Agriculture Productivity in IndiaIssues and Challenges

(Topic 1

Rank 1)

Centre : Regional Staff College, Panchkula

TEAM MEMBER:Coordinator :1. Kumar Gaurav (Leader) 2. Avnish 3. Hemant 4. Manish 5. Rajesh 6. Sandeep 7. Nirmal 8. Manoranjan

Faculty Shri V.K. Bali ( Chief manager )

Introduction: Agriculture is the backbone of the Indian Economy and also everyone of us looks up to agriculture for our sustenance too. Agriculture contributes only 17.8% of India s GDP. The current agriculture growth of India is increasing at a rate of 2% and the projected growth for the next year is about 4%. To achieve the projected growth we have to accelerate the agriculture productivity. About 60% of the total population resides in rural areas. India occupies the top slot in dairy and fruits production while also occupying the first or second position in the world in several crops in terms of area and production. But their term of productivity of some crops is not only low but they also remained stagnant over the years. The position of India is miserable. If India's agricultural productivity needs to be enhanced, policy-making must explore past policies like removing the ceiling on agricultural interest rates, reducing the excise duty on pesticides and giving benefits to the private sector and encourage them to invest in irrigation, water harvesting and management , storage, transportation, etc. These investments should be exempted from tax on profits which is similar to the investments in infrastructure. The yield gap in agriculture can be best bridged through an integrated package of technology, need based agriculture bankable schemes and agricultural policies to reach the untouched production potential, particularly, in rain-fed and other low productivity areas. A great deal still remains to raise Indian agriculture to global standards of productivity. Issues and Challenges It is here the challenge arises considering the implementation of the technology at various levels in the Global community. The need of the hour is not application of the technology but the adoption of appropriate technology, which would suit the particular level of the global community. In India, the farming practices are too haphazard and non-scientific and hence need some forethought before implementing any new technology. India is yet to take a firm ground primarily due to its unique pattern of land holdings, poor infrastructure, lack of farmers inclination to take risk, socio-economic and demographic conditions. Financial institutions are not able to provide hassle free and timely delivery to farmers. 50% of farming community availing credit facilities from private money lenders on higher interest rate which results into rural indebtedness Fragmented land holding in India is a measure challenge as the majority of the farmers in India are Small and Marginal farmers. In the US subsidy to 900,000 farmers has increased by 700 times since 1996. From 1998 to 2000, the US provided an additional 26 billion dollars to its farmers. But in India, we are told that our 'aggregate measure of support' (AMS), a

measure of subsidies that are provided to agriculture; is negative and we can still raise our subsidies to the farmers. But in reality, India is committed to doing away with agricultural subsidies under the 'structural adjustment programme' of the World Bank and the IMF. India provides only one billion dollar worth of indirect subsidies to its 560 million farmers. In the new millennium, the challenges in Indian agricultural sector are quite different from those met in the previous decades. The enormous pressure to produce more food from less land with shrinking natural resources is a tough task for the farmers.

The graph depicted above reflects the relationship between agricultural output and Total factor productivity over the years in comparison to China. Yield of food grains in India with regard to area and Production
Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08*
* Advance Estimates as released on 09.07.2008

Area 121.05 122.78 113.86 123.45 120.00 121.60 123.71 124.44

Production 196.81 212.85 174.77 213.19 198.36 208.60 217.28 230.67

Yield 1626 1734 1535 1727 1652 1715 1756 1854

% Coverage Under Irrigation 43.4 43.0 42.8 42.2 44.2 45.5 NA NA

Diffusion of fertilizer consumption in Indian agriculture has been quite widespread. The imbalances in the use of N, P and K have become highly conspicuous. The farm credit system in Indian agriculture, Credit for Indian agriculture has to expand at a faster rate than before because of the need to step-up agricultural growth to generate surplus for exports, and also because of change in the

product mix towards animal husbandry, aquaculture, fish farming, horticulture and floriculture, medicinal plants Indian agriculture, multiplication, distribution and availability of good quality seed is crucial to accelerated food production. Entry of MNCs in seed production and distribution and consequent effects of patenting under the WTO regime, providing quality seeds to farmer at an affordable cost will be a measure challenge in future. Indian agriculture is not cost-effective to meet the growing challenges and opportunities arising out of WTO agreements and the consequent globalization impacts. In Indian agriculture, rural women play a vital role and participate in all stages of crop production, as they constitute 50% of rural labour force. They contribute in agricultural operations like, transplanting, manuring and fertilizing, harvesting, threshing, winnowing, drying and carrying the product. To better exploit the emerging opportunities, there is need for changing property rights in favour of women, evolving technologies to suit women farmers, increasing the number of women extension workers, educating and training women farmers.

