February 2008

This backgrounder is adapted from the ‘Agriculture and Food Management’ section of Economic Survey 2007-2008 presented by Union Finance Minister P Chidambaram on 28 February 2008.

Read the full report on the India Budget website.

Although the share of the agriculture sector in India’s gross domestic product (GDP) has registered a steady decline from 36.4% in 1982-83 to 18.5% in 2006-07, agriculture is the mainstay of the Indian economy.

This sector continues to support more than half-a-billion people, providing employment to 52% of the workforce.
Agriculture is also an important source of raw material and demand for many industrial products, particularly fertilisers, pesticides, agricultural implements and a variety of consumer goods.

However, over a period of time, growth in the agricultural sector has been lower than the growth in non-agricultural sectors.

Slow growth in agriculture sector

Between 1950-51 and 2006-07, production of foodgrain increased at an average annual rate of 2.5% compared to population growth that averaged 2.1% during this period. As a result, India became almost self-sufficient in foodgrain and there were hardly any imports between 1976-77 and 2005-06.

The gap between growth in the agriculture and non-agriculture sectors began to widen since 1981-82, and, more particularly, since 1996-97.

The rate of growth of foodgrain production decelerated to 1.2% during 1990-2007, lower than the annual rate of growth of population, which averaged 1.9%. The per capita availability of cereals and pulses, therefore, witnessed a decline during this period. Consumption of cereals declined from a peak of 468 grams per capita per day in 1990-91 to 412 grams per capita per day in 2005-06 -- a decline of 13% during this period.

Consumption of pulses declined from 42 grams per capita per day (72 grams in 1956- 57) to 33 grams per capita per day during the same period.

The Planning Commission has made an assessment of trend-growth rates of various parameters that contribute to agricultural growth. Except for an increase in the rate of growth of credit supply to farmers, there has been a deceleration in the growth of all other variables/factors (see table).

Trend growth rates in agriculture (percent/year)

There has been a considerable decline in the rate of growth of area, production, productivity and area irrigated for the major crops. The area under production of foodgrain over a 16-year period witnessed an average annual decline of 0.26% between 1989-90 and 2005-06, largely because of a shift in area away from coarse grains. The trend was moderately reversed during 2002-06.

Cotton and oilseeds also witnessed an increase in area under production during this period.

Average annual rate of growth in production and yield varied across crops and over different time periods. For cotton and oilseeds, the rate of growth in production remained high during 2002-06 (10th five-year plan period), while in the case of wheat and sugarcane, annual growth in production peaked during the 8th five-year plan period. In the case of rice, a positive growth in yield was maintained during this period, but in the case of wheat, average annual growth in yield during 2002-06 was negative.

Growth of productivity in pulses fluctuated over the three Five-Year Plan periods. It became negative during 1997-2002 (9th five-year plan period), but turned positive again during the 10th five-year plan. Increase in production and productivity of cotton during the Tenth Five-Year Plan may be due to increased use of BT cotton.

Productivity of crops in India is not only low, relative to other countries, there are considerable inter-state variations. The productivity of wheat in 2005-06 varied from a low of 1,393 kg per ha in Maharashtra to a high of 4,179 kg in Punjab.

Agricultural production in 2006-07 and 2007-08

The overall production of foodgrain was estimated at 217.3 million tonnes in 2006-07, an increase of 4.2% over 2005-06. Compared to the target set for 2006-07, it was, however, lower by 2.7 million tonnes (1.2%).

The increase in production in 2006-07 was largely because of higher production of wheat by 6.5 million tonnes (9.3%) and of pulses by 0.8 million tonnes (6%). There was a decline in production of oilseeds (3.7 million tones, or 13%) compared to production in 2005-06.

The production of non-food crops, particularly sugarcane, cotton and jute (including mesta), however, exceeded both the targets and levels achieved in the previous year. In 2007-08, as per advance estimates of crop production, a shortfall is expected in rabi crops.

The overall foodgrain production in 2007-08 is expected to fall short of the target by 2.2 million tonnes, though it is expected to be 10.1 million tonnes higher compared to the second estimates for 2006-07. Sugarcane production is estimated to exceed the target, though it will be lower than the previous year.

A shortfall of 2.8 million tonnes (10%) is expected in the production of oilseeds compared to the target, though it is still expected to be higher by 2.9 million tonnes compared to the final estimates for 2006-07.

