN, UP Punjab, TN, UP Karnataka
Groundnut Karnataka, Odisha, TN Odisha, TN AP, Gujarat, Rajasthan
Maharashtra
Source: Directorate of Economics and Statistics, IMA analysis
Farmers continue to grow ‘unprofitable’

There are a number of explanations as to why, crops for several reasons, including self-
despite the fact that they are technically ‘loss consumption, use as animal feed, or because
making’ or only mildly profitable, farmers of short-term compulsions. Although plainly
continue to engage in agriculture: unsustainable, loan waivers also help them
keep their heads above water
 With food staples like paddy and wheat,
many – particularly the small or marginal
farmers – keep a portion for self-consumption. This ranges anywhere from 37% to 88%,
according to the most recent Agricultural Census.
 Crops like maize – particularly the lower varieties – are used mainly as cattle/broiler feed, so
the costs get recovered further down the line.
 Some crops, or certain production stages, are highly labour intensive, with little or no room
for machine-substitution in short-term. Wheat for instance is highly mechanised, but with
cotton and sugarcane, manual labour is required at every stage. As labour costs continue to
rise, technological/business-model shifts may start to change this mix.
- 67 -
 Sugarcane margins, though generally positive, are lower than what they would but for long
credit cycles (the crop cycle is 12-18 months and payments often get delayed) and high
interest costs.
 In certain regions, resource constraints determine crop choices. For instance, in the drought-
prone Vidharba region of Maharashtra, farmers necessarily opt for drought-resistant but low-
yielding crops.
 To compensate for any diseconomies of farm production, state governments regularly
announce ‘bonuses’, or pay-outs over and above the declared MSP. Typically, these are in the
range of 15-20% of the MSP, and are aimed primarily at small/marginal farmers, with caps
on the eligible volumes. Some, including Madhya Pradesh, compensate farmers that end up
selling their produce at rates lower than the MSP.
 Finally, when conditions get especially bad, states governments – and at times, the Centre –
announce loan waivers, which keep farmers afloat in the short term.
- 68 -
MOVING FROM CONSTRAINT
TO OPPORTUNITY
- 2. CREDIT AND INSURANCE
- 69 -
2.A ACCESS TO CREDIT
Weather-related risks, violent price fluctuations, low savings rates and long delays in payment
receipts mean that, more than most people, farmers must rely on credit to get by – whether to
buy seeds and fertiliser, or to tide over a bad crop year. As Table 1 illustrates, farmer income is
correlated with access to credit. Across landholding sizes, farmers with access to formal sources
of finance do better than those that have to
Table 1: Net farm income (Rs/hectare)
resort to non-institutional borrowing.
According to a NABARD study, in 2017, Landholding Formal Informal
category borrowers borrowers
just 55% of all agricultural households had
savings of any sort, while 52% held debt, Marginal 49,118 41,862
including a substantial share from non- Small 45,044 32,389
institutional sources. While formal credit has Medium 44,848 29,802

Large 40,840 23,847
grown strongly over the years, it has not
All 43,740 33,734
fully kept pace with farmers’ needs,
Source: NSSO, IFPRI
especially for those at the bottom of the
pyramid. The result is rising indebtedness,
significant farm distress, and ultimately, Farmers rely on credit more than most
flawed policy responses such as loan people. They are heavily exposed to weather
waivers. and market risk, have low rates of savings,
and must contend with long payment cycles.
FORMAL CREDIT ON THE RISE... Although access to formal credit is growing,
The image of the evil loan-shark is less true much further ground needs to be covered
today than it was 50 years ago. Until 1935,
moneylenders were the sole source of
agricultural credit in India, and most farmers lived under a heavy debt burden. With the creation
of the RBI that year, mechanisms for institutionalised farm credit started to get built. However,
the process only accelerated after 1969, with the nationalisation of 14 major banks, and the
subsequent mandate they were given to ensure ‘priority sector lending’ to agriculture. A further
push came with the establishment of regional rural banks (RRBs) in 1975 and NABARD
(National Bank for Agriculture and Rural
Chart 1: Shares of outstanding debt of
Development) in 1982. cultivator households
100
% of total household debt
Non-institutional
80 Institutional
With the 1991 reforms came the 60
deregulation of interest rate structures of 40
co-operatives and RRBs, and for larger (Rs 20
200,000 or above) commercial-bank loans 0
1950-51
1960-61
1970-71
1980-81
1990-91
2001-02
2012-13
to farmers. 1991 also saw the

recapitalisation of select RRBs, the
Source: NSSO
introduction of prudential accounting
norms for rural credit agencies and added refinance support from the RBI.
- 70 -
Resultantly, from about 90% of Chart 2: Distribution of households by

outstanding farmer debt in 1951, non- borrowing sources, 2012-13
institutional loans made up a smaller but
still substantial 36% of the total in 2012-13 Formal
only, 23%
– the latest year for which data is available
Non-
(Chart 1). Just 16% of farming households borrower,
borrowed exclusively from informal 48%
Both, 13%
sources, and 13% from a mix of formal and
informal lenders (Chart 2). However, the
Informal
access to formal sources varied sharply by only, 16%
household type: small and marginal farmers
Source: NSSO, IFPRI
are often unable to borrow at all and those
that can tend to rely more on
Chart 3: Borrowing sources by
moneylenders (Chart 3). landholding size (% of households)
100%
14.8 24.2
80% 8.9 30.0 39.1
On the other hand, bigger/richer farmers 21.7 13.3
60% 17.0 23.6
were both likelier to hold debt, and to 14.2
40% 11.6
source most of it from formal institutions. 54.7 48.3
8.9
20% 41.5
Measured by monthly expenditure, families 28.5
0%
in the top 10% in terms of earnings are Marginal Small Medium Large
~70% more likely to be indebted than Formal only Both Informal only Non-borrower
those at the bottom – 68% compared to Source: NSSO, IFPRI
40% (Chart 4). The key is that wealthier Chart 4: Indebtedness rate by monthly
farmers are generally able to pay back these expenditure decile, 2017
debts, both because they generally have a 10th (Highest) 68.0
9th 59.5
savings buffer and because they pay lower 8th 57.9
7th 51.5
rates of interest by sourcing finance from 6th 49.9
formal institutions. Poorer households, 5th 52.9
4th 49.5
although less ‘indebted’ are actually more 3rd 49.7
2nd 48.0
vulnerable, in terms of both cost and ability 1st (lowest) 39.5
to repay. Source: NABARD
FORMAL LENDING CONTINUES TO GROW STRONGLY…

In absolute terms, agricultural credit from the formal banking system grew almost 5-fold in the
decade to 2017-18, touching Rs 11.7 trillion (Chart 5). Moreover, in each year since 2006, farm
credit has exceeded government targets – and by a wide margin in the last 2-3 years. Scheduled
commercial banks (SCBs), which until the early 2000s were lending at about the same scale as the
RRBs and co-operative societies together (in a ratio of 52%:48%), now make the vast majority
(75%) of all credit flows (Chart 6). This is a positive trend.
- 71 -
…BUT SIGNIFICANT ISSUES REMAIN

Chart 5: Agricultural loans: target vs
Although these numbers are encouraging, 14.0 actual 11.7
10.7
there is another side to this story: one of 12.0
8.5 9.2
10.0
Rs trillion
7.3
financial exclusion, rising agricultural non- 8.0 6.1 10.0
11.0
4.7 5.1 9.0
performing assets (NPAs), an increasing tilt 6.0
2.5 3.0
3.8
7.0
8.0 8.5
4.0 1.8 2.3 5.8 Target
to short-term borrowing (6-12 month 2.0 4.8
3.3 3.8 Actual
tenures) and a decline in ‘indirect lending’ 0.0 1.1 1.8 2.3 2.8
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
to agriculture. The fact that nearly half of
all farmers report having no debt, rather Source: Ministry of Finance
than signalling financial comfort, indicates
that they lack access to finance. Many do Chart 6: Sources of formal credit
12
not meet the basic eligibility criteria, such 10 RRBs
as clear land-ownership records. 8 Co-operative societies
Rs trillion
6 SCBs
4
Bad loans are also on the rise. From ~5% 2
in March 2016, gross farm-sector NPAs 0
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
had risen – even with large-scale write-offs
– to 8.4% of the total in September 2018.
Meanwhile, short-term loans, which are Source: RBI
typically used to finance input-related Chart 7: Short- vs long-term loans
(seeds, fertilisers, pesticides, power and 100%
hired labour) and operational expenses 80%
(sowing, weeding, harvesting etc) rather 60%
than capital purchases, edged up from 59% 40%

20%
in 1990-91 to 76% in 2011-12 (Chart 7).
0%
The gradual rise of short-term credit in the
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
overall mix implies that the focus is shifting

from growth to survival. Instead of value-
Source: RBI Short-term Long-term
addition, more and more farmers borrow
Chart 8: Direct vs indirect lending
just to make ends meet.
100%
80%
In the same period, indirect loans to 60%
agriculture – which, among other things, go 40%
to agro- and food-processing businesses – 20%
rose (peaking at 31% in 2009-10) and then 0%
collapsed to just 17% of the total in 2012-
1990-91
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
1991-92
2003-04
13 (Chart 8). To an extent, this was the

Source: RBI Direct Indirect
result of definitional changes in the RBI’s
priority sector lending norms. Until 1993, only direct finance to agriculture counted towards the
18% priority sector target for banking lending to ‘agriculture’. From October 1993 onwards,
- 72 -
however, indirect finance also counted. Subsequently, the scope of indirect finance was
broadened with the inclusion of NBFC agri-loans, agribusiness loans, loans for the construction
and running of storage facilities (warehouses, market yards, godowns, silos and cold storages) and
loans to food- and agro-based processing units. This widening of scope heavily influenced the
growth of indirect finance during the 1990s. However, from October 2012, all loans extended to
agriculture in excess of Rs 20 million in aggregate per borrower came to be classified as indirect
finance, and all such loans below Rs 20 Chart 9: Formal vs informal credit, FY13
million were to be treated as direct finance. 100%
80%
As a consequence, the share of indirect 60%
finance in overall agricultural loans has 40%
progressively declined. 20%
0%
Arunachal…
Telangana
MP
AP
J&K
Sikkim
Gujarat
Jharkhand
Bihar
Odisha
HP
Rajasthan
UP
Tripura
Punjab
Maharashtra
Meghalaya
Chhattisgarh
Karnataka
Assam
Uttarakhand
Nagaland
Manipur
Haryana
Kerala
West Bengal
Tamil Nadu
Mizoram
Further, not all regions have made the
transition to formal lending. In several
major states – including Andhra Pradesh, Source: NSSO Institutional Non-institutional
Bihar, Jharkhand, Odisha, Rajasthan and Telengana – informal sources still made up the lion’s
share of credit (Chart 9). Admittedly, with
the exception of the NPA numbers, these Bad loans are on the rise, and more and more
data-points are quite old, and the situation farm loans are being used to fund working-
on the ground might have changed in capital needs rather than longer-term
recent years. For instance, recent reports investments. There are also major regional
suggest that PSU banks have ramped up gaps in access to institutional credit
lending to agricultural warehouses, cold
storage and other supply-chain
infrastructure. Yet taken together, the
numbers signal that farm lending is far shallower than required, and that most credit is going
towards current expenditure, instead of towards productivity-enhancing spends.
THE KISAN CREDIT CARD SCHEME: FALLING SHORT

Since its launch in 1998, the Kisan Credit Card (KCC) programme has been one of the
government’s key mechanisms for streamlining the flow of institutional credit to agriculture. So
far, however, it has failed to live up to expectations.
Under KCC, farmers of all kinds – including owner-farmers, tenants and sharecroppers – are
eligible to receive a ‘credit card’ (essentially a loan account) for an initial period of 5 years, subject
to annual reviews. Eligibility has been gradually extended to include allied and non-farm
activities, including fisheries and animal husbandry, and farmers can draw up to Rs 300,000 via
their accounts at commercial, cooperative or regional rural banks. Loans are interest-free if repaid
within a year, and various interest-subvention schemes cap the rate of interest, currently at 4%.
- 73 -
Loan conversion/rescheduling is permitted in cases of crop damage and timely repayment is

incentivised through credit-limit enhancements.
As of March 2017, a cumulative 177.7 Chart 10: KCCs issued (million)

million Kisan Credit Cards had been 13.0 13.6
11.8 12.5 12.210.8
issued, with commercial banks accounting 8.7 9.3 8.2 9.2 9.7 8.0 8.5 8.5 8.6 9.0
10.2
for 96.2 million of these, and cooperatives 5.1

and RRBs the rest (Chart 10). 5 states – 0.8
UP (27.9 million), AP (17.1 million),
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2013-14
2014-15
2015-16
2016-17
2012-13
Maharashtra (14.5 million), MP (13.0
million) and Telangana (11.9 million) –
Commercial banks Cooperative banks RRBs
accounted for nearly half (48%) of the total
Source: Parliamentary Q&A; NABARD
(Chart 11).
These numbers seem impressive but the facts on the ground say otherwise. In the year to March
2018, the number of active KCC accounts actually declined, from 71.5 million to 69.2 million, as
did the aggregate credit extended by
commercial banks, Rs 435 billion to Rs 433 The Kisan Credit Card (KCC) scheme is one
billion. Cooperatives and RRBs picked up of the government’s main vehicles for
some of the slack, so overall credit under bolstering rural credit, but it has under-
KCC grew by a modest 3%. There also performed for years. The headline numbers
seems to be large-scale double-counting, present a rosy picture of the KCC, and it
with fresh card issuances – say, when a accounts for only a fraction of all borrowings
credit limit gets enhanced – showing up as
a ‘new’ card instead of a replacement. This has
falsely boosted the overall numbers. Further, as Chart 11: State-wise KCCs
a share of total agricultural credit, KCC loans
have decline from 30-45% in the early 2000s to
UP, 16%
15-20% a decade later (Chart 12), though more Others,
25% AP, 10%
recent data is not available.
Driving these trends is a steep rise in agricultural Bihar, 5% Maharashtr

a, 8%
NPAs as well as various operational issues with
the programme itself. Key challenges include Odisha, 5% MP, 7%
issues with the RuPay system, which aims to
TN, 6%
transform KCCs into smart-cards that can be Karnataka, Telangana,
7%
used at ATMs and POS terminals. Owing to 6% Rajasthan,
6%
infrastructural constraints, including the limited Source: NABARD
reach of ATM machines and low levels of
awareness among farmers it has failed to gain traction. Reportedly, banks are going slow on card
- 74 -
issuance for fear of creating new NPAs and

