Economic Survey 2018 - Vol. 2, Ch. 7: Agriculture and Food Management (Download PDF)


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The declining share of agriculture does not undermine the significance of the sector for employment, livelihood and food security. With structural changes in agriculture, there is greater scope to broaden the range of activities related to agriculture to improve productivity and make way for sustainable growth.

Overview of agriculture and allied sectors

  • The growth rates of agriculture & allied sectors have been fluctuating. The uncertainties in growth in agriculture are explained by the fact that more than 50 percent of agriculture in India is rainfall dependent, which aggravate the production risks.

Gross Capital Formation in Agriculture and Allied Sector

  • The Gross Capital Formation (GCF) in Agriculture and Allied Sectors relative to GVA in this sector has been showing a fluctuating trend.
  • The Gross Capital Formation in agriculture and allied sectors as a proportion to the total GCF showed a decline, which can be attributed to reduction in private investment.

Production of Crops 2016 - 17

  • As per the Fourth Advance Estimates for 2016 - 17 released by Department of Agriculture, Cooperation and Farmer’s Welfare, the country achieved a record production of food grains which is higher than the previous record production of food grains in 2013 - 14.
  • The record increase in production of food grains attributed to the record production of rice and wheat.
  • This increase in production of food grains and other crops is mainly on account of very good rainfall during monsoon 2016 - 17 and various policy initiatives taken up by the Government.

Kharif Production 2017 - 18

  • As per the First Advance Estimates released on 22nd September, 2017, kharif food grains production during 2017 - 18 is estimated to be lower than the production during 2016 - 17.

Sowing of rabi crops 2017 - 18

  • The sowing of rabi crops is under progress. As per latest information available on sowing of crops from States, the area coverage under rabi crops is above 98 % of the normal area.

Dynamics of Agricultural Growth

  • The agricultural growth in India has been fluctuating since more than 50 % of agriculture in India is rainfall dependent. The sector has been witnessing a gradual structural change in recent years. The share of livestock in GVA in agriculture has been rising gradually, the share of the crop sector in GVA has been on the decline.
  • The graph given below shows share of agriculture and allied sectors in gross value added (in %)
share of agriculture and allied sectors in gross value added

Share of Agriculture and Allied Sectors in Gross Value Added

share of agriculture and allied sectors in gross value added

  • The structural changes that are being witnessed by the agriculture sector in India necessitates re-orientation in policies towards this sector in terms of strengthening the agricultural value chain by focusing on allied activities like dairying and livestock development along with gender-specific interventions
  • The decrease in share of crop sector in the total gross value added of the agriculture and allied sector has impacted the sources of incomes of the farm households. This can be observed from the pie-charts given below.
Image of sources of incomes, 2002-03 and 2012-13

Image of Sources of Incomes, 2002 - 03 and 2012 - 13

Image of sources of incomes, 2002 - 03 and 2012 - 13

  • Women play a significant and crucial role in agricultural development and allied fields. For sustainable development of the agriculture and rural economy, the contribution of women to agriculture and food production cannot be ignored.

The following measures have been taken to ensure mainstreaming of women in agriculture sector:

  • Earmarking at least 30 % of the budget allocation for women beneficiaries in all ongoing schemes/programs and development activities.

  • Initiating women centric activities to ensure benefits of various beneficiary-oriented programs/schemes reach them.

  • Focusing on women self-help group (SHG) to connect them to micro-credit through capacity building activities and to provide information and ensuring their representation in different decision-making bodies.

  • Recognizing the critical role of women in agriculture, the Ministry of Agriculture and Farmers Welfare has declared 15th October of every year as Women Farmer’s Day.

Cropping Pattern in Indian Agriculture

  • The pattern of cropping is determined by various factors like agro-climatic conditions, farm size, prices, profitability and government policies. A diversified cropping pattern will help in mitigating the risks faced by farmers in terms of price shocks and production/harvest losses.
  • The Index of Crop Diversification has been computed for major States and All India to examine whether there has been major changes in the cropping patterns across States. The index value ranges between 0 and 1 and higher the value, greater the diversification.
  • There is a declining inter-temporal behaviour in crop diversification for the States like Chhattisgarh, Haryana, Madhya Pradesh, Odisha, Punjab and Uttar Pradesh. Among these States, the decline in the index has been sharp for Odisha.
  • Two of the States Himachal Pradesh and Jharkhand have shown increasing values in crop diversification. The crop diversification scenario for India as a whole appears to be almost stable throughout the periods.
  • The issues related to monoculture as witnessed in Odisha and Punjab are declining productivity, lower fertilizer response ratio, degradation of soil health and declining profitability of cultivation.
  • Crop diversification needs to be encouraged to improve soil health, productivity and thereby profitability of cultivation.
  • Crops Diversification Program is being implemented by the Government in original green revolution states viz. Punjab, Haryana and in Western UP to diversify paddy area towards less water requiring crops like oilseeds, pulses, coarse cereal, agroforestry.
  • Shifting of tobacco farmers to alternative crops/cropping system in tobacco growing States viz. Andhra Pradesh, Bihar, Gujarat, Karnataka, Maharashtra, Odisha, Tamil Nadu, Telangana, Uttar Pradesh and West Bengal.