Over a medium term, there has generally been a shortfall in the achievement of targets for foodgrain, pulses and oilseeds between 2000-01 and 2006-07. The actual production of foodgrain, on an average, was 93% of the target. Actual production, however, was only 87.7% of the target for pulses, and 85.3% of the target for oilseeds. Production of sugarcane and cotton, however, was higher than the target in 2005-06 and 2006-07.

Rainfall in 2007

For the country as a whole, the weighted seasonal rainfall during the south-west monsoon (June-September) 2007 was 5% higher than the long period average (LPA). The southern peninsula experienced the maximum rainfall (26% more) followed by central India (8%) and northeast India (4%). Northwest India was deficient in rainfall by 15%.

Out of 533 meteorological districts, 32% received excess rainfall, 40% normal, 24% deficient rainfall. The remaining 4% received scanty rainfall. The rainfall was not uniformly distributed over time and there were significant variations relative to LPA.

The cumulative post-monsoon rainfall from October 1 to December 31, 2007, was excess-to-normal in nine meteorological sub-divisions and deficient/scanty in the remaining 27 meteorological sub-divisions in the country.

Indebtedness

As incomes from agriculture are not sufficient to meet the consumption needs of farmer households, and due to weather-induced crop uncertainties, a large number of farmers have been pushed into a debt trap.

According to the National Sample Survey Organisation’s (NSSO’s) 59th round of surveys (January-December 2003), 48.6% of farmer households in the country were in debt.

Of the total number of indebted farmers, 61% had operational holdings below 1 ha. Of the total outstanding amount, 41.6% of loans were taken for purposes other than farm-related activities; 30.6% of total loans were for capital expenditure purposes and 27.8% for current expenditure in farm-related activities; 57.7% of the outstanding amount was sourced from institutional channels (including government) and the remaining 42.3% from moneylenders, traders, relatives and friends.

The Expert Group on Agricultural Indebtedness, chaired by R Radhakrishna, estimated that, in 2003, non-institutional channels accounted for Rs 48,000 crore of farmers’ debts, out of which Rs 18,000 crore was availed of at an interest rate of 30% per annum or more.

The Expert Group, which submitted its report in July, 2007, recommended inclusion of the financially excluded, particularly small borrower households, and the adoption of risk mitigating measures for agriculture. It proposed the setting up of a Price Risk Mitigation Fund to compensate farmers in extreme cases of price collapse of plantation and other crops not covered by the minimum support price (MSP).

The Union Budget 2008 proposed a complete waiver of all loans for small and marginal farmers, to address the problem of rural indebtedness. Read details here.
Rehabilitation package for farmers in distress

The Government of India has approved a rehabilitation package of Rs 16,978.7 crore for 31 suicide-prone districts in the four states of Andhra Pradesh, Maharashtra, Karnataka and Kerala. The package will be implemented over a period of three years and includes both immediate and medium-term measures.

The rehabilitation package aims at establishing:

• A sustainable and viable farming and livelihood support system through debt relief to farmers.
• Improved supply of institutional credit.
• Crop-centric approach to agriculture.
• Assured irrigation facilities.
• Watershed management.
• Better extension and farming support services.
• Subsidiary income opportunities through horticulture, livestock, dairying, fisheries, etc.

As on December 31, 2007, an amount of Rs 3,728.4 crore of interest on overdue loans was waived by the banks, and Rs 10,086.6 crore released to Andhra Pradesh, Maharashtra, Karnataka and Kerala under the package.

Buffer stocks and offtake under TPDS

The years 2001-03 witnessed high levels of stock build-up in the central pool. Foodgrain stocks reached a peak of 64.7 million tonnes, an all-time record, in June 2002. The year 2003-04 witnessed a general easing in foodgrain stocks with the Food Corporation of India (FCI), because of relatively lower procurement of rice and wheat following a bad agricultural year in 2002-03 combined with relatively high offtake of foodgrain, especially for drought relief operations.

The steady reduction in stocks prompted the government to stop fresh allocations of rice and wheat for export, in August 2003. The year 2004-05 started with much lower levels of stock, at 20 million tonnes on April 1, 2004, as compared to 32.8 million tonnes on April 1, 2003.

Foodgrain stocks, however, remained consistently higher than the buffer requirement during 2004-05, on account of good rice and wheat procurements and relatively lower offtake compared to the previous year.

