WP-2018-026

TRANSFORMATION OF INDIAN AGRICULTURE? Growth,

Inclusiveness and Sustainability

S. Mahendra Dev

Indira Gandhi Institute of Development Research, Mumbai

December 2018
 TRANSFORMATION OF INDIAN AGRICULTURE? Growth,
Inclusiveness and Sustainability

S. Mahendra Dev

Email(corresponding author): [email protected]

Abstract
There are three goals of agricultural development in India. These are: (a) achieving high growth by
raising productivity; (b) inclusiveness by focusing on lagging regions, small farmers and women; and
(c) sustainability of agriculture. In this paper, we will address two questions:
(a) How far India progressed in the three goals of agriculture in recent decades?
(b) What are the policies and reforms needed to transform Indian agriculture in the next decade?
This paper provides 10 conclusions on the policies needed to achieve three goals of agricultural
development in India. These are : (1) There is a need for change in the narrative in the new context; (2)
Global trends and macro policies are equally important for Indian agriculture; (3) We have to walk on
two legs both agriculture and non-agriculture. There is a need to shift from cereal based agriculture to
non-cereal based crops and allied activities; (4) Doubling farm income also has to focus non-farm
sector, look at different size classes and environmental considerations; (5) Remunerative prices and
market reforms can enhances farmers' incomes; (6) The country has to go beyond harvest and give
freedom for farmers on markets and exports; (7) Do not foreget basics like water and technology; (8)
Inclusiveness is needed for board based growth and equity. Focus on small and maginal farmers,
women, youth, rainfed areas, Eastern and other lagging regions, social groups like SC and ST farmers;
(9) Measures have to be taken to take care of impacs of climate change and improving resilience in
agriculture and sustainability; (10) Strengthening institutions and governance is crucial for achieving
growth, equality and sustainability of agriculture.

Keywords: Agricultural growth, inclusiveness, sustainability, prices, water, technology, small

farmers, nutrition and climate change

JEL Code: Q10, Q11, Q18, Q20

 1

TRANSFORMATION OF INDIAN AGRICULTURE?

Growth, Inclusiveness and Sustainability1

S. Mahendra Dev
Director and Vice Chancellor, IGIDR, Mumbai

Abstract
There are three goals of agricultural development in India. These are: (a) achieving high
growth by raising productivity; (b) inclusiveness by focusing on lagging regions, small
farmers and women; and (c) sustainability of agriculture. In this paper, we will address two
questions:
(a) How far India progressed in the three goals of agriculture in recent decades?
(b) What are the policies and reforms needed to transform Indian agriculture in the next
decade?
This paper provides 10 conclusions on the policies needed to achieve three goals of
agricultural development in India. These are : (1) There is a need for change in the narrative
in the new context; (2) Global trends and macro policies are equally important for Indian
agriculture; (3) We have to walk on two legs both agriculture and non-agriculture. There is a
need to shift from cereal based agriculture to non-cereal based crops and allied activities; (4)
Doubling farm income also has to focus non-farm sector, look at different size classes and
environmental considerations; (5) Remunerative prices and market reforms can enhances
farmers’ incomes; (6) The country has to go beyond harvest and give freedom for farmers on
markets and exports; (7) Do not foreget basics like water and technology; (8) Inclusiveness is
needed for board based growth and equity. Focus on small and maginal farmers, women,
youth, rainfed areas, Eastern and other lagging regions, social groups like SC and ST farmers;
(9) Measures have to be taken to take care of impacs of climate change and improving
resilience in agriculture and sustainability; (10) Strengthening institutions and governance is
crucial for achieving growth, equality and sustainability of agriculture.

Key words: Agricultural growth, inclusiveness, sustainability, prices, water, technology,

small farmers, nutrition and climate change.

1
Presidential Address delivered at the 78th annual conference of the Indian Society of Agricultural Economics,
New Delhi, 1-3 November 2018.
 2

TRANSFORMATION OF INDIAN AGRICULTURE?

Growth, Inclusiveness and Sustainability

S. Mahendra Dev
Director and Vice Chancellor, IGIDR, Mumbai

1. INTRODUCTION

Agricultural development is important for raising the incomes of population dependent on

agriculture and growth of non-agricultural sector. There are significant linkages between farm
and non-farm sectors. The theoy of ‘unbalanced growth’ discusses sectoral linkages and also
indicates that agriculture could not become a leading sector due to its weak backward
linkages (Hirschman, 1958). In contrast to this view, it is emphasized that agricultural
development is essential for improving industrialization (Kalecki,1960 and Kuznets,1968.
Another view is that increase in terms of trade in agriculture would reduce profits for industry
(Lewis, 1954). Against this view, it was pointed out that rise in terms of trade for agriculture
would improve demand for industrialisation (Kaldor, 1957). The importance of agriculture on
non-agricultural sector growth is significant (Johsnston and Mellor,1961 and Mellor,1976).
Later, the importance of structure change within agriculture and the role of rural non-farm
sector has also been emphasised (Mellor, 1976; Liedholm and Kilby, 1989; Ranis and
Stewart, 1993)2.

Generally, the share of agriculture in total employment falls much more slowly than its share
in GDP. As a result, labour productivity in agriculture falls behind that of non-agricultural
sector. Although employment elasticity of agriculture declines over time, the absolute size of
the rural labour force continues till economies attain higher levels of transformation. Labour
productivity in agriculture can be increased with structural change in agriculture,
development of rural non-farm sector or migration to urban areas. Many countries fail to
manage this transformation at an adequate rate and face political problems with low incomes
of the agricultural population (Rosegrant and Hazell, 2000).

Agriculture has significant linkages to food and nutritional security (IFPRI, 2015). This
sector also plays an important role in adaptation and mitigation strategies relating to climate
change (IPCC, 2001 and 2007). Similarly, agriculture development is crucial for reduction in
poverty (World Bank, 2008). Thus, farm sector is also crucial for inclusiveness and
sustainability. At global level, a goal on agriculture is included in Sustainable Development
Goals (SDGs). Goal 2 of SDGs includes targets on agricultural productivity and sustainability
as agriculture is also critical to achieve many other SDGs relating to hunger, malnutrition,
climate change, gender equity, natural resources protection and jobs. There are also initiatives

2
Recent book by Rodrik et al (2017) examined structural change and focused on change in terms of shifting
from low productive to high productive sectors and change in terms of raising human capital.
 3

like Compact 2025 which aims to end hunger and undernutrition by 20253. This goal has to
be attained five years before targeted achievements of SDGs in 2030. One of the questions
this initiative asks is: How can we achieve the SDGs when people are hungry?

In the case of India, agricultural sector plays a pivotal role in the economy. India achieved
self-sufficiency in foodgrains particularly in rice and wheat due to green revolution. But,
soon it was recognised that we have to move beyond green revolution as it has neglected
rainfed areas, nutrition crops like millets, non-cereals and resource poor farmers. It has also
created ecological and environmental sustainability problems. It is well known that although
its contribution to gross domestic product (GDP) is now around one seventh, agriculture
provides employment to 48 per cent of the Indian workforce. There are also substantial
linkages between agriculture and non-agriculture sector4. In the present context, there is a
need to focus much more on agriculture due to low agricultural growth (2.5% per annum in
the last four years) and agrarian distress in terms of low agricultural prices and farm incomes.
Famers’ suicides in some parts of India are another issue relating to agriculture. Low farm
incomes led to famers’ agitations in many states of India. Agriculture sector is already facing
several problems relating to sustainability, stagnant yields, water logging, soil erosion,
volatility in prices, natural calamities, and small size of the farms.

As discussed above, agriculture has to focus on growth, equity and sustainability. India also
has three broader goals of agricultural development5. These are: (a) achieve 4% growth in
agriculture and raise incomes, increasing productivity (land, labor, total factor), structural
transformation within agriculture and farm to non-farm sector; (b) second goal is
inclusiveness by focusing on small and marginal farmers, lagging regions, Eastern India,
rainfed areas, disadvantaged groups, women, contribution to poverty reduction and food and
nutrition security; (c) third goal is to maintain sustainability of agriculture by focusing on
environmental concerns, climate change and resilience. It may be noted that all these three
goals are interconnected.

Narrative of Indian agriculture has been changing in recent years. Some of the changing
factors are: urbanization, globalization/de-globalisation, tariff wars, diversification within
agriculture and fast growing rural non-farm sector, developments in value chains, start-ups,
technological changes including IT, developments in climate change, and more emphasis on
sustainability than earlier6. There is a need for transformation of Indian agriculture in the
changing environment.

3
Compact2025 is an initiative for ending hunger and undernutrition by 2025. By building a knowledge base,
promoting innovation, and bringing stakeholders together, Compact2025 helps countries develop, scale up, and
communicate policies and programmes to accelerate progress. For more details on Compact 2025, see their
website http://www.compact2025.org/
4
On linkages between agriculture and non-agriculture in Indai, see Rangarajan, 1982; Mythili and Harak, 2013
and Dev (2018).
5
On growth, equity and sustainability in Indian agriculture, see various Presidential addresses delivered at the
annual conferences of the Indian Society of Agricultural Economics (ISAE, ed., 2016)
6
See Various plan documents upto 12th Five Year Plan and reports of Niti Ayog
 4

The crop production has significantly increased in the last decade. Foodgrains production was
275.7 million tonnes while pulses production was 24 million tonnes in 2017-18. India also
witnessed horticulture revolution and production was 305 million tonnes in 2016-17. The
production of fruits and vegetables was 93 million tonnes and 178 million tonnes respectively
in the same year. The present government, apart from other things, is rightly focusing on
enhancing farmers’ incomes rather than just increasing production. It wants to double the
farm incomes by the year 2022. In this lecture, we examine the strategies and reforms which
can move towards achieving the three goals of agricultural development.

Against this background, in this paper, we will address two questions:

(c) How far India progressed in the three goals of agriculture in recent decades?
(d) What are the policies and reforms needed to transform Indian agriculture in the next
decade?
The paper is organised as follows. Developments in global agriculture also influence growth
and sustainability of Indian agriculture. Therefore, we discuss in Section 2, changes in global
agriculture in recent years. Section 3 puts together the performance and issues in terms of
growth, inclusiveness and sustainability of agriculture in India. Section 4 provides a blueprint
on the policies and reforms needed to improve farm incomes, and three goals of agricultural
development. The last Section provides conclusions.

2. GLOBAL FOOD AND AGRICULTURE: NEW CONTEXT AND CHALLENGES

There have been significant changes in global food and agriculture in the last few decades.
Economic growth seem to be conveging across countries. This has implications for
convergence of food demand, food production and agricultural policies and trade7.

There are many challenges at global level such as climate change, urbanization, migration,
technologies like automation, increased inequality, changes in political factors like the US
policies, Brexit, and protectionism. These factors and anti-globalisation is the changing
context for food systems and agriculture.

There are geo-political challenges of uncertainty due to US policies. Recent anti-globalisation

measures like threats to NAFTA, TPP (trans pacific partnership) and, tariffs by the US and
China may have adverse impact on trade further. The US also does not respect the Paris
Agreement on climate change. These actions by the US lead to shift away from multilateral
and international agreements. The US started systematically undermining the WTO. It is now
questioning the very basic principles on which the WTO is founded. The rules-based system
that drives WTO through the dispute settlement mechanism -- so far the only arm of
multilateral body that is functioning well -- is now being threatened by the US. Trade wars
and anti-globalisation is going to hurt trade further. International trade will have benefits and
7
See Martin (2018). On agriculture and economic development through global lens, see Pingali (2007)
 5

negative effects. The risks associated with trade opening –including rising inequality, health
impact, increasing energy use, and environmental damage should be addressed with policies
directly target the source of the problem rather than hampering trade (IFPRI, 2018)8.

Another challenge is high and increasing inequality. Income of the top 1 per cent in the world
has grown twice as much as that of the bottom 50 per cent. Inequality increased both in
developed and developing countries. It will have significant implications for food and
agriculture9. Women, youth, small farmers and other vulnerable groups have to be protected
in this sector. At the economy level, the key source of inequality at global level has been
technological change favouring higher skills. In Western Europe and the USA, technological
progress has also translated into reduction of middle class jobs, a phenomenon known as
polarisation (IMF, 2017). One global trend is automation’ and ‘digitization’ and other new
technologies based on Artificial Intelligence (AI) which can take away the routine jobs
outsourced to labor abundant economies.

Urbanisation and climate change are other global challenges. The urban share of global
population is likely to increase from 55% in 2018 to 68% by 205010. It will have implications
for agriculture supply, demand, food markets and value chains. Climate change is real and
growing threat to food and agriculture which have to change to adapt to and mitigate the
impacts of climate change.

Major challenge of food systems11 is to tackle the problems of hunger and triple burden of
malnutrition - undernutrition, micronutrient deficiencies, and obesity. Around 815 million
suffer from undernourishment, 155 million children under five are affected by stunting, two
billion people lack micro nutrients, two billion adults suffer from overweight and obesity
(IFPRI, 2018). As food systems are increasingly globalized, the governance issues relating to
food and nutrition security are becoming complex. Hunger and the triple burden of
malnutrition has to be addressed at both country level as well as global level. So far the
global governance has been weak. There are platforms such as UN organisations for example
UN Committee on world food security, FAO, informal coordination mechanism among
countries like G7 and G20. But they work in silos. Therefore, designing a governing platform
for intergovernmental coordination is needed. There are also suggestions of having
‘International Panel on Food, nutrition and agriculture’ similar to panel on climate change12.
But, the experience of coordination on climate change is a mixed one. Climate change is one
issue where global governance is important. It is a public good. But, recent actions by the US
show that there are challenges for climate change issues.

8
Also see Fan (2018)
9
On inequalities and agriculture, see von Braun (2005) and Otsuka (2013)
10
See IFPRI (2017)
11
“Food systems encompass the entire range of activities involved in the production, processing,
marketing,consumption and disposal of goods that originate from agriculture, forestry or fisheries, including the
inputs needed and the outputs generated at each of these steps” (p.3. FAO, 2013)
12
See von Braun (2018)
 6

What are the likely trends in food and agriculture markets in the next ten years? OECD-FAO
Agricultural Outlook 2018 says that the weakening of demand growth is expected to persist
in the next decade. Although rate of population declines, it will be the main driver of
consumption growth for most commodities. There are increasing uncertainties with respect to
agricultural trade policies and concerns about the possibility of rising protectionism globally.
The demand for feed will continue to outpace food demand as livestock production
intensifies. China continues to have larger share of additional feed demand in the next decade
also. Per capita consumption of many commodities and real agricultural prices are expected
to be flat at a global level (OECD-FAO, 2018)13.