Input Management in Agriculture

  • Agricultural productivity is determined by the appropriate use of critical inputs like irrigation, seeds, fertilisers, credit, machines, technology and extension services.
  • The significance of extension services and capacity of farmers to adopt new innovations, technologies and inputs for improving productivity become pertinent.

Operational Holdings by Educational status

  • The educational level of farmers has a significant impact on the capacity of farmers to adopt and inculcate new methods of cultivation and input management.
  • With predominance of small and marginal farm holdings, it is necessary to improve the educational status of farmers to increase their capacity to absorb technologies, and adopt risk mitigating measures.

Use of Inputs by Agricultural Holdings

  • The small and marginal farmers use these inputs, with more than 80 % of agricultural holdings in the marginal size category using organic manure which increases soil fertility.
  • Recognizing the significance of quality of seeds in improving the crop yields, the Government has taken several measures.
  • In order to promote Seed Replacement Rate (SRR) and Varietal Replacement Rate (VRR), Seed Project entitled, “Seed Production in Agricultural Crops” is being implemented. In addition, 239 lakh planting material and 1.9 lakh tissue culture plantlets were also produced.
  • The use of fertilizers and hybrid seeds can bring about better yields if there is adequate coverage of irrigation since agriculture in India is largely rainfed.


  • The State-wise percentage distribution of net irrigated area to total cropped area shows that only two States, Punjab and Uttar Pradesh have more than 50 % net irrigated area to total cropped area and only seven states have above 34 percent.
  • There is tremendous potential to increase the coverage of irrigated area for which the Government launched the Prime Minister’s Krishi Sinchayee Yojana (PMKSY) in 2015.
  • During the year 2016 - 17, Rs. 1991.2 crores was allocated for Per Drop More Crop under PMKSY which is 28%, more than amount allocated in the year 2015 - 16.
  • The target is to bring 12 lakh hectare area under micro-irrigation during 2017 - 18. PMKSY Scheme is being implemented in the mission mode with the help of Command Area Development to complete 99 major and medium irrigation projects

Agricultural Mechanization

Indian farmers are adapting farm mechanization at a faster rate in comparison to recent past.

  • 👌 Indian tractor industries have emerged as the largest in the world and account for about one-third of total global tractor production.
  • It is estimated that percentage of agricultural workers of total work force would drop to 25.7 % by 2050 from 58.2 % in 2001.
  • Due to intensive involvement of labour in different farm operations, the cost of production of many crops is quite high. Human power availability in agriculture also increased.
  • From the graph given below, it can be observed how the Power available from different power sources on Indian farms has shifted.
 Power available from different power sources on Indian farms

Power Available from Different Power Sources on Indian Farms

Power available from different power sources on Indian farms

  • There is a need to consolidate the land holdings to reap the benefits of agricultural mechanization.
  • There is a need to innovate custom service or a rental model by institutionalization for high cost farm machinery such as combine harvester, sugarcane harvester, potato combine, paddy transplanter, laser guided land leveller, rotavator etc. to reduce the cost of operation and it can be adopted by private players or State or Central Organizations in major production hubs.

Mitigating Risks in Agriculture: Crop Insurance and Crop Loss

  • The percentage of agricultural house-holds cultivating rice and wheat insuring their crops was very less.
  • The share of households opted for crop insurance in the case of cotton, groundnut and soybean was slightly higher.
  • The different reasons of agriculture house-holds not insuring their crops is given below.
Image different reasons of agriculture house-holds not insuring

Image Different Reasons of Agriculture House-holds Not Insuring

Image different reasons of agriculture house-holds not insuring

  • To enhance the coverage and rate of crop insurance among agricultural households, proper awareness needs to be generated along with enhanced geographical coverage and simplification of procedures.
  • In this context, the Pradhan Mantri Fasal Bima Yojana (PMFBY), which is a yield index based crop insurance scheme launched in 2016, has made substantial progress with more ground coverage compared to erstwhile schemes.
  • During 2016 - 17, the target of 30 % of the Gross Cropped Area (GCA) in the country for PMFBY has been achieved.
  • The coverage of non-loaned farmers has also been increased.
  • PMFBY provides comprehensive coverage of risks from pre-sowing to post harvest against natural non-preventable risks. The insurance premium is to be paid to companies on actuarial basis, with however very low share to be paid by farmers on a uniform basis across the country.
  • It provides better protection for the farmers in terms of sum insured which has been made equal to the scale of finance.