As on April 1, 2005, the stock was 17.4 million tonnes against the buffer norm of 16.2 million tonnes. Foodgrain stocks, as on April 1, 2006, were 15.7 million tonnes against buffer norms of 16.2 million tonnes. The stock position of foodgrain, as on January 1, 2008, was 19.2 million tonnes comprising 11.5 million tonnes of rice and 7.7 million tonnes of wheat.

The economic cost of buffer stock foodgrain consists of three components: Minimum Support Price (MSP) paid to farmers, procurement incidentals, and the cost of distribution. The economic cost has witnessed a significant increase for both wheat and rice in 2007-08. While in part this is due to an increase in MSP for wheat and rice, it has also been due to an increase in procurement incidentals, particularly for rice. Further, major procurement states, namely Punjab, Haryana and Andhra Pradesh, have been imposing state taxes and levies of over 10% ad valorem on the procurement of foodgrain, inflating the economic cost.

The economic cost of wheat for 2007-08 is Rs 1,371.3 per quintal, as against Rs 1,214.4 per quintal (provisional estimate) in 2006-07. Similarly, the economic cost of rice in 2007-08 was Rs 1,572.6 per quintal as against Rs 1,411.6 per quintal in 2006-07 (provisional estimate).

The offtake of foodgrain from the central pool is primarily under the targeted public distribution system (TPDS) and for other welfare schemes. Under the TPDS, the allocation is made in terms of scale of issue which is 35 kg per family. Offtake of foodgrain, however, is lower than the allocation.

The difference between the economic cost of foodgrain and the issue price under the TDPS and other schemes is reimbursed to the FCI as subsidy. The issue price has been kept unchanged since July 1, 2002. Hence, food subsidy showed an annual increase of above 30% during 2000-01, 2001-02 and 2002-03 but it has been relatively stable since 2003-04.

Though the total amount of subsidy has continued to rise, state-wise allocations of subsidies do not seem to be related to poverty levels. The ratio of the percentage allocation of subsidies as given by the offtake of foodgrain under the TPDS and the proportion of people below the poverty line (BPL) is less than 1 for many of the poorer states (see table).

Average allocation of subsidies (2005-06 and 2006-07), and population below the poverty line

    
Factors affecting agricultural production and policy responses    

Besides the weather, the production of agricultural crops depends on the availability of inputs like fertiliser, irrigation, certified seeds, credit support and appropriate price signals. Minimum support prices announced before the sowing season act as incentives for farmers to increase the acreage of particular crops.

Support prices

The Commission for Agricultural Costs and Prices (CACP) recommends the minimum support prices (MSPs) for 24 important crops. The commission considers the cost of production, which includes cost of paid-out inputs, imputed value of family labour, rentals for the land, and other factors.

MSPs are normally announced before the commencement of sowing operations for the particular crop, and have usually been remunerative and significantly higher than the cost. The MSP, by definition, becomes the floor price and farmers are assured of getting that price.

In most crops, the MSP, inclusive of bonus, has been above the cost of production. MSPs were revised substantially in 2007-08. Increase in the MSP for paddy (common variety), wheat, moong, urad, arhar and jute in 2007-08, over the MSP for 2004-05, was 33%, 56.3%, 23.4%, 23.4%, 14.4% and 18.5%, respectively.

Irrigation

The total irrigation potential in the country has increased from 81.1 million ha in 1991-92 to 102.8 million ha in 2006-07. The potential created so far is estimated to be 73.5% of the ultimate irrigation potential. Of the total potential created, however, only 87.2 million ha (84.9%) is actually utilised.

The pace of creation of additional irrigation potential came down sharply from an average of about 3% per annum between 1950-51 and 1989-90 to 1.2%, 1.7% and 1.8% per annum, respectively, during the Eighth, Ninth and Tenth Five-Year Plan periods.

The rate of growth of utilisation of the potential created declined to 1% per annum during the Ninth Five-Year Plan period and improved to 1.5% per annum during the Tenth Five-Year Plan period. The average annual rate of utilisation remained lower than the average annual addition to the irrigation potential, resulting in continuous erosion in cumulative utilisation. This amounts to inefficient use of funds and forgone income from irrigated lands.

Responding to the continuous decline in the rate of creation in irrigation potential, the central government initiated the Accelerated Irrigation Benefit Programme (AIBP) in 1996-97 to extend assistance in the completion of irrigation schemes which had remained incomplete. In 2007-08, as on January 29, 2008, Rs 3,127.5 crore had been released for the AIBP.