Chart 12: KCC as % of agri credit
there are claims that many beneficiaries 45
withdraw the entire amount when it gets 40
35
% of total
credited to them and then have trouble 30
repaying. Individual bank branches also 25
20
face human/managerial capacity 15
10
constraints, which hinders the flow of
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
information required to approve new loans
or to raise existing credit limits. At the same
Source: RBI
time, many farmers seem reluctant to use
the system because of its
11 Table 2: Farm loan waivers (FY18 and FY19)
‘complexity’ .
State Cost (Rs Estimated Coverage
billion) benefiaries limits
FARM LOAN WAIVERS (million)
Karnataka 440 Loans of up to 2.04
Over time, inadequate flows of credit Rs 200,000
to the farm sector create various Madhya 500 5.5 Rs 200,000
stresses and pressures. In a democratic Pradesh
Uttar Pradesh 360 8.6 Rs 100,000
system, these pressures inevitably spill Maharashtra 340 8.9 Rs 150,000
over into populist policymaking, Telangana 240 4 Rs 200,000
including, most damagingly, loan Rajasthan 180 1 Rs 200,000
waivers. The first such initiative, the Chhattisgarh 61 1.67 NA
Agriculture and Rural Debt Relief Andhra 36 NA NA
Pradesh
Scheme (ARDRS), was launched in Tamil Nadu 18 NA NA
1990, just ahead of general elections. It Punjab 15 0.9 Rs 200,000
did more harm than good: farmers Assam 6 0.8 25% waiver of
farm debt, up to
came to believe that they could they a maximum of
could default with impunity and loan Rs 25,000
recovery rates plunged in subsequent Source: Press reports, IMA analysis
years. In 2008, the Centre
implemented the Agricultural Debt Waiver Rural distress – the result, among other
and Debt Relief (ADWDR) scheme, which things, of poor access to credit – is
also came mere months before Lok Sabha increasingly provided-for by loan waivers.
polls. Under the ADWDR, small landholders However, they create moral hazard and are
with overdue accounts as of December 2007 damaging to the longer-term health of both,
received a complete waiver. 37.3 million the farm economy, and India’s fiscal position
farmers benefited, at a cost of Rs 716.8
billion. Since then, several state governments
have resorted to loan waivers and there have been a spate of such announcements in the last few
years (Table 2).
11 Gyanendra Mani, ‘Study on Implementation of Kisan Credit Card Scheme’, NABARD, 2016
- 75 -
The fact is, loan waivers are a quick-shot but fiscally damaging ‘solution’ to farm distress. While
they may benefit small and marginal farmers in the near-term, they also create moral hazard.
Simply put, farmers end up taking loans they do not expect to repay. In fact, a recent study12
suggests that beneficiaries of loan waivers tend to default more frequently than non-beneficiaries,
while a World Bank report13 finds that political interference in the debt resolution process can
create moral hazard costs that exceed the entire cost of the bailout. Finally, since waivers extend
only to specified types of institutional loans, they do not help the large number of borrowers
who are in an equally vulnerable (if not worse) position, but who have had to rely on
moneylenders.
AREAS OF POLICY ACTION

Strengthening the reach of formal credit
channels will require concerted action, along There is no one-shot cure for issues around
a number of different paths: access to credit. In fact, it is tied to other
agricultural and land reforms, which need to
 Improving the KCC scheme:
be addressed holistically. In the near-term,
Stronger appraisal/review systems,
improving structural issues around the KCC
better outreach and awareness-
and fully digitising land records should help
building for rural customers (many
of whom are illiterate or semi-
literate) and simpler transaction systems would all help. There are also issues with the
mortgage policies around the KCC that need to be resolved.
 Completing the process of digitising land records: This will make it easier for
borrowers to establish credit-worthiness using land records as collateral.
 Resisting the temptation of loan waivers: Given today’s climate of ‘competitive
populism’, this is easier said than done, especially since such decisions are now
decentralised. However, in the long term, there is nothing more damaging to the
development of a healthy credit culture than believing that you can borrow without
having to repay.
12 Saptarshi Mukherjee, Krishnamurthy Subramanian and Prasanna Tantri, ‘Borrower Distress and Debt Relief:
Evidence from a Natural Experiment’, 2017.
13 Xavier Gine and Martin Kanz, ‘The Economic Effects of a Borrower Bailout : Evidence from an Emerging
Market’, World Bank Policy Research Working Paper No 7109, 2014
- 76 -
2.B INSURANCE
Broadly, farmers face two kinds of risks: yield risk and price risk. Yield risk refers to
uncertainties around the quantity or quality of output – and in India, this is primarily a function
of weather-related and other natural disruptions. According to NITI Aayog, 44% of all foodgrain
production is rainfall-dependent. The monsoon, however, tends to be erratic – rainfall in 18 of
the last 50 years has been below ‘normal’ (i.e., less than 96% of the long-term average) – and is
becoming increasingly harder to predict.
Ecological factors also pose a threat. It is
Farmers are continuously exposed to huge
estimated that each year, natural calamities
risks around both output and price – and the
damage crops on 12 million hectares, or
two often go in opposite directions. Weather
~7% of India’s total arable land. patterns are becoming more volatile, and
many farmers remain rainfall-dependent.
In comparison, price risk relates to Insurance is the only long-term solution
variations in what farmers earn from their
produce. A ‘production boom’ in
agriculture depresses prices, while shortages have the opposite effect. To mitigate this issue, the
Indian government in 1966-67 began the Minimum Support Price (MSP) scheme but rather than
fixing the problem, it ended up creating new ones (see Chapter 4.3.B: Minimum Support
Prices).
Ultimately, only a well-designed crop insurance system can sustainably protect farmer livelihoods.
However, despite several major governmental efforts in that direction since 1971 – including 4
regional pilot projects and 3 national crop insurance schemes – just 24% of India’s gross cropped
area is today covered by insurance, compared with 89% in the US and 69% in China. So far, no
insurance programme has managed to sustainably cover the bulk of farmers over an extended
period of time or to ensure adequate protection to them.
THE ROAD TO PRADHAN MANTRI FASAL BIMA YOJANA (PMFBY)

In 1985, the Centre rolled out a Comprehensive Crop Insurance Scheme. Running until 1999, it
was implemented in 15 states and 2 Union Territories, covering an aggregate of 76.3 million
farmers before being supplanted by the
National Agricultural Insurance Scheme Despite multiple attempts to push up crop-
(NAIS), which was operational until 2013- insurance coverage, India remains an under-
14, covering an aggregate of 208 million penetrated market. The latest drive comes
farmers at various points over 15 years, from the PMFBY programme, unveiled in
spanning 25 states and 2 UTs. A third major 2016 on a scale that dwarfs previous efforts
initiative, the Weather Based Crop Insurance
Scheme (WBCIS), was launched in 2007-08,
covering about 47 million farmers across 18
states.
- 77 -
2.B INSURANCE
In 2016, a new flagship programme, the Pradhan Mantri Fasal Bima Yojana (PMFBY), came into
effect. Its eligibility extends to all farmers, including sharecroppers (non-owners who use land in
return for a share of the crop they produce) and tenant farmers, who grow specified crops in
notified areas. In terms of crop coverage,
PMFBY extends to food crops (cereals, Coverage saw a big pick-up in 2016-17 but
millets and pulses); oilseeds; and annual fell back the next year, the result of structural
commercial/horticultural crops. Almost the issues with the programme as well as shifting
entire premium amount is meant to be paid risk perceptions. However, voluntary
by the Government, in a 50:50 ratio enrolment – i.e., not tied to farm loans – is
between the Centre and states. However, growing, suggesting that awareness is rising
farmers still need to pay a nominal amount:
2% of the premium for summer (kharif)
crops, 1.5% for winter (rabi) crops and 5% for annual commercial/horticultural crops. Five
public-sector insurance companies14 and 13 private sector ones15 have been empanelled for the
scheme.
ASSESSING PROGRESS
Trends in coverage
From 29.7 million (about 25% of all cultivators) in 2011-12, the number of farmers with
insurance coverage grew to 48.7 million, or 43% of all farmers, in 2017-18. The numbers swelled
after the launch of PMFBY, peaking at 57.2 million (about 50% of all farmers) in 2016-17 (Chart
1) before falling sharply the next year. In terms of area, from 44.3 million hectares in 2012-13
(24% of arable land), coverage rose steadily, Chart 1: Farmers covered under crop
peaking at 56.3 million hectares (31%) in insurance (million)
2016-17 following the launch of PMFBY, Kharif Rabi 57.2
47.5 48.7
then fell to 49 million hectares (27%) in 33.3 37.2 17
29.7 33.6 16.7 14.1
2017-18. 12.7 12.3 13.4
10.8 40.2
30.8 34.6
18.9 20.9 21 23.8
These declines were largely an outcome of
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
delays in crop-loss assessments and a tardy

claims-settlement process. Some studies Source: Parliamentary Q&A; IMA analysis
suggest that it is also attributable to a spate
of farm-loan waivers announced by state governments that year. Other driving factors include
farmers’ ever-changing risk perceptions (2017-18 saw a good monsoon), and a de-duplication of
policies, with Aadhaar numbers being made compulsory for coverage. State-wise, the steepest
drops were observed in Karnataka (-42%), Kerala (-38%) and Rajasthan (-34%).
14 Agricultural Insurance Company of India, National Insurance Company, New India Assurance Company,
Oriental Insurance Company and United India Insurance Company.
15 Bajaj Allianz, Bharati AXA, Cholamandalam, Future Generali, HDFC-ERGO, ICICI Lombard, IFFCO Tokio,
Reliance General Insurance, SBI General Insurance, Shriram General Insurance, Tata AIG, Universal Sompo,
Royal Sundaram.
- 78 -
2.B INSURANCE
In terms of the composition of coverage, two facts stand out. Unsurprisingly, the bigger states
account for the bulk of insured farmers (Chart 2) and the total area under coverage (Chart 3).
What is more significant is that several of them also do better in terms of the share of cultivators who
are covered (Chart 4). However, the relationship is complex: 80% of Maharashtrian farmers are
insured, but just 28% of land in that state is (suggesting that land holdings are heavily skewed
there); in contrast, coverage in Madhya Pradesh is more evenly distributed (roughly 70% each).
Chart 2: State-wise farmers insured Chart 3: Area coverage (FY18)

Maharashtra MP
MP Rajasthan
13% 13%
3% Rajasthan 4% Maharashtra
21% 25%
4% UP UP
4%
4% WB Gujarat
4%
5% AP Chhattisgarh
14% 4%
Bihar AP
6% 5% 14%
Odisha Bihar
5%
8% Haryana
12% Gujarat 9% 12%
11% Karnataka
Karnataka
Others Others
Source: Parliamentary Q&A; IMA analysis Source: Parliamentary Q&A; IMA analysis
A second key trend is the steady rise in the number of insured non-loanee farmers, that is,
cultivators who have either never taken a farm loan, or who have at least not taken one in the
current season.
Given that PMFBY enrolment is mandatory for availing crop loans, one would expect nearly all
insurance-holders to be loanees. Instead, the share of non-loanees has gone up steadily, from 17%
in 2011-12 to 28% in 2017-18 (Chart 5). This strongly suggests that voluntary enrolment is rising.
Encouragingly, both trends may point to a bandwagon effect, where farmers sign on after seeing
their neighbours do so.
Chart 4: PMFBY performance Chart 5: Loanee vs non-loanee

Farmers insured as % of total cultivators
farmers
100%
80% Area coverage as % of arable land (FY18)
60%
40%
50%
20%
0% 0%
Gujarat
Jharkhand
MP
Maharashtra
Odisha
AP
Rajasthan
WB
Chhattisgarh
Haryana
2011-12
2012-13
2013-14
2014-15
2016-17
2017-18
2015-16
Loanee Non-loanee
Source: Parliamentary Q&A; IMA analysis Source: Parliamentary Q&A; IMA analysis
- 79 -
2.B INSURANCE
Sum insured, premium and claims Chart 6: Sums insured, 2016-18 average
70
In 2017-18, the PMFBY provided coverage
Rs million/'000 hectares
60
50
worth Rs 4 trillion, with the larger 40
agricultural states expectedly accounting for 30
20
the bulk (Chart 6). In terms of pay-out, the 10
0
cumulative gross premiums paid through
Jharkhand
MP
Gujarat
AP
Telangana
Odisha
UP
Maharashtra
HP
Bihar
Karnataka
Rajasthan
Uttarakhand
Haryana
WB
Chhattisgarh
Tamil Nadu
FY18 stood at Rs 227.3 billion, whereas the
total claims paid out were worth a much
lower Rs 141.3 billion. At the all-India level, Source: Parliamentary Q&A; IMA analysis
the cumulative (multi-year) claim-to-
Chart 7: Claim-to-premium ratio, 2016-
premium ratio stood at a low 62.2%, with 18
large variations across states (Chart 7). Chhattisgarh 204.9%
Sikkim 137.4%
Tamil Nadu 125.4%
Given that other forms of non-life Odisha 105.3%
Madhya Pradesh 73.8% All-India:
insurance – specifically motor and health Kerala 70.6%
Haryana 70.4%
62.2%
insurance – have claims ratios in the 80- Rajasthan 63.9%
90% range, this implies some degree of Karnataka 57.3%
Maharashtra 54.0%
under-processing of claims. Year to year
variations in the weather also play a role.
FY18 was a good monsoon year in general, so the pay-out ratio fell to 49.4%, from 69.7% the
previous year. However, in states that have seen natural calamities – in 2016, Tamil Nadu saw
floods, while in 2017, Chhattisgarh saw drought while Odisha experienced floods – the claims
paid exceeded the gross premium (see Table 1 for insurer-wise details).
Table 1: Insurance company-wise details (FY17-FY18)
Sum Premium
Gross Claims Claims-to-
insured charged as
Insurer premium paid (Rs premium
(Rs % of sum
(Rs billion) billion) ratio (%)
billion) insured
AIC 1376.9 153.6 11.2% 101.2 65.9%
Bajaj Allianz 264.2 28.3 10.7% 17.6 62.2%
Cholamandalam 114.4 8.4 7.3% 2.5 29.8%
HDFC ERGO 339.3 47.3 13.9% 28.5 60.3%
ICICI Lombard 452.7 45.7 10.1% 32.5 71.1%
IFFCO Tokio 220.1 24 10.9% 17.5 72.9%
National Insurance 156.1 17.6 11.3% 7.9 44.9%
New India Assurance 136.3 32.9 24.1% 17.3 52.6%
Oriental Insurance 38.2 5.3 13.9% 3.5 66.0%
Reliance General Insurance 277.7 25.3 9.1% 11.0 43.5%
SBI General Insurance 96.1 13.8 14.4% 1.0 7.2%
Tata AIG 95.3 9.3 9.8% 9.1 97.8%
- 80 -
2.B INSURANCE
ISSUES PERTAINING TO PMFBY

A number of factors continue to limit the growth and reach of the PMFBY:
 Low levels of awareness: A majority of farmers appear not to be aware of the scheme and
its benefits. For instance, a 2018 survey by BASIX, run across eight states – UP, Gujarat,
Odisha, AP, Chhattisgarh, Nagaland, Bihar and Maharashtra – estimated that just 28.7% of
farmers were aware of its existence.
 Inconvenient enrolment processes, skewed coverage: For non-loanee cultivators in
particular, the enrolment process tends to be cumbersome. In order to register, they are required to
obtain sowing certificates and land records from the local revenue department. Further, bank
branches and customer service centres are often occupied with other activities, making little time
for insurance customers. On the other hand, as indicated earlier, cultivators who take farm loans
are automatically registered. This skews
the enrolment numbers in favour of The PMFBY has a number of critical
loanee farmers. shortcomings, including low levels of
awareness, difficult processes, skewed
 Poor crop-loss assessments: On
coverage, a degree of malpractice, and tardy
account of poor monitoring, ground-
claims settlement. Fixing these will go a long
level crop-loss assessment exercises are
way towards improving coverage
often skipped and the necessary
formalities are completed on paper. A
lack of trained outsourced agencies and considerable scope for corruption at the assessment
stage, compound the problem.
 Tardy claim settlement: Farmers
Chart 8: Actuarial premium rate (Kharif
often face delays in claim settlements. 25 2016)
% of expected future loss
For instance, those that made claims 20

