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Agriculture Sector in India

May, 2013


Agriculture is the dominant sector of Indian economy, which determines the growth and sustainability. About 65 per cent of the population still relies on agriculture for employment and livelihood. India is the first in the world in the production of milk, pulses, jute and jute-like fibres; second in rice, wheat, sugarcane, groundnut, vegetables, fruits and cotton production; and is a leading producer of spices and plantation crops as well as livestock, fisheries and poultry.

In the past few years, Indian agriculture has done remarkably well in terms of output growth. The 11th Five Year Plan (2007-12) witnessed an average annual growth of 3.6 per cent in the gross domestic product (GDP) from agriculture and allied sector. The growth target for agriculture in the 12th Five Year Plan is estimated to be 4 per cent. Indian agriculture is benefitting huge from rising external demand and the sector's wider participation in the global economy.

In order to boost investments in the sector, the Government of India has allowed 100 per cent foreign direct investment (FDI) under automatic route in storage and warehousing including cold storages. The government has also allowed 100 per cent FDI under the automatic route for the development of seeds.

Department of Agriculture and Cooperation under the Ministry of Agriculture is the nodal organisation responsible for development of the agriculture sector in India. The organisation is responsible for formulation and implementation of national policies and programmes aimed at achieving rapid agricultural growth through optimum utilisation of land, water, soil and plant resources of the country.

Market Dynamics

Backed by policy impetus by the Government of India, the country ranks 10th in global agricultural and food exports, as per Economic Survey 2012-13. 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).

Total exports of Indian agri and processed food products from April 2012 to February 2013 stood at Rs 11,254,275.51 lakh (US$ 20.74 billion) as compared to Rs 7,186,784.33 lakh (US$ 13.24 billion) during the same period last year, according to the data provided by APEDA.

As of March 1, 2013, India has wheat stocks of around 27.1 million tonnes (MT), as against a requirement of mere 7 MT, while total food grains stocks in the central pool (including rice) is estimated to be almost 63 MT, as against a requirement of 21.2 MT.

Wheat exports from India are expected to grow by 23 per cent to 8 MT in the financial year 2013-14, on the back of strong global prices and surplus domestic supply. Exports of rice are also expected to cross 10 MT from 7.3 MT during previous year due to robust demand from West Asia, Africa and South-East Asian countries.

Major Developments and Investments

The total planned expenditure for the Ministry of Agriculture has increased considerably to Rs 27,049 crore (US$ 4.98 billion) in the Union Budget 2013-14. The outlay is 22 per cent over the revised estimates of the year 2012-13. Further, the amount of Rs 1,000 crore (US$ 184.32 million) has been allocated to continue support to the new green revolution in Eastern States like Assam, Bihar, Chhattisgarh and West Bengal to increase the rice production. An outlay of Rs 500 crore (US$ 92.17 million) is also proposed for starting a programme of crop diversification that would promote technological innovation and encourage farmers to choose crop alternatives in the original green revolution States.

Under the Rashtriya Krishi Vikas Yojana, an outlay of Rs 9954 crore (US$ 1.83 billion) and Rs 2250 crore (US$ 414.64 million) have been proposed for mobilizing higher investment in agriculture and the National Food Security Mission respectively.

A memorandum of understanding (MoU) has been signed between Indian Council of Agricultural Research (ICAR) and Ramakrishna Mission Vivekananda University (RKMVU) for establishment of 632nd Krishi Vigyan Kendra (KVK) in South 24 Parganas district, West Bengal.

The ICAR and the World Bank have been implementing a joint National Agricultural Innovation Project (NAIP) in the country to accelerate the collaborative development and application of agricultural innovations. Till date, an amount of Rs 727.93 crore (US$ 134.13 million) has been released by the World Bank for the project.

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 crore (US$ 92.17 million) through these branches.