Global population is projected to reach almost 10 billion by the middle of the century. It is
known that current agri-food systems are capable of producing enough but doing in an
inclusive and sustainable manner will require major transformations. The growing demand
for food has to be achieved by ensuring that the use of the natural resource base is
sustainable, while containing green house gas emissions and mitigating the impacts of
climate change (vos and Bellu` (2018).

3. AGRICULTURAL GROWTH, EQUITY AND SUSTAINABILITY IN INDIA:

PERFORMANCE AND ISSUES

3.1. Agricultural Growth and Structural Change

It is known that the decline in the share of agricultural workers in total workers has been
slower than the decline in the share of agriculture in the GDP. There is a need for structural
change in both output and employment of agriculture.

Agricultural GDP + : It may be noted that agricultural GDP refers to agriculture and allied
activities. But, if we extend this to throughout the value chains which includes food and agro
processing, the share of agriculture GDP will be much higher and has significant linkages
with other sectors14. Therefore, we can have agriculture GDP+ if we extend the activities and
its share in overall GDP would be much higher.

Growth in Agricultural GDP: In the decade of 1960s, agricultural growth rate was around 1%
per annum (Table 1). In other periods, the growth rates range from 2.2% to 2.7% per annum.
In the post-reform period, growth rate of services was more than 8% per annum. Industry also
recorded 7 to 8% during 2004-05 to 2017-18. The highest growth rate of GDP from
agriculture was 3.7% per annum during 2004-05 to 2013-1415. The growth rate in agriculture
in the period 2009-10 to 2013-14 was 4.3% per annum. This is one of the highest growth
rates recoded in independent India.

13
In this report, the projections cover consumption, production, stocks, trade and prices for 25 agricultural
products for the period 2018 to 2027.
14
On secondary agriculture, see Chengappa (2016)
15
In Table 1, growth rate includes the year 2014-15 which is part of NDA’s period. Even if we exclude 2014-
15, the growth rate is more or less same.
 7

Table 1. Growth Rates in Agriculture , Industry and Services(%)

Periods Growth Rates of GDP (%)
Agriculture Industry Services
1960-61 to 68-69 1.04 5.05 5.03
1968-69 to 75-76 2.24 3.92 3.37
1975-76 to 88-89 2.47 5.53 5.40
1988-89 to 95-96 2.76 5.90 6.15
1995-96 to 2004-05 2.28 4.87 7.86
2004-05 to 2014-15 3.72 8.44 8.96
2014-15 to 2017-18 2.55 7.15 8.71
Source: GOI (2017) upto 2014-15; Calculated from National Accounts Statistics for the period 2014-15 to 2017-
18.

The growth rate in agricultural GDP was 2.5% per annum in the last four years of NDA
period 2014-15 to 2017-18. To be fair to the government, the first two years had growth rates
of -0.2% and 0.7% due to drought. The growth rate in 2018-19 is expected to be around
3.2%. If we add this, the rate of growth in agricultural GDP would be 2.7% per annum for the
five year period 2014-15 to 2018-19.

Volatility in agricultural production: One of the problems in agriculture is volatility in GDP

and production. However, the coefficient of variation has declined from 2.76% during 1961-
1988, to 1.87% during 1988-2004 and to 0.75% during 2004-2014 (Table 2). It shows that
volatility in agricultural growth has been declining and it was low in the last decade.
Variability in pulses was very high at 20% and 5% for cereals during 1990-2004. But it
declined drastically in the decade 2005-2014. In other words, resilience to rainfall has been
rising for Indian agriculture.

Table 2. Volatility in Agricultural GDP Growth: All India

Years Coefficient of
Variation (%)
1961-1988 2.76
1988-2004 1.87
2004-2014 0.75
Source: Economic Survey 2016-17

Table 3: Variability in Pulses and Cereal Production:

Coefficient of Variation (%)
Pulses Cereals
1951-1965 6.86 3.19
1966-1989 6.03 2.04
1990-2004 20.35 5.01
2005-2014 2.42 1.64
Source: Same as Table 2

Decline in rise of agricultural prices

Prices play an important role in raising incomes of farmers. In the last one and half years,
price rise for agriculture has declined significantly and affected the incomes of the farmers
adversely. Table 4 provides implicit price deflators for agriculture GVA and total GVA. In
2015-16 and 2016-17, inflation for agricultural GVA was higher than that of total GVA.
 8

Table 4. Implicit price deflators for Agriculture and Total GVA

Agriculture GVA Growth (%) Total GVA growth (%) Implicit price deflators
Current Constant Current Constant Agriculture Total
prices 2011-12 prices 2011-12 inflation inflation
prices prices
2015-16 5.2 0.7 8.5 7.9 4.5 0.6
2016-17 11.6 6.3 10.1 7.3 5.3 2.8
2017-18 4.5 3.4 9.7 6.5 1.1 3.2
Q1 2018-19 7.0 5.3 12.9 8.0 1.7 4.9
Source: National Accounts

However, in 2017-18 and Q1 of 2018-19, price rise for farm sector was much lower than the
rise in general price level. In 2017-18, the price rise for agriculture was only 1.1% as
compared to 3.2% for general prices. Consumer price index (CPI) also shows that inflation
for food was lower than that of general price index in the same year (Table 5). In other words,
terms of trade were moving against agriculture since 2017-1816.

Table 5. Consumer Price Index (CPI) Inflation

Year CPI , general CPI, food and beverages
2015-16 4.9 5.1
2016-17 4.5 4.4
2017-18 3.6 2.2
Source: RBI, Annual Report 2018

Changing face of agriculture and rural India: Structural change and transformation

There has been significant transformation in agriculture and rural areas. Structural change
happened at three levels: (1) diversification within agriculture sector; (2) diversification from
agriculture to allied activities like livestock and fisheries; and (3) structural change from
agriculture & allied to rural non-farm sector.

In terms of area, the share of nutri-cereals declined while the shares of oilseeds and fruits and
vegetables increased (Table 6). In the case of value of output in agriculture and allied
activities, the shares of nutri-cereals, pulses declined while the shares of fruits and vegetables,
condiments &spices, livestock and fisheries rose over time (Table 7).

Table 6. Diversification in Crop Sector

Area shares of crops to Gross Cropped Area (%)
1960-61 to 1968-69 1975-76 to 1988-89 2004-05 to 2014-15
Paddy and wheat 31.3 36.0 37.3
Nutri-cereals 25.5 19.8 12.7
Pulses 14.7 13.3 12.2
Oilseeds 9.5 10.5 13.9
Sugar 1.5 1.7 2.3
Cotton and Jute 5.8 5.0 5.9
Condiments and spices 1.0 1.2 1.5
Fruits and vegetables 1.9 3.0 6.5
Other Crops 8.8 9.5 8.0
Source: GOI (2017)

16
On terms of trade, see Dev and Rao (2015)
 9

Table 7. Share in value of production (2004-05 prices) %

Crops 1960-61 to 1968-69 1975-76 to 1988-89 2004-05 to 2014-15
Paddy and wheat 18.2 21.2 17.9
Nutri-cereals 6.9 5.0 2.7
Pulses 7.3 5.0 3.0
Oilseeds 7.1 6.3 6.7
Sugar 4.5 4.1 4.5
Cotton and Jute 2.9 2.4 3.3
Condiments and spices 1.7 1.7 2.6
Fruits and vegetables 10.6 14.7 18.8
Floriculture 0.3 0.4 0.9
All Crops 77.1 75.4 69.6
Livestock 20.1 21.4 25.8
Fisheries 2.9 3.3 4.6
Source: GOI (2017)

Table 8 provides shares in value output for year 2015-16 at 2011-12 constant prices. It
provides shares of agriculture and agriculture& allied activities separately. The share of fruits
& Vegetables in crop sector was almost equal to that of cereals in 2015-16 (Table 8). In the
case of allied activities, the shares of livestock and fisheries and forestry rose significantly
over time. In fact, the share of livestock is nearly 30% now. It may be noted that the share of
agriculture in the total agriculture & allied activities including forestry was only 58% in
2015-16.

Table 8: Diversification in Agriculture&Allied Activities: Share in Value of Output (%), 2015-16

(2011-12 prices)
Crops Share in Agriculture Share in Agri & Allied
Cereals 27.06 15.72
Oilseeds 7.73 4.49
Fibre 5.60 3.25
Fruits& Vegetables 26.64 15.30
Other crops 7.40 4.35
Others 25.80 14.99
Agriculture 100.00 58.10
Livestock -- 28.8
Forestry -- 7.90
Fisheries -- 5.16
Agriculture&Allied 100.00
Activities
Source: Calculated from National Accounts Statistics, MOSPI, GOI

There has been diversification of Indian diets away from foodgrains to high value products
like milk, meat products, vegetables and fruits17. The increasing middle-class due to rapid
urbanization, increasing per-capita income, increased participation of women in urban jobs
and impact of globalization has been largely responsible for the diet diversification in India.
High value products have caught the fancy of the expanding middle class and the result is
visible in the growing demand for hi-value processed products. Demand for non-foodgrain
items has been increasing. The expenditure elasticity for non-cereal food items is still quite
high. Per capita consumption of fruits and vegetables showed the highest growth followed by

17
On demand projections, see Kumar and Joshi (2016)
 10

edible oils18. Diversification to high value crops and allied activities is one of the important
sources for raising agricultural growth19.

Agro processing and retail trade: Food and agro processing sector has huge potential for
India in agricultural transformation. The country processes only 10 per cent of fruits and
vegetables while many other countries process 40 to 70 per cent. Several changes have been
occurring in value chains in the segments of food processing, cold chains, wholesalers, and
logistics and they impact the linkages. Similarly promotion of retail trade and foreign direct
investment in this sector will also help promoting linkages. The major change in food value
chain is emergence of supermarkets.

Changes in Rural India

The face of rural India has been changing. There has been significant rise in some rural
activities. These are : rural non-farm employment, connectivity, public employment,
expenditure on social protection like MGNREGA, the role of panchayati raj institutions,
education, migration and remittances. Rural India witnessed significant structural change in
rural work force for bothe females and males during the period 1993-94 to 2011-12 (Table 9).

Table 9. Changes in Structure of Rural workforce

Sectors Male Female
1993-94 2011-12 1993-94 2011-12
Agriculture 74.0 59.4 86.2 74.9
Manufacturing 7.0 8.2 7.1 9.8
Construction 3.2 13.0 0.8 6.6
Services 14.8 18.3 5.6 8.3
Source: NSS data on employment and unemployment surveys

Rural non-farm employment

The rural non-farm sector is being increasingly seen as an important sector in development
literature. At the all India level, the share of non-farm sector in rural areas increased from
around 19% in 1983 to 36% in 2011-12. Largest increase occurred between 2004-5 and 2011-
12. The share of rural non-farm sector for males in 2011-12 was 40% while for females it
was 25% (Dev, 2017a). It means still 75% of females in rural areas are in agriculture . First
time there was absolute decline in the number of agricultural workers after 2004-05. Entire
growth of employment in rural areas during 2004-05 and 2011-12 was due to non-farm
employment. This was an important structural break since 2004-05. There are a number of
longitudinal village surveys. A recent book by Himanshu et al (2016) provides lots of insights
on changes in village India. This volume includes village studies from different regions of
India. Village studies by Rodgers et al (2016) also indicate considerable increase in rural non-
farm employment in Bihar villages. Migration also increased significantly in Bihar.

Doubling farm income: Focus on both agriculture and rural non-farm sector
The present government is focusing on doubling farm income by 2022. This is based on the

18
This is based on NSS data on consumer expenditure
19
On diversification at regional level, see Chatterjee and Kumar (2017)
 11

thinking that we need to give importance to the welfare and prosperity of farmers rather than
just increasing agricultural production.

The Situation Assessment Surveys of NSSO show that the average monthly income of
agricultural households in current prices increased from Rs. 2115 in 2003 to Rs.6426 in 2012-
1320 (Table 10). The share of cultivation in total income is the highest at 46% in 2003 and
48% in 2013. The share of income from animals rose while that of wages and non-farm
business declined in 2013 as compared to those of 2003.

Another source of farmer’s income is the All India Rural Financial Inclusion Survey of
NABARD. This survey also provides information on income of agricultural households and
non-agricultural households for the year 2015-16. The NABARD survey is not strictly
comparable with the Situation Assessment Surveys of NSSO due to changes in definitions.
This survey shows that 35% income of agricultural households is from cultivation, 34% from
wage labour, 16% from salaries and 8% from livestock (Table 11). The share of cultivation
and livestock together was 43% in NABARD survey as compared to 60% in NSS Survey of
2013.
Table 10. Average Monthly Income of Agricultural Households in current prices: NSS Surveys 2003 and 2013
Income (in Rs) Share in total income
(%)
2003 2013 2003 2013
Cultivation 969 3081 45.8 47.9
Animals 91 763 4.3 11.9
Wages 819 2071 38.7 32.2
Non-farm business 236 512 11.2 8.0
Total 2115 6426 100.0 100.0
Source: NSS Surveys

Another interesting finding is that only 23% of rural income is from agriculture
(cultivation+livestock) if we consider all rural households (Table 11). Around 44% of income
is from wage labour, 24% from government/private service and 8% from other enterprises. It
shows that income from non-farm sector is the major source in rural areas.

Table 11. Average Monthly Income of Agricultural Households in current prices: NABARD survey 2015-16
Source of Income Agricultural Households All (agri+non-agri) households
Income (in Rs.) Share in income% Income (In Rs.) Share in Income%
Cultivation 3140 35.2 1494 18.5
Livestock 711 8.0 338 4.2
Other enterprises 489 5.5 679 8.4
Wage Labour 3025 33.9 3504 43.5
Govt/pvt.service 1444 16.2 1906 23.7
Other sources 122 1.4 138 1.7
Total 8931 100.0 8059 100.0
Source: NABARD (2018)

NABARD survey provides interesting data on number of sources of income. Only 13% of
agricultural households have one single source of income. Around 50% of these households

20
These two surveys are not strictly comparable.
 12

have two sources, 29% three sources and 9% four sources. It shows that agricultural
households do not depend only on farm income but they depend on multiple sources for their
livelihoods. Thus, both agriculture and non-agriculture are important for raising income of
agricultural households. On the other hand, nearly 80% of non-agricultural households
depend only on single source of income.

