1 State of Indian Agriculture: Challenges and ProspectsRamesh Chand NITI Aayog

2 Some Important Aspects of Indian AgricultureScale Average size of holding 1.12 hectare. 85% below 2 hectare and 67 % below 1 hectare, average 1 acre. Not in one place – fragments. Land consolidation. More than half is rainfed. Crop intensity only 1.42. Structural imbalance in output and employment Output 17%, Employment 48 per cent. Long term growth 2.90 per cent per year. Wide fluctuations - Face weather shock and price shock. Overall surplus: Net foreign exchange earnings Rs crore; 6% of GDP agri; 1% of total GDP total Agriculture matters a lot for Sustainability Water consumption ~ 75 per cent Land under agriculture ~ 46 per cent Green house gases ~ 17 per cent Ramesh Chand

3 Main Challenges…1 Raising growth trajectory above 4 per centPost reform rise in income disparities with non agriculture Growth in farm income not keeping pace with rise in farmers need and aspiration – which grow like those engaged in non agriculture. Rising indebtedness to meet agri and consumption expenses - Agrarian distress. Crop loan exceeds value of inputs including hired labour. Improving viability and economy of small holders Policy biases and imbalances in agriculture. Policy distortions in some states creating conflict between crop pattern and resource endowments Low or missing private sector participation at all levels Indiscriminate use of agro-chemicals Ramesh Chand

4 Main Challenges…2 10. Efficiency not improvingLarge yield gap – low adoption of technology Agricultural R&D: Modern science, breakthroughs. Very low livestock productivity Breakdown of extension machinery Serious Imbalances in Production and Demand Food wastage Agricultural markets not evolving Price crashes and gluts Food safety neglected at all stages Ramesh Chand

5 Growth Trend Agri growth moved up and down around long run growth rate of 2.8 to 2.9% Brief spells of higher growth failed to shift growth trajectory up Last 45 years do not show any permanent structural break in growth path In some years farm income even fell. Crop sector income show frequent negative growth Average annual rate of change in GDP Agri five years period to Annual rate of change in GDP agri Ramesh Chand

6 Post Reforms Disconnect Between Agriculture and Non Agriculture GrowthB. Correlation between Annual Growth Rate in GDP Agri and Non Agriculture A. Average Annual Growth Rate in Agri and Non agri GDP in 5 Years Period Ramesh Chand

7 Current Status of Farmers’ IncomeNational Average Monthly Income of a Farmer # Tremendous variation across states Type Level Farm income per Cultivator: NITI Estimate Rs. 9761 Minimum land holding to keep a farm family above poverty line, if it does not get income from non farm sources: Acre 1.55 Acre Land holdings below poverty threshold % 53% B. Non farm income earned by a cultivator (40%) NSSO Rs. 6507 C. Total income of a cultivator (Farm and Non farm) Rs Farmers below poverty line based on total (farm and non farm) household income 22.5% # Ramesh Chand

8 Poverty Among Farm Households in StatesRamesh Chand

9 Status of Farmers Relative to Non farmersIncome of a farmer compared to non farmers : One third : One fourth : One third : Less than 1/3rd Time gap in income of farmers compared to non-farmers: About 27 years. What a farmer earns today was the earning of a non- agriculture worker in Ramesh Chand

10 Diagnosis: Why Aggravated After Early 1990s?Agreement among experts - it is due to lopsided economic reforms Agri witnessed inverse, patchy and piecemeal reforms. Controls and restriction on agriculture persist. Regulatory reforms in agri 2002 to 2004 at Centre: Removed restrictions under ECA, new MMPO Rolled back during 2006 to 2008 Very diluted reforms in agri markets despite persistent efforts by the Central govt beginning Old APMC Act in tact. Middlemen got stronger, organized. Not only opposed, successfully prevented reforms No liberalisation of land lease market Ramesh Chand

11 Thus Need for a Paradigm Shift?Food security paradigm: Increase production. It will result in increase in farmers income. True in many cases but not always. At disaggregate level some time more production bring less return due to price fall. Even if income growth match with output growth the level remains low (2.8 per cent which is very low when economy growing at 7 per cent) Farmers Income Security paradigm: Increase farmers income. It will result in increase in agri-food production This shift from chasing production targets to chasing target in farmers income is at the heart of goal of Doubling Farmers Income by 2022. Ramesh Chand

