Agriculture reforms: Why India’s farm sector needs a sea change

As agitations continue with no headway in talks between the farmers and the government, we look at some of the key issues surrounding India’s farm sector and why reforms are imperative for transforming the agriculture industry.

Despite record production of certain major agricultural produce and rise in exports, India’s farm sector faces some underlying challenges such as low crop yield, monsoon dependency, low share of exports in global markets, lag in farm mechanisation, burden of loans and farmer suicides.

All this puts a load on the already struggling industry, limiting its growth. Here’s how:

Low crop yields

India has reported a record foodgrain production of an estimated 296.65 million tonnes in 2019-20. Production of foodgrains has seen a rise over the last few years with India being the largest producer of pulses and the third largest producer of cereals in the world.  Likewise, yield of foodgrains has increased as well; however, it lags when compared with other agrarian economies. Yield or agriculture output is measured as the yield of a crop per unit area of land cultivation. 

For instance, India accounted for 24 percent of the world pulses production in 2017, according to the government’s Agricultural Statistics 2019 report. While in terms of yield (664 kg/hectare) it was lowest among the top 10 countries, well below the global average (1009 kg/hectare).

“Pulse cultivation in India is mostly concentrated in the rainfed area (around 80 percent of the area), on marginal lands, on low fertile soil by resource poor farmers. Moreover, low seed replacement rate, high susceptibility to pests especially pod borer, inadequate market linkages, etc., are the primary reasons for low yield of pulses,” the State of Indian Agriculture (SIA) 2017 report states. 

The case is the same for other crops as well. India, despite being the second-largest producer of paddy and wheat after China, reports low yield compared to other countries and below the world average. 

Dependence on monsoon

Reliance on seasonal rainfall hampers productivity as “yields in rainfed areas remain low”. Additionally, change in climatic conditions and erratic weather patterns--such as cyclones and droughts --can impact yields of agricultural crops.

The growth of India’s agriculture sector has been dependent on monsoons, and as a result, it has been volatile. The sectoral growth in terms of gross value added reported a 'sharp fall' from 5.6 percent in 2013-14 to -0.2 percent in 2014-15, remaining low at 0.6 percent in 2015-16. This is attributed to the two consecutive rainfall-deficient years. 

In the face of a global pandemic, India’s agriculture sector clocked a growth of 3.4 percent at constant prices in the July-September quarter, according to the official data released in November. This was due to favourable weather. “A favourable monsoon in over six years resulting in a bumper kharif season is among the primary factors for the outperformance of the farm sector despite the COVID-19 impact,” Moneycontrol reported last month. 

The government is now encouraging micro-irrigation to improve water usage/efficiency as the “cropping pattern in India is highly skewed towards crops that are water intensive.”

Low share in global markets

Another positive development amidst the pandemic for the sector has been an uptick in exports of agriculture commodities between March and September this year. Overall, while India has emerged as an agri-exporter nation with regards to crops such as rice, spices, tea, sugar etc., the share of India’s agricultural exports in world trade remains low (2.15 percent in 2018), according to the ministry of agriculture’s annual report 2019-20.

The share of agri-exports to the country's total merchandise exports needs to improve as well. It has remained in the range of 12 percent on an average over the last five years, falling to 11.9 percent in 2018-19, from a high of 20.33 percent in 1996-97.  

Boosting agriculture export is of significance for the agri-industry, as “exports help farmers/producers/exporters to take advantage of a wider international market and increase their income.” This will also be crucial with the government planning to double farmers’ income by 2022. 

Indebtedness and farmer suicides  

The average monthly income of an Indian agriculture household was estimated at Rs 6,426, with a wide-spread disparity across states, ranging from Rs 18,059 in Punjab to Rs 3,558 in Bihar, according to Agricultural Statistics 2019, based on the Assessment Survey of Agricultural Households (January-December 2013). 

About 52 percent of agricultural households in India are indebted, varying across states, the survey data showed. Nearly 64 percent of the marginal farmers (holding land less than one hectare) or agricultural households are indebted, followed by small (1 to 2 hectares) agricultural households (18 percent). 

It is important to note that the demographics--especially with regards to agri-household income and outstanding loans--might have changed over these years. 

As many as 10,281 suicides were reported in the farming sector in 2019, of which 58 percent or 5,957 were farmers/cultivators and 4,324 were agricultural labourers, according to National Crime Bureau Records (NCRB) data. Reported cases of suicides in the farming sector are on the decline, data suggests. Since 2016, data on cause of farmer suicides--such as indebtedness or bankruptcy--are not available. 

In 2015, of the 8,007 suicides by farmers/cultivators, 38.7 percent were due to ‘bankruptcy or indebtedness’ and 19.5 percent due to ‘farming-related issues’. While for agriculture labourers, bankruptcy/indebtedness accounted for 2.2 percent as the cause for suicides and poverty 3.9 percent. In terms of landholding status, small and marginal farmers/cultivators accounted for 72.6 percent of the total farmer/cultivator suicides in 2015. 

Over 86 percent of agricultural land-holdings belong to the marginal and small farmers, according to the Agriculture Census 2015-16. Large farmers who hold more than 10 hectares of land constitute less than 1 percent. 

“As the proportion of small and marginal holdings is significantly large, land reform measures like freeing up land markets can help farmers in improving their income. Small holdings of land can be better harnessed through appropriate use of farm mechanisation,” the 2019-20 economic survey said. 

Changing landholding patterns 

The average size of agricultural land-holding has reduced from 2.28 hectares in 1970-71 to 1.08 hectare in 2015-16. The change in land-holding pattern is similar among fellow agri-economies as well. Therefore it is important to focus on improving productivity of small and marginal farmers rather than trying to reverse the trend, the SIA 2017 report notes.

To address the issue and support small-holdings the government has initiated measures such as “adoption of modern technologies and practices like multiple cropping, intercropping and integrated farming systems.” 

“Effective use of agricultural machinery helps to increase productivity and production of farm output along with timely farm operations for quick rotation of crops on the same land,” according to the latest Economic Survey. The other issue that needs to be acted upon is low farm mechanisation in India which is about 40 percent compared to China (60 percent), Brazil (75 percent) and the USA (95 percent).

The need for reforms

As a result of these multiple challenges and issues, India’s agriculture sector is shrinking. The share of agriculture to total employment in the country has reduced from 44 percent (PLFS 2017-18) to 42.5 percent (PLFS 2018-19), while it was almost 60 percent a couple of decades ago.

Likewise, the share of agriculture and its allied sectors in national income has declined from 18.2 percent in 2014-15 to 16.5 percent in 2019-20, “reflecting the development process and the structural transformation taking place in the economy”, the Economic Survey 2019-20 states. 

Thus with technological advancements in the field of agriculture like mechanisation, micro-irrigation and digital market platforms, it is time that India brings in reforms to address these challenges, refining its agricultural policies with the aim to improve productivity, self-sufficiency and doubling farmers income.