3.2. Inclusiveness: Equity in Agriculture

Second goal of agricultural development is sharing growth and achieving equity. There is
some sort of consensus now that growth should be shared by all sections of the society rather
than limiting to few categories of population. This is important to reduce poverty and
inequalities in the economy and society. Here we discuss inequalities in agriculture and rural
areas. Inclusiveness in agriculture should focus on inequalities in regions, women and youth,
disadvantages social groups, small vs. large farmers and irrigated vs. rainfed areas. Focus on
eastern region is also important.

Changing Agrarian Structure: Shrinking Size of Farms

The recent Agricultural Census data shows that there were about 145.7 million agricultural
holdings in India in 2015-16 (GOI, 2018). Around 118 millions were small and marginal
farmers. The share of small and marginal farmers in total holdings increased significantly in
the last three decades. As shown in Table 12, the share of marginal and small farmers
increased from 70 per cent in 1980-81 to 86 per cent in 2015-16. It may be noted that 69 per
cent of land holdings belong to marginal farmers with less than 1 ha. Thus, the smallholding
character of Indian agriculture is much more prominent today than even before. Small and
marginal farmers account for 86% of total farm hhs but their share in operated area is around
44%. Thus, there are significant land inequalities in India.

Shrinking size of farms is one of the major problems. The average size of farm holdings
declined from 2.3 ha. in 1970-71 to 1.08 ha. (2.9 acres) in 2015-16. The average size of
marginal holdings is only 0.38 ha. (less than one acre) in 2015-16 (Table 12). Viability of
marginal and small farmers is a major challenge for Indian agriculture.
Table 12. Changes in Agrarian Structure
Size of Farmers Share in farm holdings Share in operated area Average size of
(%) (%) holding (in hectares)
1970- 1990- 2015- 1970- 1990- 2015- 1970- 1990- 2015-
71 91 16 71 91 16 71 91 16
Marginal 51.0 59.4 68.5 9.0 15.0 24.2 0.40 0.39 0.38
Small 18.9 18.8 17.7 11.9 17.4 23.2 1.44 1.43 1.41
Semi-medium 15.0 13.1 9.5 18.5 23.2 23.7 2.81 2.73 2.70
Medium 11.2 7.4 3.8 29.7 27.0 20.0 6.08 5.84 5.72
Large 3.9 1.6 0.6 30.8 17.3 9.0 18.10 17.20 17.10
All Size 100.0 100.0 100.0 100.0 100.0 100.0 2.28 1.41 1.08
Note: Marginal – less than 1 ha.; Small – less than 2 ha.; Semi-medium – 2 to 4 ha.; Medium – 4 to 10 ha.; large
– above 10 ha. Source: Agricultural Census, 2015-16, Ministry of Agriculture, GoI
 13

Inequalities in Consumption, Income and Wealth

In India, consumer expenditure from NSS (National Sample Survey) is generally used to
estimate inequality. As shown in Table 13, consumption Gini coefficient is 0.38 in 2011-12.
On the other hand, inequality in income is high with a Gini coefficient of 0.55 while wealth
Gini coefficient is 0.74 in 2011-12 (Table 13). Income gini is 20 points higher than
consumption Gini while wealth Gini is nearly 40 points higher than consumption Gini. Thus,
inequality in income and wealth is much higher than that of consumption. Inequality in
consumption and wealth is lower in rural areas as compared to urban areas. However,
inequality in income is higher in rural than urban areas21.

Table 13. Consumption, Income and Wealth Inequality in India: Rural, Urban and Total, 2011-12
Sector Total Rural Urban
Consumption Gini 0.375 0.311 0.390
Income Gini 0.553 0.541 0.506
Wealth Gini * 0.740 0.670 0.770
*Refers to 2012
Sources: Income Gini coefficients are estimated from the data of Indian Human Development Survey (IHDS);
Anand and Thampi (2016) for consumption and wealth Gini coefficients
Table 14 provides trends in inequality in consumption, income and wealth in rural areas. It
shows consumption and income Gini increased marginally between 2004-05 and 2011-12.
However, wealth inequality increased from 0.63 to 0.67 - by 4 points during the same period.

Table 14: Trends in Inequality in Rural Areas

Sector 1993-94 2004-05 2011-12
Consumption Gini 0.286 0.305 0.311
Income Gini -- 0.520 0.532
Wealth Gini * 0.62 0.63 0.67
*Wealth Gini refers to 1991, 2002, 2012
Source: Same as Table 1

One can estimate income inequality for agricultural households based on Situation
Assessment Survey of NSS. At the all India level, the income Gini at 0.58 was much higher
than consumption Gini at 0.28 – around 30 points higher (Table 15). The estimates at state
level also show similar results. The income Gini at state level varies from 0.43 in Chattisgarh
and Gujarat to 0.61 in Bihar. The difference between consumption Gini and income Gini for
Bihar is nearly 40 points. The income inequality is higher in South Indian states such as
Kerala, Andhra Pradesh and Tamil Nadu (Table 15). The consumption inequality is the
highest in Kerala.

Table 15: Estimates of Inequality (Gini) in Per Capita Income and MPCE for
Agricultural Households
States Gini Per Gini MPCE States Gini Per Gini MPCE monthly-per capita cons exp
capita 2011-12 capita 2011-12
income: income:
2013 2013
Andhra Pradesh 0.60 0.27 Madhya Pradesh 0.49 0.25
Assam 0.52 0.23 Maharashtra 0.57 0.21
Bihar 0.61 0.22 Odisha 0.53 0.24

21
More on inequality, see Dev (2017). On growth, inequality and poverty linkages see Thorat (2016)
 14

Chattisgarh 0.43 0.22 Punjab 0.53 0.29

Gujarat 0.43 0.23 Rajasthan 0.50 0.27
Haryana 0.51 0.25 Tamil Nadu 0.59 0.28
Jharkhand 0.53 0.28 Uttar Pradesh 0.58 0.28
Karnataka 0.58 0.23 West Bengal 0.53 0.28
Kerala 0.59 0.31 All India 0.58 0.28
Source: Chakravorty et al (2016)

A study based on 2013 Situation Assessment Survey of farmers, (Birthal et al 2017) shows
that around 70% of the farmers have per capita income less than the average of all the
farmers.

Village Studies
In-depth village surveys can give a better idea on inequality in income in agriculture. The
project on Agrarian Relations in India (PARI), a project to study village economies in
different agro-ecological regions of India provides estimates of income inequality in 17
villages covering 9 states: Andhra Pradesh, Telangana, Karnataka, Madhya Pradesh,
Maharashtra, Rajasthan, Uttar Pradesh, Punjab and West Bengal22.

The 17 villages were surveyed between 2005 and 201123. These surveys provide two
conclusions. One is that the inequality in income is very high in study villages. It is much
higher than consumption inequality. Second conclusion is that there are significant village-
wise variations in income inequality. The gini coefficients of household income and per
capita income for the 17 villages are given in Table 16. The gini coefficient rages from 0.781
in Gharsondi village of Madhya Pradesh to 0.372 in Amarsinghi village of West Bengal.

Table 16. Gini coefficients of household income and per capita income, by study villages
Gini coefficient
Village State Survey year
Households Persons
Ananthavaram Andhra Pradesh 2005-06 0.656 0.602
Bukkacherla Andhra Pradesh 2005-06 0.607 0.539
Kothapalle Telangana 2005-06 0.577 0.565
Harevli Uttar Pradesh 2005-06 0.667 0.598
Mahatwar Uttar Pradesh 2005-06 0.527 0.516
Nimshirgaon Maharashtra 2006-07 0.549 0.491
Warwat Khanderao Maharashtra 2006-07 0.586 0.531
25 F Gulabewala Rajasthan 2006-07 0.740 0.686
Rewasi Rajasthan 2009-10 0.541 0.465
Gharsondi Madhya Pradesh 2007-08 0.781 0.721
Alabujanahalli Karnataka 2008-09 0.536 0.467
Siresandra Karnataka 2008-09 0.511 0.453
Zhapur Karnataka 2008-09 0.516 0.485
Amarsinghi West Bengal 2009-10 0.372 0.370

22
Himanshu et al (2016) also provide estimates of income inequality in villages using longitudinal research.
23
For details of the project and design of surveys, see www.agrarianstudies.org
 15

Panahar West Bengal 2009-10 0.664 0.547

Kalmandasguri West Bengal 2009-10 0.387 0.334
Tehang Punjab 2010-11 0.622 0.608
Source: Based on PARI survey data. Estimates for first eight villages are from Swaminathan and Rawal (2011)
using PARI survey data. Table prepared by Tapas Modak.

Taking care of vulnerable regions and groups

There are significant disparities in agricultural growth and incomes across regions. In recent
years, some of the less developed states like Madhya Pradesh showed high growth while
Punjab recorded low growth (Niti Ayog, 2017). Rain fed area has been neglected for a long
time. Eastern region should be the focus area for the next stage of agricultural development in
India.

Similarly, incomes of small and marginal farmers are much lower than other farmers.
Viability of small farmers is important for promoting equity. The role of women in
agriculture is increasing over time as men are migrating to rural non-farm and urban areas.
Women work harder than men in agricultural operations. We also need to encourage youth to
take up agricultural activities so that more inclusive, innovative agriculture can be achieved.
Discrimination of disadvantaged sections in agricultural input and output markets is another
issue to be taken up as part of improving inclusiveness in agriculture24.

Agriculture and nutrition

One of the emerging areas of research and policy focus in India is how to improve linkages
between agriculture and nutrition. Malnutrition among women and children inspite of high
economic growth is one of the major problems in India. We are stressing on this as
undernutrition among children would have long term impact on children’s health, their
psychosocial well-being, educational and skill achievements and labour productivity.
International studies have shown that the rate of decline of child undernutrition tends to be
around half of the rate of growth of per capita GDP. Stunting rate among children under
three in India declined from 53% in 1992-93 to 45% in 2006, average rate of decline of 1.2%
per year. Recent data shows that stunting among children under 5 years declined from 48% in
2005-06 to 38.% in 2015-16 at the average rate of 1% per year (Table 17). Underweight has
declined only 0.7% per year during this period. On the other hand, wasting has slightly
increased. Malnutrition and anaemia for children and women is higher in rural areas than
urban areas. Although there is some improvement in anaemia for children and women and
BMI for women, the levels are still high. Around 58% of children and 53% of women are
having anaemia in 2015-16.

Table 17. Nutritional Status of Children under 5 years and Women (15-49): All India

24
On discrimination in agricultural markets see, Thorat and Sabharwal (2013)
 16

Total (Rural+Urban) 2015-16 (NFHS 4)

Children under 5 years 2005-06 2015-16 Rural Urban
(NFHS 3) (NFHS 4)
Stunting (height for age) 48.0 38.4 41.2 31.0
Underweight (weight for 42.5 35.7 38.3 29.1
age)
Wasting (weight for height) 19.8 21.0 21.5 20.0
Anaemia among children 69.4 58.4 59.4 55.9
Women (15-49 years
Anaemia among women 55.3 53.0 54.2 50.8
BMI below normal (women) 35.5 22.9 26.7 15.5
Sources: NFHS 3 and NFHS 4

Wealth quintiles show that in the lowest quintile, malnutrition is very high at 51% in 2015-
16. It has nearly two and half times malnutrition levels than the highest quintile (Table 18).
Scheduled Castes and Scheduled Tribes have 10 percentage points higher malnutrition than
other castes. No education category has 20 percentage points higher malnutrition as
compared to the category with education of secondary or more.

At state level, stunting among children declined in all the states during the period 2005-06 to
2015-16 (Table 19). Kerala state has the lowest malnutrion level at 19.7% followed by
Punjab, Himachal Pradesh, Tamil Nadu and Jammu and Kashmir. On the other hand, Bihar,
Jharkhand, Utar Pradesh and Madhya Pradesh have high levels of malnutrition (above 40%).
Gujarat has malnutrition levels closer to that of all India.
Table 18. Nutrition Status of Children under 5 years, Stunting (height for age) : All India, 2015-16
Wealth Quintile Stunting (%) Social Groups Stunting(%) Education Stuntin
g (%)
Lowest 51 Scheduled 43 No education 51
Caste
Second 44 Scheduled Tribe 44 Primary complete 44
Middle 36 OBCs 39 Secondary or more 31
complete
Fourth 29 None of them 31
Highest 22
Source: NFHS 4
Table 19. Stunting Among Children under 5 years Across States : 2005-06 (NFHS 3) and 2015-06 (NFHS 4)
States Stunting (%) Stunting (%)
2005-06 2015-16 2005-06 2015-16
Andhra Pradesh 38.1* 31.4 Madhya Pradesh 50.0 42.0
Assam 46.5 36.4 Maharashtra 46.3 34.4
Bihar 55.6 48.3 Odisha 45.1 34.1
Chattisgarh 52.9 37.6 Punjab 36.7 25.7
Gujarat 51.7 38.5 Rajasthan 43.7 39.1
Haryana 45.7 34.0 Tamil Nadu 30.9 27.1
Himachal Pradesh 38.6 26.3 Telangana 38.1* 28.1
Jammu&Kashmir 35.0 27.4 Uttar Pradesh 56.8 45.3
Jharkhand 49.8 45.3 West Bengal 44.6 32.5
Karnataka 43.7 36.2 All India 48.0 38.4
Kerala 24.5 19.7
*Combined Andhra Pradesh
Source: NFHS 3 and NFHS 4
 17

Table 20 provides a breakup of the bottom 100 districts with high stunting levels among
children under 5 years. It shows that states like Uttar Pradesh, Bihar and Madhya Pradesh
have large number of districts among the bottom 100 districts.

