In chapter 7 of the Economic Survey, the state of the agricultural sector receives an overview. The growth of the agricultural and allied sectors fell sharply in 2018-19 but since then it has stabilised at around 3.5% – 4.0%. Much of the growth has been fuelled by the sub-sector or livestock, which recorded a 7% expansion as of 2019-20. Fishing has grown consistently at double-digit rates, except for 2019-20. In terms of the gross value added (GVA), agricultures contribution to the country’s GDP remains at its average of 18%.
Total agricultural production for the year 2020-21 reached a record of 308.65 million tonnes, which was an 11.15 million tonne increase from the year prior. The country’s production of edible oils has also been increasing steadily with a slight reduction in the amount imported. This has been due to a concentrated effort by the government as the price of edible oils can at times be quite high which adds to the import bill.
Increasing the production of edible oils also benefits the farmer as it improves their income. The country’s diet is changing as the average income level goes up, therefore more people are expected to consume processed foods which has a high vegetable oil content, of which India is the number one importer in the world. If the government can incentivise more in the agricultural industry to get involved in the production of edible oils, there is money to be made. Thus far, the government has encouraged oil production by making available and distributing high-yield oil seeds and minikits that will help producers get started. They have also given producers the equivalent of an MSP only it is called a ‘viability price’ (VP) wherein the government will purchase the ‘first fruit bunches’ at a guaranteed price to protect against international oil price fluctuations.
Such a tactic has previously worked with the production of sugar. Soon after India gained independence, it needed to deal with the problem of nutrition as many in the country were unable to meet their basic calorie requirements.
The government began incentivising the production of sugar by offering a ‘fair and remunerative price’ for the produce which has doubled over the last ten years. State government can offer their own prices which at times are ven higher. In addition to this, sugar mills are only allowed to purchase sugar from within their own specified locality meaning that sugarcane farmers are guaranteed to find a buyer. India now produces much more sugar than it needs, which leads to its own problems as we have previously explained in a separate article. The point, however, is that the policies of a support price being offerred by the government and restriction of sales to within a locality have lead to sugarcane farmers being wealthier than their other crop producing counterparts. Indian sugarcane farmers make more than even farmers in the US do for the same crop.
The fact that this information is available to see in the survey is interesting within the context of the now repealed farm laws which were proposed by the government. These laws would have led to a move away from the existing system of MSPs and localised trading but as the survey itself mentions, these same policies were responsible for the thriving sugar industry that we see today in the country. In fact, the survey also talks about how the government has found that it can use MSPs to encourage crop diversification amongst the farmers, that lack of which has been an issue in the country. By diversifying crop production, the government is able to deal with two issues at once namely, increasing the incomes of farmers and reducing the import bill of the country. Longer term goals such as water use efficiency and sustainable soil health are also helped by diversification.
Apart from the increasing contribution of the livestock sector, the agricultural industry has largely remained where it has been for the last few years. It continues to employ the largest proportion of the Indian workforce but its contribution to the country’s GDP has remained at the same level for many years. A focus on livestock and fisheries is leading to positive changes as far as the farmers incomes are concerned, but there is still much to do to truly improve the plight of the farmers. Seeing that the farm laws were outrightly rejected by the farmers of the country, the government will have to come up with an alternative plan to transform this industry.
There are comments in the survey about the need to focus on new technology and allied sectors such as food processing, but this has been known for a long time and yet only small improvements are apparent. The statistics with regards to the relative robustness of the industry to the Covid-19 pandemic are only as they are because of the enormous amount of support that the government gave to it as it is also the most vulnerable to such crises. The growth in food subsidies in 2020-21 was 400% compared to the year prior. Agriculture continues to remain the foundation of India’s economy, but this is often to the detriment of those employed in the sector.