Restoration of waterbodies

The central government sanctioned a National Project for Repair, Renovation and Restoration of Water Bodies directly linked to agriculture, in January 2005, with an estimated cost of Rs 300 crore to be shared by the Centre and states in a 3:1 ratio.

Waterbodies with a cultivated command area of more than 1 ha and up to 2,000 ha were included under the pilot scheme in one or two districts in each state. The scheme was approved for 26 districts in 15 states. The central share of Rs 179.3 crore has been released to the states till November 30, 2007, covering 1,098 waterbodies. Restoration work has been completed for 733 waterbodies and work is in progress on the remaining 365 waterbodies.

Following the pilot scheme, restoration of waterbodies has been taken up in the states, with World Bank assistance. A World Bank loan agreement has been signed with Tamil Nadu for Rs 2,182 crore to restore 5,763 waterbodies with a cultivated command area (CCA) of 4 lakh ha. A Rs 835 crore Andhra Pradesh Community-Based Tank Management Project was signed with the World Bank in June 2007 for the restoration of 3,000 waterbodies with a CCA of 2.5 lakh ha.

A project for Karnataka was signed for the amount of Rs 259 crore in November 2007 to restore 1,225 waterbodies involving a CCA of 0.52 lakh ha. Proposals from the governments of Orissa and West Bengal have been submitted to the World Bank.

Irrigation is one of the six components in the development of rural infrastructure under the Bharat Nirman and aims at creating an irrigation potential of 10 million ha by 2008-09. The target under the Bharat Nirman is to be met largely through the completion of ongoing major and medium irrigation projects/schemes. During 2005-06 and 2006-07, 1.68 million ha and 1.94 million ha of irrigation potential, respectively, is reported to have been created.

Capital formation in agriculture

Productivity increase in agriculture is considerably dependent on capital formation both from the public and private sectors. Gross capital formation (GCF) in agriculture as a proportion of total capital formation has shown a continuous decline. GCF in agriculture relative to GDP in this sector has shown an improvement from 9.6% in 2000-01 to 12.5% in 2006-07. This however needs to be raised to 16% during the Eleventh Five-Year Plan to achieve the target growth of 4% in this sector.

Credit support to agriculture

The Farm Credit Package announced in June 2004 stipulated, among other things, doubling the flow of institutional credit for agriculture in the ensuing three years. Credit flow to the farm sector was doubled during two years, as against the stipulated time period of three years.

To provide adequate and timely support from the banking system to farmers for their cultivation needs, including the purchase of inputs in a flexible and cost-effective manner, a Kisan Credit Card (KCC) Scheme was introduced in August 1988 for short- and medium-term loans.

NABARD asked banks to extend coverage through expanding their outreach by lending to more farmers including non-wilful defaulters, oral lessees, tenant farmers and sharecroppers who may have been outside the fold of the scheme, as also to new farmers.

About 705.55 lakh KCCs were issued up to November 2007. Further, from January 31, 2006, the scheme was extended to all types of loan requirements of borrowers of State Cooperative Agriculture Rural Development Banks (SCARDBs).

Rate of interest on agricultural loans

From kharif 2006-07, the Centre decided that farmers would receive crop loans up to a principal amount of Rs 3 lakh at a 7% rate of interest, and that the Government of India would provide the necessary interest subvention to NABARD and banks for this purpose. This policy has been continued in 2007-08 also. For this, the Government of India made provision of Rs 1,677 crore in Union Budget 2007-08.

Revamping the cooperative credit structure

In January 2006, the government announced a package to revive the short-term rural cooperative credit structure involving financial assistance to the tune of Rs 13,596 crore. NABARD has been designated as the implementing agency for the purpose. A department for cooperative revival and reforms has been set up in NABARD to facilitate the implementation process.

States are required to sign a Memorandum of Understanding (MoU) with NABARD committing to implement legal, institutional and other reforms as envisaged in the revival package. So far, 21 states and three union territories have agreed to implement the package. A total amount of Rs 1,073 crore has been released by NABARD as Government of India’s share under the package to Andhra Pradesh, Madhya Pradesh and Haryana.

Agricultural insurance

The National Agricultural Insurance Scheme (NAIS) for crops has been implemented from the rabi 1999-2000 season with the objective of providing insurance coverage in the event of failure of any notified crops as a result of natural calamities, pests and diseases. The scheme is available to all farmers irrespective of holding size. It envisages coverage for all food crops (cereals, millets and pulses), oilseeds and other commercial/horticultural crops in respect of which past yield data is available for an adequate number of years.