Table 20. Bottom 100 districts with High Malnutrition (Stunting) Levels
States No. of districts States No. of districts
Uttar Pradesh 29 Meghalaya 4
Bihar 25 Chattisgarh 3
Madhya Pradesh 13 Maharashtra 2
Jharkhand 6 Haryana 1
Gujarat 5 Odisha 1
Rajasthan 5 Assam 1
Karnataka 5 Total 100
Source: NIN (2017)

Malnutrition depends on many other factors apart from agriculture. However, agriculture and
nutrition linkages can be further improved in order to raise both growth and equity (more on
policies below).

3.3. Sustainability
The third and important goal of agricultural development is sustainability. This goal is
becoming much more important in recent years with global recognition of achieving SDGs.
Brundtland Commission 1987 defines sustainability as “ development that meets the needs of the
present without compromising the ability of futute generations to meet their own needs” (World
Commission on Environment and Development, 1987) We have to look at issues such as
energy, environment, natural resources and climate change. Intensification of agricultural
production in irrigated and favourable rainfed environments combined with sometimes
flawed incentives due to inappropriate policies have caused substantial environmental
degradation. Expansion in cropped area into forest areas and onto steeper slopes increased
soil erosion. Intensive livestock production also added water and land quality problems.
Indian soils are gradually degrading because of soil erosion, loss of organic carbon, nutrient
imbalance and salinization. Water logging, soil erosion and ground water depletion are some
of the problems leading to unsustainability of agriculture.

Dr. M.S. Swaminathan appealed to the farmers as early as 1968 not to harm the long term
production potential for short term gain. He described this appeal in his own words as
follows.“ In order to ensure that a productivity based agriculture does not result in ecological harm
due to unsustainable exploitation of land and water, adoption of mono culture and excessive use of
mineral fertilisers and chemical pesticides, I appealed to farmers in January 1968 not to harm the long
term production potential for short term gains. I pleaded for converting the green revolution into
evergreen revolution by mainstreaming the principles of ecology in technology development and
dissemination. I defined evergreen revolution as increasing productivity in perpetuity without
associated ecological harm. I pleaded for avoiding the temptation to convert the green revolution into
a greed revolution. Unfortunately, ecologically unsound public policies, like the supply of free
electricity, have led to the over-exploitation of the acqifer in Punjab, Hayana and Western UP region.
 18

The heartland of the green revolution is in deep ecological distress …The need for adopting the
methods of an evergreen revolution has therefore become very urgent” (p.20, Swaminathan, 2010)25.

Land, water, energy, common property resources and forests are some of natural resources
that needs to be sustained over time. Fiscal and environmental implications of subsidy
policies in energy, water and agricultue sectors are being recognised. It is known that most of
these subsidies pose a threat to environment. Soil is under threat in India from soil erosion
due to deforestation and use of chemical fertilisers. Free or cheap power has encouraged
excess drawal of groundwater leading to falling water tables in large parts of the country.

Climate change and agriculture

Climate change is a reality. Agriculture is the sector most vulnerable to climate change due to
its high dependence on climate and weather and because people involved in agriculture tend
to be poorer compared with urban residents. Agriculture is part of the problem and part of the
solution26.

Using district level data on temperature, rainfall and crop production, Economic Survey
2017-18 (GOI, 2018) examines a long term trend of rising temperatures, declining averge
precipitation, and increase in extreme precipitation events. The following are the findings of
the study.

(1) The first finding is that the climate change impact in terms of temperature and rainfall is
non-linear and felt in the extreme i.e. when temparatures are higher, rainfall is substantially
lower, and the number of dry days higher than normal.

(2) The second finding which is not surprising is that the impacts of the climate factors are
significantly more adverse in unirrigated areas compared to irrigated areas.

Table 21. Impact of Weather Shocks on Agricultural Yields and Farm Income: India
Kharif/Rabi Impact on agricultural yields Impact on farm income
Extreme Extreme Rainfall Extreme Extreme Rainfall
Temparature Shocks (%) Temparature Shocks (%)
Shocks (%) Shocks (%)
Average Kharif 4.0 12.8 4.3 13.7
Kharif, Irrigated 2.7 6.2 7.0 7.0
Kharif, unirrigated 7.0 14.7 5.1 14.3
Average Rabi 4.7 6.7 4.1 5.5
Rabi Irrigated 3.0 4.1 3.2 4.0
Rabi Unirrigated 7.6 8.6 5.9 6.6

25
This quotation was also given by Jeffrey Sachs in his foreword to the book
26
Farm sector also contributes to climate change by raising emissions. Agriculture alone contributed 13 per cent
of total global GHG emissions in 2000. If we add emissions due to deforestation, agriculture's share would be 30
per cent to global emissions. The sources of emissions from agriculture are: 37% from Fertilizers (N2O), 11%
from rice (CH4), 32% from livestock (CH4), 13% from residue burning and/or forest clearing and, 7% from
manure management (CH4 and N2O) (USEPA 2006).
 19

Source: GOI (2018)

(3) The third finding relates to the impacts on agricultural yields and farm income. Table 21
shows that the extreme temparature shock reduce yields by 4% and 4.7% for Kharif and Rabi
respectively while the extreme rainfall shocks reduce yields by 12.8% and 6.7% for kharif
and Rabi respectively. The same table provides the impact on farm incomes. It shows that
extreme temparature shocks results in a 4.3% decline in Kharif farm income and a 4.1% for
Rabi farm income. In the case of extreme rainfall shocks, the farm income declines by 13.7%
for Kharif and 5.5% for Rabi.

The study also estimates the farm income loss by applying IPCC-predicted temparatures and
projecting India’s recent trends in precipitation. These estimates show that farmer income
decline from climate change could be between 15% and 18% on average and could be
anywhere between 20% and 25% in unirrigated areas. These results show that the impact of
climate change on farm income loss would be substantial in India.

4. WHAT ARE THE POLICIES AND REFORMS NEEDED FOR ENHANCING

FARM INCOME, INCLUSIVENESS AND SUSTAINABILITY?

In order to achieve the goals of agricultural development, there is a need for a medium term
strategy and action plan. This section examines the policies and reforms needed to raise farm
incomes, equity and sustainability in the medium term.

In this section, we first discuss on macro policies and issues under doubling farm income. We
will also examine the policies needed for remunerative prices including marketing issues.
Then we move on to the policies on water and technology including information technology.
Finally, we will deal with policies on post-harvest activities, inclusiveness, climate change
and institutions.

4.1.Macro economic policies and Agriculture

Agricultural economists generally restrict to the policies relating to farm sector. However,
there is a need to look at policies related to macro policies and non-agriculture2728.
Macroeconomic policies, relating to fiscal, monetary, trade, tariff, exchange rate, have direct
and indirect impacts on agriculture. Although the primary objectives of macroeconomic
policies are aimed at controlling inflation, sustaining public expenditure and attaining fiscal
balance, but these policies through fiscal and monetary policies may have significant impact
on agriculture. In order to influence agriculture, fiscal policies have to improve tax revenue
and public investment on infrastructure and other supply constraints. Macro policies like
financial liberalization and trade policies may promote or hamper agricultural growth.
Similarly, promotion of rural non-farm sector and promotion of labour intensive

27
On the role of agricultural economists in the emerging scenario, see Sen (2016)
28
On Type 1 and Type 2 macro policies, see Goyal (2017)
 20

manufacturing sector and services are important to reduce demographic pressures on

agriculture. Macro policies will have general equilibrium impact on agriculture through
various linkages. In section 2 we have discussed on trends and future scenario for global
level agriculture and food. These global trends and policies including climate change will
also have impact on Indian agriculture and food systems.

Is the solution for agriculture lies in non-agriculture?

Some economists like T.N. Srinivasan (2008) argue that agricultural policies may be
important but fundamental factor for low productivity in agriculture lies in non-agriculture.
Non-agriculture is not absorbing labour force from agriculture. According to him, the
development “strategy completely ignored the lessons of economic history: successful
development lies in the transformation of economic structure by shifting a substantial part of
the large initial share of labour force in agriculture and other low productivity activities in the
informal sector to more productive off-farm activities through rural and urban
industrialization with emphasis on labour-intensive manufactures to supply growing domestic
and world markets and raising agricultural productivity” (p.1). This is similar to the views of
Arthur Lewis who has put forward his model of “Economic Development with Unlimited
Supplies of Labour” which envisages the capital accumulation in the modern industrial sector
so as to draw labour from the subsistence agricultural sector (Lewis, 1954).

There have been debates on the roles of agriculture and non-agriculture in reducing poverty.
Some studies showed that non-agriculture and urban growth were important for poverty
reduction29. Some other studies indicated that poverty reducing impact of agriculture is much
higher than that of non-agriculture (World Bank, 2008; Gaiha, 2015)30. Recent evidence also
shows that growth in agriculture is in general more effective at reducing poverty (two to three
times) as compared to that of industry and services. It is also shown that the effects of poverty
reduction of agriculture are largely for the poorest in society than those for non-agriculture
(Christiaensen and Martin, 2018)3132.

It may be noted that one should have balanced approach regarding the roles of agriculture and
non-agriculture in raising agricultural productivity and farmers’ incomes. Poverty can’t be
eliminated without shifting workers from agriculture to non-agriculture. However, focusing
on agriculture is still important for reduction in poverty as it is the biggest provider of
livelihoods and has forward and backward linkages with other sectors33. Thus, both
agriculture and non-agriculture are important for agricultural population.

29
See Datt et al (2014) and Dercon (2015)
30
Also see Parikh et al (2013)
31
This study provides eight insights on the relationship between agriculture, structural transformation and
poverty reduction.
32
Also see Ivanic and Martin (2018)
33
On agriculture productivity and rural non-farm sector, see Ritadhi and Madhur (2017)
 21

4.2. Doubling Farm Income (DFI)

Several studies have examined the feasibility of attaining doubling farm incomes (DFI) by
2022. NITI Ayog (2017) and the Ashok Dalwai Committee (GOI, 2017) have given several
suggestions for DFI34. Chand (2016) discusses sources of growth and strategies for DFI35.
According to him there are 6 sources for DFI. These are: (a) increase in agricultural
Productivity; (b) rise in total factor productivity; (c) diversification to high value crops; (d)
increase in cropping intensity; (e) improving terms of trade for farmers; (f) shifting
cultivators to non-farm and subsidiary activities. The study also discusses strategies for
achieving the DFI through these sources. It may be noted that there is overlapping in these
sources of growth. For example, agricultural productivity also affects total factor
productivity. Therefore, one has to be careful in interpreting the impact of these sources on
DFI. In the last four years, the Government has introduced several programmes covering
irrigation, crop insurance, minimum support prices and agricultural markets to improve
agricultural growth and farmers’ incomes36.

Dalwai committee says “on an average 60 per cent of farmers’ income is from agricultural output
(including livestock), the targets are designed to double this component of income and also improve
the ratio between farm and non-farm income from 60:40 as of now to 70:30 by the end of target
period. In doing so, various other developments in the form of allied enterprises and support
infrastructure are envisaged. These developments will create new sources of income and near-farm
jobs, to add to income” (p.V, Vol.2, GOI 2017).

It may be noted that there are several issues regarding doubling farm income as given below.

(1) Estimates on changes in farmers’ income show that it tripled in nominal terms during
the period 2003 to 2013. But, in real terms the total income rose only 32% in 10 years
– 3.2% per annum (Chandrasekhar and Mehrotra, 2016)37. In other words, we need
more than 10% per annum growth in income to achieve DFI in 2022.
(2) Achieving 10% or more is difficult given that farmer’s income growth has been only
around 2.5% per annum in the last four years 2014-15 to 2017-18.
(3) Government seems to be banking on agriculture (crop+livestock) sector for DFI. As
mentioned by Dalwai Committee, the focus is on this sector which has 60% share in
total farm income. However, recent estimates based on NABARD’s Financial
Inclusion Survey show that agriculture’s share is 43% of total farm income in 2015-
16. The share of agriculture in total rural incomes is only 23% in the same year.
(4) It shows that non-farm sector is becoming more important. Some people think that we
must go beyond agriculture for doubling farm income38. Government should promote
much more opportunities in non-farm sector in rural areas.

34
On well-being of agricultural households, see Radhakrishna and Raju (2016). On agrarian prospects see Sen
(2016 a).
35
On earlier estimates of farmers’ income, see Chand et al (2012)
36
Some of the main programmes of the Government are: Pradhanamantri Krishi Sanchayi Yojana, Pradhana
Mantri Fasal Bhima Yojana, Soil health cards, e-NAM (National Agricultural Market), PM-AASHA on
marketing, fixing minimum support prices by 1.5 times to the cost of production (A2+FL).
37
A study by Gulati and Saini (2016) is skeptical about achieving DFI. On estimates of farm income, also see
Narayanamoorthy (2016).
38
Fan (2018a) says India must get people off farms to double farm income
 22

(5) Although NITI Ayog and Dalwai Committee discuss regional disparities in farm
incomes, one has to take into account heterogeneity among different classes of
farmers.
(6) It is also argued that profiling of farmers and identifying their locations are needed in
order to move towards DFI (Birthal, 2018)39. It is the marginal farmers, three-fourths
of whom stay at the bottom of income distribution, should be at the forefront of any
developmental strategy. Some of the marginal farmers controlling for other factors
have relatively high incomes through diversification of crops, allied activities and to
non-farm sector (Birthal, 2018). What are the lessons from these successful marginal
farmers? Also, all efforts should be made to focus more on Eastern region that has
lagged behind in agricultural development and is home to about 60% of the total low-
income marginal farmers.
(7) What about measures for rising incomes of agricultural labourers? They are also part
of the agricultural population. Policies have to be different for them.
(8) As mentioned in Section 3, there are lot of inequalities among farm incomes across
farmers and locations. Marginal and small farmers who constitute 86% of the total
have low incomes and with high volatility. For these farmers, consumption is higher
than incomes and indebtedness is high. Even if we double their income, it would not
be sufficient to take care of their consumption including health and education. It may
be noted farmers incur lot of expenditure on health.
(9) What about the impact of doubling farmers’ income on environment? One can have
high agricultural growth and productivity with high growth of capital and other
inputs. But, it damages the environment and natural resources. Zero budget natural
farming can improve incomes for farmers. There is a need to discuss these issues in
the context of DFI.