15
related to the 2016 summer crop 10
5
received their payments as late as April 0
2017. Moreover, according a CSE
Uttar Pradesh
Jharkhand
Gujarat
Tripura
Telangana
Maharashtra
Odisha
Goa
Rajasthan
Bihar
Karnataka
Andhra Pradesh
Uttarakhand
Madhya Pradesh
Chhattisgarh
Haryana
West Bengal
Manipur
Tamil Nadu
Himachal Pradesh
(Centre for Science and Environment)

study, in 14 of 21 states, claims were
either not paid at all or paid only
partially. A key causal factor is that
while the PMFBY was conceived and designed at the Centre, it is the state governments that
are responsible for rolling it out. Many are either not keen on it or face shortages of funds.
Only a handful pay their share of the premium in a timely manner, which causes the Centre
to also delay its payments. For their part, the insurance companies tend to sit on claims until
they receive the premium.
 High actuarial premium rates: As Chart 8 illustrates, actuarial premium rates – the
estimated crop-loss as a share of the total projected output – vary sharply by region. For the
2016 summer crop, while the all-India average was 12.5%, they were much higher in Gujarat
(20.5%), Rajasthan (19.8%), Maharashtra (18.9%) and Bihar (17.9%), and close to nil in states
- 81 -
2.B INSURANCE
like Uttarakhand, HP, Goa and Tripura. These figures, which are derived from crop sampling
exercises, are critical, because they feed into the final premium amount and ultimately, into
the claim-premium ratio. Any errors – whether of omission or commission – determine
whether it is the insurer or the insured who gains more from the process. Currently, as Table
1 indicates, the claims-to-premium ratio ranges significantly across insurers, from just 7.2%
(SBI General Insurance) to 97.8% (Tata AIG). Clearly, this is driven by the fact that these
companies may be operating in different states and covering crops with varying risk profiles.
However, it also suggests that on the whole, the industry – and the processes underlying it –
is yet to fully mature.
 Malpractice: Recent experience suggests that the PMFBY suffers in many places from such
issues as the enrolment of ‘ghost farmers’, data manipulation, wrongful claims rejection and
even the collection of unduly high premiums in low-risk areas, often with the aid of
middlemen. All of this feeds into farmers’ perceptions of the programme and their lack of
willingness to enrol.
Crop insurance schemes: Global comparisons
 Germany: Fully voluntary, with no government subsidies. Cultivators bear 100% of the
premium cost.
 United States: Over 100 crops are covered and premiums are subsidised to the tune of
about 62%. Insurance policies are sold and serviced entirely by 18 empanelled private
insurance firms.
 Canada: Individual provinces have their own programmes though the federal government
contributes a portion of the total premium and administrative costs. It also provides deficit
financing for reinsurance.
 China: The world’s second-largest crop-insurance market (after the US), China’s
programme relies on a weather index. The sums insured are calculated on the basis of
materialised costs of production, excluding labour costs.
 Japan: Compulsory for all farmers, Japan’s crop insurance scheme is subsidised (50%
publicly funded) and compensation is paid on the basis of a detailed loss assessment.
AREAS OF POLICY ACTION

Crop insurance in India is an evolving area
and deepening its coverage will mean Stronger claims-settlement norms, better
setting right the constraints highlighted oversight of industry practices, and more
above. Given the sharply varying claims-to- robust redressal mechanisms can help boost
premium ratios across insurers, there is crop insurance penetration. The PMFBY also
perhaps a need for greater oversight of requires some procedural tweaks, but most of
industry practices and the establishment of all, it needs the states to fully come on board
norms and guidelines to ensure consistency
across states and crops. Stronger grievance
- 82 -
2.B INSURANCE
redressal systems are also needed – at present, they are either non-existent or overly complex.
Crop-cutting experiments – a method of estimating crop yields prior to harvest, which ultimately
feeds into the actuarial premium rates – are currently quite error-prone and will need to be run
more scientifically. Crop growth must be carefully monitored to determine potential losses more
accurately and the entire process will need to be made more accessible and transparent to
stakeholders, ideally via an online platform. All of this will entail substantial expenses on capital
equipment, information (detailed, real-time weather data), technology (remote sensing, modelling
and big data analytics) and human resources.
What is also required is stronger public outreach/education on the one hand and better claims
settlement on the other. The latter, in particular, depends on state governments coming fully on
board and releasing premium payments on time – thus enabling insurers to do their job more
efficiently.
- 83 -
I. Access tSdfasdfasdf
MOVING FROM CONSTRAINT

TO OPPORTUNITY
3. MARKET LINKAGES
- 84 -
3.A MARKETING REGULATIONS
Since the 1950s, agricultural growth has been shackled, at least in part, by a single set of laws.
Under the Agriculture Produce Market Committee (APMC) Act, farmers are required to sell
notified agricultural products only at local mandis, or wholesale markets. Since agriculture is a
state subject, most states have their own APMC legislation with separate lists of notified items.
The Centre plays only an advisory role in policy formulation. Each state divides up its
geographical area into distinct markets, which are headed by Market Committees. All farm
production in a particular area is meant to be brought before the Market Committee and
auctioned in the farmer’s presence. This itself creates a series of fragmented markets, with sharp
variations in prices between them. This is a far cry from the ideal of a single, all-India market for
agricultural produce. Though originally well intentioned, the APMC system has failed to meet its
original goals, which were to promote transparency, boost farm income and end the discretionary
power of traders. By falling behind market realities, it has, instead of aiding farmers, become a
major pain-point. In the last few years,
states have begun to reform their APMC Instead of helping farmers get the best prices
laws but slowly – and where they have, the for their produce, the APMC laws have
changes often remain on paper. shackled them. High fees and commissions,
the ubiquity of middlemen, information gaps,
WHAT AILS THE SYSTEM? delayed payments, and various sell-side and
There are a number of shortcomings with operational issues come in the way
the APMC mechanism:
 Factors that impact prices and
margins to farmers. These include:
o High fees and commissions: Market Committees collect fees, commission and
handling charges – which together add up to a substantial amount.
o Middlemen at different stages of the value chain: This escalates prices to the end
consumer, while leaving less money in the farmer’s hand.
o Information asymmetries: With local markets largely disconnected from national or
global ones, farmers must depend on commission agents for price information.
Recently however, technology – most importantly, the spread of cheap data and
smart/feature phones – is starting to bridge this information gap.
o Delayed payments: Farmers end up selling mainly to traders or commission agents
they have worked with for years. However, the personal nature of such deals is a
double-edged sword because payment timelines are not strictly enforced, as they would
be in a free-market system.
o Restrictions on the sell-side: Many states bar private agricultural-produce markets,
direct marketing and contract farming, which stops farmers from accessing alternative
marketing channels. Further, exporters and food-processing units cannot buy directly
from farmers but only through middlemen.
- 85 -
 Operational issues at the mandi level:

o Entry hurdles: New entrants to the mandi – whether traders, commission agents or
other license-holders – face major entry barriers. Often, there is no space to set up shop
or worse, existing license-holders form an association that puts up roadblocks to entry.
o Variations in market coverage: Compared to a recommended catchment area of 80
sq km, mandis on average cover an area of 487 sq km, varying from ~119 sq km in
Punjab to 11,215 sq km in Meghalaya. Larger coverage areas give greater pricing power
to traders and middlemen.
o Poor infrastructure: Often, mandis lack such Table 1: Post-harvest wastage (%)
basic infrastructure as a covered auction area, Cereals 4.7-6.0%
storage and handling facilities, grading, Pulses 6.7-8.4%
weighing and testing equipment, and so on. Oilseeds 3.1-10.0%
This pushes up already-high food wastage Fruits 6.7-15.9%
rates. According to a 2015 ICRA study,
Vegetables 4.8-12.4%
India’s total post-harvest losses in 2014 were
in the region of Rs 927 billion, accounting for Source: ICRA, IMA Analysis
anywhere between 3% and 16% of the output of individual crops (Table 1).
THE LONG ROAD TO REFORM

For over a decade, the Central Government
has encouraged states to reform their A clear road-map for reform exists, including
APMC systems. In 2003, it formulated a a set of Model Rules issued by the Centre.
Model APMC Act which, very broadly, The most urgent priorities are to allow
would lift major restrictions on agricultural contract farming, direct wholesale farm-gate
marketing and trading, enable more purchases and private markets, and to resolve
seamless contract farming and rationalise issues around fees and licenses
how mandis function. Under the existing
APMC Acts, all contract farming
agreements must be registered with local mandis, which receive a fee for the service and are
authorised to resolve disputes. Doing away with this restriction – such as by allowing agreements
to simply be registered with a notary – takes away this power as well as reduces cost. In 2007, the
Centre released a set of Model Rules and has since issued a series of advisories urging states to
align themselves with the Model Act. These advisories focus specifically on the following areas
where, according to the Centre, change is most urgently required:
1. Allowing direct wholesale purchases at the farm-gate by food processors, exporters, bulk
retailers and end-users.
2. Permitting the establishment of private market yards/markets that are outside the
purview of Market Committees with provisions for direct sales by producers to
consumers.
- 86 -
3. Provisions for contract farming and e-Trading outside the mandi system.
4. A unified registration/licensing system for trade transactions in mandis across the state.
5. Levying a single market fee at the point of first transaction.
Running into barriers

Over the years, many states have initiated Chart 1: Status of APMC-related reforms
agricultural marketing reforms but to varying
Private wholesale markets 21
degrees and with mixed results. Going strictly permitted 10
by amendments to the law, a fairly large Direct farm-gate purchases
22
14
number now allow private wholesale markets, 21
Contract farming
direct farm-gate purchases, contract farming 14
16 APMC Act
and so on. However, the majority of them have Direct farmer-consumer sales
7 amended
yet to notify the necessary rules around these e-Trading
16 Rules notified
12
changes. For instance, 21 states have passed a 19
Single point levy of market fee
law permitting private wholesale markets, but 16
just 10 of these have notified the rules that Single unified trading license in 15
mandis 12
actually enable this (Chart 1, and Table 2 on Number of states
the next page). Even those that have notified the Source: NITI Aayog, IMA Analysis
rules have been slow to implement them. For
instance, just 4 states have taken fruits and
vegetables out of the purview of the Many states have even amended their laws.
APMC Act; 10 have done this partially; and However, most have not notified the
22 have not moved ahead at all. Thus, in necessary rules, and on-ground change
effect, little has changed on the ground. remains elusive – even in Bihar, which
repealed the APMC Act years ago.
Bihar is the only state to have entirely Maharashtra made a move last year but the
abolished its APMC Act, which it did as far unions called foul
back as 2006. Since then, new private
wholesale markets have sprouted up, particularly for fruits and vegetables. Transaction fees tend
to be relatively low (1-2%) and ground-level studies suggest that most farmers are happy with
the system. However, these markets have little or no storage/processing infrastructure and prices
are generally lower than what is guaranteed by state MSPs (minimum support prices). Moreover,
small land-holdings mean that markets remain fragmented and contract farming is not yet
permitted.
Maharashtra recently tried taking a similar path. In November 2018, it introduced a new APMC
Bill that proposes removing all farm produce (including livestock) from the purview of Market
Committees. It also proposed granting ‘Markets of National Importance (MNI)’ status to its
larger mandis so as to facilitate both exports and inter-state trading. Currently, only Delhi’s
- 87 -
Azadpur fruit and vegetable mandi has MNI status. However, the Market Committees went on
an indefinite strike, driving up prices by 15-20% and forcing the government to withdraw the bill.
Table 2: Status of agricultural-marketing reforms across states*

APMC Laws modified to allow…
Private Direct Contract Direct e- Single Single
wholesale wholesale farming producer-to- Trading point levy unified
market purchases consumer sales of market trading
at the farm permitted fee license in
gate mandis
Andhra Pradesh    X   
Arunachal     X X X
Pradesh
Assam     X X X
Bihar (APMC Act       
repeated in 2006)
Chhattisgarh       
Goa       
Gujarat       
Haryana X   X   
Himachal       
Pradesh
Jammu & Kashmir X X X X X X X
Jharkhand       X
Karnataka       
Madhya Pradesh X   X   
Maharashtra       
Meghalaya X X X X X X X
Mizoram       
Nagaland     X  
Odisha  X  X X X X
Punjab    X X  X
Rajasthan       
Sikkim       
Tamil Nadu X X X X X X X
Telangana    X   
Tripura     X X X
Uttar Pradesh X X X X   
Uttarakhand       X
West Bengal   X  X X X
Source: NITI Aayog; Note: Kerala, Manipur and the Andaman & Nicobar Islands do not have APMC Acts; union territories excluded
from this list as their agricultural sectors tend to be small; *Many states have modified specific elements of their APMC Acts to permit the
activities listed above, but not all of them have actually notified the new rules. This list covers changes to the law and not the on-ground
implementation status.
- 88 -
NAM: A ray of hope

In 2016, the Centre launched e-NAM, or Electronic National Agriculture Market, a pan-India
trading portal which networks the existing Map 1: Number of e-NAM-enabled markets,
APMC mandis to create a unified national January 2019
market for agricultural commodities. e-NAM
provides a single-window platform for
various APMC-related information and
services. This includes commodity arrivals
and prices, buy-and-sell trade offers, a
provision to respond to trade offers, among
other services. While actual material flows
continue to be channelled via the mandis, an
online market reduces transaction costs and
information asymmetries.
As of January 2019, 585 wholesale markets

across 16 states and 2 union territories – out
of a total of over 7,000 across India – had
been integrated with the e-NAM platform.
UP alone had 100 such markets, MP 58,
Maharashtra 60 and Gujarat 79 (Map 1).
States that seek to link up to e-NAM are Since 2016, close to 600 wholesale markets
required to carry out three marketing across India have been integrated with the e-
reforms in their APMC Act: enabling a Nam platform, which seeks to create a pan-
single-point levy of mandi fee; a unified India market for agricultural produce. This is
trade license that is valid across all mandis a fraction of the total number of mandis, but it
within the state; and making provisions for is still a step in the right direction
e-Auctions.
UNSHACKLING CONTRACT FARMING

