agriculture notes

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  1. The Central Statistical Office (CSO) recently revised the methodology for calculating the real Gross Domestic Product (GDP) from GDP at factor cost to GDP at constant market price, in alignment with international practice. The base year, too, was changed from 2004–05 to 2011–12, to base the calculations on a more contemporary basket of goods and services.
  2. Accordingly, the Survey targets a GDP growth rate of between 8.1 and 8.5 per cent during 2015–16, to be supported by lower fiscal deficit and reduced
  3. inflation levels, along with favourable factors like a sharp decline in oil prices, significant inflow of foreign funds, commitment to fiscal consolidation, the potential impact of the reform initiatives of the Government of India (GoI), improved growth prospects and the overall macroeconomic situation.
  4. On the domestic front, the spillovers of slow agricultural growth and the challenges in meeting the massive demand for skill creation and infrastructural upgradation could be generating headwinds that threaten India’s growth prospects.
  5. growth rate (%) at basic price at constant (2011–12) prices
  6. Agriculture = 0.2 %
  7. Industry = 5.6 % (electricity , gas and water supply > manufacturing > mining )
  8. Services = 9.8%
  9. the IMF expected India’s growth to pick up to 7.2 per cent during 2014 and accelerate further to 7.5 per cent in 2015 as well as in 2016. The World Bank (World Bank, 2015) expects India to grow at 7 per cent during both 2016 and 2017, compared to 7 and 6.9 per cent, respectively, projected for China.
  10. the Asian Development Bank (ADB, 2015) has estimated that India’s GDP will grow at a rate of 7.4 per cent in 2014, 7.8 per cent in 2015, and 8.2 per cent in 2016.
  11. The RBI has decided to anchor its monetary policy stance to headline CPI (combined) inflation from April 2014. Going forward, the RBI will seek to bring the inflation rate to 4 per cent by the end of a two-year period starting from the fiscal year 2016–17.
Major steps taken by Government of India to control food inflation :

 

Allocation of an additional 5 million tonnes (MT) of rice to below and above poverty line families in the states, pending implementation of the National Food Security Act, 2013 (NFSA), and allocation of10 MT of wheat under open market sales for the domestic market in 2014–15

Moderation in increases in the minimum selling prices during the previous and current seasons

Advisory to the states to allow free movement of fruits and vegetables by delisting them from the Agricultural Produce Marketing Committee (APMC) Act

Bringing onions and potatoes under the purview of the Essential Commodities Act 1955, thereby allowing state governments to impose stock limits to deal with cartelization and hoarding, and making violation of stock limits a non-bailable offence

Imposing a minimum export price of US$450 per MT for potatoes with effect from 26 June 2014 and US$300 per MT for onions with effect from 21 August 2014.