A cross country study by Mikecz and Vos (2016) examines whether small farmers can double
productivity and incomes during the period 2015-2030. This study looked at past trends of
land and labour productivity of small farmers for 140 countries. Out of these 140 countries,
there were 41 countries in the case of land productivity and 41 countries in the case of labour
productivity that managed to double productivity at least once within a 15-year time span.
Pro-active government policies seem to have played a key role in pushing up productivity in
these countries.

To conclude on DFI, efforts must be made to improve farmers’ income whether we achieve
the goal of doubling farm income or not by 2022. The focus on income rather than
production is in the right direction.

4.3. Price and Marketing Policies

Price factor was important even during green revolution time along with technology. We
have not been able to provide remunerative prices for farmers in the last 70 years since
independence. Farmers have been getting low prices in normal, drought and good years
because of distortions in price and market policies.

39
Also see Birthal et al (2017)
 23

Variation in agricultural prices across regions is quite high in India. Chatterjee and Kapur
(2017) examine spatial price variation using high frequency price and quantity data from the
AgMarket portal of Government of India. The study shows that the average standard
deviation of log (real) prices across mandis in a given month is 0.17. This spatial variation is
higher than those of some other developing countries. The price variation persists over time
despite substantial investments in rural roads and improvement in information and
communication technologies (e.g. mobile phones). District-fixed effects could explain part of
the variation but 39% of it is unexplained which could be attributed to the time and location
varying factors (Chatterjee and Kapur, 2017). It shows that we have distorted price and
market policies.

Distortions in minimum supoort price (MSP) policy are well known40. Criticism of the MSP
policy is that it is limited to few crops (mainly rice and wheat) and few states. Even for
commodities covered, not all farmers are able to sell their produce at the MSP in other
regions. Focusing mainly on rice and wheat is creating problems for diversification.

Few months back, government has announced MSP at 1.5 times the A2+FL cost (paid out
cost plus cost of famil labour) for all Kharif crops. Increase in MSP is a right move as
farmers need higher prices. It is generally argued that increase in MSP and agricultural prices
would increase general inflation. But, farmers should not suffer because of urban consumers.

It may be noted that inspite of MSP and subsidies, Indian farmer is net taxed as compared to
farmers of other countries. An OECD and ICRIER study shows that PSE (producer support
estimates) was negative to the tune of 14% on average during the period 2000-01 to 2016-17
(Gulati and Cahill, 2018). In other words, distorted policies are hurting the Indian farmers.

However, increase in MSP does not have any meaning unless we have procurement of crop
production. It is known that government procures mainly rice and wheat apart from
occasional procurement by NAFED (National Agricultural Cooperative Marketing Federation
of India) for few crops.

Recently, the government announced a new Umbrella Scheme ‘Pradhan Mantri Annandata
Aay Sanrakshan Abhiyan’ (PM-AASHA). The scheme is aimed at ensuring remunerative
prices to the farmers for their produce as announced in the Union Budget for 2018. It has
three components41. (1) Price support scheme (PSS) (2) Price Deficiency Payment Scheme
(PDPS). (3) Pilot of Private Procurement & Stockist Scheme (PPPS). There are some issues
to be sorted out in each scheme for better implementation42. For example, there have been
operational challenges including manipulation by traders in Bhavantar Bhugtan Yojana of
Madhya Pradesh. It is also not clear that how many states will opt for PDPS given the

40
On incentives and disincentives, see Dantwala (1967). On price policy, see Acharya (2016), Chopra (2016)
41
For details on these schemes see http://pib.nic.in/newsite/PrintRelease.aspx?relid=183409
42
For merit and demerits of these three schemes see Hussain (2018). Also see Ramaswamy (2018) on
agricultural markets.
 24

implementation problems. Operationally, Rythu Bandhu Scheme of Telangana is better as

compared to the above schemes. This is also called Farmers’ Investment Support Scheme
which is a welfare program to support farmer’s investment for two crops a year by the
Government of Telangana. The government is providing 5.83 million farmers, Rs. 4000 per
acre per season to support the farm investment, twice a year, for rabi and kharif seasons. One
major problem with this scheme is that tenant farmers do not get anything from this scheme.
Most of the farmers’ suicides in Telangana are by tenant farmers. We also need proper land
records and financial resources to implement this scheme in other states. It may be noted that
it is income transfer programme and not price support scheme.

Marketing reforms and freedom for farmers: Agricultural markets witnessed only limited
reforms. They are characterized by inefficient physical operations, excessive crowding of
intermediaries, fragmented market chains. Due to this, farmers are deprived of fair share of
the price paid by the final consumers. For example, sometimes farmers get Rs.1 per kg for
tomatoes while consumers pay Rs.40 per kg. Traders get higher margins due to long supply
chain. Some of these problems can be overcome with present reforms including APMC.
Unfortunately, States have not shown any urgency in reforming agricultural markets due to
political factors. The government created e-NAM platform for creating a national market but
the progress has been slow. The farmer must be given full freedom to sell her produce to
whomsoever she wants. Institutional arrangements like producers’ organizations, contract
farming, cooperatives, women’s self-help groups can help in getting better price for
farmers43.

Aggarwal et al (2017) examine Karnataka’s agricultural output marketing reforms. The study
has two objectives: (a) assessing the state and challenges of implementation and (2) learn
lessons from Karnataka’s experience for India’s e-National Agriculture Market. Based on a
field study of 10 mandis across the state, the study finds that while Karnataka has been
consistently pushing through with reforms, there remain significant challenges. Based on
Karnataka’s experience, the study argues that agricultural market reform in India rests on
three pillars: (a) institutions that establish the rules of the game; (b) incentives for agents to
participate actively in the market (3) and infrastructure to support the modernised trading
platform (Agarwal et al, 2017). They conclude that the reforms are unlikely to succeed unless
they address all these three issues simultaneously.

Need to Shift from Cereal Biased Policies

Government policies have been biased towards cereals particularly rice and wheat
(Subrahmaniam, 2018). It procures rice and wheat based on minimum support prices in few
states. Cereal-centric policies also provide subsidies for fertilisers, water, power, credit and
seeds. Large part of the subsidy goes to these two crops. These subsidies also benefit large
farmers, few states and irrigated areas and have adverse impact on soil quality, water quantity
and quality and human health. Punjab, Haryana and other states have been focusing mainly

43
On agricultural marketing reforms, see Mundle (2018)
 25

on rice and wheat because of government support to these crops. There is a need to shift from
cereal-centric policies to non-cereal focused policies. Diversification of cropping pattern is
obvious for improving agricultural growth, incomes of farmers and environmental
sustainability.

Beyond Harvest: warehousing, storage, value chains, food processing, exports

Agriculture has to go beyond farming and develop value chain, comprising farming,
wholesaling, warehousing, logistics, processing, and retailing. Exports can be included in this
holistic approach. Over regulation of domestic trade, agro processing, enterprise size, and
land and credit market can discourage private investment.
In developing countries like India, we have ‘missing middle’ in marketing. Value chain runs
from production to processing. For example, storage, processing and agri-business are
missing. As mentioned above, India processes very limited quantities of fruits and vegetales.
Post-harvest losses are also high. In order to link farmers to retailers and processing, we need
investments and increase efficiency. In developed countries we do not find 'missing middle’.
One can learn lessons from these countries. Private sector participation can be improved if
some of the fears like the Essential Commidity Act, stock limits and export bans are
removed.

Exports: The National Export policy is formulated in line with the goal of doubling the
farmers’ income and increase agriculture exports from present $30 billion to over $60 billion
by 2022. We do not see consistent policies regarding domestic and international trade. There
is no long-term policy on exports and futures markets. Export bans are imposed frequently.

Banning exports hurts the farmers most. It is known that governments ban exports of crops
like onion, pulses etc. when the consumer prices rise. Similarly, tariffs for imports are
lowered to allow more imports and reduce prices. Sometimes the tariff policy can hurt the
farmers. The government controls exports through minimum export price and export bans.
There is a need for predictability and stable export policies44.

Start-ups: The government has been promoting start-ups by giving incentives. It announced
‘Start-up India’ as a flagship programme in 2016. There have been new generation start-ups
coming up in agriculture. Rao et al (2017) document the evolution of recent strat-ups in
agriculture. Broadly, they render either input services or output services in marketing and
related jobs. BigHaat.com, Flybird, AgroStar, Stellaps, Kedut, EcoZen, MITRA, EM3,
Skymet, YCook, IFFCOKisan, Aarav Unmanned Systems, and CropIn are some of the start-
ups involved in input services. For output services, there are several start-ups like Ninjacart,
TheAgrihub, SVAgri, Sabziwala, Flipkart, and Big Basket.

44
On structural reforms in Indian agriculture, see Dev (2008a). On emerging trends in agriculture see Gulati
(2009).
 26

The start-ups brought several innovations in product, process, marketing and organisation.
These startups relied mainly on online and mobile platforms and rendered input and output
services (Rao et al, 2017). These start-ups have been altering the value chain and roles of
different actors by cutting down the length of value chain. The start-up activity in agriculture,
however, falls short of the total activity and accounted for just one per cent of total
investment of six billion dollars in 2015. Experience in other countries also show evidence of
market failures in entrepreneurial activity in agriculture and need for the state to intervene.
Certain amount of start-up fund may be earmarked for spurring innovative start-ups in food
and agriculture (Rao et al, 2017). Other suggestions of this study include channeling
entrepreneurial activity in food and agriculture include remodelling technology business
incubators under Indian Council of Agricultural Research (ICAR) on business principles and
ensuing representation of ministry of agriculture in the inter-ministerial board for start-up
promotion.

4.4. Do not forget basics: Water and technology.

Basics like seeds, fertlizers, credit, water, technology etc. are important for agriculture and
they should not be forgotten. Similarly investment in irrigation, rural infrastructure, R&D are
important for raising productivity and incomes. The ratio of gross capital formation in
agriculture to GVA in agriculture showed fluctuating trend from 18.2% in 2011-12 to 16.4%
in 2015-16. Public investment in agriculture was around 2.8% of GVA in agricultre in 2015-
16. Studies have shown that public investment in rural infrastructure and R&D has positive
effect in reducing poverty45.

Here we discuss issues and policies in water and technology as both are crucial for
agricultural development.

Water Management46

Water is the leading input in agriculture and major policy issue in the 21st Century. Since
independence, India invested significantly in irrigation infrastructure particularly canal
irrigation. Prime Minister’s Krishi Sinchai Yojana (PMKSY) introduced by the present
government is in the right direction. However, strategy on irrigation development is
preoccupied with increasing water supplies and neglected efficiency of use and sustainability
(Vaidyanathan, 2010)47. Because the government highly subsidizes both canal water rates and
the power tariff for drawing groundwater, much of this water is unfortunately either used
inefficiently or overused. Areas of reforms needed in irrigation are: stepping up and
prioritizing public investment, raising profitability of groundwater exploitation and
augmenting ground water resources, rational pricing of irrigation water and electricity,

45
See Fan (2008). For a recent study, see Batla et al (2017)
46
For elaboration on water see Dev (2016). On water crisis in India see Gulati and Banerjee (2017).
47
On economics of flow irrigation, see Rath (2016)
 27

involvement of user farmers in the management of irrigation systems and, making

groundwater markets equitable (Rao, 2005).

There is paradox of high investments in canal irrigation on the one side and shrinking of net
irrigated area under canals. Governments have significantly raised plan expenditure on
irrigation and flood control since independence. The outlays on major and medium irrigation
rose from Rs.376 crores in the First Plan to an outlay of more than Rs.165,000 crores in the
11th Plan with a cumulated expenditure of Rs,3,51,000 crores (GOI, 2012). A study of 210
major and medium irrigation projects shows that after investing Rs 130,000 crore, these
projects delivered 2.4 million ha. less irrigation during 1990–01 to 2006–7 (Shah, 2011). The
12th Plan working group indicates that there has been massive time and cost overruns. The
average cost of overruns for major irrigation projects is as high as 1,382 per cent. It is known
that present water pricing covers less than 10 per cent of the Operation & Maintenance costs
(O&Ms) under canal irrigation. In general, water pricing is very low for canal irrigation while
we have best practices in water pricing in urban areas which cover around 50 per cent of
O&Ms. Water pricing should at least cover major part of O&Ms so that sustainability of
irrigation systems is ensured.

Water use efficiency, conservation and soil moisture management :India has successive
droughts in 2014-15 and 2015-16. There is a need for strategies in short and long term for
mitigating the adverse effects of droughts. It is clear that better and efficient management of
water resources is necessary for India to achieve “more crops per drop.”48

“India uses 2-3 times the water used to produce one tonne of grain in countries like Chia,
Brazil and USA. This implies that with water use efficiency of those countries India can at
least double irrigation coverage or save 50 per cent water currently used in irrigation”(p.9,
NITI Ayog, 2015). NITI Ayog mentions adoption of drip irrigation as one of the mechanisms
for efficiency. Investments in three components pond, rural electrification and drip irrigation
are needed for enhancing water efficiency (Damodaran, 2016). Drip irrigation can cover ten
times the area covered under usual flood irrigation.

Inspite of several benefits, the coverage of area under drip irrigation has remained small with
less than 5 per cent of net sown area. What are the reasons for this low coverage? High initial
capital cost is considered to be one of the biggest obstacles for adoption of drip irrigation.
Therefore, alternative financial mechanisms should be explored to fund this initial cost. The
present subsidy system is not effective. There are alternative subsidy implementation models
(Palanisami, 2015). Some of the measures needed are reducing the capital cost, restructuring
subsidy programmes and effective (quality) extension networks for promoting drip irrigation
(Reddy and Dev, 2006). Promoting rainwater harvesting and drip irrigation can be important
strategies for drought proofing.

48
On water reforms see, Shah (2016) and Vijayshankar (2016)
 28

Conflicts over water are a grim reality today. Inter-State disputes and conflicts on water at
farm level are expected to increase over time. The problem is not due to shortage of water
resource, but due to the absence of proper mechanisms for its augmentation, conservation,
distribution, and efficient use. Water management should be given number one priority
regarding policies on agriculture particularly for drought proofing and to face the risks due to
droughts. Main strategy should be to increase water productivity i.e. ‘more crops per drop”.
Conservation of surface and ground water has become imperative. Water use efficiency can
be increased significantly in Indian agriculture. Multiple approaches are needed for this
purpose. MGNREGA created assets would be useful for drought proofing. Drip irrigation is
one of the important mechanisms to improve water efficiency. For ground water
management, we need to reduce electricity subsidies and water intensive crops while
improving drip irrigation and participatory management.

