Download Some Imperatives in Indian Agriculture

46th Annual Convocation Address
Some Imperatives in Indian Agriculture
by
Dr. C. Rangarajan
Chairman
Economic Advisory Council to the Prime Minister
April 13, 2012
University of Agricultural Sciences
Bangalore
Some Imperatives in Indian Agriculture
by
Dr. C. Rangarajan
Chairman
Economic Advisory Council to the Prime Minister
It gives me great pleasure to be in your midst this morning and
to deliver the 46th Annual Convocation Address of the University of
Agricultural Sciences, Bangalore.
I am deeply grateful to the
Chancellor of the University and to the Vice Chancellor for inviting
me to deliver the Address. The origin of the University goes back
almost to the 19th century. Since 1963, when it became a university,
this University has grown into a strong institution and has provided
quality agricultural education, cutting edge research and extension
services. I am particularly happy to know that this University has
released so far 170 improved varieties of seeds in cereals, pulses,
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oilseeds and other commercial crops. As I shall emphasis later, this
is the direction in which all agricultural universities must move in
order to ensure food security.
Let me at the outset congratulate all of you who are graduating
today. Let me add a word of special appreciation to those who are
receiving awards. One stage in your life is coming to an end and
another is about to begin.
You will be leaving the sheltered
collegiate life and entering the wide world with all its ups and
downs. From the country’s point of view, we welcome you as our
next generation of change agents in agriculture. In a sense, your
future is intertwined with the future of this country. You also have
an opportunity to shape it.
The importance of agriculture in India’s economy cannot be
overstated. It is true that the contribution of agriculture to overall
GDP has been coming down. It fell from 30 per cent in 1990-91 to
14.5 per cent in 2010-11. However, this decrease in agricultural
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contribution to GDP has not been accompanied by a matching
reduction in the share of agriculture in employment. Even today
about 52 per cent of the total workforce is still employed in the farm
sector. The last two years have clearly shown how even a small
shortfall in food production can cause serious distortions in the
economy.
From the point of view of food security, reduction of
poverty and balanced regional development, agricultural growth is
imperative. The World Development Report 2008 brings out clearly
that agricultural growth is at least twice as effective as nonagricultural growth in reducing poverty.
The growth performance of the agriculture sector has been
fluctuating over the last two decades. Between 1992 and 1997 this
sector grew at 4.8 per cent but the growth rate came down to 2.5
per cent during the period 1997-2002 and further to 2.4 per cent
during 2002-07. During the 11th Plan period, there has been a pick
up in agricultural growth which is estimated to be 3.4 per cent. The
trend rate of growth of agriculture during 1992-93 to 2010-11 was
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2.8 per cent while the average annual rate of growth in agriculture
and allied activities during the same period was 3.2 per cent. It
must also be noted that agriculture performance in India has also
been volatile. The coefficient of variation during 2000-01 to 2010-1
was 1.6 as compared to 1.1 during 1992-93 to 1999-2000. This is
at least six times more than the coefficient of variation observed in
the overall GDP growth in the country. Besides, there is a wide
variation in the performance of different States. During 2000-01 to
2008-09 the growth performance of agriculture in Rajasthan (8.2 per
cent), Gujarat (7.7 per cent), and Bihar (7.1 per cent) was much
higher than that of Uttar Pradesh (3.2 per cent) and West Bengal
(2.4 per cent).
It is heartening to note that some of the poor
performing States have shown strong growth in the recent period.
The Plan documents have always set the target for the annual
rate of growth of agriculture and allied activities at 4 per cent. We
have fallen short of this target in almost every Plan. Looking at the
agricultural scene, I feel that there are four or five areas which need
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attention, if we ought to achieve the target we have set Plan after
Plan.
1.
Need for renewed technology intervention:
Agricultural productivity as measured by the yield per hectare
is low in India as compared to many other countries. This applies
almost to every crop. In mid-1060s, a new agricultural strategy was
adopted which emphasized on the spreading of dwarf and high
yielding varieties of wheat.
Along with high yielding varieties,
emphasis was also laid on the use of fertilizers supplemented by
the availability of adequate water. The new strategy paid dividends
and resulted in the well acclaimed “Green Revolution”. However,
since then, there has been no major breakthrough. There is a clear
evidence of ‘technology fatigue’. The yields of almost all the crops
have stagnated.
Among two major cereals, productivity of rice
shows an annual growth of 1.69 per cent while wheat productivity
experienced less than half of one per cent growth. Productivity in
pulses has remained unimpressive. Only in cotton, there has been
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a sharp increase in the yield. If we have to usher in a second green
revolution, we need some significant technological revolution. We
have made large investments in agricultural universities and
research institutions. It is high time that our research institutions
rise to the occasion and provide solid support for improving
productivity in agriculture.
Seed is an important carrier of
technology. Seed is a basic input to raise productivity. I do not
want to belittle the contributions made by scientific institutions in
agriculture. Nevertheless, in the case of most crops, the scope for
increasing the yield per hectare is immense. This is particularly true
in relation to dry land farming.
A conscious effort to upgrade
technology in agriculture has become necessary.
2.
