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Agriculture is the most important sector of Indian economic system and economic activity as it contributes 14% of GDP. About 53% of our population is dependent on agriculture.
The role of agriculture in the Indian economy is as follows:
  • Generates employment: At the time of independence, about 72% of the population was engaged in agriculture and its allied activities like storage, trade and transport, etc. During 2010-11, the percentage of people working in agriculture sector dropped to around 53% (see chart 1). However, in absolute terms, the population dependent on agriculture has risen sharply. Beside this, a large number of people earn their living by working in occupations dependent on agriculture like storage, procuring, trade and transport, marketing and export of agricultural products.
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  • Contributes to national income: The share of agriculture in total GDP in 1950-51 was around 55% which has come down to 12.3 % in 2010-11 (see chart 2). However, this share indicates that India continues to be an agricultural economy.
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  • Supports industries: Several agro-based industries like textiles, sugar, tea, paper and other industries depend on inputs from agriculture. Agricultural production determines the income of the farmers, which in turn determines the demand for industrial products.
  • Contributes to foreign trade: The supply of various goods in the agricultural sector determines the quantity of traditional commodities like jute, tea, tobacco, and coffee that are to be exported. Textiles, jute and tea contributed to over 50% of our export earnings at the time of independence. However, cashews, kernels, tobacco, coffee, sugar, etc., and all the other agricultural commodities put together contribute to 70% of our total exports. With the development in the economy, the share of agricultural exports in total exports decreased. During 2010-11, agricultural exports formed just about 12% of the national exports. However, unfavourable weather conditions or failure of crops necessitate the import of agro products. Agro-imports constituted just 3% of national imports in 2010-11. This indicates India’s self sufficiency with regard to agro-products. They are imported only under conditions of severe shortages.
  • Supplies food and fodder: In India, food and food products constitute a major proportion of the people’s income. Food prices thus have a major influence on the cost of living. Agriculture also sustains livestock by providing fodder. This also contributes to generation of employment and income to a large number of people who dwell in rural and hilly areas.
  • Saves capital: The capital output ratio of agriculture is very low when compared to that of the industrial sector. To a developing economy like India, a low capital ratio calls for better opportunities for development.

Note: Capital output ratio refers to the capital required per unit of output produced.

  • ƒInfluences Government’s revenue: Although the direct contribution of agriculture to central and state revenue by means of taxes is relatively insignificant, it has a strong influence on the government’s revenue. Government revenue depends on agricultural prosperity. Due to drought or famine government revenue suffers and relief expenditure of the government goes up.
  • ƒMitigates urban congestion and rural brain drain: The prosperity and development of agricultural sector will attract talented people to pursue agricultural activities. This will reduce the instances of migration from rural to urban areas and metropolitan cities. Migration not only deprives the rural areas of skilled and educated persons, but also creates urban congestion. Both these dangers of migration can thus be prevented.

Growth of agriculture during planning period

  • ƒRise in production and productivity: Since independence, agricultural production has increased by more than four times. While the production of food grains in 1950-51 was 51 million tonnes, it rose to 259.3 million tonnes in 2011-12. The New Agricultural Strategy, adopted in 1966 (also known as green revolution) was the major contributing factor for this growth. This strategy emphasised on using High-Yielding Variety (HYV) seeds, fertilisers, pesticides and insecticides and proper irrigation. Over the period 1950-51 to 2010-11, there was a sharp increase in the production of various cropss.
The following table indicates that



(in million Tonnes)

(in million tonnes)


Food Grains
















Cotton (million Bales)




Jute and Mesta



  • High Yielding Varieties Programme (HYVP) covered 5 crops: wheat, rice, bajra, jowar and maize. The production of wheat increased more than 7 times (from 11 million tonnes in the 3rd plan to 94 million tonnes in 2011-12). There was also a significant increase in the productivity of wheat (from 827 kilograms per hectare in 1965-67 to 3140 kilograms per hectare in 2011-12). These led to the green revolution often being referred to as wheat revolution.
The output of food grains saw a long-term annual growth of about 2% from 1960-61 to 2010-11, while the per capita availability of food grains was enhanced from 395 gm in 1951 to 463 gm in 2011 (see chart 3). Agricultural productivity saw an annual growth rate of 2.32% during 2000-2012.