  1. India has witnessed a credit boom over the last decade, with the share of credit to GDP increasing from 35.5 per cent in 2000 to 51 per cent in 2013. Public sector banks (PSBs) continued to record the highest level of stressed advances, at 12.9 per cent of their total advances in September 2014, followed by private sector banks, at 4.4 per cent.
  2. Regional rural banks (RRBs) maintained a stable growth rate in assets, at around 16 per cent, during 2013–14. The major sources of growth were borrowings from NABARD and capital infusion by sponsor banks on the liabilities side, and loans and advances on the assets side.
  3. The incidence of poverty declined from 37.2 per cent in 2004–05 to 21.9 per cent in 2011–12 for the country as a whole, with a sharper decline in the number of the rural poor . Rural poverty declined from 41.8 per cent to 25.7 per cent during this period, and in numerical terms, from 326.3 million to 216.5 million.
  4.  
  5. the net monthly income (farm and non-farm) in respect of size classes up to 1 ha was negative and it increased steadily with an increase in size classes. This demonstrates that small-scale farming is inefficient in India.
  6. It is estimated that the quality of seed accounts for 20–25 per cent of productivity. Hence, timely availability of quality seeds at affordable prices to farmers, especially small and marginal farmers, is necessary for achieving higher agricultural production and productivity. Further, as hybrid seeds in cross-pollinated crops give a higher yield, greater emphasis needs to be laid on hybrid seeds to improve crop productivity.
  7. The all-India average consumption of fertilizers increased from 105.5 kg per ha in 2005–06 to 144 kg per ha in 2011–12 (ibid.). The imbalanced use of fertilizers
  8. due to price variation is one of the reasons for a decline in the crop response ratio.
  9. intensive agriculture is experiencing widespread deficiency of micronutrients. in order to improve soil health, the Union Budget 2015–16 has proposed
  10. to support the Agriculture Ministry’s ‘Paramparagat Krishi Vikas Yojana’. To promote the use of bio-fertilizers, subsidy on bio-fertilizers under the National
  11. Food Security Mission (NFSM) has been enhanced from `100 per ha to `300 per ha.
  12. Dr M.S. Swaminathan. Eco technology based precision farming, if adopted by small and marginal farmers, can help cut costs, enhance marketable surplus and
  13. eliminate ecological risks.
  14. The rationalization of subsidies and better targeting of beneficiaries through direct transfers would generate part of the resources for public investment that is
  15. essential for research, education, extension, irrigation and water management, soil testing, warehousing and cold storage.
  16. About 35 per cent of cropped area in the country is irrigated. Providing irrigation can improve yields substantially. Although the ultimate irrigation potential in India
  17. is estimated at about 140 million ha, the widening gap (about 15 per cent) between the irrigation potential created and that being utilized is a matter of concern.
  18. Microirrigation, minor irrigation, rainwater harvesting and groundwater recharging are vital in utilizing the existing resources and expanding the irrigation system in a viable manner. In this context, the Pradhan Mantri Gram Sinchai Yojana introduced by the  Central government aims to irrigate every farmer’s field and improve the efficiency of water use to provide ‘per drop more crop’. the Union Budget 2015–16 has allocated `5,300 crore to support microirrigation, watershed development and the Pradhan Mantri Krishi Sinchai Yojana.
  19. ‘Neeranchal’, introduced by Government of India in 2014 with an initial outlay of `2142 crore, was aimed at imparting an additional impetus to watershed development in the country.
  20. Climate change, depleting natural resources, scarcity of labour and volatile market forces are some of the concerns that have put tremendous pressure on both farmers as well as extension systems in the context of increasing the productivity, profitability and sustainability of agriculture.
  21. India’s ranking in the Global Hunger Index (GHI) (IFPRI, 2014) has been improving over the years. It was ranked 55th in 2014, with a GHI of 17.8, compared to 24.2 in 2005. The implementation of the Mahatma Gandhi National Rural Employment Guarantee Act Scheme and the National Food Security Act, 2013, have put in place the legal framework for employment and food security, which will go a long way to improve India’s GHI ranking.
  22. Capital formation in agriculture is of critical importance for the sustainability of agricultural growth. The gross capital formation (GCF) in agriculture and allied
  23. sectors relative to the agri-GDP improved from 13.5 per cent in 2004–05 to 21.2 per cent in 2012–13 at 2004–05 prices
  24. the National Agricultural Insurance Scheme (NAIS) was introduced from the 1999–2000 rabi season in place of the erstwhile Comprehensive CropInsurance Scheme.

• Protected cultivation is a hi-tech method which involves interventions that create favourable conditions around the cultivated plants, offsetting the detrimental effects of the prevailing biotic and abiotic factors. It involves the principles of greenhouse effect for heated cultivation space using the sun’s ray and ventilation for cooling and carbon-dioxide regulation.

• The various methods of protected cultivation are: (a) mulching, (b) floating covers, (c) low tunnels/ row covers, (d) cloches, and (e) polyhouses/ greenhouses.

• The advantages of protected cultivation are: (a) significantly higher levels of productivity, (b) superior quality of produce because of isolation and controls, (c) higher input use efficiencies in cultivation, by minimizing the use of water and fertilizers, (d) significant increase in income per area of cultivation, and € year-round production of crops which are usually seasonal in nature.

• Protected cultivation involves high initial expenditure by way of creating greenhouse structures, but offers increased returns. The farmers can use the greenhouses for a long time, and can grow and sell vegetables and other high-value commodities during the off-season, when prices are generally high. Further, greenhouses also help farmers to reduce the expenditure on pesticides by warding off insect pests. Significantly, consumers can gain access

to a supply of off-season vegetables. Hence, there is considerable merit in the expansion of the area under protected cultivation, as it benefits both producers and consumers.

• Protected cultivation has been able to alleviate major constraints in horticultural crop production, viz., inadequate sunlight, inappropriate temperatures, moisture deficiencies or excesses, weed growth, deficiencies in soil nutrients, excessive wind velocity, and atmospheric carbon dioxide. Further, it is economically more rewarding in the production of high-value, low-volume crops, seeds and planting materials, as well as offseason

fruits and vegetables.

• It offers several advantages for growing high-value crops with improved quality even under unfavourable and marginal environments. Indeed, protected cultivation has the potential to  meet the requirements of small and marginal farmers by significantly

increasing the yield per unit area.