Contract farming involves a pre-harvest sale agreement with a farmer, at a specified price. Such
contracts aim to reduce the price-risk to farmers and the supply-risk to purchasers. Since the
interests of both sides are aligned, buyers are incentivised to extend various forms of support,
including know-how and technology (e.g., new seed varieties), which can boost productivity.
Buyers may also be in a position to offer the use of post-harvest processing infrastructure,
including packaging that increases shelf-life and brings down wastage. On paper, 21 states have
amended the APMC act to allow contract farming, but just 14 have notified these changes and
even fewer actually have contract farming agreements in operation. There also continue to be
restrictions on which crops can be grown under contract farming; the lists vary by state.
- 89 -
PepsiCo has been a pioneer in the contract farming space, partnering with Indian farmers for
over 25 years. As of 2017, it was working with more than 24,000 farmers, locally sourcing over
65% of its fruit-pulp requirements for Tropicana juice and 100% of the potatoes used in its Lays
and Uncle Chipps brands. It is now working with the Maharashtra government to develop a
‘citrus ecosystem’ in the state, by investing in a lime/lemon processing plant in Nanded and
partnering with farmers to raise their productivity levels. Pepsi’s contracts establish selling prices
in advance, insulating farmers from price
fluctuations. The company also supplies Contract farming helps align the interests of
high-quality planting material, including its buyers and sellers, and usually means better
proprietary advanced seed varieties; and price realisations for farmers. Starting with
shares its advanced plant-protection PepsiCo, a number of private companies have
systems and other technical know-how, entered the contract farming space. The list is
which it has developed in collaboration only growing, but remains regionally skewed
with leading agri-input companies like
DuPont, Bayer and BASF. In recent years,
a number of other companies, including ITC, HLL, McCain, Nestle, Marico and Cargill, have
entered into contract farming arrangements – see Table 3 on the next page for an indicative list.
ITC’s e-Choupal: Evolving with the Indian farmer
Two decades ago, ITC set up its e-Choupal network with the aim of bridging information gaps and to
enable farmers to make better production- and marketing-related decisions. Since then, it has installed
6,100 kiosks covering 35,000 villages and over 4 million farmers. Started in an age when Internet access
was considered a luxury, its operating model has evolved considerably, and a fourth-generation version
is likely to be launched in mid-2019. The new model is predicated on low-cost, mobile-enabled data
access across the length and breadth of India.
ITC’s aspiration today is to be an aggregator of solutions, offering a one-stop platform serving almost
every farming need. It will offer a bouquet of farm-focused services, bringing together service and
technology providers in areas such as crop management, farm mechanisation, healthcare, banking and
insurance, under a single umbrella. The objective is to enable efficient price discovery and boost farm
productivity, with the ultimate goal of raising incomes and profitability throughout the value chain.
There are over ~1,500 firms and start-ups offering various solutions relating to farmers and agriculture.
Most focus on a narrow domain but ITC aims to bring them under one roof.
This has the power to revolutionise the Indian agriculture sector. By encouraging farmers to adopt best
practices and by helping to broaden the equipment-rental segment, it could push up yields. At the other
end of the chain, e-Choupal will continue to help farmers secure better prices for the output. While
many of these services will be chargeable, ITC plans to continue making information freely available.
More broadly, for over two decades, ITC has, through its e-Choupal system, been helping
farmers to get around the informational and marketing constraints they face (see insert: ITC’s e-
Choupal: Evolving with the Indian farmer). Going forward, states that allow contract farming
currently require such agreements to be registered with the local APMC market and for the buyer
to pay the applicable fees. The APMC market also has the power to resolve disputes arising from
- 90 -
such contracts. Both the NITI Aayog and a 2014 Committee of State Ministers on Agricultural
Reforms have recommended that contract farming should be taken entirely out of the ambit of
the APMC system.
Table 3: Contract farming agreements (indicative)
State Crops Company
Maharashtra Patchouli SH Kelkar Group of companies
Maharashtra White onion Jain Irrigation
Maharashtra Multiple crops Mahindra Shublabh
Maharashtra Winery grapes Several wineries
Maharashtra Table variety grapes Tata Chemicals
Maharashtra Fodder for 3,500 cows Gowardhan Dairy
Maharashtra Red onion Panchganga
Maharashtra Banana Gargi Agribiotech
Maharashtra Cotton 12 companies
Maharashtra, Madhya Safflower Marico
Pradesh, Gujarat, Karnataka,
Chhattisgarh, Rajasthan
Maharashtra Tomato Varun Foods
Maharashtra, Andhra Broiler Sri Venkateshwara Hatcheries; Swathi Hatcheries;
Pradesh, Tamil Nadu Pioneer; Suguna Poultry
Maharashtra, Gujarat, Potatoes PepsiCo
Punjab, West Bengal,
Karnataka
Maharashtra, Tamil Nadu Organic banana, potato, wheat, Ion Exchange Enviro Farms
Madhya Pradesh, Gujarat, papaya, basmati, cotton
Haryana,
Maharashtra, Punjab, UP, Basmati, Wheat, Fruits and Rallis
Madhya Pradesh, Karnataka Vegetables
Karnataka Marigold, Caprica Chilly AVT Natural Products
Andhra Pradesh guar Agrilogix
Gujarat; Punjab; HP Sesame seeds; Potato; Seed potato McCain
Karnataka herbs Rosun Naturals Products
Karnataka, Andhra Pradesh Gherkin, baby corn, paprika Global Greens, Sterling Agro Products, Ken
Agritech, Green Agri Pack, Unicorn AgroTech
Karnataka, Tamil Nadu Organic Cotton Appachi Cotton Company
Madhya Pradesh Wheat, Maize and Soybean Cargill India
Madhya Pradesh Wheat HLL
Madhya Pradesh Soyabean ITC - IBD
Madhya Pradesh Pomegranate Sanjeevani Orchards
Punjab Chilies, Basmati, Groundnut PepsiCo
Punjab Tomato and chilies Nijjer Agro Foods
Punjab Basmati Satnam Overseas, Escorts
Punjab Milk Nestle
Punjab, Rajasthan, UP and Baby corn, sweet corn Bharti Del Monte
Maharashtra
Rajasthan Barely SAB-Miller
Rajasthan Guar Vikas WSP
Rajasthan Barley UB Group (through PepsiCo)
Tamil Nadu Paddy EID Parry
Source: Industry reports
- 91 -
3.B MINIMUM SUPPORT PRICES
By its very nature, agriculture is prone to price and output volatility. The two usually move in
opposite directions: food prices tend to spike when a crop fails and collapse when there is a glut.
Given the vital role farmers play in ensuring food security, governments the world over intervene
to stabilise farm income. Such interventions include subsidies, direct-income support
programmes and in India’s case, Minimum Support Prices (MSPs). In a developing country like
India, food-price stability matters for both consumers and producers. However, the system as it
stands today is in dire need of reform.
HOW THE MSP SYSTEM WORKS…

At the start of each sowing season, the Commission for Agricultural Costs and Prices (CACP)
announces MSPs or their equivalent for 26 specified commodities (Table 1), which it sets in
consultation with state governments and other stakeholders. The price-setting process is meant
to account for a variety of factors such as
production costs (see detailed discussion As with many forms of government
intervention, the MSP system is well-intended
later in this chapter), demand-supply
but poorly executed. It seeks to protect
conditions, inter-crop price parity and the
farmers against price volatility but instead
‘terms of trade’ between the agricultural
skews production decisions and distorts the
and non-agricultural sectors. MSPs are set
overall market for agriculture
directly for 23 crops, while the floor prices
for another 2 crops are linked to other
MSPs.
For sugarcane, India follows the so-called FRP (fair and remunerative price) system, which was
implemented in 2009-10. Like with MSPs, FRPs are set on the basis of a consultative process.
The key difference is that
while MSPs are primarily
about ensuring that farmers’ Table 1: Crops covered by the MSP system
costs are covered, FRPs Type of support Crops covered
account for the final value
Minimum support Paddy, Jowar, Bajra, Maize, Ragi, Arhar, Moong,
generated by the end-product prices (MSPs) Urad, Groundnut, Soyabean, Sunflower, Sesamum,
– in this case, sugar, molasses Nigerseed, Cotton, Wheat, Barley, Gram, Lentil,
and other by-products like Rapeseed, Mustard, Safflower, Jute, Copra
bagasse. The intent is to allow Fair and Sugarcane
Remunerative
for revenue-sharing between
Price (FRP)
sugar mills and sugarcane Linked to MSPs of Toria (Rapeseed/Mustard) and De-Husked Coconut
farmers (in a 70:30 ratio), other crops (Copra)
while taking into Source: Ministry of Agriculture and Farmers’ Welfare; IMA analysis
consideration the fact that
recovery rates from sugarcane are typically very low. The main product is the juice that is
extracted during the crushing process and not the cane stalks themselves. Actual pay-out to
- 92 -
farmers depends on a complex formula that includes actual recoveries beyond the assumed
baseline rate of 9.5%.
What is common to all of the commodities under the MSP/FRP system is that they are widely-
grown, have substantial areas under cultivation, are items of mass consumption with a reasonably
long shelf life and – with the exception of cotton – are important for food security. Additionally,
since 2013-14, a total of 49 minor forest products (MFP) – including tamarind, wild honey and
sal-tree leaves – have been progressively brought under the MSP system with the aim of ensuring
fair prices to those that gather them, often under difficult circumstances. The system’s
commitment is that, when market prices slip below the MSP, government agencies will purchase
the entire quantity offered by farmers at the announced minimum price.
Procurement: complicated
Crop procurement occurs via a sprawling
and complex system. It is run primarily by India has a Byzantine system around crop
state-level agencies and a handful of Central procurement, which is run mainly by the
agencies, most importantly the Food states but supported by a handful of Central
Corporation of India (FCI), Cotton agencies. On paper, it has the capacity to
Corporation of India (CCI) and NAFED. handle all of India’s foodgrain output, but
Procurement operations are seasonal but these facilities are poor and wastage is high
overlapping, with the kharif (summer)
marketing season running from October to
September and the rabi (winter) one from April to March. The main summer crops include paddy
and coarse grains like jowar, bajra, ragi and maize; the main winter ones are wheat and barley.
Procurement is open-ended – i.e., government agencies purchase whatever amount of foodgrain
farmers offer for sale (provided they meet the quality specifications) within the specific marketing
season. They manage these purchases via wholesale markets (mandis) or other aggregation points
and temporary purchase centres.
To handle the annual estimated grain storage requirement of 65-75 million tonnes, the FCI has
about 2,000 warehouses spread across India. Together with warehouses owned by the Central
Warehousing Corporations, state agencies and private-sector contractors, India on paper has
sufficient storage capacity – about 85 million tonnes currently. However, the quality of this
storage and the associated supply-chain infrastructure is exceedingly poor. Both at the farm level
and immediately after procurement, foodgrain tends to be left in open spaces and exposed to
seepage. Few if any warehouses are temperature and moisture-controlled, and storage tanks are
rudimentary. A substantial share of the stock that ends up there is lost to mould and insect
infestation.
- 93 -
Procurement is either centralised or

Chart 1: Procurement of rice and wheat
decentralised, depending on the type of (million tonns)
commodity, and the location. The former 72 69 73
57 57 57 63 57 60 62 61
involves direct purchases by the FCI or state 42 34 40
agencies acting on FCI’s behalf, and getting

reimbursed upon stock transfer. With the
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
latter, it is the state agencies who handle
procurement and stock management, though
they do at times transfer their excess stock to Wheat Rice
Source: DF&PD; IMA analysis
central agencies.
For sugarcane, sugar mills in each area are responsible for purchasing the entire local stock at the
set FRP. Given the vast number of agencies involved in the process, detailed splits by
value/quantity are not available. However, by any measure, paddy and wheat account for the vast
majority of procurement (Chart 1), with a handful of states procuring the bulk of both
Chart 2: Rice procurement Chart 3: Wheat procurement

(FY14-FY19) (FY14-FY19)
Punjab
Chhattisgarh Punjab
8% 5%
3% Andhra Pradesh 8%
4% 30% Haryana
6%
Telangana
40%
Haryana 23% Madhya
9% Pradesh
Odisha
Uttar Pradesh
9% 11% Uttar Pradesh
10% 10% West Bengal 25% Rajasthan
Bihar
Others
Source: DF&PD; IMA analysis
commodities (Charts 2 and 3).
MSPS: RISING, BUT SLOWLY

Since 2010-11, MSPs have risen at a MSPs have been steadily going up, but there
compounded annual rate of 6.5-13.0% for is debate as to what should be the ‘correct’
different crops (Table 2). The NDA measure of agricultural costs against which to
government of 2014-19, especially in its peg them. By one measure, MSPs adequately
first few years, was more circumspect about cover costs, while by another, broader
MSP increases than its predecessor, the measure, they fall short
UPA. This helped control food inflation
but on the flip side, by slowing farm-
- 94 -
income growth, contributed to the narrative around ‘rural distress’. Partly because of this, the
Centre in FY19 announced that it would fix the kharif (summer crop) MSPs at levels that are at
least 150% of the cost of production. However, there is considerable debate about the most
‘accurate’ way to compute production costs (see insert: Computing agricultural costs).
Table 2: Trends in MSP rates (Rs/quintal)

Compounded annual
growth (%)
Commodity Variety FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY11- FY15- Full
FY14 FY19 period
Kharif (summer) crops
Paddy Common 1,000 1,080 1,250 1,310 1,360 1,410 1,470 1,550 1,750 9% 6% 7.2%
Grade 'A' 1,030 1,110 1,280 1,345 1,400 1,450 1,510 1,590 1,770 9% 6% 7.0%
Jowar Hybrid 880 980 1,500 1,500 1,530 1,570 1,625 1,700 2,430 19% 10% 13.5%
Maldandi 900 1,000 1,520 1,520 1,550 1,590 1,650 1,725 2,450 19% 10% 13.3%
Bajra 880 980 1,175 1,250 1,250 1,275 1,330 1,425 1,950 12% 9% 10.5%
Maize 880 980 1,175 1,310 1,310 1,325 1,365 1,425 1,700 14% 5% 8.6%
Ragi 965 1,050 1,500 1,500 1,550 1,650 1,725 1,900 2,897 16% 14% 14.7%
Arhar (Tur) 3,000 3,200 3,850 4,300 4,350 4,625 5,050 5,450 5,675 13% 6% 8.3%
Moong 3,170 3,500 4,400 4,500 4,600 4,850 5,225 5,575 6,975 12% 9% 10.4%
Urad 2,900 3,300 4,300 4,300 4,350 4,625 5,000 5,400 5,600 14% 5% 8.6%
Cotton Medium 2,500 2,800 3,600 3,700 3,750 3,800 3,860 4,020 5,150 14% 7% 9.5%
Staple
Long Staple 3,000 3,300 3,900 4,000 4,050 4,100 4,160 4,320 5,450 10% 6% 7.7%
Groundnut In shell 2,300 2,700 3,700 4,000 4,000 4,030 4,220 4,450 4,890 20% 4% 9.9%
Sunflower seed 2,350 2,800 3,700 3,700 3,750 3,800 3,950 4,100 5,388 16% 8% 10.9%
Soyabean Black 1,400 1,650 2,200 2,500 2,500 - - 3,050 3,399 21% 6% 11.7%
Yellow 1,440 1,690 2,240 2,560 2,560 2,600 2,775 21% NA NA
Sesamum 2,900 3,400 4,200 4,500 4,600 4,700 5,000 5,300 6,249 16% 7% 10.1%
Nigerseed 2,450 2,900 3,500 3,500 3,600 3,650 3,825 4,050 5,877 13% 11% 11.6%
Rabi (winter) crops

Wheat 1,120 1,285 1,350 1,400 1450 1,525 1,625 1,735 1,840 8% 6% 6.4%
Barley 780 980 980 1,100 1,150 1,225 1,325 1,410 1,440 12% 6% 8.0%
Gram 2,100 2,800 3,000 3,100 3,175 3,500 4,000 4,400 4,620 14% 8% 10.4%
Masur (Lentil) 2,250 2,800 2,900 2,950 3,075 3,400 3,950 4,250 4,475 9% 9% 9.0%
Rapeseed/Mustard 1,850 2,500 3,000 3,050 3,100 3,350 3,700 4,000 4,200 18% 7% 10.8%
Safflower 1,800 2,500 2,800 3,000 3,050 3,300 3,700 4,100 4,945 19% 11% 13.5%
Toria 1,780 2,425 2,970 3,020 3,020 3,290 3,560 3,900 4,190 19% 7% 11.3%
Copra Milling 4,450 4,525 5,100 5,250 5,250 5,550 5,950 6,500 7,511 6% 7% 6.8%
Ball 4,700 4,775 5,350 5,500 5,500 5,830 6,240 6,785 7,750 5% 7% 6.5%
De-husked 1,200 1,200 1,400 1,425 1,425 1,500 1,600 1,760 2,030 6% 7% 6.8%
Coconut
Jute 1,575 1,675 2,200 2,300 2,400 2,700 3,200 3,500 3,700 13% 10% 11.3%
Sugarcane 139 145 170 210 220 230 230 255 275 15% 6% 8.9%
Source: Ministry of Agriculture Cooperation and Farmer Welfare
- 95 -
Computing agricultural costs
India uses three different methods to compute agriculture costs – the A2, A2+FL and C2 methods. A2
includes all direct expenditure on farming activities including spending on seeds, fertilisers, pesticides
and labour. FL is the imputed value of family labour – important, because in India, it is a common
practice for family members to be directly involved in the cultivation activities. The C2 method
considers a wider range of inputs, such as interest on value of owned capital assets, rental value of
owned land and rent paid for leased land. Thus, in any given scenario, C2>A2+FL>A2. The
Agriculture Ministry maintains crop-specific production cost data, but this is typically available only
with a 3-year lag. To produce rough estimates of current costs, the CACP use price data from the
Labour Ministry and other sources for the current period.
In 2006, the MS Swaminathan-led