12 Sources of Growth in Farmers IncomeProductivity: International and inter-district Efficiency: Flood irrigation, broadcast fertiliser Area expansion through Crop intensity Crop diversification – high value crops Better price realization Allied activities to supplement farmers income Bee keeping Trees on private land On farm post harvest value addition 7. Shift of farmers to non farm jobs Ramesh Chand

13 Achievements During Recent Past and Required ChangeS.N. Source Period Growth rate/change Required growth for DFI 1a Crop productivity 70% seg 3.1 4.1 1b Livestock value added 30% seg 4.5 6.0 2 Improvement in resource use efficiency 2.26 3.0 3 Crop Intensity (70% segment) 1 %age 1.3 4 Crop diversification (70% seg) 3.31 4.4 5 Better price realisation: Crops Karnataka experience. Reforms 13% total. Real terms. 17.0 6 Shift to non -farm occupation 1.81 2.4 If growth/change achieved during is repeated after then farmers income will increase by 75 % by 2022. To double farmers income by 2022, the rate of growth in sources need to be raised by 33%. Ramesh Chand

14 Ongoing and Required Initiatives and their Expected ContributionDevelopmental actions (One third) Routine and regular Special: PMKSY; PKVY, PMFBY, Soil Health Card, E-NAM Policies and reforms: identified three areas (One third) Market reforms Land lease reforms Removal of restrictions on tree felling and wood based industries R&D, Technology (one third)

15 Target for Development Initiative for DFI1a. Crop sector Source Base level and year Target Quality seed: Million tonne 3.03 7.97 ( ) Fertilizer: million tonne 25.58 36.24 Irrigation: million hectare 92.58 110.40 ( ) Electricity for agri purposes: 000 GWH 147.48 307.39 Are under more than one crop: % 40.00 53.00 Area under fruits and vegetables: Million hectare 16.75 26.38 ( ) Area under High Yielding Varieties: % 69.3 90.0 Ramesh Chand

16 Roadmap and Action Point1b. Growth in Livestock Source Target 2022 Breed improvement 4 million breedable buffaloes, 1.3 million breedable cross bred cattle and 6 million breedable indigenous cattle have never calved. Out of above population, at least 2 million buffaloes, 0.8 million crossbred and 3 million indigenous cattle should have additional number for calving by 2022. Reducing age at first calving 33 months in murrah buffaloes. Reduce by 3-4 months. Artificial insemination 35% now. Increase Semen straw from 81 million now to 161 million Reducing calving interval Feed, upkeep, health Average milk yield is 4.90 kg per in-milk buffalo and 3.1 kg per in-milk cow. 37% growth in milk due to productivity 63% due to number. Ramesh Chand

17 2. Resource Use Efficiency to Reduce CostTechnologies that give more output for same input or same output for less inputs Reduction in input use/output and average cost Varieties/practices that shift production function Precision farming – big role. Sensors application Soil health card: application based on test Efficient fertiliser use Drip, sprinkler, irrigation Different components of PMKSY Use of solar energy to save cost Ramesh Chand

18 3. Crop Intensity Second crop taken on 40% area.Some states less than 20% Predominantly in rabi season. Some progress expected with irrigation Critical and life saving irrigation Watershed development Ramesh Chand

19 4. Diversification Productivity of fruits and vegetable 4 times cereals, pulses and oilseed. In ten years (after ) area under fruits and vegetables increased from 12 mh to 17 mh. It is 8.6 per cent of GCA now. Value chain, contract farming, food processing, market reforms. Ramesh Chand

20 5. SHIFT TO NON FARM OCCUPATIONSOccupational shift: Rural workforce Million NSSO Cultivators Ag Labourers Agricultural workers Share in rural workers % 159.5 89.4 248.9 72.5 140.7 74.8 215.5 64.0 Change in 7 years % -11.8 -16.4 -13.4 -8.5 Are they getting better employment outside agriculture?