• Despite immense government initiatives for promoting protected cultivation, there remain gaps in terms of human resource development and technical support to the farmers. It is, therefore, critically important to promote a meaningful interface between cultivators, academicians, administrators/ policy-makers, agriculture/ horticulture department officials, entrepreneurs and industry to share ideas, challenges and opportunities.

• There is a need to develop appropriate, efficient and affordable protected cultivation structures with a focus on identifying and developing suitable varieties of horticulture crops. Crop nursery practices could be standardized under a protected environment to optimize the use of the space available. There is also a need to develop multi-tiered protected farming techniques to maximize the productivity per unit of ground area to cope with the growing

demands for vegetables, fruits, flowers, and medicinal and aromatic plants, specifically in the context of the increasing marginalization of

landholdings. The development of post-harvest practices for handling, grading, packaging, transport and short-term storage of produce from

protected cultivation also needs to be encouraged.

• NABARD has initiated pilot projects to fund protected cultivation in Maharashtra, West Bengal and Haryana for onion, potatoes and tomatoes, respectively.

• Given the increasing importance of protected cultivation for the development of horticulture and high-value agriculture, it is a matter of concern that only a small share of agricultural credit is directed towards capital investment, whereas protected cultivation involves a high initial expenditure of capital. There is also the prospect of the growing need for working capital and post-harvest credit to be considered. Therefore, banks need to channel credit for promotion of this sector, which is starved of financial resources.

 

