Last Updated: April 17, 2015
CEO, DVA Group, Germany
Updated: February, 2015
Sectoral Report | October, 2014
Despite the focus on industrialisation, agriculture remains a dominant sector of the Indian economy both in terms of contribution to gross domestic product (GDP) as well as a source of employment to millions across the country.
Agriculture plays a vital role in the Indian economy. Over 70 per cent of the rural households depend on agriculture as their principal means of livelihood. Agriculture, along with fisheries and forestry, accounts for one-third of the nation’s GDP and is its single largest contributor.
The total Share of Agriculture & Allied Sectors (Including agriculture, livestock, forestry and fishery sub sectors) in terms of percentage of GDP is 13.9 percent during 2013-14 at 2004-05 prices. [As per the estimates released by Central Statistics Office]
Agricultural exports constitute a fifth of the total exports of the country. In view of the predominant position of the Agricultural Sector, collection and maintenance of Agricultural Statistics assume great importance.
The country is also the largest producer, consumer and exporter of spices and spice products in the world and overall in farm and agriculture outputs, it is ranked second. From canned, dairy, processed, frozen food to fisheries, meat, poultry, and food grains, the Indian agro industry has plenty of areas to choose for business.
The Department of Agriculture and Cooperation under the Ministry of Agriculture is the nodal organisation re-sponsible for the development of the agriculture sector in India. Under it, several other bodies such as the National Dairy Development Board (NDDB) work for the development of other allied agricultural sectors.
There are multiple factors that have predominantly worked in tandem leading to the growth of the Indian agriculture sector in recent years. These include growth in income and consumption, growth in food processing sector and increase in agricultural exports. Also, increasing private participation in Indian agriculture, growing organic farming and usage of information technology are the trends that are being witnessed by the agriculture industry.
As per the 4th Advance Estimates of Production of food grains for 2013-14, total food grain production is estimated to be 264.77 million tonnes (MT).
With an annual output of 130 MT, India is the largest producer of the milk in the world. It also has the largest milk-producing animal population of over 118 million. However, milk yields per animal are among the lowest in the world.
India is the biggest producer of pulses in the world at 19 MT and their biggest importer 3.5 MT.
India is the second largest producer of sugar in the world and the government has aimed to increase the exports from 1.3 MT in 2013 to an average of 2 MT in 2014 and 2015.
Spice exports from India are expected to reach US$ 3 billion by 2016-17, on the back of creative marketing strate-gies, innovative packaging, strength in quality and a strong distribution network. The Indian spices market is pegged at Rs 40,000 crore (US$ 6.42 billion) annually, of which the branded segment accounts for 15 per cent.
In 2013-14 India achieved a record food grain production of 264 MT, beating the previous year's (2012-13) 257 MT, according to data provided by Department of Economics and Statistics (DES). Also, agricultural profitability has increased over the last decade with record increases in MSPs (minimum support prices) for agricultural produce for all covered crops.
The procurement target for rice during Kharif Marketing Season (KMS) 2014-15 has been finalised as 30.05 MT.
Prompted by the Indian government's initiatives, there has been various investments in the Indian agricultural sector.
The Indian agricultural services and the agricultural machinery sectors have cumulatively attracted foreign direct investment (FDI) equity inflows to the tune of US$ 2,153.61 million in the period April 2000-December 2014, according to the Department of Industrial Policy and Promotion (DIPP).
Some of the major investments and developments in agriculture in the recent past are as follows:
Recognizing the importance of Agriculture Sector, the Government during the budget 2014-15 took a number of steps for sustainable development of Agriculture. These steps include enhanced institutional credit to farmers; promotion of scientific warehousing infrastructure including cold storages and cold chains in the country for increasing shelf life of agricultural produce; Improved access to irrigation through Pradhan Mantri Krishi Sichayee Yojana; provision of Price Stabilisation Fund to mitigate price volatality in agricultural produce; Mission mode scheme for Soil Health Card; Setting up of Agri-tech Infrastructure fund for making farming competitive and profitable; provide institutional finance to joint farming groups of “Bhoomi Heen Kisan” through NABARD; development of indigenous cattle breeds and promoting inland fisheries and other non-farm activities to supplement the income of farmers.
Central Government recognizes and discharges its responsibility to assist State Governments in overall development of Agriculture sector. Effective policy measures are in position to improve agricultural production and productivity and address problems of farmers. State Governments are also impressed upon to allocate adequate funds for development of agriculture sector in State plan, as well as initiate other measures required for achieving targeted agricultural growth rate and address problem of farmers.
The Department of Agriculture & Cooperation under Ministry of Agriculture has entered into MOUs/Agreements with 52 countries including United State of America. In addition, Department of Agriculture Research & Education (DARE) and Department of Animal Husbandry, Dairying & Fisheries (DAHD&F) under Ministry of Agriculture have also entered into MOUs/Agreements with other countries taking the total number of countries to 63. Agreements with these countries provide better agricultural facilities due to cooperation in areas such as Research and Development, Capacity Building, Germ-Plasm Exchange, Post Harvest Management, Value Addition/ Food Processing, Plant Protection, Animal Husbandry, Dairy & Fisheries and also help in enhancing bilateral trade.
The Government of India realises the importance of agriculture to the development of this nation and hence has adopted several initiatives and programmes for this sector’s continuous growth. Notable among them are Rashtriya Krishi Vikas Yojana (RKVY); National Food Security Mission (NFSM); National Horticulture Mission (NHM); Gramin Bhandaran Yojana; Integrated Scheme of Oilseeds, Pulses, Oil palm, and Maize (ISOPOM), etc.
Some of the recent major government initiatives in the sector are as follows:
The Indian agriculture sector is expected to grow with better momentum in the next few years owing to increase in investment in agricultural infrastructure such as irrigation facilities, warehousing and cold storage. Factors such as reduced transaction costs, time, better port gate management and fiscal incentives will also contribute to this upward trend. Furthermore, the increased use of genetically modified crops is also expected to better the yield of the Indian farmers.
The 12th Five Year Plan’s estimates of expanding the storage capacity to 35 MT and the target of achieving an overall growth of 4 per cent will also go a long way in modifying the overall face of the Indian agriculture sector in the next few years.
Exchange rate used: INR 1= US$ 0.016 as on February 24, 2015
References: The Economic Survey, Agricultural and Processed Food Products Export Development Authority (APEDA), The Union Budget 2014-15, Press Releases, Media Reports
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
India exported nearly 20 million tonnes of foodgrain in 2012-2013, becoming a major contributor to the world's food basket.