Note: Agricultural productivity is measured in terms of yield per hectare land.

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  • ƒDiversified agriculture: Agriculture in India is no longer traditional and conservative. It has diversified over a period of time as indicated in the below points.
    • Non-crop sectors (fishery, forestry, and animal husbandry) occupy a large share in total agricultural output and has increased over the years.
    • …Commercial crops like sugar, oilseeds, etc., use larger area than before
    • …There is a rise in the area under cultivation of superior cereals like rice and wheat, while the area under cultivation of inferior cereals has been declining
  • ƒ Modernized agriculture: The green revolution has enabled Indian agriculture to modernize, the signs of which are as below.
    • …Increase in the use of high-yielding varieties of seeds, chemical fertilisers, pesticides, etc.
    • …Use of modern methods such as intensive cultivation, multiple cropping, scientific water management etc.
    • …Increase in awareness and acceptance of new and scientific techniques of production.
    • …Increase in agricultural capacity due to use of modern techniques.
    • …Rising presence of institutions to render services to agriculturists with respect to marketing of agricultural products, provision of agricultural credit, purchase, distribution of agricultural inputs and storage etc.
  • ƒImproved agrarian system: As exploitation and social injustice were common occurrences within the agrarian system, the government introduced three types of land reforms to prevent the exploitation of actual tillers.
    • …Abolition of intermediaries: The zamindari system was abolished in all states through legislations. This enabled the Government to acquire about 173 million acres of land from the intermediaries and also led to 2 crore tenants being brought in direct contact with the state.
    • …Tenancy reform: Zamindars charged a very high rate of interest ranging from 30 to 75% from the tenants. Thus, legislations were passed to fix the rents from 25 to 50% for different states after independence. Legislations have been passed to confer ownership rights on tenants and as a result, about 12.42 million tenants have acquired ownership rights over 6.32 million hectare of land. Ceilings were also imposed on the amount of land which a family could hold and accordingly, a family could hold upto 18 acres of wet land or 54 acres of un-irrigated land. 2.98 million hectares of land were surplus, out of which 2.18 million hectares were distributed to 5.58 million beneficiaries.
    • …Reorganisation of agriculture: Farmers faced the problem of fragmented land holdings, i.e. ownership of scattered pieces of land. To solve this problem, land was reorganized. The government decided to consolidate holdings by giving to the farmer, one consolidated holding equal to the total of the land in different scattered plots under his possession. Cooperative farming was also introduced.
  • ƒOther developments: The following developments have also taken place.
    • Material inputs at subsidized rates are provided to farmers.
    • Minimum support price and marketing assistance are provided to the farmers by the government.
    • Credit facilities are provided to them at low rates of interest.
    • To provide employment to the rural people, special programmes like Integrated Rural Development Programme, Jawahar Rozgar Yojana etc. were started.
    • To achieve integrated development of food crops, the Rashtriya Krishi Vikas Yojana (RKVY) is being implemented, which emphasizes on agricultural mechanization, improvement of soil health and productivity, development of rain fed farming systems, improvement of agricultural marketing and pest management in 2007 -08.
    • Self-sufficiency in food crops is attempted through the enactment of National Food Security Mission in selected districts.
    • Forecasting Agricultural output using Space, Agro-meteorology and Land-based observations (FASAL) and Extended Range Forecasting System (EFRS) are projects that provide scientific and reliable basis for forecasting.
    • The production of oilseeds, pulses, oil palm, maize, rubber, bamboo, coffee, etc. have been encouraged by introducing various schemes for the same.
    • To enhance food security and to make Indian agriculture more resilient to climate change, National Mission for Sustainable Agriculture (NMSA) was launched in 2011-12.