National Commission on Farmers (NCF) The official policy today is for MSPs to be at
had recommended that MSPs should be least 50% above the A2+FL cost, which
set at 50% above the broadest definition accounts for most inputs and family labour,
of costs, C2, which includes the rental but not the imputed cost of land and capital
value of land and the imputed interest cost rentals. Some contend that A2+FL
on self-owned capital equipment. This understates the ‘true’ cost of production
recommendation was never officially
accepted, though the BJP’s 2014 election
manifesto did promise that it would. Until the 2019-20 Union Budget, MSPs were set on the
basis of multiple factors, including production costs defined more narrowly on an input cost plus
family labour (A2+FL) basis, demand-supply conditions, domestic and international prices, inter-
crop parity and the ‘terms of trade’ between the agricultural and non-agricultural sectors. The
revised policy explicitly states that MSPs are to be ‘at least’ 50% higher than cost, which
continues to be measured on an A2+FL basis. This leaves room to take MSPs higher while not
committing the government to a C2-based costing, which would, in its view, take food prices
through the roof. The net result is that, aside from bajra (50%), today’s MSPs are only 10-20%
above what farmers and some agricultural experts regard as the ‘true’ cost of production (Table
3).
- 96 -
Table 3: Crop-wise MSP and cost comparisons, FY18 and FY9 (Rs/quintal)
Cost basis (Rs) MSP/Average MSP* FY19 MSP as a ratio of
(Rs)
A2+FL C2 FY18 FY19 A2+FL2 C2
Kharif (summer) crops
Paddy* 1,166 1,560 1,570 1,760 1.5 1.1
Jowar* 1,619 2,183 1,713 2,440 1.5 1.1
Bajra 990 1,324 1,425 1,950 2.0 1.5
Ragi 1,931 2,370 1,900 2,897 1.5 1.2
Maize 1,131 1,480 1,425 1,700 1.5 1.1
Toor 3,432 4,981 5,450 5,675 1.7 1.1
Moong 4,650 6,161 5,575 6,975 1.5 1.1
Urad 3,438 4,989 5,400 5,600 1.6 1.1
Groundnut 3,260 4,186 4,450 4,890 1.5 1.2
Sunflower 3,592 4,501 4,100 5,388 1.5 1.2
Soyabean 2,266 2,972 3,050 3,399 1.5 1.1
Sesamum 4,166 6,053 5,300 6,249 1.5 1.0
Nigerseed 3,918 5,135 4,050 5,877 1.5 1.1
Cotton* 3,433 4,514 4,170 5,300 1.5 1.2
Rabi (winter) crops
Wheat 817 1,256 1,625 1,735 2.1 1.4
Barley 845 1,190 1,325 1,410 1.7 1.2
Gram 2,461 3,526 4,000 4,250 1.7 1.2
Lentil 2,366 3,727 3,950 4,150 1.8 1.1
R&M 2,123 3,086 3,700 3,900 1.8 1.3
Safflower 3,125 3,979 3,700 4,000 1.3 1.0
Source: Ministry of Agriculture Cooperation and Farmer Welfare; IMA analysis; * For paddy, jowar and cotton, the
reported MSP is the simple average of the MSPs for different varieties of the crop.
AREAS OF POLICY ACTION: No cure for farm distress…

This is not to imply that ever-higher MSPs is the answer to farmers’ woes. According to National
Sample Survey Office (NSSO) data, 92% of Indian farmers in 2010-11 had small or marginal
landholdings (<2 hectares). Given the
limited potential to grow food on such
The MSP is a blunt instrument. It is set at an
small tracts, a majority of them are actually all-India level and so does not account for
net buyers of agricultural commodities – regional variations in costs and prices. This
and only a miniscule share of (richer) means that farmers in one region might make
farmers are net sellers. Any MSP hike will a ‘profit’ from farming, while their peers
therefore bring net gains for a tiny layer of elsewhere make a ‘loss’ on the same crop
the rural rich while stoking inflation, thus
adversely impacting the poor, who must
pay more for the food they consume. The net impact on ‘food security’ might even be negative.
Moreover, MSPs apply to the whole country, while production costs tend to vary greatly from
one region to the next. The profit-loss equation for farmers in one state might thus be very
different from that in another state. For instance, the CACP notes that the A2+FL cost of
- 97 -
growing paddy in Maharashtra is Rs 2,102 per quintal, well above the MSP, but in Punjab, costs
are a fraction of that (Rs 702). If these figures are correct, Maharashtran farmers operate at a loss
while Punjabi ones make a tidy profit.
…but MSPs are a necessary interim measure

Viewed from a broader, macro-economic
Chart 4: Food subsidy expenditure
perspective, the costs of the MSP system are 1800 8.0%
1600 7.5%
massive. India’s total food subsidy bill – mainly
% of Union Budget
1400 7.0%
procurement under MSP and subsequent 1200
Rs billion
6.5%
1000
6.0%
distribution under the PDS (Public Distribution 800
5.5%
600
System) scheme – made up roughly 7% of the 400 5.0%
4.5%
Union Government’s expenditure in 2018-19 200
0 4.0%
(Chart 4). The ratio has been in the range of ~5-8%
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
over the last decade while generally inching
Source: Union Budget documents Food subsidy % of Budget (RHS)
upwards. In a country where food security and
farmers’ welfare are both perennial concerns, it would be infeasible to argue that support systems
of this nature should not exist. But what is needed is reforms that can help plug leakages,
incentivise farmers to produce more remunerative crops and measures which improve their
welfare on a self-sustaining basis.
To the degree that it bolsters food security,

India will need to continue growing staples Even as MSPs add considerably to India’s
such as rice and wheat. By assuring farmers overall subsidy bill, it would be infeasible to
of a ready, predictable market, the MSP do away with support systems of this nature
system works towards this goal. However, in a developing country where food security
subsidies and price-supports are inherently and farmers’ welfare are perennial concerns.
distortionary. They encourage farmers to All said, they do provide a degree of security
grow low-risk crops, regardless of whether
their land is suited to that purpose, instead
of venturing into higher-value commercial crops or fruits and vegetables. In the longer term, the
wisdom of staying the present course is debatable because it limits what farmers can potentially
earn. Some of this will self-correct as individual states start to reform agriculture in a more
holistic, fundamental sense. In any event, there are major shortcomings with the way the MSP
system currently works. These must be addressed if support prices are to meet their most basic
aim – ensuring farmer livelihoods. Some of these include:
 Delayed payments: Typically, there are long gaps between crop delivery and the receipt of
payments. The absence of spot payments drives many farmers to sell to traders at prices
below the MSP, undermining the system’s very purpose. Shifting to spot payments, ideally via
direct bank transfers, would go a long way to correcting this.
- 98 -
 Short lead times: MSP rates are often announced either after preparation for sowing has
begun or even when the sowing season is in full swing. To allow farmers to make informed
choices about which crops to grow in a particular season – something that hinges critically on
price levels – it is important to front-end the MSP announcements.
 Low awareness levels: Farmers’ knowledge about the MSP system is generally poor. A 2016
NITI Aayog study found, for instance, that only 33% and 56% of farmers in Gujarat and
Rajasthan, respectively, knew what the current MSP levels were. Technology-driven solutions
can help, as would public notices and
advertisements. Reforming the system would involve speeding
 Poor procurement and storage up payments, shortening the lead times,
infrastructure: Wastage rates are high raising farmer awareness levels, and investing
on account of poor storage facilities. in procurement and storage infrastructure. It
Investments in this area would pay off may also be necessary to temporarily broaden
in the long term, stabilising supply and the scope of the system to include more crops
even creating opportunities for
exporting surplus output, given that
wastage levels would fall.
 Inadequate coverage: Ideally, India should be entirely moving away from price supports,
but political realities make this difficult. In the interim, bringing higher-value horticultural
crops such as fruits and vegetables within the MSP fold could actually reduce some of the
distortions that exist today. Although costly in the short term, it would encourage farmers to
move away from their current rice-and-wheat-centric approach, while continuing to enjoy a
degree of income security. As other agricultural reforms unfold, and as better market linkages
get built, the need for MSPs would reduce.
- 99 -
3.C COLD CHAIN AND LOGISTICS
A 2013 Indian Council of

Agriculture Research (ICAR) study Chart 1: Rates of food wastage
20
found that each year, Rs 927 billion 15.9
% of output wasted
Average/lower-end
worth of food goes waste. In terms 15
Upper-end
of quantity, a more recent estimate 10.0
10 10.5 8.4
suggests that as much as 67 million
6.4
tonnes of perishable food is lost 5 4.6 6.7 5.2
3.1 2.7
annually. Wastage rates vary 0.9
0
tremendously – from up to 16% for
Oilseeds
Pulses
Fruit
Poultry
Meat
Milk
Marine fish
Inland fish
fruit, all the way down to 0.9% for
milk (Chart 1). Improvements in
transport networks and information Source: Indian Council of Agricultural Research
flows over the last few years and the
steady rise of food processing would have brought down the amount of wastage since then, but
not substantially. The problem remains very real, impacting food security and farmer incomes
directly. A leading cause of the problem is that India is yet to address key shortcomings in its
cold-chain infrastructure, including the following:
Exceedingly few integrated pack-

houses: A 2017 NITI Aayog study found India’s food-wastage rates are exceedingly
that, compared to a requirement of high. Contributing to this is an under-
developed cold chain network, with few
~70,000 integrated pack-houses – facilities
integrated pack houses, poor transportation
where fruit and vegetables are received,
linkages, and a limited cold-storage network
sorted and packed for distribution – India
had just 249.
Poor transportation linkages: In 2017, India had less than 10,000 refrigerated trucks, compared
to a requirement of 62,000. This adds up to just 4 million tonnes of capacity – a fraction of the
34 million tonnes of India’s combined cold storage capacity (captive storage owned by hotels,
food processing units, etc. is not counted). Crucially, unlike with foodgrain and other less-
perishable items, where rail transport networks are well-established, there are no refrigerated rail
cars. In other words, road transportation is the only option for moving perishable food around.
A limited cold-storage network: The vast majority of India’s cold storage is privately operated,
and 60% of the total lies in just five states: UP, West Bengal, Gujarat, Punjab and Andhra
Pradesh. Moreover, roughly three-fourths of this is designed for single-commodity storage
(mostly potatoes and tomatoes), rather than for multi-use.
- 100 -
3.C COLD CHAIN AND LOGISTICS
THE WAY FORWARD

All said, the perishable food trade faces severe limitations in terms of market connectivity. Most
food goes to waste either before it sets out on its journey or along the way. Fixing this will
require forward movement in several areas:
 The development of local

(village-level) hubs where food A mix of private and public investment will
can be aggregated, packed and pre- be needed if India is to overcome this serious
conditioned for onward transport. infrastructural deficit. What is required is
more local hubs, massive capacity creation in
 Massive capacity creation in
refrigerated transport and multi-modal
terms of both refrigerated
storage and logistics, and dedicated rail
transport and multi-use cold
infrastructure
storage facilities. A 10-year-old
government programme, the Integrated Cold Chain and Value Addition scheme,
provides grant-in-aid of 35-50% of the initial cost, up to a maximum of Rs 100 million,
of projects in the areas of storage, cooling, processing and transportation. So far, 299
have been sanctioned, with Maharashtra and a handful of other states leading the way
(Chart 2). Clearly, though, far more will be required.
 The creation of multi-modal
Chart 2: Cold chain projects - leading
logistics hubs in key locations. states
Promisingly, the Delhi Mumbai
Maharashtra 32 35
Industrial Corridor Development UP 11 15
Corporation (DMICDC) has Uttarakhand 15 10 Number of
projects
awarded several contracts for such Gujarat 12 10
hubs, including in UP and AP 4 17
Punjab 12 7
Haryana, that will tie in with the
Himachal Pradesh 9 6
overall DMIC project. The Karnataka 5 8
Completed
completion of two Dedicated Tamil Nadu 3 9
Ongoing
Freight Corridors (DFCs) in the West Bengal 8 3
next year or two will also give a Haryana 8 3
boost, as may the Free Trade Rajasthan 4 6
Warehousing Zone Scheme. Source: Ministry of Food Processing Industries
 Building up dedicated rail-

linked infrastructure: This would include integrated pack-houses along rail routes,
refrigerated cars, refrigerated distribution hubs and more refrigerated parcel vans.
- 101 -
V. LOOKING AHEAD
INTRODUCTION
- 102 -
V. THE FORWARD VIEW
Important changes are underway in the Indian agricultural space. Farmers are slowly but steadily
shifting to higher-value crops, while the non-crop (dairy, meat, poultry, fisheries) segment is
growing rapidly. Still, the untapped opportunity remains huge and if yields were to be raised
significantly, the implications for output – and thus farm income – would be profound.
EMERGING BUSINESS OPPORTUNITIES

From a business perspective, Indian agriculture offers several medium-term growth opportunities
at both ends of the supply chain – the input side and the value-add/marketing end. These
include:
 Micro-irrigation: Water availability is closely linked to farm productivity and India is an
increasingly water-stressed country. The Centre is working to revive some medium and large-
scale irrigation projects but micro-
irrigation technologies will be a bigger The business opportunities from agriculture
focus area. As contract farming/land are significant, covering a range of industries
pooling takes root, farmers will be in a from micro-irrigation, pesticides and
fertilisers, to farm machinery, information
position to invest more in such
and financial services, food processing and
systems, creating sales and maintenance
cold chain and logistics
opportunities for private players.
 Pesticides: Currently low by global
standards, pesticide usage will grow steadily, driven by rising awareness levels among farmers,
more discerning customers and – most of all – the need to boost farm yields. Consolidation
within the sector and the fact that many pesticides will go off-patent in the next 2-3 years,
will allow for economies of scale and higher margins that can be channelled back into market
expansion. Bio-pesticides, a niche segment today, will be a key growth area, given rising
demand for organic produce.
 Fertilisers: As the Soil Health Card programme finds traction and as knowledge flows in
general improve, farmers should start to gravitate towards better fertilisers that fortify soil
quality and boost yields. Today, the economics of the fertiliser market favour urea, but
reforms in the pricing/subsidy mechanisms would shift the balance. The NDA government
is moving steadily towards a quasi-Universal Basic Income (UBI) programme for farmers,
and once this reaches critical mass, it will become possible to either whittle away at fertiliser
subsidies.
 Farm machinery: Tractors aside, much of the farm-equipment sector is under-penetrated.
Affordability is a key factor, given that most farmers have only small or marginal land
holdings. However, contract farming is gaining ground, especially in states like Gujarat,
Maharashtra and Punjab (see Chapter 4.3.A: Marketing Regulations). By making
machinery more cost-effective, this will boost demand including for what are currently niche
segments. An even bigger impetus will come from contract hiring centres (CHCs), which
enjoy policy support and have also attracted several major private sector players (see
Chapter 4.1.C: Farm Mechanisation).
- 103 -
V. THE FORWARD VIEW
 Information services: The Indian farmer is increasingly connected to data via

mobile/smartphones. At the same time, information – in terms of market prices, weather,
crop suitability, soil conditions etc – is becoming more readily available. Going forward,
private service providers that can marry these two trends will be in a strong position to create
subscription-based/pay-per-use information services. ITC, for instance, plans to do this with
its e-Choupal platform, which is expected to ‘go mobile’.
 Farm credit: Access to credit remains the bane of most farmers (see Chapter 4.2.A: Access
to Credit). A key impediment is the absence of a verifiable financial history and in many
cases, the lack of clear land titles. Both of these impediments should start to ease, albeit
slowly, as the government pushes the ‘JAM trinity’ (Jan Dhan, Aadhar, Mobile) and as land
records get digitised. Combined with the emergence of a social security net – including the
small but meaningful Kisan Samman programme that is currently being rolled out – nearly all
farmers will soon have a bank account, regular, traceable income and a growing share of their
earnings/savings getting channelled into formal financial institutions. This will spur lending,
both by banks and by micro-credit institutions.
 Food processing: As India’s transport infrastructure improves, farm-to-market linkages will
continue to strengthen. Wastage rates for perishable items in general will decline as food
reaches end-markets faster. The food-processing sector in particular will get an impetus as
supplies become cheaper and more reliable.
 Cold chain and logistics: The shift to higher value-added crops, including fruit, vegetables
and flowers and better road links, are improving the viability of the cold-chain and logistics
segments (see Chapter 4.3.C: Cold Chain and Logistics). Investments in this area have so
far been highly concentrated regionally – Maharashtra, UP, Uttarakhand, Gujarat and AP
account for the bulk – but in the years ahead, they should start to spread out as an all-India
agricultural market emerges.
THE POLICY AGENDA FOR AGRICULTURE