Land Policy: There is consensus among majority of agricultural economists that land tenure
should be legalised. Small holders will have access to land due to this measure. An expert
committee chaired by T.Haque prepared a Model Leasing Act at national level. It
recommends legalizing land tenancy to provide complete security of land ownership rights
for land owners and security of tenure for tenants for the lease period 49. It also recommends
facilitating all tenants to access bank credit and insurance facilities. Another related reform
on land policy relates to land records and ownership titles. National Land Records
Modernisation Programme (NLRMP) was launched by government of India in 2008. It was
revamped in 2014 as the Digital India – Land Records Modernisation Programme
(DILRMP). Narayanan et al (2018) present findings of an impact assessment of the
programme in Himachal Pradesh and Maharashtra. There are significant differences between
land records and ground situation in villages. Based on the findings, the study provides
suggestions for better land records management.

Technology, Research and Extension

Yields for several crops in India are lower than many countries of the world. Similarly,
growth in total factor productivity in India has been lower compared to countries like Brazil,
China and Indonesia (BIC)50. What policies, investment and institutions explain these
differences? There is no single bullet for lower productivity in India. Overall these three BIC
countries invested more in technology, extension, education, transport, energy and better
institutions (Lele et al, 2018). India is trailing and should invest more in each of these areas
and implement effectively.

Technology (including IT) is crucial for rise in total factor productivity51. The new
agricultural technologies in the horizon are largely biotechnologies. There has been a

49
See Haque, Tajmul (2015)
50
See Lele et al (2018)
51
On technology, see Pal et al (2016), Ramasamy and Ashok (2016)
 29

revolution in cotton production due to success of BT cotton. India allowed BT cotton but not
food crops so far. Some of the concerns of GMOs relate to food and health safety, control of
corporate control on agriculture, pricing of seeds etc. However, many countries adopted GM
crops. India did not approve of BT Brinjal, Mustard and Chickpea. Recently, gene editing is
becoming popular and this can be encouraged in India.

A study by Mathur (2016) shows economic inefficiency in Indian agriculture. According to

him, the implied cost of economic inefficiency is quite high as farmers are losing on average
over two thirds of their potential income through sub-optimal crop and input choices. It
means that farmers’ incomes could be increased over three times with the same resources.
This can be achieved through extension services. Public sector investment for agriculture
research and development, and education in India is only 0.6% of the agricultural GDP which
needs to be raised to at least 1.0%, as is being invested by most of the developing countries.
The returns to investment on research and extension will be much higher on agricultural
growth as compared to other investments.

Information technology can be another source of agricultural development. Digital India is a

campaign launched by the Government of India to ensure the Government's services are
made available to citizens electronically by improved online infrastructure and by increasing
internet connectivity or by making the country digitally empowered in the field of
technology. This initiative includes plans to connect rural areas with high speed internet
networks. Fourth industrial revolution will also have implications for Indian agriculture. Lele
and Goswami (2017) examines how India is facing the fourth industrial revolution in terms of
public policy and public-private and NGO partnerships to improve development particularly
agriculture and rural development. Their study argues that the new technologies are being
used more on governmental redistributive policies than on those directed at improving
productivity and livelihood opportunities for the poor. The study emphasizes that more
investment on technology has to be made in physical and institutional capacity at the ground
level in order to raise farm productivity.

4.5. Policies on Inclusiveness

Sharing growth and equity in agriculture is important to improve livelihoods in rural areas.
Increasing the viability of small and marginal farmers, reducing social, gender and regional
inequalities, improving rainfed areas are some of the goals of equity in agriculture52.

Increase the viability of small and marginal farmers

Around 86% of agricultural holdings belong to small and marginal farmers. The average size
of land holding has been shrinking and it is matter of concern. In his Radhakrishna Memorial
Lectures, Sukhamoy Chakravarty argued that viability of small and marginal farmers have to

52
On inclusive growth, see Dev (2008) and Rao (2018). On strategies for rain fed areas see Raina (2012)
 30

be increased for sustainability of agriculture (Chakravarty, 1987). We are still talking about
viability of small farms even after three decades.

Farmers face several risks in agriculture. These are: production risks, weather and disaster
related risks, price risks, credit risks, market risks and policy risks 53. These risks are much
higher for small farmers.

Table 22 shows that the income of the marginal and small farmers from all sources is only
around 1/10 th of those of large farmers. The income from agriculture is very low for small
farmers. Even if we add the other sources of income, it is not enough to take care of daily
consumption and they have to borrow to survive. Small holding farmers have to get part of
income from rural non-farm activities. Therefore, promotion of rural non-farm sector is
essential for generating incomes for small farmers. Simultaneously, we have to improve the
viability of small holdings54.

Table 22. Monthly Income and Consumption of Agricultural Households : 2013 (Rs.)
Land size Cultivat Animals Wage Non-farm Total Income Total
(ha.) Income Income Income business Consumption
<0.01 31 1223 3019 469 4742 5139
0.01-0.40 712 645 2557 482 4396 5402
0.41-1.00 2177 645 2072 477 5371 5979
1.01-2.00 4237 825 1744 599 7405 6430
2.01-4.00 7433 1180 1681 556 10849 7798
4.01-10.00 15547 1501 2067 880 19995 10115
>10.00 35713 2616 1311 1771 41412 14445
All Classes 3194 784 2146 528 6653 6229
Source: NSS Situation Assessment Survey 2013

However, in contrast to NSS data, a recent survey by NABARD (2018) shows surplus (the
difference between income and expenditure classes) for the all the size classes below 2 ha
(Table 23). Of course, there is inverse relationship between surplus and size classes except
for the size class less than 0.01 ha.

Table 23. Average Monthly Income and Consumption for Agricultural Households by Size Class of Land :
2015-16 (in Rs.)
Size Class Income Consumption Surplus
<0.01 ha 8136 6594 1542
0.01 – 0.40 ha 6650 6185 465
0.41-1.00 ha 8171 6653 1518
1.01-2.00 ha 9990 7802 2188
>2.00 ha 14682 9787 4895
All size classes 8931 7152 1779
Source: NABARD, 2018

53
See Economic Survey 2016-17
54
The inverse relationship between farm size and productivity has been weakening over time. See Deininger et
al (2018).
 31

Small farmers face several challenges in the access to inputs and marketing55. They need a
level playing field with large farms in terms of accessing land, water, inputs, credit,
technology and markets. Small holdings also face new challenges on integration of value
chains, liberalization and globalization effects, market volatility and other risks and
vulnerability, adaptation of climate change etc. (Thapa and Gaiha (2011).

Small farmers require special support, public goods and efficient links to input and output
markets. There are many technological and institutional innovations which can enable
marginal and small farmers to raise agricultural productivity and increase incomes through
diversification and high value agriculture5657. A number of innovative institutional models are
emerging and there are many opportunities for small and marginal farmers in India. Group or
collective approach e.g. farmers’ organisations, women self help groups is one of the main
instituional mechanisms to help marginal and small farmers.

Credit: It is true that there have been some improvements in flow of farm credit in recent
years58. However, the Government has to be sensitive to the three distributional aspects of
agricultural credit. These are: (a) not much improvement in the share of small and marginal
farmers; (c) increase in the share of indirect credit in total agricultural credit and; (d)
significant regional inequalities in credit. Indebtedness of marginal and small farmers is
another issue to be tackled.

Transformation of small farm economy is the biggest challenge for developing economies
like India. Small farmers59 are not homogeneous category as some of them have done
exceedingly well as compared to others. There are three categories of small farmers: (a)
succeed as commercial farmers; (b) diversifying into rural non-farm sector; and (c)
subsistence oriented farmers. Policies may have to be different for each of these categories 60.

Many of the small farmers can not leave agriculture because of lack of opportunities in
non-farm sector. Only option is to organise them into groups to benefit from the
cooperative approach and increase their farm incomes.

Eastern region
This region has the highest poverty in the country. Agricultural development is important to
reduce poverty in Eastern India. The region has fertile soil and ample water resources. Plenty
of surface and ground water and less intensive use of land resources reveal that region has
considerable scope for raising agricultural productivity. Eastern region is the ideal place for
having second green revolution. Rice is an important crop in the region. Of course,

55
On small farmers, see Swaminathan and Bakshi (2017), Himanshu et al (2016) on small farmers based on
village surveys. On agrarian crisis, see Reddy and Mishra (2010)
56
See Vaidyanathan (2010) for efficiency in investments. See Alagh (2013) for a discussion on future of Indian
agriculture and Alagh (2017) on a vision for agriculture.
57
On innovative input markets, see Singh (2015)
58
Narayanan (2015) examines productivity of credit in India
59
It also includes marginal farmers
60
See Hazel et al (2007) on small farmers. Also see Vaidyanathan (2016) for the impact of slow down of
agricultural growth on small, medium and large farmers.
 32

diversification is important for raising incomes for farmers. Infrastructure improvement in

institutions and input delivery mechanism are needed in the region. Crop varieties that grow
well with shorter time schedule should be developed. Creation of adequate marketing
infrastructure and support mechanism is needed to have revolution.

In the 1980s, Sen Committee (RBI, 1984) examined the constriants for agricultural
productivity in the eastern region. Apart from problems in agrarian structure, irrigation and
drainage facilities were the main impediments. Joshi and Kumar (2016) study the
transformation of agriculture in Easter region. It provides various challenges and
opportunities for agricultural sector in Bihar and Orissa. The key challenges include low crop
yield and high risk, biotic and abiotic constraints, small size of holdings, inadequate
infrastructure and weak institutions while opportunities include good soil and ground water
potential. The study also says that appropriate policies, institutions and infrastructure should
be developed in favour of high value sectors such as dairy, poultry, horticulture and inland
fish.

Women in Agriculture
Agriculture is becoming increasingly feminized as men migrate to the rural non-farm sector.
Nearly 75% of rural women work in agriculture as compared to 59% of rural men in
agriculture in 2011-12. Agricultural policies should correct the gender bias in the functioning
of institutions and support systems including property rights for women61.

Women work in “land preparation, seed selection and seed production, sowing, in applying manure,
fertilizer and pesticides, weeding, transplanting, threshing, winnowing and harvesting etc., as well as in
animal husbandry and dairying, fish processing, collection of non timber forest produces (NTFPs), back
yard poultry, and collection of fuel wood, fodder and other products for family needs” (GOI 2007).

Despite their importance, women are continually denied their property rights and access to
other productive resources. Policies that protect women’s rights in land, enhance infrastructure
support to women farmers, and give them legal advice on existing laws, will facilitate
recognition of women’s role as farmers and enable them to access credit, inputs, and marketing
outlets. Women’s names should be recorded as cultivators in revenue records, for family farms
where women operate land that is registered under male ownership.

There is increasing recognition of the role of women in agriculture. Women’s cooperatives,

producer women’s groups, and other forms of group efforts should be promoted, to overcome
the constraints of small and uneconomic land holdings, to disseminate agricultural technology
and other inputs, and for marketing of produce (Agarwal 2010).

61
On gender and land rights, see Agarwal (1994)
 33

There has also been greater emphasis on women’s collectives62. Based on primary surveys,
Agarwal (2018) examines the impact of group farming by women on productivity and
profitability in Kerala and Telangana. The farms of women’s groups under Kudumbashree
(also called joint liability groups) in Kerala performed much better than the predominantly
male-managed individual farms, in their annual value of output per hectare as well as annual
net returns per farm. In the case of Telangana group farms (Samatha Dharani Groups) perform
much worse than individual farms in annual output, but are equivalent in net returns. The study
finds that in both states, groups do much better in commercial crops than in traditional
foodgrains (Agarwal, 2018). The study demonstrates that group farming can provide an
effective alternative, subject to specified conditions and adaptation of the model to the local
context.

Youth: In the changed narrative, policies can be taken to attract youth in agriculture.
Vijayabaskar et al (2018) examine the prospects of improving youth livelihoods in
agriculture. According to them measures for improving incomes within agriculture while also
paying sufficient attention to caste and gender relations, access to land, youth preferences and
mobility aspirations are critical sustaining agriculture and youth livelihoods. Around 56.6%
of rural youth in the age group 15–29 years continued to rely on agriculture, forestry, or
fishing as a source of livelihood (Vijaybaskar et al, 2018). In general, the youth are not
interested to continue as farmers due to the falling profitability and incomes in agriculture.
They prefer non-agricultural and urban jobs. In order to continue them in farming and attract
more youth, we need to encouage mechanised or scientifically supported high yield
agriculture, horticulture, animal husbandry, fisheries and the allied processing industry,
information technology and start-ups. These measures can generate a demand, market, profits
and potentially aspirations of youth in agriculture.

Agriculture and Nutrition Linkages

An emerging area of research relates to linkages between agriculture and nutrition. Nutrition
is determined by several factors such as agriculture development, health, sanitation, safe
drinking water, women empowerment etc63. Reseachers say that agriculture, women
empowerment and health contribute 1/3rd each to the nutritional status. However, in India, the
linkage between agriculture and nutrition is less explored area as compared to other subjects.,
“Agricultural initiatives alone cannot solve the nutrition crisis in India but they can play
much bigger role toward that end than they have done thus far”(p.1, Gillespie and Kadiyala
2011). Agriculture is a key driver of poverty reduction, but pathways to nutrition are diverse
and interconnected (Box 1). Dev and Kadiyala (2011) discuss three entry points namely,
importance of agriculture for inclusive growth, agriculture for diversification of diets and role
of women in agriculture.