Reasons for Crop Loss

  • Inadequate rainfall/drought was most reported reason for crop loss for all the selected crops except coconut and urad during the first half of the agricultural year.
  • In respect of coconut and urad, the highest reported single reason for crop loss during this period was “disease/insect/animal”.
  • Within an agricultural year, the reasons for crop loss will vary substantially in rainfed agriculture, which is highly dependent on weather conditions for cultivation of crops.
  • Other natural calamities also happened to be one of the major reasons reported by households which experienced loss of crops like gram, potato, rapeseed/mustard during this period.
  • The significance of adopting climate resilient agriculture is increasing with rapid environmental changes occurring due to climate change factors
  • 📝 👌 Climate-smart agriculture (CSA) is an approach that helps to guide actions needed to transform and reorient agricultural systems to effectively support development and ensure food security in a changing climate.
  • CSA aims to tackle three main objectives: sustainably increasing agricultural productivity and incomes; adapting and building resilience to climate change; and reducing and/or removing greenhouse gas emissions wherever possible.
  • CSA is an approach for developing agricultural strategies to secure sustainable food security under climate change. CSA provides the means to help stakeholders identify agricultural strategies suitable to their local conditions.

Agricultural Credit and Marketing Initiatives

  • Credit is a critical input in achieving high productivity and overall production in the agricultural sector.
  • The Government of India has approved funds to meet various obligations arising from interest subvention being provided to the farmers on short term crop loans, as also loans on post-harvest storages meets an important input requirement of the farmers in the country.
  • The crop insurance under Pradhan Mantri Fasal Bima Yojana (PMFBY) is linked to availing of crop loans, the farmers would stand to benefit from both farmer oriented initiatives of the Government, by accessing the crop loans.
  • The electronic National Agriculture Market (e-NAM) that was launched by Government on April, 2016 aims at integrating the dispersed APMCs through an electronic platform and enable price discovery in a competitive manner, to the advantage of the farmers
  • The loans are available to Kisan Credit Card (KCC) holding small and marginal farmers at interest subvention of 2 % on such storages for a period of upto six months. This will help the farmers to sell when they find the market is buoyant, and avoid distress sale.
  • Interest Subvention Scheme (ISS) was operational since 2006 - 07, for 2017 - 18 will help farmers to avail of short term crop loans up to Rs. 3 lakh payable within one year at only 4 % per annum. The Interest Subvention Scheme will continue for one year and it will be implemented by NABARD and RBI.
  • The interest subvention will be given to Public Sector Banks (PSBs), Private Sector Banks, Cooperative Banks and Regional Rural Banks (RRBs) on use of own funds and to NABARD for refinance to RRBs and Cooperative Banks

Agriculture Research and Development

During the current year (2017 - 18), investment in Agriculture Research and Education protected new agricultural innovations by filling 45 patent applications at Indian Patent Office (IPO) and the cumulative patent applications has now risen to 1, 025.

10 copyright and 12 trademark applications were filed by ICAR for products and processes. After the Protection of Plant Varieties and Farmers’ Rights Authority notified new genera, applications for 135 varieties were filed at the Registry and 155 high-yielding varieties/hybrids of cereals were released for cultivation in different agro-ecologies of the country during 2016. The achievements in the field are

  • Cereals: 117 high yielding varieties/hybrids of cereals were released for cultivation in different agro-ecologies of the country during 2017.

  • Oilseeds: 28 high yielding oilseeds were released for different agro-ecological regions.

  • Pulses: 32 high-yielding varieties of pulses were released for different agro-ecological region.

  • Commercial crops: 24 high-yielding varieties of commercial crops were released for different agro-ecological regions.

  • Forage crops: 8 high yielding varieties/hybrids of forage crops were released for cultivation in different agro-ecologies.

Food Management

There are multiple objectives to be achieved through the system of procurement operations as implemented in India in terms of

  • providing fair price to farmers

  • making food-grains affordable to low income consumers

  • provision for contingencies/shortages by maintaining buffer stocks and to reduce food price volatility.

During the financial Year 2017 - 18 (upto 27.11. 2017), Rs. 2785 crore has been released to State Governments as Central assistance to meet the expenditure incurred on intra-State movement of food-grains and fair price shop dealers’ margins.

Economic Costs of Foodgrains to FCI

  • The Economic Cost of foodgrains consists of three components, namely, pooled cost of grains, procurement incidentals and the cost of distribution.
  • Pooled cost of food grains is the weighted MSP of the stock of foodgrains available with FCI at the time of calculating the economic cost

👌 Open Market Sale Scheme (Domestic)

FCI on the instructions from the Government sells excess stocks out of Central Pool through Open Market Sale Scheme (Domestic) [OMSS (D) ] in the open market from time to time at predetermined prices to achieve the following objectives

  • To enhance the supply of food grains during the lean season and deficit regions

  • To moderate the open market prices

  • To offload the excess stocks

  • To reduce the carrying cost of food grains.

The Way Forward

  • The Government has initiated reforms in the field of agricultural marketing, given a big push to the use of technology in agriculture, and also adopted Direct Benefit Transfer (DBT) mode for timely delivery of extension services, credit and other inputs to small and marginal farmers.
  • The central priority of the government will be to provide opportunities for farmers to diversify their income generating opportunities to reduce the various risks by facilitating the development of agricultural sub-sectors like livestock and fisheries.
  • The transformation of agriculture and allied sector is imminent by way of appropriate policy interventions related to prices, trade, adoption of Climate Smart Agriculture, increased focus on small, marginal and women farmers.

- Published/Last Modified on: March 28, 2018


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