In recent years, the Central government has
launched a number of reforms, such as in Agriculture is mainly a state subject, and the
terms of agricultural marketing, crop Centre’s role is largely limited to an advisory
insurance and using digital networks to one. So far, the policy agenda at a broad level
has focused of farm credit, MSPs, crop
build a national agricultural market.
insurance, loan waivers and some production
However, agriculture is primarily a state
and market-related interventions
subject and as such, the Centre’s role is
mainly a facilitating one. Only a few states
have implemented these – or their own – reforms and that too, in a patchwork manner. At a
broad policy level, India’s response to a growing agrarian crisis has centred on five main areas:
- 104 -
V. THE FORWARD VIEW
• Credit to farmers
• Minimum support prices
• Agricultural insurance
• Farm-loan waivers
• Production- and market-related interventions
Everyone knows where the problems lie and while most will agree what the solutions are, action
on the ground has been limited. Current Central government thinking on agriculture centres on
doubling farmers’ income in the 5-year period from 2017 to 2022. Often criticised for being
‘unrealistic’, this does, however, come with
The ‘solutions’ are well known and there is
one key feature: it shifts the broad policy
broad agreement around what needs to be
thrust from production to income. Rather
done. There is also a welcome shift in
than focusing on ‘self-sufficiency’ or on
policymaking from output enhancement to
mere crop-volume growth, it moves the
farmer income-generation. What has been
discourse towards the more efficient
missing thus far is decisive action.
deployment of resources, whether land,
labour or capital.
A 2017 Niti Aayog report, ‘Doubling Farmers’ Income: Rationale, Strategy, Prospects and Action Plan’,
outlines seven ‘sources of growth’ for the farm sector. These are:
• Increasing crop productivity

• Increasing the production of livestock
• Improving the efficiency of input use (i.e., cost savings)
• Increasing crop intensity
• Diversification towards high-value crops
• Improving price realisation for farmers
• Shifting cultivators to non-farm jobs
Policy reforms in the coming years should be expected to follow these seven focus areas but –
depending on the political dispensations at the state level – to varying degrees. Value addition,
crop substitution, exports and disintermediation are likely to figure high on any agenda but the
Centre’s role will be limited mainly to nudging state policies in a particular direction. The ‘wish
list’ of what exactly needs to be done is nearly endless but agricultural experts and government
alike are looking at a more focused pool of solutions that lie in two main buckets. These include
fixing input (supply-side) issues; and secondly, fostering stronger, more competitive agricultural
markets which help ensure better price realisation for farmers.
- 105 -
V. THE FORWARD VIEW
FIXING THE INPUT-SIDE ISSUES

Nudging farmers to produce higher-value crops and more efficiently, requires a mix of policies
that free up land markets, encourage better production choices and leverage technology to the
full. These include:
• Non-distortionary income transfers:

Compared to MSPs and input subsidies, On the input side, the focus should be on
focused income transfers, crop diversification,
income support schemes have the
direct benefit transfers, better crop-insurance
advantage that they do not distort
coverage, freeing up land and agricultural
agricultural markets. They make
markets, and plugging gaps in value chain and
agriculture more financially viable but
in the irrigation networks
do not push farmers to reform their
practices or make better crop choices.
Examples include Telengana’s Rythu Bandhu scheme, which offers a fixed, per-acre pay-out
and the Central Government’s new support scheme for farmers (Rs 6,000 a year per family),
which was announced in the February 2019 Interim Budget. From a fiscal standpoint,
however, such schemes will need to supplant rather than merely be an add-on to an
expanding list of costly government interventions.
• Strengthening the DBT framework: Direct benefit transfers have been a big focus area for
the government and this is likely to strengthen in the years ahead. Fertiliser subsidies for
instance are being shifted to the DBT platform. Linking payments to the more efficient use of
fertilisers – such as via the soil health card scheme – would improve production efficiency and
reduce leakages from the system.
• Expanding crop insurance coverage: At below 50% in FY19, crop insurance coverage
remains poor; moreover, insurance pay-outs frequently get delayed. Betters outcomes in this
regard will be critically important to securing farmer livelihoods in the years ahead, especially
in the face of rising climate variability. Technology – including satellite images or drones that
can assess crop damage – can play a key role; stronger Centre-state coordination would also
help.
• Freeing up land markets: Easier land-leasing rules and greater formalisation of tenancy
rights would go a long way towards building a dynamic market for agricultural land, allow
farming on scale and even encourage people to shift to other professions. To this end, a
Model Land Lease Law exists but awaits implementation. However, accurate, digitised land
titling – an area where some states have made progress – will be a critical prerequisite. China’s
policy of allowing corporates to lease land for periods of up to 30 years – which has enabled a
free-flow of expertise and investment – highlights the benefits of such an approach.
• Encouraging crop diversification: Farmers are moving in the direction of higher-value
crops but arguably not fast enough. Additionally, in large swathes of the country, including in
arid or semi-arid regions, water-intensive crops like sugarcane and rice continue to be sown,
creating unnecessary environmental and human stress. Better information flows, improved
- 106 -
V. THE FORWARD VIEW
farm-to-market linkages and more efficient agricultural markets can push farmers towards
better-paying, less resource-intensive cropping choices. In this regard, it is not a single
measure but holistic change that is needed.
• Creating stronger value chains: This includes building cold storage and transport
infrastructure and linking farmers more closely with food processing units. Spoilage would be
reduced and income realisations to farmers would improve.
• Plugging gaps in the public irrigation system: It is now widely acknowledged that large-
scale irrigation projects tend to be inefficient, difficult to maintain (many lie silted over) and
prone to corruption. Smaller-scale interventions – including water pipelines – may be faster
and cheaper to implement. Additionally, micro-irrigation (including both drip-irrigation and
sprinkler systems) could have an important role to play. Israel, a water-scarce country, has
99% of its irrigated land under micro-irrigation and India could learn a great deal from its
experience.
• Investments in research: This includes, among other things, developing new seeds,
including genetically modified (GM) varieties or new farming and irrigation techniques.
• Technology adoption: Encouraging the adoption of new technology and disseminating
cutting-edge information are an essential piece of the overall puzzle. Crop yields can go up,
for example, through the use of new seed varieties, irrigation technologies and so on, while
the productivity of livestock can be improved through better nutrition and breeding
techniques.
FOSTERING COMPETITIVE AGRICULTURAL MARKETS; IMPROVING PRICE REALISATION

Middlemen have a stranglehold over Indian agricultural markets. In most cases, this means that
farmers receive less, sometimes only a
fraction, of what consumers pay for their Agricultural markets will be strengthened by
undoing much of the damage that is inflicted
produce. For instance, the mandi prices of
by a combination of the APMC laws and the
‘basic’ vegetables like potatoes, onions and
MSP system. Breaking down the wholesale
tomatoes might drop as low as Rs 2 per kg
monopolies, encouraging agricultural exports,
at harvest time, while consumers pay Rs 15-
and improving logistics are all part of this
20 per kg for the same items. Middlemen
pocket most of the difference. Correcting
this situation will involve a multi-pronged approach, including:
• Direct purchases from farmers on a wider scale
• Improved logistics, from grading and storage to movement, with stronger links between
farmers and retailers, food processing companies and exporters
• Breaking wholesale monopolies: As noted in a previous section, APMC reforms have begu,
but remain limited, and largely on paper. This is a fraught issue, requiring immense political
will to sort out.
• Strengthening the e-Nam (electronic national agricultural market) framework: This ties
in with the goal of loosening the grip that middlemen currently have over the farm sector.
- 107 -
V. THE FORWARD VIEW
However, e-Nam has not yet seen much success with very few inter-mandi or inter-state
transactions taking place currently.
• Ramping up agricultural exports: Surplus produce can and should be exported. Getting to
that stage, however, will entail building export clusters and processing units, strengthening
transport networks and creating a functional national market for agriculture. It will also
depend on India’s ability to negotiate favourable trade deals – no easy task, given how
politically sensitive agriculture remains globally. India will also need to resist the temptation to
frequently open and close the window for agricultural exports, as it does today, improving
planning and predictability for farmers.
• Moving beyond MSPs: Price support schemes are not just expensive, inefficient and often
corrupt, but also distortionary and ineffective. Storage and procurement systems have limited
reach and are often absent in areas where they are needed the most. MSPs also tend to
incentivise the wrong crops, pushing farmers to grow foodgrain instead of higher-value
produce. Prime Minister Modi has argued for shifting from an MSP-based regime to one
where minimum reserve/floor prices are set for each crop at the mandi level. However, this
may prove difficult to implement and additionally, will keep the state at the very centre of
agricultural markets which runs directly against the larger objective of freeing up the sector
from bureaucratic and political influence.
- 108 -
ANNEXURES
- 109 -
I. CROPPING PATTERNS:
AREAS UNDER MAJOR CROPS
Table A.1.1: Rice

% of all-India % change in area
FY09 FY19 total (FY19) (FY09 to FY19)
Uttar Pradesh 6.03 5.97 14.2 -0.9%
West Bengal 5.94 4.79 11.4 -19.4%
Chhattisgarh 3.73 3.86 9.2 3.6%
Odisha 4.45 3.83 9.1 -13.8%
Bihar 3.5 3.30 7.9 -5.7%
Punjab 2.74 3.04 7.2 11.0%
Assam 2.48 2.20 5.2 -11.3%
Madhya Pradesh 1.68 2.17 5.2 28.9%
Andhra Pradesh 4.39 1.96 4.7 -55.4%
Maharashtra 1.52 1.52 3.6 0.1%
Others 9.08 9.34 22.2 2.8%
Total 45.5 42.0 22.2% -7.8%
Source: Department of Agriculture and Cooperation; IMA analysis
Table A.1.2: Wheat

Cropping area (million ha) % of all-India total % change in area
FY09 FY19 (FY19) (FY09 to FY19)
Uttar Pradesh 9.51 9.91 33.2% 4.2%
Madhya Pradesh 3.79 5.91 19.8% 56.0%
Punjab 3.53 3.50 11.7% -0.8%
Rajasthan 2.29 2.83 9.5% 23.4%
Haryana 2.46 2.52 8.4% 2.3%
Bihar 2.16 2.26 7.6% 4.4%
Gujarat 1.09 0.81 2.7% -26.0%
Maharashtra 1.02 0.57 1.9% -44.2%
Himachal Pradesh 0.36 0.35 1.2% -2.8%
Uttarakhand 0.4 0.35 1.2% -13.8%
Others 1.14 0.85 2.9% -25.1%
Total 27.8 29.8 15.8% 7.6%
- 110 -
Table A.1.3: Coarse cereals

% of all-India % change in area
Rajasthan 7.10 5.76 25.6% -18.9%
Maharashtra 5.79 3.17 14.1% -45.2%
Karnataka 3.59 2.90 12.9% -19.1%
Madhya Pradesh 1.89 2.17 9.7% 15.0%
Uttar Pradesh 1.99 2.06 9.2% 3.6%
Bihar 0.68 0.90 4.0% 32.2%
Gujarat 1.44 0.68 3.0% -52.8%
Haryana 0.76 0.67 3.0% -12.4%
Tamil Nadu 0.72 0.66 3.0% -7.8%
Andhra Pradesh 1.27 0.46 2.0% -63.8%
Others 2.22 3.05 13.5% 37.2%
Total 27.5 22.5 11.9% -18.1%
Source: Department of Agriculture and Cooperation; IMA
analysis
Table A.1.4: Pulses

% of all-India total % change in area
FY09 FY19 (FY19) (FY09 to FY19)
Madhya Pradesh 4.56 6.94 23.6% 52.1%
Rajasthan 3.67 5.14 17.5% 39.9%
Maharashtra 3.08 3.51 11.9% 14.1%
Karnataka 2.09 3.03 10.3% 45.1%
Uttar Pradesh 2.22 2.72 9.2% 22.4%
Odisha 0.80 1.73 5.9% 116.1%
Andhra Pradesh 1.77 1.24 4.2% -29.8%
Chhattisgarh 0.86 1.08 3.7% 25.9%
Tamil Nadu 0.54 0.76 2.6% 41.5%
Jharkhand 0.39 0.74 2.5% 89.1%
Others 2.11 2.53 8.6% 19.9%
Total 22.1 29.4 15.6% 33.2%
- 111 -
Table A.1.5: Oilseeds

FY09 FY19 (FY19) (FY09 to FY19)
Madhya Pradesh 6.49 6.98 27.0% 7.5%
Rajasthan 4.65 4.69 18.1% 0.8%
Maharashtra 3.98 4.28 16.5% 7.4%
Gujarat 2.98 2.39 9.2% -19.8%
Uttar Pradesh 1.35 1.72 6.7% 27.7%
Karnataka 2.18 1.02 3.9% -53.3%
Andhra Pradesh 2.60 0.81 3.1% -68.8%
West Bengal 0.70 0.64 2.5% -9.1%
Haryana 0.54 0.56 2.2% 3.5%
Odisha 0.30 0.49 1.9% 62.1%
Others 1.79 2.30 8.9% 28.5%
Total 27.6 25.9 13.7% -6.1%
Table A.1.6: Cotton

FY09 FY19 (FY19) (FY09 to FY19)
Maharashtra 3.15 4.12 34.2% 30.9%
Gujarat 2.35 2.71 22.5% 15.3%
Madhya Pradesh 0.62 0.70 5.8% 12.4%
Haryana 0.46 0.67 5.5% 44.6%
Andhra Pradesh 1.40 0.55 4.6% -60.6%
Karnataka 0.41 0.55 4.5% 33.7%
Rajasthan 0.30 0.50 4.1% 65.4%
Punjab 0.53 0.28 2.4% -46.4%
Tamil Nadu 0.11 0.02 0.2% -80.3%
Others 0.08 1.97 16.3% 2361.3%
Total 9.4 12.1 6.4% 28.2%
- 112 -
Table A.1.7: Jute and Mesta

FY09 FY19 (FY19) (FY09 to FY19)
West Bengal 0.59 0.50 71.4% -15.1%
Bihar 0.15 0.10 13.8% -35.6%
Assam 0.07 0.08 10.7% 7.1%
Odisha 0.02 0.01 1.4% -50.0%
Meghalaya 0.01 0.01 1.3% -11.0%
Others 0.06 0.01 1.4% -83.3%
Total 0.9 0.7 0.4% -22.0%
Table A.1.8: Sugarcane

FY09 FY19 (FY19) (FY09 to FY19)
Uttar Pradesh 2.25 2.16 49.2% -4.0%
Maharashtra 1.05 0.63 14.4% -40.0%
Tamil Nadu 0.39 0.21 4.8% -46.2%
Karnataka 0.33 0.35 8.0% 6.1%
Andhra Pradesh 0.26 0.10 2.3% -61.5%
Gujarat 0.21 0.17 3.9% -19.0%
Haryana 0.14 0.10 2.3% -28.6%
Bihar 0.13 0.24 5.5% 84.6%
Uttarakhand 0.12 0.09 2.1% -25.0%
Others 0.27 0.34 7.7% 25.9%
Total 4.4 5.2 2.8% 17.5%
- 113 -
Table A.1.9: Fruits

Cropping pattern (thousand ha) % of all-India % change in area
Maharashtra 1565.0 698.7 10.7% -55.4%
Andhra Pradesh 649.7 664.9 10.2% 2.3%
Uttar Pradesh 406.5 480.4 7.4% 18.2%
Karnataka 406.3 453.5 6.9% 11.6%
Gujarat 370.8 422.4 6.5% 13.9%
Madhya Pradesh 210.8 353.7 5.4% 67.8%
Jammu & Kashmir 355.6 330.6 5.1% -7.0%
Odisha 338.5 328.8 5.0% -2.9%
Bihar 304.6 308.8 4.7% 1.4%
Kerala 376.9 301.8 4.6% -19.9%
Others 2342.9 2189.1 33.5% -6.6%
Total 6.1 6.5 3.4% 6.6%
Table A.1.10: Flowers

Cropping area (thousand ha) % of all-India % change in area
Jammu & Kashmir 0.8 49.6 14.6% 6468.0%
Tamil Nadu 55.0 35.3 10.4% -35.9%
Karnataka 30.6 32.2 9.5% 5.3%
West Bengal 24.9 27.6 8.1% 11.1%
Andhra Pradesh 20.4 22.4 6.6% 10.1%
Uttar Pradesh 16.6 21.3 6.3% 28.5%
Gujarat 17.3 20.4 6.0% 18.1%
Madhya Pradesh 17.1 17.7 5.2% 3.8%
Chhattisgarh 10.1 12.9 3.8% 27.4%
Haryana 6.5 8.6 2.5% 32.9%
Others 55.9 91.3 26.9% 63.4%
Total 0.2 0.3 0.2% 53.0%
- 114 -
Table A.1.11: Vegetables