Measures to boost Agriculture Productivity

The rural finance would require improving the performance of regional rural banks and rural credit cooperatives. Give States an incentive to amend the APMC act and abolish mandi taxes. Support the organised private sector in increasing its spending on extension and technology transfer. Implement the Unified Food Law, and back it up with lowering the total tax burden on processed foods so that the sector picks up, and consequently demand for farm produce rises. Target foreign buyers of high-value ethnic Indian foods, as opposed to commodity exports-starting with the large NRI population of 20 million, which can be a huge market. Create a viable model of public-private partnership that allows private investors to invest in agriculture infrastructure in partnership with banks and financial institutions. Improved rural infrastructure is also playing a key role behind the agri sector's comeback trail. With better rural infrastructure, is comparatively easier and costeffective to bring farm produce to the market. Creating a more productive, internationally competitive and diversified agricultural sector would require a shift in public expenditures away from subsidies towards productivity enhancing investments.

The agricultural research and extension systems need to be strengthened to improve access to productivity enhancing technologies. Increase in multi-sectoral competition for water highlights the need to formulate water policies and modernizing Irrigation and Drainage Departments Direct support to self-help groups, village committees, user s associations, savings and loans groups and others can provide the initial push to move organizations to higher level and access to new economic opportunities. Rising incomes are fueling demand for higher-value fresh and processed agricultural products in domestic markets and globally, which open new opportunities for agricultural diversification to higher value products (e.g. horticulture, livestock), agro-processing and related services. The government needs to shift its role from direct intervention and overregulation to creating the enabling environment for private sector participation and competition for agribusiness and more broadly, the rural non-farm sector growth. Improving the rural investment climate includes removing trade controls. Local governments capacity to identify local priorities through participatory budgeting and planning needs to be strengthened. Flowers are estimated to be grown in about 35,000 ha in India of which 10,000 ha are under modern flowers like rose, carnation, orchid, etc. Major flowers grown are jasmine, marigold, rose, etc. Banks participation and Govt. policies to provide venture capital can boost this activity.

Innovations: To have a hassle free delivery of financial products to farmers. Timely availability of credit as per need of the farmers. Technical guidance in respect of agriculture projects by banks. It is widely accepted that the present loan appraisal and delivery processes of banks are cumbersome and time consuming an innovative, ATMs, Internet kiosks for delivery of financial services in a cost effective manner. This methodology would lower the cost of operation and ensure timely delivery of the loans. Consolidation of land holding. Enhanced Central contribution under the Accelerated Irrigation Benefit Programme. Tax holiday benefit for cold chain/storage facilities to States, which rationalise water rates to cover at least Operations and Maintenance costs. One time management subsidy and recurring assistance over an initial period of 3 years to all registered Water Users Associations, linked to incremental water rate collection. A new credit-linked capital subsidy scheme for construction of cold storages and rural godowns to create additional cold storage capacity Commercial Banks could partner with agricultural marketing and producers cooperatives to reach out to farmers where branch networks are not available.

Financial inclusion for unbanked people to ensure financial accessibility i.e. to make every un banked people banked.

SHG-Bank linkage- Financial sector reforms motivated policy planners to search for products and services for delivering credit to the poor in a sustainable manner, consistent with high repayment rates. The NABARD study shows that 56% of SHG members are SF & MF and 31% agricultural labourers. In the line of innovations, Farmers Club are important, aimed at disseminating farmer related information, facilitating the adoption of financial products of the banking system by farmers. Innovation relates to support services i.e. those which facilitate an enabling environment of these extension is the most important. Technological progress and technical efficiency are two important factors, which influence the investment decisions of farmers. Farmers require not only Extension Services but also backward and forward linkages. In recent times banks have been partners in contract farming schemes, set up to enhance credit. Another interesting innovation is that of The Punjab Mandi Board, which has experimented with a farmers market to provide small farmers located in proximity to urban areas, direct access to consumers by eliminating middlemen. Innovations in enabling support services relates to credit risk mitigation. This is an area of interest both to banks and farmers. The Government of India has

experimented with crop loan insurance though the results have not been very satisfactory. CONCLUSION Agriculture productivity in India is challenge because of fragmented land holding. Consolidation of land holding is one of the measures to get maximum out of it. Government has to take innovative steps to get farmer benefited with the subsidy schemes directly as applicable in other countries to make the farmers self reliant. Banking industry in India has to take suggestive measures to cover excluded or unbanked people get benefited to make them out of the rural indebtedness due to the private money lenders. India has a wide network of rural finance institutions, many of the rural poor remain excluded, due to inefficiencies in the formal finance institutions, the weak regulatory framework, high transaction costs, and risks associated with lending to agriculture. The innovations that are taking place in the rural hinterland are many. Each of these innovations offers potential to be replicated for the greater good of the poor and the unreached. A great deal of experimentation is going on quietly and silently through the banking system. There is no doubt that change is happening. Depth and variety of these changes are extremely exciting. As competition among banks intensifies we should see a broadening and deepening of the innovation process. The Indian banking system has one outstanding merit. Given crises, given a challenge it has always and unfailingly risen to the occasion. It will also successfully find ways and means to reach the 45 million small cultivators who have not been reached so far at all. It is not as a pios hope.