At present, 10% subsidy in premium is available to small and marginal farmers, to be shared equally by the Centre and state governments. The scheme is implemented in 23 states and two union territories. Since the inception of the scheme and until rabi 2006-07, about 971 lakh farmers have been covered. The coverage area is 156 million ha and the sum insured is Rs 92,618 crore. Claims to the tune of around Rs 9,855 crore have become payable against the premium income of around Rs 2,943 crore, benefiting nearly 270 lakh farmers.

Despite a high claims ratio (1:3.3) and low premium rates, particularly for food crops and oilseeds, farmers are not coming forward to avail of crop insurance in a big way. To overcome some of the limitations and to make the scheme more farmer-friendly, a joint group was constituted to suggest improvements in existing crop insurance schemes.

The group made an in-depth study and has come up with important recommendations such as reduction in the unit area of insurance to the gram panchayat for major crops, improving the basis of calculation of threshold yield, higher indemnity level coverage for pre-sowing/planting risks and post-harvest losses, personal accident insurance cover, etc.

Based on the group’s recommendations and the views of various stakeholders, modifications to the NAIS are being considered.

As announced in Union Budget 2007-08, a Weather-based Crop Insurance Scheme (WBCIS) was implemented in selected areas of Karnataka on a pilot basis. The WBCIS intends to provide insurance protection to farmers against deficit and excess rainfall. It has the advantage of being able to settle claims within the shortest possible time. Agriculture Insurance Company of India Ltd (AIC) has implemented the pilot WBCIS in Karnataka during the 2007 kharif season, covering eight rain-fed crops, insuring crops on nearly 50,000 ha for a sum insured of Rs 50 crore.

The WBCIS is being implemented in 2007-08 on a larger scale in selected areas of 12 states for the rabi 2007-08 season. In addition to AIC, private insurers like ICICI-LOMBARD General Insurance Company and IFFCO-TOKIO General Insurance Company have been included for selected areas.

Better seeds

Seeds, as carriers of new technology for crop production and higher crop yields, are a critical input for sustained growth in agriculture. However, more than 80% of Indian farmers rely on farm-saved seeds, leading to a low seed replacement rate.

The Indian Seed Programme engages the central and state governments, Indian Council of Agricultural Research (ICAR), state agricultural universities, and the cooperative and private sectors in its programme. There are 14 State Seed Corporations (SSCs) besides two national-level corporations.

The private sector has begun to play a significant role in the production and distribution of seeds, particularly after the introduction of the Seed Policy of 1988. It is estimated that about 46% of seeds sold commercially in the country is by private seed companies. The annual rate of growth of certified/quality seed distribution is expected to accelerate from 12.1% in 2005-06 to 18.1% in 2006-07.

Use of fertilisers

To increase the use of chemical fertiliser, the farm gate prices of fertiliser have been kept unchanged. Per hectare consumption of fertiliser has increased from 69.8 kg in 1991-92 to 113.3 kg in 2006-07 at an average rate of 3.3%.

The current fertiliser policy subsidises 15 types of fertilisers, which largely provide major nutrients (NPK), by fixing maximum retail prices (MRPs). A large proportion of fertiliser subsidy goes to fertiliser units, a practice that has allowed inefficient units to persist.

The pricing mechanism has also encouraged nutrient imbalance. There is excessive use of urea and a bias against micronutrients. As against the desirable NPK proportion of 4:2:1, the average use is 6:2.4:1.

As nitrogenous fertilisers are subsidised more than potassic and phosphatic fertiliser, the subsidy tends to benefit crops and regions that require greater use of nitrogenous fertiliser compared to crops and regions that require higher application of potassic and phosphatic fertiliser.

Excessive use of urea has also adversely affected the soil profile.

Healthy plant growth is possible only if all 16 nutrients are available in the soil. Besides NPK, sulphur, zinc and calcium are also needed in sufficient quantities; nutrients such as iron, boron, etc, are also required in small quantities. Their deficiency significantly impacts plant growth. Micronutrients are best applied through fortification of major fertilisers. However, restrictions of MRP as well as fixed subsidies afford no incentive for such fortification. Micronutrient deficiency affects crop productivity significantly.