Cropping area (thousand ha) % of all-India total % change in area
FY14 FY19 (FY19) (FY14 to FY19)
Uttar Pradesh 831.9 1479.4 14.2% 77.8%
West Bengal 1363.7 1464.6 14.0% 7.4%
Madhya Pradesh 621.7 927.3 8.9% 49.2%
Bihar 807.3 852.6 8.2% 5.6%
Maharashtra 726.0 682.9 6.5% -5.9%
Odisha 664.7 639.4 6.1% -3.8%
Gujarat 582.3 613.1 5.9% 5.3%
Karnataka 408.4 502.4 4.8% 23.0%
Haryana 373.2 500.0 4.8% 34.0%
Chhattisgarh 400.1 489.0 4.7% 22.2%
Others 2505.6 2284.9 21.9% -8.8%
Total 8.0 10.4 5.5% 30.0%
Table A.1.12: Spices

Cropping area (thousand ha) % of all-India % change in area
Rajasthan 819.5 1122.1 27.5% 36.9%
Gujarat 541.8 578.0 14.1% 6.7%
Madhya Pradesh 284.9 549.8 13.5% 93.0%
Uttar Pradesh 61.7 397.3 9.7% 544.3%
Karnataka 191.8 247.3 6.1% 28.9%
Andhra Pradesh 169.4 243.1 5.9% 43.5%
Odisha 123.3 148.7 3.6% 20.6%
Kerala 167.0 143.3 3.5% -14.2%
West Bengal 97.6 121.5 3.0% 24.6%
Telangana 134.2 118.9 2.9% -11.4%
Others 572.2 415.8 10.2% -27.3%
Total 2.6 4.1 2.2% 57.7%
- 115 -
STATE-WISE
Table A.2.1: Andhra Pradesh

Area under cultivation (million ha) % of total area % change in area
FY14 FY19 FY14 FY19 (FY14 to FY19)
Rice 4.36 1.96 32.9% 31.0% -55.1%
Pulses 1.67 1.24 12.6% 19.7% -25.6%
Oilseeds 2.03 0.81 15.3% 12.8% -60.0%
Fruits 0.65 0.66 4.9% 10.5% 2.3%
Cotton 2.39 0.55 18.0% 8.7% -76.9%
Coarse cereals 1.35 0.46 10.2% 7.3% -65.9%
Spices 0.17 0.24 1.3% 3.8% 43.5%
Vegetables 0.43 0.23 3.2% 3.6% -46.8%
Sugarcane 0.19 0.14 1.4% 2.2% -27.9%
Flowers 0.02 0.02 0.2% 0.4% 10.1%
Jute and Mesta 0.01 0.00 0.1% 0.1% -57.0%
Total 13.27 6.32 100.0% 100.0% -52.3%
Table A.2.2: Assam

Rice 2.45 2.20 71.9% 68.6% -10.2%
Oilseeds 0.31 0.33 9.1% 10.2% 5.5%
Vegetables 0.28 0.32 8.3% 10.1% 15.2%
Fruits 0.14 0.17 4.2% 5.2% 15.6%
Spices 0.09 0.10 2.7% 3.2% 10.9%
Jute and Mesta 0.07 0.08 2.1% 2.3% 7.1%
Wheat 0.03 0.01 0.9% 0.3% -63.3%
Sugarcane 0.03 NA 0.9% NA NA
Total 3.41 3.21 100.0% 100.0% -5.9%
- 116 -
STATE-WISE
Table A.2.3: Bihar

Rice 3.13 3.30 39.0% 37.6% 5.5%
Wheat 2.01 2.26 25.0% 25.7% 12.2%
Coarse cereals 0.76 0.90 9.5% 10.2% 18.3%
Vegetables 0.81 0.85 10.1% 9.7% 5.6%
Pulses 0.50 0.57 6.2% 6.5% 13.6%
Fruits 0.30 0.31 3.8% 3.5% 1.4%
Sugarcane 0.26 0.27 3.2% 3.1% 3.1%
Oilseeds 0.12 0.22 1.5% 2.5% 85.2%
Jute and Mesta 0.12 0.10 1.5% 1.1% -19.5%
Spices 0.01 0.01 0.2% 0.1% -35.5%
Total 8.02 8.78 100.0% 100.0% 9.4%
Table A.2.4: Chhattisgarh

Rice 3.80 3.86 68.8% 63.7% 1.7%
Pulses 0.84 1.08 15.2% 17.8% 28.9%
Vegetables 0.40 0.49 7.2% 8.1% 22.2%
Coarse cereals 0.24 0.37 4.3% 6.1% 53.5%
Fruits 0.22 0.23 3.9% 3.8% 6.3%
Flowers 0.01 0.01 0.2% 0.2% 0.0%
Spices 0.01 0.01 0.2% 0.2% 0.0%
Flowers 0.01 0.01 0.2% 0.2% 27.4%
Total 5.53 6.07 100.0% 100.0% 9.8%
- 117 -
STATE-WISE
Table A.2.5: Gujarat

Cotton 2.52 2.71 21.6% 27.5% 7.5%
Oilseeds 3.08 2.39 26.4% 24.3% -22.4%
Wheat 1.44 0.81 12.3% 8.2% -44.0%
Rice 0.79 0.81 6.8% 8.2% 1.9%
Coarse cereals 1.34 0.68 11.5% 6.9% -49.3%
Pulses 0.81 0.63 6.9% 6.4% -21.8%
Vegetables 0.58 0.61 5.0% 6.2% 5.3%
Spices 0.54 0.58 4.6% 5.9% 6.7%
Fruits 0.37 0.42 3.2% 4.3% 13.9%
Sugarcane 0.17 0.18 1.5% 1.9% 7.6%
Flowers 0.02 0.02 0.1% 0.2% 18.1%
Total 11.66 9.84 100.0% 100.0% -15.6%
Table A.2.6: Haryana

Wheat 2.50 2.52 41.4% 38.7% 0.6%
Rice 1.23 1.33 20.4% 20.4% 8.0%
Coarse cereals 0.52 0.67 8.6% 10.2% 28.1%
Cotton 0.54 0.67 8.9% 10.2% 23.1%
Oilseeds 0.55 0.56 9.1% 8.6% 1.6%
Vegetables 0.37 0.50 6.1% 7.7% 35.1%
Sugarcane 0.10 0.09 1.7% 1.4% -9.0%
Pulses 0.15 0.08 2.5% 1.2% -46.0%
Fruits 0.05 0.07 0.8% 1.1% 40.0%
Spices 0.02 0.02 0.3% 0.3% 0.0%
Flowers 0.01 0.01 0.2% 0.2% 0.0%
Total 6.04 6.51 100.0% 100.0% 7.7%
- 118 -
STATE-WISE
Table A.2.7: Himachal Pradesh

Area under cultivation (million ha) % of total area
% change in area
Wheat 0.36 0.35 35.7% 34.8% -2.8%
Coarse cereals 0.32 0.31 31.7% 31.2% -2.0%
Fruits 0.22 0.23 21.9% 23.2% 5.8%
Vegetables 0.10 0.10 9.9% 9.9% 0.0%
Spices 0.01 0.01 0.8% 0.9% 3.1%
Total 1.01 1.01 100.0% 100.00% -0.3%
Table A.2.8: Jammu & Kashmir

Fruits 0.36 0.33 33.0% 35.5% -8.2%
Wheat 0.29 0.24 26.6% 26.2% -15.9%
Coarse cereals 0.34 0.21 31.2% 22.2% -39.3%
Vegetables 0.10 0.10 9.2% 10.7% 0.0%
Flowers 0.00 0.05 0.1% 5.3% 6468.0%
Total 1.09 0.93 100.0% 100.0% -14.7%
Table A.2.9: Jharkhand

Rice 1.26 1.52 47.1% 49.4% 20.2%
Pulses 0.57 0.74 21.3% 24.0% 29.4%
Vegetables 0.31 0.29 11.7% 9.5% -7.5%
Coarse cereals 0.27 0.26 10.1% 8.4% -4.1%
Wheat 0.17 0.16 6.3% 5.3% -3.5%
Fruits 0.09 0.10 3.5% 3.3% 7.9%
Total 2.68 3.07 100.0% 100.0% 14.5%
- 119 -
STATE-WISE
Table A.2.10: Kerala

% change in area
Fruits 0.38 0.30 42.3% 43.3% -19.9%
Rice 0.20 0.17 22.4% 24.1% -16.0%
Spices 0.17 0.14 18.7% 20.6% -14.2%
Vegetables 0.15 0.08 16.6% 12.0% -43.4%
Total 0.89 0.70 100.0% 100.0% -21.9%
Table A.2.11: Karnataka

Pulses 2.50 3.03 22.6% 28.9% 21.3%
Coarse cereals 3.49 2.90 31.5% 27.7% -16.8%
Rice 1.34 1.16 12.1% 11.1% -13.5%
Oilseeds 1.41 1.02 12.7% 9.7% -27.8%
Cotton 0.66 0.55 6.0% 5.2% -17.0%
Vegetables 0.41 0.50 3.7% 4.8% 23.0%
Fruits 0.41 0.45 3.7% 4.3% 11.6%
Sugarcane 0.42 0.44 3.8% 4.2% 4.3%
Spices 0.19 0.25 1.7% 2.4% 28.9%
Wheat 0.21 0.15 1.9% 1.4% -28.6%
Flowers 0.03 0.03 0.3% 0.3% 5.3%
Total 11.07 10.49 100.0% 100.0% -5.3%
- 120 -
STATE-WISE
Table A.2.12: Madhya Pradesh

Oilseeds 7.73 6.98 32.5% 26.0% -9.7%
Pulses 5.40 6.94 22.7% 25.9% 28.5%
Wheat 5.38 5.91 22.6% 22.0% 9.9%
Coarse cereals 1.63 2.17 6.9% 8.1% 33.3%
Rice 1.93 2.17 8.1% 8.1% 12.2%
Vegetables 0.62 0.93 2.6% 3.5% 49.2%
Cotton 0.51 0.70 2.1% 2.6% 36.7%
Spices 0.28 0.55 1.2% 2.1% 93.0%
Fruits 0.21 0.35 0.9% 1.3% 67.8%
Sugarcane 0.07 0.10 0.3% 0.4% 40.0%
Flowers 0.02 0.02 0.1% 0.1% 3.8%
Total 23.78 26.81 100.0% 100.0% 12.7%
Table A.2.13: Maharashtra

Oilseeds 4.15 4.28 17.9% 21.7% 3.0%
Cotton 4.19 4.12 18.1% 21.0% -1.6%
Pulses 3.95 3.51 17.0% 17.9% -11.0%
Coarse cereals 4.81 3.17 20.7% 16.1% -34.1%
Rice 1.61 1.52 6.9% 7.7% -5.5%
Sugarcane 0.94 1.08 4.1% 5.5% 15.2%
Fruits 1.57 0.70 6.7% 3.6% -55.4%
Vegetables 0.73 0.68 3.1% 3.5% -5.9%
Wheat 1.10 0.57 4.7% 2.9% -48.3%
Spices 0.12 0.04 0.5% 0.2% -71.0%
Flowers 0.02 0.01 0.1% 0.0% -76.2%
Jute and Mesta 0.02 NA 0.1% NA NA
Total 23.20 19.68 100.0% 100.0% -15.2%
- 121 -
STATE-WISE
Table A.2.14: Odisha

% change in area
Rice 4.18 3.83 64.2% 50.5% -8.3%
Pulses 0.78 1.73 12.0% 22.8% 121.7%
Vegetables 0.66 0.64 10.2% 8.4% -3.8%
Oilseeds 0.22 0.49 3.4% 6.4% 121.0%
Coarse cereals 0.18 0.40 2.8% 5.3% 124.9%
Fruits 0.34 0.33 5.2% 4.3% -2.9%
Spices 0.12 0.15 1.9% 2.0% 20.6%
Sugarcane 0.01 0.01 0.2% 0.2% 20.0%
Jute and Mesta 0.01 0.01 0.2% 0.1% 0.0%
Flowers 0.01 0.01 0.1% 0.1% -11.2%
Total 6.51 7.60 100.0% 100.00% 16.7%
Table A.2.15: Punjab

Wheat 3.51 3.50 47.6% 46.8% -0.2%
Rice 2.85 3.04 38.6% 40.7% 6.7%
Cotton 0.45 0.28 6.1% 3.8% -36.9%
Vegetables 0.19 0.26 2.5% 3.5% 39.7%
Coarse cereals 0.14 0.14 1.9% 1.8% -3.6%
Fruits 0.08 0.09 1.1% 1.3% 13.6%
Sugarcane 0.09 0.09 1.2% 1.2% -4.4%
Oilseeds 0.05 0.05 0.7% 0.6% -10.0%
Flowers 0.02 0.03 0.3% 0.4% 66.9%
Total 7.38 7.48 100.0% 100.0% 1.4%
- 122 -
STATE-WISE
Table A.2.16: Rajasthan

Coarse cereals 6.26 5.76 31.4% 28.4% -8.0%
Pulses 4.20 5.14 21.1% 25.4% 22.3%
Oilseeds 5.27 4.69 26.4% 23.1% -11.1%
Wheat 2.81 2.83 14.1% 13.9% 0.5%
Spices 0.82 1.12 4.1% 5.5% 36.9%
Cotton 0.39 0.50 2.0% 2.4% 27.2%
Vegetables 0.14 0.17 0.7% 0.8% 17.2%
Fruits 0.04 0.06 0.2% 0.3% 40.9%
Total 19.94 20.26 100.0% 100.0% 1.6%
Table A.2.17: Tamil Nadu

Rice 1.73 1.35 33.5% 34.2% -21.7%
Pulses 0.82 0.76 15.9% 19.3% -6.8%
Coarse cereals 0.90 0.66 17.4% 16.8% -26.2%
Oilseeds 0.41 0.34 7.9% 8.5% -18.2%
Fruits 0.34 0.30 6.5% 7.5% -11.9%
Vegetables 0.28 0.24 5.5% 6.2% -13.9%
Sugarcane 0.31 0.18 6.0% 4.6% -41.0%
Spices 0.17 0.06 3.2% 1.6% -62.9%
Flowers 0.06 0.04 1.1% 0.9% -35.9%
Cotton 0.15 0.02 2.9% 0.5% -85.5%
Total 5.16 3.96 100.0% 100.0% -23.3%
- 123 -
STATE-WISE
Table A.2.18: Uttar Pradesh

Wheat 9.84 9.91 39.7% 36.5% 0.7%
Rice 5.98 5.97 24.1% 22.0% -0.1%
Pulses 2.31 2.72 9.3% 10.0% 17.7%
Sugarcane 2.23 2.39 9.0% 8.8% 7.2%
Coarse cereals 2.02 2.06 8.1% 7.6% 2.1%
Oilseeds 1.11 1.72 4.5% 6.3% 55.3%
Vegetables 0.83 1.48 3.4% 5.4% 77.8%
Fruits 0.41 0.48 1.6% 1.8% 18.2%
Spices 0.06 0.40 0.2% 1.5% 544.3%
Flowers 0.02 0.02 0.1% 0.1% 28.5%
Total 24.8 27.2 100.0% 100.0% 9.5%
Table A.2.19: Uttarakhand

Wheat 0.35 0.35 36.9% 36.3% -1.4%
Coarse cereals 0.23 0.22 24.3% 23.1% -4.3%
Fruits 0.17 0.18 18.1% 18.8% 4.1%
Vegetables 0.09 0.10 9.3% 10.5% 13.3%
Sugarcane 0.10 0.09 10.5% 9.8% -7.0%
Spices 0.01 0.01 0.9% 1.6% 82.7%
Total 0.95 0.95 100.0% 100.0% 0.4%
Source: Department of Agriculture and Cooperation; IMA
analysis
- 124 -
STATE-WISE
Table A.2.20: West Bengal