62
The NGO Deccan Development Society (DDS), for example, enables women from landless families to access
various government programs to establish claims on land, through purchase and lease.
63
On triple burden of malnutrition, see Meenakshi (2016). Also see Pingali and Rao (2017)
 34

Box 1: Agriculture-Nutrition Pathways

1. Agriculture as a source of food
2. Agriculture as a source of income
3. Agricultural policy and food prices
Gender Dimension
4. Women’s status and intrahousehold decisions and resource allocation
5. Women’s agriculture ability to manage young child care
6. Women’s own nutritional status
Source: Kadiyala et al 2014

Agriculture for Inclusive Growth

At the policy level, achieving inclusive growth in agriculture is important for strengthening
the linkages between agriculture and nutrition. Agriculture development is part of any
inclusive growth strategy in India (Dev 2008), as the majority of the population depends on
agriculture for their livelihoods. However, inequalities in agriculture can weaken the
agriculture-nutrition linkages. “Inclusiveness and equity in agriculture can be achieved by
increasing agricultural productivity in rainfed and resource poor areas, thereby raising the
productivity and income of small and marginal farmers” (Dev and Kadiyala 2011). The bulk
of the rural poor, as well as small and marginal farmers lives in such resource-poor areas,
where undernutrition is concentrated as well64.

Agriculture for diversified diet

The fact that consumption patterns have been changing towards non-cereals presents a good
opportunity for farmers to diversify their cropping patterns in order to improve both incomes
and nutrition. Agricultural diversification can partly improve diet diversification although
there is no one to one relationship between the two. Several women and children suffer from
micro-nutrients such as iron, iodine, zinc, vitamin A and vitamin B12. Biofortification is one
way of access to micronutrients. We should also promote naturally biofortified crops such as
sweet potato, moringa (drumsticks), bread fruit and various berries which are rich in
micronutrients (Swaminathan and Kesavan, 2016). Farming system research (FSR) is needed
to strengthen linkages between agriculture and nutrition. This will involve crop-livestock-fish
integration in research. FSR will help in providing balanced diet with the introduction of
dairy, poultry, fish and other animal protein along with cereals. The importance of
agricultural value chains and food systems for improving food and nutrition is well
recognised now65. The nutrition value and safety of foods should be enhanced along the value
chains.

Women Empowerment and Nutrition

Improving the productivity of women farmers as well as income levels of women agricultural
labourers is crucial for contributing to improved nutrition. The profound gender bias in the
functioning of institutions for information, extension, credit, inputs and marketing needs

64
Agricultural income also increases BMI of women (Rao and Pingali, 2018)
65
For transitioning to toward nutrition sensitive food systems in developing countries, see Pingali and Sunder
(2017)
 35

urgent correction, taking into account their mobility, domestic responsibilities and social
constraints. Women’s cooperatives, producer women’s groups and other forms of group
efforts should be utilized to encourage production and consumption of nutrient rich foods,
enable women and their children access health and nutrition services and for catalyzing
critical behavior change for optimal health and nutrition outcome in the long-run. While
linking women in agriculture to Mahatma Gandhi Rural Employment Guarantee Scheme
(MNREGS) is certainly in the discourse, 66these linkages need to be operationalized and
tightened.

Conditions under which women are employed (for example, prolonged exposure to
fertilizers, pesticides, long working hours) and the support systems to strengthen women’s
capacity to care for themselves and their children are of utmost importance. Easy access to
maternity entitlements, optimum quality day care facilities for children within the community
and /or at place of work is critical to strengthen caring capacity and translate higher incomes
into health and nutrition benefits (Dev and Kadiyala 2011)67.

4.6. Policies on Sustainability and Climate Change

Sustainability of agriculture is becoming much more important now. A crucial step is to
provide farmers with a policy environment that will make agricultural growth more
sustainable. It also includes review of water, energy and fertilizer subsidies that encourage
unsustainable resource use. This is particularly important encouraging agricultural producers
to adopt specific technologies that increase agricultural productivity and enhance
environment sustainability.

One can achieve higher agricultural growth but it has to be sustainable in terms of using
lower resources and less input growth. 12th Five Year Plan report provides the trends in
outputs, value added, inputs and factor productivities since independence. These trends are
given in Table 24. One can derive interesting findings from this table as given below.
Table 24. Growth of Output, Inputs and Productivity: All India
(period averages of annual growth rates)
Pre-green Green Wider Early Ninth Tenth Eleventh
Revolution revolution coverage liberalization plan plan plan
1951/52 to 1968/69 to 1981/82 to 1991/92 to 1997/98 2002/03 2007/08
1967/68 1980/81 1990/91 1996/97 to to to
2001/02 2006/07 2011/12
I Value of output (2004/5 prices)
All Crops 3.0 3.0 3.0 3.1 2.3 2.1 3.4
Livestock 1.0 3.3 4.8 4.0 3.6 3.6 4.8
Crops and Livestock 2.5 3.0 3.3 3.3 2.6 2.5 3.8
Fishing 4.7 3.1 5.7 7.1 2.7 3.3 3.6
Forestry 1.7 -0.2 0.3 0.3 2.7 1.3 2.3
Agriculture and Allied 2.3 2.4 3.0 3.1 2.6 2.4 3.6
II. Value of Inputs (2004/5 prices)
All inputs crops and livestock 2.4 4.5 2.2 1.9 3.0 2.5 4.4
Inputs for fishing 4.6 3.3 5.4 6.5 2.7 1.5 3.5
Inputs for forestry 1.7 -0.2 0.1 0.3 2.6 1.3 2.3

66
For a district level analysis on stunting, see Menon et al 2018
67
On women empowerment and nutrition, see Dev et al (2017)
 36

All inputs agriculture and allied 2.3 3.9 2.1 1.9 3.0 2.4 4.3
III Gross value Added (2004/5 prices)
Crops and Livestock 2.7 2.7 3.7 3.7 2.5 2.5 3.5
Fishing 4.7 3.0 5.8 7.2 2.7 3.6 3.7
Forestry 1.7 -0.2 0.4 0.3 2.8 1.3 2.3
Agriculture and Allied 2.5 2.4 3.5 3.7 2.5 2.4 3.3
IV Factor inputs into agriculture
Land (gross cropped area) 1.3 0.4 0.8 0.3 -0.1 0.6 0.3
Labour 1.8 1.1 0.5 2.3 0.3 0.5 -1.5
Net fixed capital stock 2.3 3.6 2.8 3.1 3.4 4.7 6.0
Of which: public --- --- 3.9 2.0 1.4 2.3 3.6
Of which :private --- --- 1.4 4.3 5.1 6.6 7.5
V partial factor productivities (2004/5 prices)
Land productivity 1.2 2.0 2.7 3.3 2.6 1.8 3.1
Labour productivity 0.7 1.4 3.0 1.4 2.2 1.8 4.8
Capital productivity 0.2 -1.1 0.7 0.6 -0.9 -2.4 -2.7
Source: p.6, Vol. II, 12th Five Year Plan, GOI

(a) Growth of total value of output in agriculture (crop and livestock) during the 11th plan at
3.8 per cent per annum was the highest as compared to earlier periods since independence. It
was also the highest for pulses, fibres, all crops and livestock. The growth rates for all the
crop aggregates are higher for 11th plan as compared to those of 9th and 10th plans.

(b) Growth in intermediate inputs for agriculture and allied activities was the highest for 11th
plan at 4.3 per cent per annum compared to 3 per cent and 2.4 per cent respectively for 9th
and 10th plans. The growth rates for all the inputs were higher in 11th plan compared to those
for 9th and 10th plan. In other words, the high growth rate is accompanied by high input
growth which is not sustainable.

Soil quality improvement is one of the major issues for sustainability. Many state
governments have recognized the need for improvement in soil health. Similarly water
management is another issue for sustainability. India exports rice in large quantities. It is
known that rice is a water intensive crop. In other words India is exporting water in terms of
rice exports.

In a lecture, Subrahmaniam (2018) says that “ I would urge the CACP in its MSP calculations to
quantify not only the private costs and returns of various crops but also their true social costs. For
example, the social cost of cultivating rice in north-western India far exceed private costs because of
damage to soil quality, depletion of water tables, damage to human health, and spewing of pollution
into the atmosphere” (p.16)

The need for adopting the methods of an evergreen revolution has become very urgent
because of sustainable concerns. According to Swaminathan (2010) there are two major
pathways to fostering an evergreen revolution. The first one is organic farming. But, so far
the experience shows that although we have the practice of organic farming in several
pockets of India, the production under organic farming is not significant compared to overall
crop production in the country. There is a need for improving organic farming in different
parts of India. The second pathway to achieve evergreen revolution is green agriculture. In
this case, 'ecologically sound practices like conservation farming, integrated pest
 37

management, integrated nutrient supply and natural conservation and enhancement, are
promoted’ (p. 21, Swaminathan, 2010)68.

Food safety is another concern for countries like India. We have problems in crop production
and allied activities. Severe pesticide is being used in fruits and vegetables, and antibiotics in
chickens. More nutritious foods like animal sources, fruits and vegetables have food safety
problems. Similarly, maize, groundnut, sorghum have aflatoxin problems. Notwithstanding
the focus on market-based solutions, it is likely that specific, well-targeted interventions will
be required to support poor people on food safety. The targeting should consider
opportunities for groups of poor people to benefit including comparative advantage for
certain foods such as dairy or vegetables. Livestock sector should also be focused to help the
poor regarding food safety.

Climate Change and Agriculture

We have discussed above (in Section 3) that climate change would have adverse impact on
Indian agriculture. What are the policies needed to face the impact of climate change?
Economic Survey 2017-18 says that India needs to spread irrigation against a backdrop of
rising water scarcity and depleting groundwater resources. India pumps more than twice as
much groundwater as China or United States (GOI, 2018). There is a need to review of power
and water subsidies.

Agriculture is the sector most vulnerable to climate change69. Consistent warming trends and
more frequent and intense extreme weather events such as droughts have been observed. The
recent IPCC Special Report (IPCC 2018) has indicated that global warming is likely to reach
1.5°C between 2030 and 2052 if it continues to increase at the current rate. limiting global
warming to 1.5°C is projected to reduce risks to marine biodiversity, fisheries, and
ecosystems. Populations at disproportionately higher risk of adverse consequences of global
warming of 1.5°C and beyond include disadvantaged and vulnerable populations, some
indigenous peoples, and local communities dependent on agricultural or coastal livelihoods
(IPCC 2018). It is well known that we need adaptation and mitigation strategies regarding
impacts of climate change.

Climate-smart agriculture: FAO (2010) discusses strategies needed for climate-smart

agriculture. It is defined as agriculture that sustainably increases productivity, resilience
(adaptation), reduces/removes GHGs (mitigation), and enhances achievement of national
food security and development goals.

68
On sustainability, also see Gerber and Raina (2018)
69
For an earlier study on climate change and challenges for India’s poor, see Somanthan and Somanathan
(2009)
 38

It provides examples of climate-smart production systems such as soil and nutrient

management, water harvesting and use, pest and disease control, resilient eco systems,
genetic resources etc. It also discusses about efficient, harvesting, processing and supply
chains. Efficient harvesting and early processing can reduce post-harvest losses and preserves
food quantity, quality and nutritional value of the product (FAO, 2010). This approach also
ensures better use of co-products and by-products, either as feed for livestock, to produce
renewable energy in integrated systems or to improve soil fertility.

The report says that ‘there is a need for policies, infrastructures and considerable investments
to build the financial and technical capacity of farmers (especially small holders) to enable
them to adopt climate-smart practices that could generate economic rural growth and ensure
food security” (p.4, FAO, 2010). The report says that agriculture in developing countries
must undergo a significant transformation in order to meet the related challenges of food
security and climate change. Effective climate-smart practices already exist and could be
implemented in developing country agricultural systems. For small holders, climate smart
agriculture offers a triple-win strategy: (a) improving small holder productivity for nutrition
crops; (b) help small holders to adapt to climate change; (c) mitigate agriculture’s
contribution to climate change (Nwanze and Fan, 2016)70.

There is a need for an effective climate resilient agriculture (CRA) in India71. Three main
issues are discussed here.

First, there is a need for diversified cropping systems in view of climate related risks. For
example, cultivation of pulses can be an important strategy for CRA. Pulses are legumes
which improves soil fertility. Thus, diversification to pulse cultivation can lead to win-win
situation in terms of attaining self-sufficiency and raising soil fertility72. 2016 was the
international year of pulses. Three-fourths of the total area under pulses is in the states of
Madhya Pradesh, Maharashtra, Rajasthan, Gujarat, Andhra Pradesh, Karnataka and Uttar
Pradesh. Pulses are grown largely in rainfed areas as only 16 per cent of area is irrigated.
Diversification to pulses is thus a good strategy for CRA particularly in rainfed areas73.

Second one is crop insurance which can be used as one of the strategies for CRA. In this
context, Pradhan Mantri Fasal Bhima Yojana(PMFBY) introduced by the Central
government is in the right direction. There are many features in the new crop insurance
scheme which makes it different from earlier schemes. It has been mentioned that the new
crop insurance can be a game changer if the conditions of low premiums and the SI covering

70
See Babu et al (2017)
71
Indian government has formulated National Mission for Sustainable Agriculture (NMSA) for enhancing
agricultural productivity especially in rainfed areas focusing on integrated farming, water use efficiency, soil
health management and synergizing resource conservation. This is also being used for climate change
adaptation.
72
On pulses see Joshi et al (2017)
73
See Joshi (2016) on climate smart agriculture in India
 39

the GVO are met along with quick claim settlements with mobile and satellite technology
(Damodaran, 2016a).

MGNREGA can be another instrument for drought proofing and CRA. Agricultural and
livelihood vulnerability indices developed showed reduction in vulnerability due to
implementation of works under MGNREGA and resulting environmental benefits (Esteves et
al, 2013). A study on MGNREGA works in Maharashtra shows 87% of the works exist and
function and over 75% of them are directly or indirectly to agriculture (Narayanan et al,
2014). These works included land levelling (10%), wells (77%), farm ponds (9%), bunding
(12%), irrigation channels (5%), and trenches (5%). A majority of the water works on
common lands comprised check dams, followed by bunds and dykes. MGNREGA thus can
help as an important strategy for CRA.