Reforms through the APMC Act

To inject dynamism and efficiency into the marketing system, large investments are required to develop a post-harvest and cold chain infrastructure close to the farmers’ fields. Accordingly, the ministry of agriculture circulated a model Agriculture Produce Marketing Committee (APMC) Act, 2003, and suggested amendments to the state APMC Acts to promote investments in marketing infrastructure, motivate the corporate sector into undertaking direct marketing and facilitate a national integrated market.

The ministry of agriculture formulated model APMC Rules and circulated it among the states. The ministry has requested states and union territories to complete the process of amendments and notification of rules by 2007-08.

National Food Security Mission

The department of agriculture and cooperation, ministry of agriculture, has launched a centrally-sponsored scheme -- the National Food Security Mission (NFSM) - to increase the production of rice, wheat and pulses by 10, 8 and 2 million tonnes, respectively, over the benchmark levels of production, by the end of the 11th five-year-plan period.

Activities of the NFSM relate to:

• Demonstrations of improved production technology.
• Distribution of quality high-yielding variety (HYVs) seeds and hybrids.
• Popularisation of new varieties.
• Support for micronutrients.
• Training and mass media campaigns, including awards for the best performing districts.

The NFSM is being implemented in 305 districts of 16 states in the country. An amount of Rs 149.4 crore has been released to the states to plan and implement various interventions during 2007-08.

Rashtriya Krishi Vikas Yojana (RKVY)

To offer incentives to states to increase the share of investments in agriculture in their plans, a Rashtriya Krishi Vikas Yojana (RKVY) with an allocation of Rs 25,000 crore has been proposed for the 11th five-year-plan.

The RKVY will be a state plan scheme and eligibility for assistance under it will depend on the amount provided in state budgets for agriculture and allied sectors, over and above the baseline percentage expenditure incurred on agriculture and allied sectors.

Funds under the RKVY will be provided to the states as a 100% grant by the central government. An outlay of Rs 1,500 crore has been approved for 2007-08.

National Policy for Farmers, 2007

The approved National Policy for Farmers, 2007, hopes to ensure that:

• Farmer households in villages either possess or have access to a productive asset or marketable skill.
• The concept of maximising yields and income per unit of irrigation water in all crop production programmes is accorded priority.
• New technologies like biotechnology, information and communications technology (ICT), renewable energy technology, space applications, and nano technology are used to improve productivity per unit of land and water, on a sustainable basis.
• A National Agricultural Biosecurity System is established
• Every farmer is to be issued a soil health passbook containing integrated information on farm soils with corresponding advisories.
• Support services like crèches, childcare centres and adequate nutrition for women working in the fields will be funded.
• Financial services will be galvanised within timely, adequate and easy reach of farmers, at reasonable rates of interest.
• 'Gyan chaupals' at the village level and farm schools in the fields of outstanding farmers will be set up to promote farmer-to-farmer learning.
• A minimum support price (MSP) mechanism will be implemented effectively across the country in order to ensure remunerative prices for agricultural produce.
• The food security basket will be enlarged to include nutritious crops such as bajra, jowar, ragi and millets, mostly grown in dryland farming areas.

An inter-ministerial committee has been set up to operationalise implementation of the policy.

Production of horticultural crops

The horticulture sector in 2005-06 contributed around 28% of GDP in agriculture. Vegetables, fruits, plantation crops and spices contributed 59.8%, 30.9%, 6.5% and 2.1% of total horticulture production, respectively, in 2006-07. The production of horticultural crops registered an increase of 8.9% in 2005-06. Growth in production decelerated to 2.8% in 2006-07, mainly because of a decline in the production of onions and stagnation in spice production.

The department of agriculture and cooperation launched a centrally-sponsored scheme called the National Horticulture Mission (NHM) in 2005-06 to develop this sector. An outlay of Rs 1,150 crore has been earmarked for implementation of the scheme during 2007-08. Against this, an amount of Rs 691 crore has been released till the end of January 2008.

Micro-irrigation

A centrally-sponsored scheme for micro-irrigation was launched in January 2006 to promote efficient water use by adopting drip and sprinkler irrigation. Between 2005-06 and 2006-07, Rs 280.58 crore and Rs 460.7 crore, respectively, were released to cover 5.9 lakh ha (3.5 lakh ha under drip, and 2.4 lakh ha under sprinkler irrigation systems).

National Bamboo Mission

A centrally-sponsored scheme called the National Bamboo Mission was launched in 2006-07. An area of 20,500 ha was covered; the existing stock on 4,117 ha was improved and 213 bamboo nurseries were established with an outlay of Rs 80 crore.