% change in area
Rice 5.51 4.79 58.9% 55.9% -13.1%
Vegetables 1.36 1.46 14.6% 17.1% 7.4%
Oilseeds 0.77 0.64 8.2% 7.4% -17.4%
Jute and
Mesta 0.57 0.50 6.1% 5.9% -12.1%
Pulses 0.29 0.45 3.1% 5.3% 55.0%
Fruits 0.24 0.27 2.6% 3.1% 10.9%
Coarse cereals 0.14 0.18 1.5% 2.1% 27.4%
Spices 0.10 0.12 1.0% 1.4% 24.6%
Wheat 0.33 0.11 3.5% 1.2% -68.2%
Flowers 0.02 0.03 0.3% 0.3% 11.1%
Sugarcane 0.02 0.02 0.2% 0.2% -5.0%
Total 9.36 8.56 100.0% 100.0% -8.6%
- 125 -
II. PRODUCTION, YIELD AND
Table A.3.1: Rice production, area and yield

Production (million tonnes) Area (million ha) Yield (Kg/ha)
West Bengal 15.75 5.46 2,883
Uttar Pradesh 12.51 5.87 2,132
Punjab 11.82 2.98 3,974
Tamil Nadu 7.98 2.04 3,918
Andhra Pradesh 7.49 2.16 3,466
Bihar 6.49 3.21 2,019
Chhattisgarh 6.09 3.82 1,597
Odisha 5.88 3.94 1,491
Assam 5.14 2.47 2,084
Haryana 4.15 1.35 3,061
Madhya Pradesh 3.58 2.02 1,768
Telangana 2.96 1.05 2,830
Jharkhand 2.88 1.59 1,814
Karnataka 2.70 1.06 2,547
Maharashtra 2.63 1.53 1,714
Gujarat 1.67 0.76 2,189
Kerala 0.56 0.20 2,834
Total 100.28 41.51 2,416
- 126 -
Table A.3.2: Wheat production, area and yield

Bihar 4.75 9.64 2,205
Gujarat 2.48 5.91 2,919

Haryana 11.35 3.50 4,407
Himachal Pradesh 0.68 2.58 1,968
Jammu & Kashmir 0.50 3.11 1,550
Maharashtra 0.76 0.85 1,205
Punjab 16.08 2.15 4,596
Rajasthan 9.87 0.63 3,175
Uttarakhand 0.76 0.34 2,225
West Bengal 0.96 0.32 2,825
Total 92.75 29.72 3,121
Table A.3.3: Coarse cereal production, area and yield

Rajasthan 4.70 4.64 1,014
Karnataka 2.43 1.34 1,814
Tamil Nadu 1.01 0.27 3,759
Maharashtra 1.76 2.48 710
Bihar 0.03 0.01 3,337
Telangana 0.08 0.03 2,766
Gujarat 0.98 0.60 1,632
Haryana 0.84 0.47 1,781
West Bengal 0.02 0.00 4,305
Himachal Pradesh 0.04 0.02 2,194
Jammu & Kashmir 0.02 0.01 1,455
Punjab 0.04 0.01 3,678
Total 15.79 11.86 1,332
- 127 -
Table A.3.4: Pulses production, area and yield

Madhya Pradesh 5.12 5.77 888
Rajasthan 1.95 3.87 504
Karnataka 1.39 2.78 500
Andhra Pradesh 1.23 1.45 846
Uttar Pradesh 1.22 1.87 654
Tamil Nadu 0.57 0.92 619
Jharkhand 0.55 0.60 920
Odisha 0.55 1.29 428
Gujarat 0.53 0.60 890
Chhattisgarh 0.51 0.84 608
Bihar 0.43 0.51 847
West Bengal 0.33 0.41 800
Telangana 0.24 0.47 509
Total 16.03 24.72 648
Table A.3.5: Oil seed production, area and yield

Rajasthan 5.71 4.83 1,181
Gujarat 4.10 2.56 1,603
West Bengal 0.94 0.80 1,181
Tamil Nadu 0.92 0.41 2,230
Karnataka 0.87 1.34 651
Uttar Pradesh 0.86 1.29 668
Haryana 0.85 0.53 1,608
Telangana 0.50 0.45 1,105
Assam 0.19 0.31 605
Bihar 0.13 0.12 1,076
Odisha 0.11 0.17 642
Total 24.67 25.26 977
- 128 -
Table A.3.6: Cotton production, area and yield

Gujarat 9.70 2.72 606
Haryana 1.35 0.60 381
Karnataka 1.60 0.63 430
Punjab 0.45 0.34 226
Rajasthan 1.32 0.45 501
Telangana 3.86 0.14 370
Tamil Nadu 0.37 1.77 442
Total 29.65 11.70 2,535
Table A.3.7: Sugarcane production, area and yield

Uttar Pradesh 145.39 2.17 67,029
Maharashtra 72.26 0.99 73,207
Karnataka 38.48 0.45 85,500
Tamil Nadu 26.50 0.26 102,998
Bihar 14.68 0.25 59,024
Gujarat 12.96 0.18 70,820
Punjab 6.58 0.09 73,067
Haryana 6.51 0.09 70,000
Uttarakhand 5.98 0.10 61,608
Telangana 2.42 0.04 69,000
West Bengal 2.08 0.02 119,232
Assam 1.04 0.03 35,931
Odisha 0.58 0.01 64,415
Total 349.8 4.89 71,523
- 129 -
Table A.3.8: Milk production

State Production ('000 tonnes)
Uttar Pradesh 29,052
Rajasthan 22,427
Madhya Pradesh 14,713
Andhra Pradesh 13,725
Gujarat 13,569
Punjab 11,855
Maharashtra 11,102
Haryana 9,809
Bihar 9,242
Tamil Nadu 7,742
Karnataka 7,137
West Bengal 5,389
Telangana 4,965
Kerala 2,576
Jammu & Kashmir 2,460
Orissa 2,088
Jharkhand 2,016
Uttarakhand 1,742
Chhattisgarh 1,469
Himachal Pradesh 1,392
Assam 872
Delhi 279
Tripura 174
Meghalaya 85
Manipur 82
Nagaland 74
Sikkim 59
Goa 55
Arunachal Pradesh 54
Pondicherry 49
Chandigarh 42
Mizoram 25
Andaman & Nicobar Islands 17
Dadra and Nagar Haveli 8
Lakshadweep 3
Daman & Diu 1
All India 176,347
Source: National Dairy Development Board, IMA Analysis
- 130 -
III. FARM POWER AVAILABILITY
III. AND
TAccess tSdfasdfasdf
PRODUCTIVITY ACROSS STATES, 2016
Table A.4.1: Farm power availability and productivity, 2016-17

State Power availability Food grain production
(kwh/ha) (tonnes/ha)
Andhra Pradesh 2.14 3.5
Arunachal Pradesh 0.46 1.5
Assam 0.99 2.1
Bihar 2.80 2.3
Chhattisgarh 1.25 1.5
Gujarat 2.57 2.2
Haryana 4.32 3.7
Himachal Pradesh 1.14 2.1
Jammu & Kashmir 1.12 1.9
Jharkhand 1.21 1.7
Karnataka 2.14 2.1
Kerala 1.10 2.8
Madhya Pradesh 1.50 2.6
Maharashtra 1.19 0.9
Manipur 0.50 1.5
Meghalaya 0.29 2.6
Mizoram 0.48 1.6
Nagaland 0.50 1.7
Odisha 1.65 1.5
Punjab 4.40 4.3
Rajasthan 1.37 1.7
Sikkim 0.53 1.6
Tamil Nadu 2.91 3.8
Telangana 2.89 2.9
Tripura 1.32 2.9
Uttar Pradesh 2.84 2.4
Uttarakhand 2.64 2.1
West Bengal 1.87 2.9
All India 2.03 2.4
Source: Department of Agriculture, Cooperation & Farmers Welfare, IMA Analysis
- 131 -
IV. COST VS VALUE OF OUTPUT:
BY CROP AND STATES, 2015-16
Chart A.5.1: Economics of paddy cultivation 2015-16

Cost (A2+FL) Value of output Margin (RHS)
Cost/value (Rs '000/ha)
120 80
70
Margin (Rs '000/ha)

100
60
80 50
60 40
40 30
20
20 10
0 -
West Bengal
Orissa
Chhatisgarh
Bihar
Kerala
Karnataka
Haryana
Assam
Tamil Nadu
Punjab
All India
Jharkhand
Uttarakhand
Andhra Pradesh
Madhya Pradesh
Uttar Pradesh
Source: Ministry of Agriculture, IMA analysis
Chart A.5.2: Paddy - Changing cost structures

Human labour Fertiliser and manure Machinery Animal labour Seed Irrigation charges Other charges Insecticides
2005-06 49.0% 14.8% 11.0% 9.1% 6.2% 5.1% Rs 16,716
2015-16 52.4% 12.4% 13.5% 5.2% 6.2% 4.9% Rs 34,017
0% 20% 40% 60% 80% 100%

Source: Ministry of Agriculture, IMA analysis; Values represent weighted all-India averages on an A2+FL
Chart A.5.1: Ecomomics of wheat cultivation 2015-16


80 50
70
Margin (Rs '000/ha)
60 40
50 30
40 20
30
20 10
10 0
0
-10 -10
Uttar Pradesh
Gujarat
Bihar
Rajasthan
Haryana
All India
Punjab
Jharkhand
Uttarakhand
Himachal Pradesh
Madhya Pradesh
- 132 -
Chart A.5.4: Wheat - Changing cost structures

Human labour Machinery Fertiliser and manure Irrigation charges
Seed Animal labour Other charges Insecticides
2005-06 29.1% 19.5% 16.3% 13.3% 10.2% 7.3% Rs 13,531
2015-16 37.0% 20.3% 14.2% 10.9% 10.2% 3.7%

Rs 32,706
0% 20% 40% 60% 80% 100%

basis
Chart A.5.5: Economies of sugarane cultivation 2015-16


300 140
Margin (Rs '000/ha)

250 120
200 100
80
150
60
100 40
50 20
0 0
Karnataka
Tamil Nadu
All India
Uttarakhand
Andhra Pradesh
Maharashtra
Uttar Pradesh
Chart A.5.6: Sugarcane - Changing cost structures

Human Labour Fertiliser & Manure Seed Irrigation charges
Other charges Machinery Animal Labour Insecticides
2005-06 46.4% 15.3% 14.1% 9.4% 5.1% 4.9% Rs 31,441
2015-16 57.8% 13.4% 7.7% 7.7% 4.8% 5.9% Rs 81,646
0% 20% 40% 60% 80% 100%

basis
- 133 -
Chart A.5.7: Economies of cotton cultivation 2015-16

Cost/Value (Rs '000/ha)
120 60
100 50
Margin (Rs '000/ha)

80 40
60 30
40 20
20 10
0 0
-20 -10
-40 -20
-60 -30
Madhya Pradesh
Gujarat
Tamil Nadu
Rajasthan
All India
Punjab
Karnataka
Haryana
Andhra Pradesh
Maharashtra
Chart A.5.8: Cotton - Changing cost structures

Human labour Fertiliser and manure Seed Animal labour Machinery Insecticides Irrigation charges Other charges
2005-06 43.0% 12.4% 11.7% 9.3% 8.4% 7.8%

Rs 17,911
2015-16 52.7% 12.9% 7.8% 6.1% 7.7% 6.7%

Rs 54,194
0% 20% 40% 60% 80% 100%

basis
Chart A.5.9: Economies of maize cultivation 2015-16

100 50
80 40
Margin (Rs '000/ha)
60 30
40 20
20 10
0 -
-20 (10)
-40 (20)
-60 (30)
Bihar
Karnataka
Rajasthan
All India
Jharkhand
Himachal Pradesh
Andhra Pradesh
Madhya Pradesh
Uttar Pradesh
- 134 -
Chart A.5.10: Maize - Changing cost structures

Human labour Fertiliser and manure Machinery Animal labour Seed Irrigation charges Other charges Insecticides
2005-06 46.0% 17.0% 11.9% 9.9% 7.0% 5.2% Rs 9,289
2015-16 51.1% 13.9% 12.7% 6.3% 8.5% 4.8% Rs 32,757
0% 20% 40% 60% 80% 100%

basis
Chart A.5.11: Economics of gram cultivation 2015-16
Margin (Rs '000/ha)

90 70
80 60
70 50
60
50 40
40 30
30 20
20
10 10
0 -
Bihar
Chhatisgarh
All India
Rajasthan
Jharkhand
Maharashtra
Madhya Pradesh
Uttar Pradesh
Chart A.5.12: Gram - Changing cost structures

Human labour Seed Machinery Animal labour Fertiliser and manure Irrigation charges Insecticides Other charges
2005-06 31.2% 23.4% 15.0% 11.2% 6.7% 6.5% Rs 6,412
2015-16 37.6% 19.4% 17.9% 6.0% 8.1% 5.0% Rs 23,452
0% 20% 40% 60% 80% 100%

basis
- 135 -
IMA India
107, Time Square,
1st Floor, Sushant Lok - I, Block B,
Gurgaon - 122002
INDIA
Tel: +91 124 459 120
www.ima-india.com

IMA - Indian Agri - Opportunities and Challenges

Uploaded by

Copyright:

Available Formats

IMA - Indian Agri - Opportunities and Challenges

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

IMA - Indian Agri - Opportunities and Challenges

Uploaded by

Copyright:

Available Formats

India’s Agriculture Sector:

Opportunities and Challenges

I. Introduction and Overview Page 1

II. Global Mega-Trends in Agriculture Page 7

III. Output and Yield Page 20

IV. Moving From Constraint to

 1: The Input Side Page 34

o A: Land Fragmentation Page 35

o B: Water and Irrigation Page 41

o C: Farm Mechanisation Page 48

o D: Soil Health Page 54

o F: Rising Input Costs Page 65

 2: Credit and Insurance Page 69

o A: Access to Credit Page 70

 3: Market Linkages Page 84

V. Looking Ahead Page 102

ANNEXURES Page 109

While the number of cultivators has

consequently decreased in size. Today, 16

landholdings. This not only pushes up the

Table 1: Area under major crops, 2006-07 and 2016-17

A shifting farm workforce

Between 2001 and 2016, the share of India’s 238.2 268.3

Credit and insurance:

AGRICULTURE’S SHARE OF GDP: FALLING

Chart 1: Agriculture's share in GDP (%)

Chart 2: Employment in agriculture (% of total employment)

Africa Americas Asia Europe Oceania

CHANGING PATTERNS OF FOOD PRODUCTION, DEMAND AND TRADE

The production side: driven by efficiency gains

Chart 3: Regional Trends in Production

Demand growth: likely to flatten

Table 1: Per capita food consumption: Cereals (kg/cap)

Chart 4: Regional contribution to incremental food demand

OECD Sub-Saharan Africa India China MENA Rest of World

Dairy: Driven by India

Table 2: Per capita food consumption: Dairy (kg/cap)

Meat and fish: slow global convergence

Table 3: Per capita food consumption: Meat (kg/cap)

Sugar and vegetable oil: Consumption rising despite health concerns

Non-food: Feed and fuel rising fast

The demand for cereals, vegetable oil and

Agriculture Trade: Slowing

Chart 5: Growth in trade volumes, by commodity 2008-17 2018-27

Skim milk powder

Whole milk powder

Source: OECD Agricultural Statistics, FAO

Chart 6: Agricultural trade balances by region

AGRICULTURAL INPUTS: FERTILISERS, PESTICIDES AND WATER

Chart 9: Nitrogenous fertilisers usage, per hectare of land

Africa Americas Asia Ocenia Europe India China

Chart 7: Fertiliser usage (2016) Chart 8: Global fertiliser usage per

Source: FAO Source: FAO

Source: FAO Source: FAO

FARM MECHANISATION AND TECHNOLOGICAL CHANGE

AGRICULTURE 4.0: KEY TRENDS

Chart 13: Levels of farm Chart 14: Tractor sales

Western Europe 95%