The third issue relates to the role of research and extension system in promoting CRA.
Research leads to development of climate resilient technologies and extension system will
promote them among farmers. There have been some initiatives recently. For example, the
National Initiative of Climate Resilient Agriculture (NICRA) was initiated in 2011 by ICAR.
The project aims to enhance resilience of Indian agriculture to climate change and climate
vulnerability through strategic research and technology demonstration. The research on
adaptation and mitigation covers crops, livestock, fisheries and natural resource management.
The project has made significant initial impact and was well received in most of the districts.
Technologies such as on-farm water harvesting in ponds, supplemental irrigation,
introduction of early maturing drought tolerant varieties, paddy varieties tolerant to sub-
mergence in flood prone districts, improved drainage in water logged areas, recharging
techniques for tube wells, site specific nutrient management and management of sodic soils,
mulching, use of zero till drills were enthusiastically implemented by the farmers in NICRA
villages across the country (ICAR, 2016). Much more research and extension are needed to
have effective CRA particularly in the current environment of climate risks. Thus,
diversification, crop insurance, research and extension can become important strategies for
climate resilient agriculture.

Conservativation agriculture: It is developed as an alternative to conventional production

systems.The spread of conservation agriculture (CA) is largely concentrated in the rice–wheat
system in the Indo-Gangetic Plains of the country. The zero-till wheat after rice is the most
widely adopted conserving agricultural technology in the Indian Indo-Gangetic Plains. Thus
it has become the predominant CA based cropping system. Zero-till wheat has the advantage
of significant costs savings and potential yield increase (GOI, 2017). There are many benefits
due to conservation agriculture. These are (a) enhance livelihood security; (b) reduce soil
erosion; (c) more carbon sequestration; (d) enhance resource use efficiency; (e) improve soil
health; and (f) minimize green house gas emissions (GOI, 2017)
 40

Zero Budget Natural Farming (ZBNF): This natural farming has been promoted by Subhash
Palekar74. Nearly 5 million farmers seem to have adopted ZBNF so far. It does not use
fertilisers and pesticides. It only uses natural resources like soil, water, air and, cow urine.
Andhra Pradesh has become the first state to adopt ZBNF. The state plans to spread this
technology to 6 million farmers by 2024. Unlike the chemical farming, the ZBNF does not
add to green house gas emissions. It is important to scale up ZBNF to different parts of India
to improve incomes, environment, adapt and mitigate to climate change75.

Vegetarian vs. non-vegetarian food and climate change

Studies have shown that meet and dairy consumes lot of resources and contributes
greenhouse gas emissions. Lot of grains are used as feedstock for livestock. “Livestock has the
world’s land footprint and is growing fast, with close to 80% of the planet’s agricultural land now
used for grazing and animal feed production, even though meat delivers just 18% of our calories”
(p.1,The Guardian, 2018). In a report, experts warn that Europe must halve meat and dairy
consumption by 2050 to reduce GHG emissions. It also advocates taxes and subsidies to
discourage livestock products harmful to health, climate or the environment (The Gaurdian
2018). In the case of India, meat and livestock will increase with rising incomes.
Vegetaianism helped to some extent consuming less natural resources. The per capita meat
and dairy consumption in India is not as high as those of developed or some of the
developing countries. However, India has to keep in mind that it has to adopt sustainable
practices regarding meat and livestock items.

Consumption and climate change: There are two types of inequalities regarding consumption
patterns and impact on climate change. First one is that the inequality in consumption
patterns between advanced countries and developing countries. The developed countries have
historical responsibilities. Second one is inequalities in consumption patterns between rich
and poor in India. The consumption of the rich in India is more or less equal to the rich of the
advanced countries. The rich in India have to contribute much more for sustainable
development and climate related issues.

4.7 Institutions and Governance

Strengthening institutions and governance is crucial for achieving the growth, equality and
sustainability of agriculture. Rigid institutions and inefficient governance are the primary
cause of the poor implementation of various government programs. Inefficiencies, in turn,
lead to increased subsidies in the agricultural sector. These institutions and old ways of
governance thus need to be changed if agricultural performance is to be improved.
Institutions throughout the agricultural value chains and food systems are important for better
governance and effective implementation. They are also important for reducing inequality.

74
For details on ZBNF, see http://www.palekarzerobudgetspiritualfarming.org/
75
See Kumar, Rajiv (2018)
 41

Institutional reforms are important particularly in the domain of public systems for
transforming agriculture. We need institutional reforms for input and output markets, land
and water management and sustainable agriculture.

Farmer producer organisations (FPOs): Collectives or producer organisations can help in

having economies of scale in input and output marketing by organising the small farmers.
They can participate throughout the value chain. Some of them are doing well. But, many
FPO’s are only on paper. There is a need to support them financially and strengthen the
capacity of farmer producer organisations.

The increasing costs of purchased inputs, as well as the problems of quality in terms of sub-
standard and spurious seeds and pesticides have also figured as the dominant proximate
factors for the crop failures. This has also been recognised as a critical risk factor linked to
distress of farmers. Therefore, appropriate institutions are important for delivery of inputs,
credit and extension especially for small farmers. We already discussed about the importance
of marketing.

Vaidyanathan (2010) who is critical of government policies, says that “There was hardly any
change in the strategy for agriculture. It was hardly affected by the reforms. Policies continued as
before to focus on large investments in irrigation and other infrastructure, and special programmes to
increase rural employment”(p.32). He says that efficiency of investments has to be improved
with institutional reforms rather than keep on increasing investments and subsidies.

Institutional factors are the key for improving efficiency in canal irrigation. Mere increase in
water pricing may not result in financial sustainability unless institutions are in place to
recover water charges (Reddy and Dev, 2006). Maintenance and management of canal
systems through the participation of user societies is expected to contribute to an efficient and
equitable distribution of water resources. Reforming institutional structures in favour of
participatory irrigation management (PIM) and water user associations (WUA) have to be
strengthened. Currently there are 56,539 WUA managing 13.16 million hectare of irrigated
land (NITI Ayog, 2015). Only 15 States have enacted PIM Acts. However, successful
functioning of WUAs is reported only in a few projects in Maharashtra, Gujarat, Andhra
Pradesh and Orissa. In strengthening the PIM and WUAs, the only long term solution is
awareness building and promoting participatory monitoring and evaluation.

Earlier studies have also shown that several institutions have been working on natural
resources management76. Some examples are : (a) Common pool land resources:Tree
Growers’ Cooperatives, Joint Forest Management, Van Panchayats; (b) Watershed
development: Ralegaon Siddhi village in Maharashtra under Anna Hazare; (c) Canal water:

76
For details see Marothia (2016)
 42

Water user associations; (d) Ground water : Pani Panchayats. We have to scale up some of
these successful institutions for improving sustainability77.

The importance of collective action in climate change adaptation and mitigation is

recognized. Research and practice have shown that collective action institutions are very
important for technology transfer in agriculture and natural resource management among
small holders and resource dependent communities.

Central and State governments have several agricultural programmes. An earlier evaluation
advocates a four-pronged institutional approach to improve the performance of these programs,
including: (a) a credible institutional platform at the local (village and block) level, to serve as a
link between the ultimate beneficiaries, the farming community, and the government agencies;
(b) greater institutional focus on making available improved agricultural technology and on
improving rural infrastructure; (c) a watershed program, partnering with rural communities to
deal with upland, degraded, and desertified areas; (d) more explicit partnership with the private
sector at the state level (Raturi, 2011).

Reforms should involve more efficient delivery system of public services. Social
mobilization, community participation and decentralised approach are needed for better
governance and implementation. It is recognized that decentralization in terms of transferring
power to local councils is important for agricultural development. For many state
governments in India, decentralisation means devolution of power from centre to states. The
experience of decentralisation in terms of greater devolution of functions, finances and
powers to panchayati raj institutions (PRI) and urban local bodies in many states has not been
satisfactory. The PRIs have to be strengthened for achieving growth with equity and
sustainability.

Finally, the agriculture policies have to be formulated by taking the views of stake holders.
There is a view that policy documents and five year plans had been prepared by the experts
without understanding the stakeholders’ viewpoints (Deshpande, 2016). Therefore, policies
will be successful if farmer-centric decentralised approach is followed.

77
The Report of the Commission on ‘Inclusive and Sustainable Development of Andhra Pradesh (CESS, 2016)
provides some examples of the following best institutional practices in agriculture in India : (a)Building
Alternative Markets: Rythu Bazars, SAFAL (Bangalore); (b)Contract farming: Broiler Poultry and Sam
Agritech on grapes in Andhra Pradesh; (c) Farmer Federations: Timbaktu Collective in Anantapur district of
A.P, Vegetable and Fruit Promotion Council Keralam (VFPCK); (d)Land lease for livelihood creation:
Kudumbashree intervention in leasing and group farming; (e) Use of technology for price discovery: ITC e-
Chaupal; (f) Building market infrastructure: Rural godowns by SHGs of small farmers in Germalam village,
Erode district, Tamil Nadu; (g) Strengthening Panchayati Raj Institutions: An experiment in grassroots
democracy and self-rule in village Menda-lekha Gadchiroli district of Maharashtra.
 43

5. CONCLUSIONS
There are three goals of agricultural development. These are: (a) achieving high growth by
raising productivity; (b) inclusiveness by focusing on lagging regions, small farmers and
women; and (c) sustainability of agriculture. In order to achieve these goals, we have to
provide medium term strategy and action plan. This paper examines policies and reforms for
attaining these goals. The 10 conclusions of the paper are given below.

(1) Need for change in narrative in the new context: Basically, we have to change the
narrative on agriculture towards more diversified high value production, better remunerative
prices and farm incomes, marketing and trade reforms, high productivity with less inputs,
cost effective, less chemical and pesticide based, inclusive in terms of women and youth
farmers, small farmers and rain fed areas, nutrition sensitive, environmental friendly and
sustainable agriculture. The five ‘I’s in agriculture: Incentives, Investment, infrastructure,
Institutions, Information’ have to be modified to achieve the goals.

(2) Global trends and Macro policies are equally important for Indian agriculture: There are
many challenges at global level such as climate change, geo-political and urbanization. These
factors and anti-globalisation is the changing context for food systems and agriculture.
Agricultural economists generally restrict to the policies relating to farm sector. However,
there is a need to look at macro policies and non-agriculture.

(3) We have to Walk on two legs (agri. and non-agri.) in the changing context: Rural areas
are changing. We have to invest in agriculture for raising the livelihoods but simultaneously
shift population from agriculture to non-agriculture over time. Thus, both agriculture and
non-agricultre are important for raising income of farm households.

Two agricultures: There are two types of agricultures in India – one is cereal based and the
other one is non-cereal based78. Government policies have been biased towards cereals
particularly rice and wheat. There is a need to shift from rice, wheat-centric policies to millets
based and non-cereal focused policies to promote diversification of cropping patterns.

(4) Doubling farm income (DFI): Estimates show that we need more than 10% per annum
growth in income to achieve DFI in 2022. Government seems to be banking on agriculture
(crop+livestock) sector for DFI. But, as shown above. Government should also promote
much more opportunities in non-farm sector in rural areas. Also, one has to take into account
heterogeneity among different classes of farmers. Similarly, environmental aspects of
doubling farm incomes have to be assessed.

(5) Remunerative price is the most important factor for farmers: Even after 70 years of
independence, we are not able to provide remunerative prices for farmers. Farmers have been

78
See Subrahmanian, 2018
 44

getting low prices in normal, drought and good years because of distortions in price and
marketing policies. Many reforms in marketing are needed.

(6) Beyond harvest and Freedom for farmers: Agriculture GDP+ indicates that we have to go
beyond farming and develop value chain comprising farming, wholesaling, warehousing,
logistics, processing, and retailing. Farmers want freedom from restrictions on market and
exports. Private sector participation can be improved if some of the fears like the Essential
Commodity Act, stock limit and export bans are removed. Banning exports hurts the farmers
most. There have been new generation start-ups coming up in agriculture.

(7) Do not forget basics like water and technology: Basics like seeds, fertilizers, credit, land
and water management and technology are important and they should not be forgotten.
Similarly, investment in infrastructure and R&D are needed. But, we discussed the issues and
policies in water and technology as both are crucial for agricultural development. Basically it
is not investment alone but efficiency in water management in both canal and ground water is
important. Some countries invested more in technology, extension, education, transport,
energy and institutions. India is trailing behind in all these areas.

(8) Inclusiveness for broad based growth and equity: Inequalities in agriculture are high.
There is a need to focus on small and marginal farmers, women, youth, rainfed areas, Eastern
and other lagging regions, social groups like SC and ST farmers. We discussed policy issues
in each of these elements of inclusiveness in agriculture. The role of women in agriculture
has been increasing. Women collectives and group farming can be encouraged to benefit
female farmers. An emerging area of research relates to linkages between agriculture and
nutrition. There can be three entry points namely, importance of agriculture for inclusive
growth, agriculture for diversification of diets and role of women in agriculture for
strengthening agriculture-nutrition linkages. Farmer households spend considerable amount
of money on health and education. In fact, health expenditures on catastrophic illness lead to
indebtedness in agricultural households. Otherwise, governments have to provide farmers
income similar to universal basic income.

(9) Measures to take care of impacts of climate change and improving resilience in
agriculture and sustainability: One can achieve higher agricultural growth but it has to be
sustainable in terms of using lower resources and less input growth. Resilience in agriculture
has to be improved. Climate smart agriculture is being discussed throughout the world to
reduce GHG emissions and increase resilience. FAO says that there is a need for raising
technical capacity of farmers particularly small holders to enable them adopt climate-smart
agricultural practices. Conservation agriculture and zero budget natural farming are some of
the methods that have to be used as part of adaptation and mitigation measures for climate
change.

(10) Institutions and Governance: Strengthening institutions and governance is crucial for
achieving growth, equality and sustainability of agriculture. Institutions throughout the
 45

agricultural value chains and food systems are important for better governance and effective
implementation. They are also important for reducing inequality. There are several examples
of best practices in institutions relating to alternative markets, contract farming, self help
groups, farmer federations, farmer producer companies, women collectives like
Kudumbashree programme in Kerala, self help groups of women, institutions relating to
canal and ground water irrigation and natural resource management. We have to scale up
some of these successful institutions for improving agricultural development.

To conclude, agriculture is a state subject according to the Indian constitution. States have to
play active role along with central government in achieving the three goals of growth,
inclusiness and sustainability. Achieving high growth is important. But, growth without
inclusiveness and sustainability will not be useful. Agriculture transformation has to be
viewed more holistically in terms of rural transformation and urban linkages. There is a need
to give big push for Indian agriculture for transformation and achieving farmers’ welfare.

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