      1. A critical problem faced by India’s agricultural sector is the fragmented and distortions-ridden state of agricultural markets. Hence, there is an urgent need
  1. to develop a national common market for agricultural commodities. Presently, markets in agricultural commodities are regulated under the APMC Act, enacted by the state governments. There are about 2477 principal regulated markets and 4843 sub-market yards regulated by the respective APMCs.
  2. Thus, effectively, India has thousands of agricultural markets, leading to inefficiency in price discovery, and high cost of handling and transportation of agriculture produce. Consequently, farmers are frequently forced to sell their produce at low prices.
      1. India is a leading exporter of agricultural commodities. India’s agricultural exports were valued at US$47 billion in 2013, and its share in total world exports stood at 2.7 per cent
      1. During 2014–15, NABARD sanctioned credit limits aggregating `90,620 crore to all agencies under the short-term refinance portfolio, keeping up the increasing trend
  1. of the last four years. NABARD’s long-term refinance disbursement has touched `31,427 crore, an all-time high, marking a growth of 46.3 per cent over the previous year.
  2. Union Budget 2015–16: Challenges and opportunities for NABARD:
  3. JAM Trinity: Jan Dhan, Aadhar and Mobile, this can aid in the implementation of direct transfer of benefits
  • Amrut Mahotsav: 2022 will mark the 75th year of India’s independence. The vision should include the following.
  1. »» ‘Housing for all’ by 2022 (including 4 crore houses in rural areas)
  2. »» Each house in the country should have the basic facilities of
  3. 24-hour power supply, clean drinking water and a toilet, and should be connected to a road.
  4. »» At least one member of each family should have access to a means of livelihood, employment or economic opportunity.
  5. »» Absolute poverty should be eliminated.
  6. »» Electrification, by 2020, of the remaining 20,000 villages in the country, including by off-grid solar power generation
  7. »» Connecting each of the 1,78,000 unconnected habitations byall-weather roads
  8. »» Providing medical services in each village
  9. »» Educating and imparting skills to the youth to enable them to get employment
  10. »» An increase in agricultural productivity and the realization of reasonable prices for agricultural production is essential for the welfare of rural areas. It is important to increase the irrigated area, improve the efficiency of the existing irrigation systems, promote agro-based industry for value addition and increase farm
  11. incomes, and to ensure that farmers get reasonable prices for farm produce.
  12. »» Ensure connectivity to all villages
  13. »» To ensure that the youth get proper jobs, it is necessary to make India the manufacturing hub of the world. The Skill India and the Make in India programmes are aimed at doing this.
  14. »» Encourage and promote the spirit of entrepreneurship in India and support new start-ups.
  15. »» The eastern and north-eastern regions of our country are lagging behind in development on many fronts. There is a need to ensure that they are at par with the rest of the country.
  • Agriculture
  1. »» Paramparagat Krishi Vikas Yojana—organic farming scheme to improve soil health
  2. Pradhan Mantri Gram Sinchai Yojana—scheme aimed at irrigating the field of every farmer and improving water use efficiency to provide ‘per drop more crop’
  3. »» Micro-irrigation, watershed development and the Pradhan Mantri Krishi Sinchai Yojana
  4. »» A national agricultural market will be set up to increase the incomes of farmers, and will also have the incidental benefit of moderating price rises.
  • Funds allocated to NABARD
  1. »» RIDF: `25,000 crore
  2. »» Long-term Rural Credit Fund: `15,000 crore
  3. »» Short-term Cooperative Rural Credit Refinance Fund: `45,000 crore
  4. »» Short-term RRB Refinance Fund: `15,000 crore
  • Agricultural credit
  1. »» A target of `8.5 lakh crore of credit has been set for the year 2015–16.
  • Financial inclusion
  1. »» The postal department will make its proposed payments bank venture successful so that it contributes further to the PMJDY.
  • Rural development
  1. »» Rural connectivity—completion of 1 lakh km and building another 1 lakh km by 2022
  2. »» Measures to plug leakages in subsidy purveying
  3. »» Promotion of solar energy
  • Social security
  1. »» The Pradhan Mantri Suraksha Bima Yojana will cover accidental death risk of `2 lakh for a premium of just `12 per year.
  2. »» The Atal Pension Yojana will provide a defined pension, depending on the contribution and its period.
  3. »» The Pradhan Mantri Jeevan Jyoti Bima Yojana covers both natural and accidental death risk of `2 lakh.
  • Infrastructure funding
  1. »» Tax-free infrastructure bonds for projects in the rail, road and irrigation sectors
  2. »» PPP mode of infrastructure development to be revisited and revitalized
  3. »» National Investment and Infrastructure Fund: `20,000 crore annually
  • Skill India
  1. »» Skill India needs to be closely coordinated with Make in India.
  2. »» National Skills Mission should be implemented through the Skill Development and Entrepreneurship Ministry
  3. »» Deen Dayal Upadhyay Gramin Kaushal Yojana to improve employability of rural youth
  • Digital India
  1. »» The National Optical Fibre Network Programme of 7.5 lakh km, networking 2.5 lakh villages, is being further speeded up by allowing willing states to undertake its execution.
Inclusive growth for sustainable rural prosperity:
watershed development,
livelihood-based programmes,
Natural resource management,
Agricultural technology transfer
development of tribal farmers
  1. Financing rural infrastructure:
  2. The RIDF is a major source of funds for the states for the development of rural infrastructure. The cumulative resource routed through the RIDF stood at `2,17,500 crore as on 31 March 2015. The Union Budge 2015–16 has announced an allocation of `25,000 crore under RID XXI. An all-time record sanction of `28,63 crore against a corpus of `25,000 cror was achieved under RIDF XX (2014–15). Th disbursements during the current year als touched a record `19,642 crore. Further, a record sanction of `6001 crore against a corpus of `5,000 crore was achieved under the WIF during 2014–15.
  3. With the RBI’s decision to expand the definition of priority sector lending to include medium enterprises, social infrastructure and renewable energy sectors,
  4. the shortfall in priority sector lending by commercial banks would shrink, reducing the availability of funds to NABARD for financing RIDF and WIF projects. NABARD
  5. could meet this challenge by exploring the possibility of raising funds by issuing taxfree infrastructure bonds and by borrowing from multilateral agencies like the World
  6. Bank and Asian Development Bank (ADB).
  7. Critical developments in agriculture :
  • More than half the population still reports agriculture as the primary source of livelihood. Thus, the per capita income of an agricultural household is a fraction of the income of a household that depends on other sectors.
  1. There has been an increase in the
      1. marginalization of holdings in the agricultural sector. About 85 per cent of the operational holdings (accounting for 45 per cent of the area) are less than 2 ha, as per the Agricultural Census, 2010–11.
      1. the major problem farmers  have been facing is the loss of soil fertility and productivity due to salinity and erosion It is estimated that almost half of the country’s agricultural area is on the grips of such challenges.
      2. Water problems :  (i) 54 per cent of the country faces high to extremely high water stress and the same proportion of wells face groundwater decline, and (ii) more
  1. than 100 million people live in areas that have water of poor quality Globally, by 2050 the agricultural sector needs to produce 60 per cent more and in the developing countries it needs to produce 100 per cent more (United Nations World Water Assessment Programme, 2015). This can be achieved only by improving the productivity of water and arriving at the right policy mix.
  2. climate
      1. change will have significant negative impacts. It is predicted that yields will fall by 4.5–9 per cent, depending on the magnitude and distribution of warming.
Risks in agriculture:
The risks faced by farmers fall primarily under the following heads: a) production, b) price, c) input, d) technology, and e) institutional risk.
Pre-insurance measures include preparing a weather atlas of critical weather elements, developing early warning systems, bringing about changes

in land use and management, promoting diversification and mixed farming, protecting agriculture, developing resource-conserving

technologies, establishing food and forage banks, setting up agri-risk funds, and conducting surveillance activities to control pests and diseases.

