Alas! Long Live Indian Agriculture Sector


By

Dr. Vijay Pithadia
Assistant Professor & Kidevices Chair
School of Management Studies
Shri Lauva Patel Trust College For Women
Amreli-365 601 GJ

&

Krishna Chaitanya V.
Assistant Professor & Research Associate (Finance Area)
Dhruva College of Management
Kachiguda, Hydearabad-500 027
 


India is an agrarian economy and agriculture continues to be the mainstay of the Indian economy. Directly or indirectly, almost one-third population depends on agriculture sector. Agriculture remains a significant contributor, as its contribution to the national Gross Domestic Product is about 25 per cent and provides livelihood for nearly two-thirds of population. It provides employment to about 65% of the labour force, which accounts for nearly 27% of GDP; it contributes 21% of total exports, and raw materials to several industries. The Livestock sector contribution is estimated at 8.4 % of the GDP and 35.85 % of the agricultural output. It also provides raw material for industrial growth like sugar, jute, cotton and agro-based industries such as food processing are gaining importance.

But the growth rate particularly in the last half-decade does not portray a rosy picture of the Indian agriculture sector.

Exhibit 1: Agriculture growth rate in India 1996-97 to 2002-03


Also there is a lot of pressure on the farmers to produce more food from less land with fewer natural resources and inputs like seeds, fertilizers, and irrigation sources. But the major issue to be highlighted is the decline of capital formation in the agricultural sector.

Table 1: Gross Fixed Capital Formation in and for Agriculture in India

Gross Fixed Capital Formation in and for Agriculture at 1993-94 Prices
                                                                                                                                                                                    
(in Rs Crore)

 

 

GFCF (Goss Fixed Capital Formation)

Per cent Share in GDP of GFCF

Year

GDP

in Agriculture

For Agriculture

in Agriculture

for Agriculture

1995-96

899563

16824

25283

1.9

2.8

2000-01

1198685

18364

27946

1.5

2.3

2001-02

1265429

19880

28830

1.6

2.3


Source: Report of Committee on Capital Formation in Agriculture, Directorate of Economics   & Statistics, Department of Agriculture & Cooperation, Ministry of Agriculture

The biggest worry is the continuous fall in the share of public sector investment in agriculture to total public sector investment from last one decade. On the other hand when it comes to allocation of financial resources, the priority was given to the investment goods from the very first Five-Year Plan. This was seen as a gradual shift from agriculture to industry sector. Till early 70's the major investment in agriculture sector from government was in the form of irrigation, which was largely beneficial to the so called zamindars, large and medium scale farmers. Therefore, the investments by government in agriculture sector did not greatly help the poor farmer.

Table 2: Sectoral Share in Five-Year Plan Outlays (in %)

Plans

Agriculture

Irrigation

Power

Industry & Mining

Transport

Social & Communication

Total (Crs.)

I Plan

14.8

22.0

7.7

4.9

24.4

24.1

1960

II Plan

11.8

9.3

9.5

24.1

27.0

18.3

4672

III Plan

12.7

7.8

14.6

22.9

24.6

17.4

8577

Annual Plan 1966-69

16.7

7.1

18.3

24.7

18.4

14.7

6625

IV plan

14.7

8.6

18.6

19.7

19.5

18.9

15779

V plan

12.1

8.7

17.8

25.9

17.3

17.3

39322

Annual Plan

12.3

9.8

18.8

24.3

17.3

17.3

39462

VI plan

13.7

10.0

28.3

15.2

16.1

16.1

109616

VII Plan

(12.5)

(3.9)

(19.3)

(22.1)

(16.30

(20.4)

1800

VIII Plan

n.a

n.a

n.a

n.a

n.a

n.a

n.a


Note: n.a: not available

The Table 2 shows the percentage share of total plan outlay for different sectors under each Five Year Plan. The share of agriculture was under 15 percent in the entire Five Year Plans starting from the second Five-Year Plan to date whereas the share of industry was almost 20 percent or more in every Five Year plan. On the other hand the total plan outlay has doubled for every Plan.

Moreover, in the total national income, the share of agriculture is around 40 to 50 percent in eight five year plans, but the share of industry in national income is just 15 percent during the same period. Therefore, it is important that this declining trend needs to be reversed to keep up the momentum of growth of both the sectors as well as the economy.

Apart from the above, there are three most significant issues in Indian agriculture sector which cannot be ignored and are hampering the growth and development of this sector.

Firstly, finance, which is the major issue for farmers. Over the years, there have been some improvements in this area specially in providing facilities such as rural banking, credit societies, kisan credit cards. But it is found even today that in many villages the farmers are still heavily dependent on the same old money- lender.

Secondly, because of huge population in India, the agricultural labour earns a very low wages, which is actually ailing this sector. It is also found that due to lack of proper opportunities in agriculture sector, there has been a migration of labour from villages to urban areas. Also, because of low wages, lack of proper availability of finances, still the farmers in many villages are forced to adapt labour-intensive methods of production instead of modern technology. SMEs or Village level industries are the answer to arrest this outward flow of labour. Productivity has to increase for incomes to rise and expenditures to rise as well. On a broader plank, the terms of trade has to move in favour of agriculture keeping a balance between industry and agriculture. Small and marginal farmers need protection, security of incomes and crops, insurance of animals and a whole host of support measures. Targeted policies aimed at the vulnerables coupled with a micro-plan for the livelihood of the small farmer is the need of the hour.

Finally, we have moved to a stage where the Indian framers are dependent totally on the RAIN-GOD, the monsoon, which will decide their fate for that particular year. The best example being Indore and some other regions in Madhya Pradesh, and some regions in Rayalaseema region in Andhra Pradesh which did not see rain from last three years. Also, it is shocking to know that 70% of the areas in India are still dependent on monsoon rather than irrigation. The monsoon Model is lurking in our minds more rather than a rural sustenance model.

Added to all these, the issues related to WTO are believed to hamper the growth prospects Indian agriculture, which is already ailing with problems. Many academicians, politicians, research scholars, policy markers are for the opinion that the WTO measures are doing more harm than good to the Indian farmers and agriculture sector. The extreme argument says that in the name of WTO and free trade most of the advanced countries are resorting to the protectionists' measures to themselves, which is a threat to the entire process of Globalization as a whole.

Whatever may be the case, it is high time now to give agriculture paramount importance keeping in view the number of people who depend on this sector, which is known to be India's backbone.
 


Dr. Vijay Pithadia
Assistant Professor & Kidevices Chair
School of Management Studies
Shri Lauva Patel Trust College For Women
Amreli-365 601 GJ

&

Krishna Chaitanya V.
Assistant Professor & Research Associate (Finance Area)
Dhruva College of Management
Kachiguda, Hydearabad-500 027
 

Source: E-mail June 27, 2005

 

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