21 Growth in Rural and Urban Economy and Employment in Post Reform PeriodAspect to to Real NDP Urban 7.4 8.2 Rural total 5.1 Rural Agriculture 1.87 4.27 Rural Non agriculture 7.93 9.21 Manufacturing 8.38 15.87 Construction 7.92 11.49 Employment 3.08 2.47 1.45 -0.28 0.74 -2.04 3.68 3.64 2.79 0.67 8.32 12.09 Source: Ongoing work by Srivastava and Chand, Not to be quoted

22 6. Terms of Trade and Price RealizationMarket reforms (Model APMC Act) Direct sale by farmers Direct purchase by bulk buyers De-notify fruits and vegetables from APMC Electronic trading Single levy Single traders license Setting up of private markets E-NAM Contract farming Ensuring MSP alone can bring per cent increase in farmers income in many states Institutional support: FPO/FPC Warehouse receipt system Ramesh Chand

23 Gluts and Price CrashesMostly localised Poor market integration aggravates See tomato prices Rs./quintal Source: Agmarknet.gov.in However, strategic intervention will be required in some cases Very high spatial price differential in same region: market integration May to June 2017: Price increased by 70 to 215% in one month: Storage, value chain, shelf life Volatility – Cobweb: Market intelligence and price forecast State May-17 Jun-17 Jun-16 Gujarat 974 1662 3183 Rajasthan 375 699 1767 M.P. 598 922 1651 Chhatisgarh 831 1771 3223 West Bengal 1235 2606 3527 Orissa 1774 2195 3428 A.P. 551 1745 3015 Kerala 1518 2554 4723

24 Progress of Reforms Market reforms: Model APMC Act 2003 based on Consensus with states 21 states/UTs amended the act. 11 notified the rules. Diluted the application of provisions and coverage to benefit only small fraction of total agricultural produce Thus market reforms may not be benefitting more than 10 per cent of value of agri produce Land lease reforms: Only one state Relax restrictions on transit and felling of trees on private land and Wood based industry No Change: AP, TEL, RAJ, U.P., Assam, Bihar, Chh, HP, JHAR, JK, MANI, MEGH, MIZ, NAGA, SIK, ARUN Ramesh Chand

25 Implementation of Market ReformsPrivate markets: Maharashtra (41), Gujarat (25), Karnataka (6) and Rajasthan (9) Direct marketing license issued: Maharashtra (527), Karnataka (37), Rajasthan (79), M.P. (1), A.P. (2), Telangana (3) Contract farming companies: PB (1), Har (7), Chhatisgarh (2), Maharashtra (10), Gujarat (1), MP (1) Karnataka (1) Mandatory reforms to link to E-NAM 17 states: GUJ, MH, TG, JH, CHH, MP, HAR, HP, UP, AP,RAJ, TN, UTTARAKHAND, KARNATAKA, SIKKIM, MIZO, GOA Ramesh Chand

26 7. Other Sources of Growth in Farmers IncomePost harvest value addition Allied activities Pisciculture, mushroom, bee keeping, vermiculture, forestry, Input and Service activities Quality seed production; nursery raising: custom hiring services Bio waste to bio wealth. Compost, ethanol, energy Ramesh Chand

27 PUTTING IN PERSPECTIVEDoubling farming income by 2022 is must to secure future of farming and farmers. It is challenging but attainable. It require shift in focus from: Food security paradigm: To Farmers Income paradigm Three pronged strategy with equal contribution from: development initiatives, technology and Market and policy reforms and institutional support Require changes in the way we do agriculture and produce food and the way we market food, we the way we do research, ? R&D focus enterprise centric to farm centric. Production: knowledge and science based. Competitive market model linking farm to end users. Enhanced private sector participation at all stages by changing regulation and facilitating environment. Investments and ideas Startups. Ramesh Chand

28 PUTTING IN PERSPECTIVESome innovative farmers are making many times more income than neighbourhood with simple farm level interventions. Learning from innovators! Blending grassroots innovations with modern science. Upscaling innovations. Non farm employment by linking agri-food processing to production Accelerate ongoing efforts by one third. Strong Coordination among concerned departments and Centre and states - states must own the goal of DFI. Ramesh Chand

29 Thank you!