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Agriculture Sector in India

November, 2012


Agriculture is the dominant sector of the Indian economy, growing at an average rate of 2.8 per cent. The sector provides the principal means of livelihood for over 58.4 per cent of India's population and contributes approximately one-fifth of total gross domestic product (GDP).

India is blessed with favorable climatic conditions for the production of a wide variety of crops. The country boasts of having the largest share of cultivated land, amounting to nearly 52 per cent of its total area. "India is the second-largest producer of food in the world and holds the potential of being the biggest on global food and agriculture canvas," according to a Corporate Catalyst India (CCI) survey. The Gross Capital Formation (GCF) in the agriculture and allied sectors in the country rose by 87 per cent to Rs 1,42,254 crore (US$ 25.80 billion) in the 2010-11 fiscal as compared to Rs 76,096 crore (US$ 13.80 billion) in 2004-05, as per annual report of the Department of Agriculture and Cooperation for the year 2011-12.

Further, the green revolution transformed India from a food deficient stage to a surplus food market. In a span of three decades, India has become a net exporter of food grains.The transformations in the sector are due to factors such as new and improved technologies, easy credit facilities, interest of the organised sector, rapid growth of contract farming, and investor friendly Government policies.

Market Dynamics

  • Agriculture accounts for about 10 per cent of the total export earnings and provides raw material to a large number of industries. "Exports of agricultural products are expected to cross US$ 22 billion mark by 2014 and account for 5 per cent of the world's agriculture exports," according to the Agricultural and Processed Food Products Export Development Authority (APEDA)
  • Spices exports from India rose nine per cent in volume in 2011-12, at 5, 75,720 tonnes, as against 5, 25,750 tonnes in the previous fiscal. Total export earnings were increased by 43 per cent (in dollar terms) at Rs 9,783 crore (US$ 1.77 billion) compared to Rs 6,841 crore (US$ 1.24 billion) in 2010-11, according to the Spice Board
  • The Asian Development Bank (ADB) will provide a loan of US$ 67 million to Bihar for expanding agriculture value chain and to facilitate linkages for small farmers with food processors, agri-business entrepreneurs and service providers in Mazaffarpur, Patna and Nalanda districts

Major Developments and Investments

  • The total planned expenditure for the Department of Agriculture and Cooperation has increased by 18 per cent from Rs 17,123 crore (US$ 3.11 billion) in 2011-12 to Rs 20,208 crore (US$ 3.67 billion) in 2012-13. The outlay for Rashtriya Krishi Vikas Yojana (RKVY) is being increased from Rs 7,860 crore (US$ 1.43 billion) in 2011-12 to Rs 9,217 crore (US$ 1.67 billion) in 2012-13. Further, the amount of Rs 1,000 crore (US$ 181.28 million) has been allocated for "Bringing Green Revolution to Eastern India (BGREI)" initiative, compared to Rs 400 crore (US$ 72.51 million) in 2011-12
  • The Chennai-based Indian Overseas Bank (IOB) keeping its thrust on agricultural lending under priority sector area has proposed to open 15 special agricultural credit branches in Karnataka and Maharashtra. The bank intends to lend about Rs 500 crores (US$ 90.69 million) through these branches
  • The Tea Trade Association of Cochin has decided to set up a state-of-the-art Tea Trade centre at an estimated cost of Rs 100 crore (US$ 18.13 million). The centre will aim at consolidation of various activities connected with tea trade under one roof with key focus on centralising the warehousing operations
  • The Spices Board, in partnership with Confederation of Indian Industry (CII) and U.S. Food and Drug Administration (USFDA), has decided to set up a collaborative training centre for food safety and supply chain management to facilitate capacity building and developing product specific testing procedures for spices and botanical ingredients