Modern terminal markets

The department of agriculture and cooperation is promoting modern terminal markets for fruits, vegetables and other perishables at important urban centres of the country. The markets will be built, owned and operated by a corporate/private/cooperative entity. The central/state government will lend financial support to the project by way of equity participation up to a maximum of 49%, determined through a competitive bidding process. Operational guidelines for the scheme have been circulated to states that have amended the APMC Act. Several states including Andhra Pradesh, Bihar, Madhya Pradesh, Maharashtra, Orissa, Punjab, Rajasthan and Tamil Nadu have identified land to set up terminal markets.

Livestock sector

The livestock sector contributes over 4% to the total GDP and about a quarter of GDP from agriculture and allied activities. This sector is a main source of family income in arid and semi-arid regions. The Eleventh Five-Year Plan envisages an overall growth rate of 6-7% per annum for the sector.

In 2006-07, this sector contributed 101 million tonnes of milk, 51 billion eggs, 45 million kilos of wool, and 2.3 million tonnes of meat. The 17th Livestock Census (2003) has placed the total livestock population at 485 million and that of poultry at 489 million. Results of the 18th Livestock Census are awaited.

India ranks number one in the world in milk production, which increased from 17 million tonnes (MT) in 1950-51 to around 102 MT by 2007-08. The per capita availability of milk has also gone up from 112 grams per day in 1968-69 to 246 grams during 2006-07. But this is still low compared to the world average of 265 grams/day. About 80% of milk produced in the country is in the unorganised sector and the remaining 20% is shared equally by cooperative and private dairies. Over 1.2 lakh village-level dairy cooperative societies, spread over 265 districts in the country, collect around 21 million litres of milk per day and market around 18 million litres.

The efforts of the dairy sector are concentrated on the promotion of dairy activities in non-Operation-Flood area with an emphasis on building up a cooperative infrastructure, revitalising sick dairy cooperatives and federations and creating infrastructure in the states to produce quality milk and milk products.

The National Project for Cattle and Buffalo Breeding (NPCBB), a major programme for genetic improvement, was launched in October 2000 and will be implemented over a period of 10 years. Under the project, financial assistance to the tune of Rs 348.9 crore was released to the states up to 2006-07.

A livestock insurance scheme was introduced on a pilot basis in 100 selected districts during 2005-06 and 2006-07 to protect farmers against losses due to the untimely death of their animals. The central government provided subsidy to the tune of 50% of the premium under the scheme to insure cross-bred and high-yielding cattle and buffaloes. About 5.2 lakh animals were insured in two years at an expenditure of around Rs 23.4 crore. The scheme is being continued in 2007-08 with an outlay of Rs 35 crore.

Undeterred by isolated occurrences of bird flu in 2007, levels of production in the poultry sector have been sustained. Per capita availability of poultry products, however, has immense scope for improvement with present consumption of only 42 eggs and 1.6 kg of chicken meat per person per year. Exports of poultry products in 2006-07 were to the tune of Rs 316 crore. The availability and cost of maize are deterrent factors in scaling up production at a sustainable pace.

Fisheries

Fish production increased by 4.4% and reached 6.9 million tonnes in 2006-07. Fishing, aquaculture and allied activities are reported to have provided livelihoods to over 14 million people in 2005-06, apart from being a major foreign exchange earner.

Conclusion

The agriculture, forestry and fishing sector is estimated to grow at 2.6% during 2007-08, as against the previous year’s growth rate of 3.8%. Output in this sector has been affected by weather, reduced capital investments and a plateauing of yield levels in major crops.

Acceleration of growth in this sector will not only push the overall GDP up but will also make the growth more inclusive and biased in favour of women. Increasing farm incomes is also necessary for equitable growth.

Further, with uncertainties in global markets and a hardening of international prices for food, fuel and edible oils, domestic price stability and food security critically depend on growth in this sector.

This necessitates better utilisation of available resources at all levels, in the area of irrigation, fertiliser, use of high-yielding seed varieties, extension support to facilitate the adoption of improved practices, and market access. Food and fertilisers may have to be better targeted. With area under cultivation staying constant, improving crop productivity is very important.

Human resource development of those engaged in agriculture is also necessary for greater penetration of better technology. New skill sets will also enable underemployed labour in this sector to get absorbed in other fast-growing sectors.

Source: India Budget website