Institutional support to small and marginal land holdings:
The average area of operational holdings in India has
diminished progressively from 2.28 ha in 1970-71 to 1.55 ha in
1991-92 and further to 1.23 ha in 2005-06.
According to the
Agricultural Census of 2005-06, the proportion of marginal holdings
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(less than 1 ha) has increased from 61.6 per cent in 1995-96 to 64.8
per cent in 2005-06. This is followed by about 18 per cent of small
holdings (1 to 2 ha). Thus marginal and small holdings constitute a
significantly large proportion of the total holdings. The small and
marginal holdings account for a high proportion of the total output.
According to one estimate, small and marginal farmers together
supply 62 per cent of paddy, 54 per cent of coarse cereals and 52
per cent of wheat.
It is not surprising that with such small
operational holdings, most farmers are not able to earn a
reasonable income. Over 45 per cent of farmers interviewed by the
National Sample Survey Organisation had expressed a desire to
quit farming. How can we help the small and marginal farmers to
overcome the handicaps of size?
Most of the agricultural
innovations such as improved variety of seeds or fertilizers or
pesticides are scale neutral. All the same, the handicaps faced by
the small and marginal farmers in obtaining inputs such as seeds,
fertilizers and pesticides at reasonable prices can be overcome to a
certain extent by appropriate institutional support. These farmers
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should be encouraged to form themselves into formal or informal
groups and pool their requirements of inputs and thereby gain the
advantage that may exist because of the scale. Thus aggregation
in purchase of inputs and sale of products of small farmers can help
to overcome the handicaps of small size. Appropriately supervised,
contract farming can also be a help. Shift to high value crops such
as vegetables is surely an option.
However, without adequate
credit support and marketing arrangements this may not work.
Thus, a strong institutional support to small and marginal farmers is
very much needed, if they have to overcome the disadvantages of
size. Also, the meagre income of small and marginal farmers needs
to be supplemented by non-farming activities in the rural areas.
3.
Improved marketing of products:
The marketing arrangements with respect to agricultural
products remain very archaic. Some of the legislations such as
APMC have also not helped the farmers. There is a big difference
between what the farmers get for the products and what the
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consumers pay for the products.
This difference is extremely
glaring in the case of perishable commodities like vegetables.
Reform of the marketing arrangements must be given priority
attention by State governments. In the case of rice and wheat,
public procurement to some extent takes care of the problem. In
the case of other agricultural products, a significant improvement in
the marketing arrangements can by itself give to the farmers a
higher level of income.
4.
Availability of credit:
There has been a significant increase in the flow of bank credit
to agriculture in recent years. It has increased from Rs. 38,000
crore in 2001 to Rs. 3,00,000 crore in 2011. However, a critical
analysis of the data indicates that a good part of this credit has
gone to medium and large farmers. The small farmers continue to
depend on the informal sources to obtain credit on difficult terms.
The emphasis on financial inclusion has made banks aware of this.
The Committee on Priority Sector Credit has recommended a sub9
ceiling
of 9 per cent of net bank credit for credit to small and
marginal farmers. However, banks need to put in place some kind
of institutional arrangement such as Business Correspondents to
get the small and marginal farmers closer to the banks.
5.
Investment in agriculture:
The key driver of growth is investment.
The Gross Capital
Formation (GCF) in agriculture as a percentage of agriculture GDP
rose steadily from the First Plan to the end of the Fifth Plan, when it
touched 10.8 per cent. After that there was a steady decline which
was reversed only during the Ninth Plan period. It now stands at
18.7 per cent of agri GDP. It has more than doubled during the last
decade. But the sad fact is that there has been no commensurate
improvement in the rate of growth of agriculture output. This shows
a declining efficiency in the use of capital. Additional investment in
irrigation particularly in major and medium projects has not resulted
in a proportionate increase in output. One sees a similar trend even
in input use. A multi-pronged approach to improve productivity is
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needed. Investment, however, will be a significant element in that.
It must also be noted that public investment now forms only 20 per
cent of the total investment in agriculture. 80 per cent comes from
the private sector.
I have talked about what ails Indian agriculture and what
needs to be done. This is not an exhaustive enumeration of the
challenges or the solutions.
There are many more dimensions
which I have not covered. We need to tackle on an urgent basis the
task to raise the productivity of agriculture and the income of the
farmers. Perhaps, what I have said about Indian agriculture applies
with equal force to agriculture in Karnataka as well. Let me, in
conclusion, stress one point which I had made earlier. Unless a
significant breakthrough in technology is made to raise the yields of
various crops, a sustained rate of growth of agriculture at 4 per cent
per annum may not be possible. Our farmers are quite intelligent.
There is no doubt that if a new way is shown and is found to be
profitable, they will adopt it. Research institutions and agriculture
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universities like yours have a major responsibility to shape the
future of agriculture. You must evolve new varieties of seeds. You
must show how farming practices can be modified to increase
productivity. Agricultural extension activities assume importance in
this context. You must carry the results obtained in the lab to the
farmers in the field. You must not shy away from going to rural
areas. It lies in your hands to decide whether we are on the brink of
a revolution or stagnation. We must remember the words of the
poet who said:
“A bold peasantry, their country’s pride
When once destroyed can never be supplied.”
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