Several credit-related measures can be useful when a risk event occurs. These include simplifying the rescheduling of the loans taken by farmers affected by a natural calamity in order to enable them to apply for a fresh loan; giving loans to those who swap informal loans with formal loans; and providing farmers with credit counselling through financial literacy centres.
 
  1. New and innovative measures to adapt to climate change include: (i) changes in agricultural practices to improve the fertility of soil and enhance carbon sequestration; (ii) changes in the management of agricultural water for more efficient use of water; (iii) agricultural diversification to enhance resilience in the face of climatic change; (iv) development of agricultural science and technology, agricultural advisory services, and information systems; and (v) improving risk management and crop insurance.
  2. How to address distress:
      1. Financial management:
        • One-time settlement (OTS) for formal sector loans and the financial burden to be shared among the banks, state governments and GoI
        •  Debt-swapping facility to enable farmers to switch over their loans from moneylenders to the formal sector
        •  Putting in place a credit guarantee scheme, which will be implemented by the Deposit Insurance and Credit Guarantee Corporation (DICGC) and
  1. shall be applicable soon after the declaration of distress and before the rescheduling of loans, instead of granting compensation in areas going
  2. through consecutive years of distress.
      • Any kind of distress to be addressed immediately through insurance, risk mitigation and the credit guarantee mechanism
      1. Risk mitigation
        • Setting up a Fund for Agriculture Risk Mitigation (FARM)
        • Establishment of agriculture meteorological laboratories in 31 distressed districts by the Indian Meteorological Department, to be managed by panchayat/ village knowledge centres
      1. Social networking
      • Promoting social network groups on the lines of Pragati Bandhu (Karnataka) and Rythu Mitra Groups (Andhra Pradesh)
      •  Debt counselling centres, based on the Bank of India model in the Wardha district of Maharashtra, should be set up. The coverage of the centres should first be extended to the remaining distressed districts of the state, then to those in Andhra Pradesh and Karnataka, and finally, the remaining 100 agriculturally backward districts in other states. A total of 204 lakh small and marginal farmer should be covered.
  1. Food processing in India—the sunrise industry:
  2. Food and food products are the biggest consumption category, and have a market size of `9,05,000 crore, which represents nearly 21 per cent of India’s gross domestic product. Accounting for about 32 per cent of the country’s total food market, the food processing industry is one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth.
  3. In India, food and food products are a high-profit industry as they lend themselves to significant value addition. The size of the food processing industry in the country went up from `32,54,216 crore in 2005–06 to `44,93,743 crore in 2009–10—a compounded annual growth rate of 8.4 per cent. The food processing industry has been recognized as a high-priority area and is poised for tremendous growth, which can potentially increase the country’s share in world food trade
  4. every year. The total food production in India is likely to double over the next 10 years, with the country’s domestic food market estimated to
  5. reach US$258 billion by end of 2015.
  6. During the post-Independence period, India witnessed rapid growth in the food processing sector, especially through the 1980s. It followed the first phase of the Green Revolution, which resulted in increased agricultural production and the need for post-harvest management. The importance of the sector was realized by the business community, leading to diversification from grain trading to processing. Initially, it was mostly rice processing, followed closely by wheat milling, the paper and pulp industry, milk processing sector, jute industry, sugarcane processing and oil extraction through solvent plants. In some areas, like the solvent
  7. extraction industry, growth in the installed processing capacity has far outrun the supply of raw materials.
  8. The dairy sector has the highest share in processed food, with 35 per cent of its total produce being processed. Only 15 per cent of this is processed by the organized sector. The processing level is around 2.2 per cent for fruits and vegetables and 21 per cent for meat and poultry products. Of the 2.2 per cent processing in fruits and vegetables, only 48 per cent is carried out by the organized sector.
  9. Notwithstanding the strong agricultural production base, India’s food processing industry is still relatively underdeveloped. This offers significant scope for expansion and value creation. The real challenge and opportunity is to capture the value-added food products space, in India and abroad. With a large and growin consumption base as well as export potential, food processing is truly India’s sunrise sector.
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