Problems of agricultural sector in India

  • ƒSlow and uneven growth
    • Agricultural growth is not in proportion to the population growth. Thus, agricultural growth is insufficient to meet the rising demands of the fast growing population
    • …The rate of growth in some crops (e.g. wheat) is higher than in others. This has resulted in uneven growth.
    • …The yield per unit area is low across almost all crops. In spite of contributing to 21.8% of global rice production, India’s yield per hectare in 2004-05 was 1/3rd that of Egypt. Correspondingly, while India’s wheat production accounted for 12% of global production, its average yield was less than 1/3rd of the highest yield level estimate for the UK in 2004-05. In terms of productivity, India ranks 52nd in rice and 38th in Wheat (in the world).
    • …Regional imbalances in the spread of growth have rendered the national growth uneven. Majority of the agriculture growth is confined to Punjab, Haryana and Western Uttar Pradesh.
    • …More importance has been given to the development of agricultural crops and not to animal husbandry, fisheries and forestry.
  • Not-so-modern agriculture
    • …The HYVP served only a small area of 1.89 million hectares in 1966-67. In 2003-04, it covered only 80 million hectare (about 44%) of the gross cropped area
    • …Primitive methods of agriculture, including ploughing, sowing, harvesting etc. continue to be employed.
    • …There is excessive reliance on rain feeding, while dry farming techniques are not in place. 60% of net sown area is rain fed.
    • …Irrigation facilities lack appropriate investment and management as a result of which, only 40% of the gross cropped is irrigated.
  • Flaws in land reforms
    • All states did not benefit from the legislation measures.
    • Ceiling laws were inadequate. There was uncertainty with the scope of certain terms like personal cultivation. Zamindars were given a vast portion of land for personal cultivation. Tenants were forced to surrender their land to the landlords.
  • ƒProblems relating to finance
    Money lenders played a prominent role as credit providers for agricultural credit even during post-independence. They accounted to 71.6% of rural credit. Needless to say, excessive rates of interest (18-50%) put the farmers in need of agricultural credit in distress. The nationalization of 14 banks in 1969 and 6 banks in 1980 however, helped in providing credit to the rural and other priority sectors. Regional Rural Banks (RRBs) were set up in 1975 to meet the requirements of farmers and villages. National Bank for Agriculture and Rural Development (NABARD) was set up as the apex bank for this purpose in 1982. The establishment of cooperative credit societies also helped in financing rural projects at lower rates of interest. All these efforts have decreased the share of money lenders to 27% of total credit providers and have increased the share of credit institutions.
  • ƒThe other main problems are:
    • …Concentration of agricultural loans in certain regions and states.
    • …Increasing proportion of overdue to demand: Almost 40% of the amount financed does not return back to the society.
    • …Large and medium farmers enjoy the benefits of agricultural credit.
    • …Lack of experienced and skilled staff in such institutions

Steps taken to enhance credit support to farmers

  • Farm Credit Package was introduced in 2004. This has multiplied the flow of credit to the farm sector by more than three times during 2003-04 to 2009-10.
  • ƒKisan Credit Card scheme was introduced in 1998 to support the farmers’ cultivation needs by providing sufficient and timely credit assistance. Over 11 crore kisan credit cards have been issued till date.
  • ƒAgricultural Debt Waiver and Debt relief scheme was introduced in 2008. Direct agricultural loans provided to marginal, small and other farmers were included in this scheme which eventually waived overdue loans worth ₹ 50,000 crore and provided one-time-settlement relief for loans worth ₹ 10,000 crore

Warehousing and marketing problems

  • ƒPrimitive storage (dug-holes and pits) with the individual farmers result in 10-15% of agricultural produce getting spoiled or eaten by rats and rodents.
  • ƒLack of organisation among farmers denies them a chance to get a fair price from the well organised purchaser community.
  • ƒThe presence of many intermediaries lead to a large amount of money being paid as fees/ commission.
  • ƒPractice of unethical and unscrupulous means like false weighing, unauthorized fees, and taxes etc. are persistent in unorganized agricultural markets.
  • ƒPoor grading and standardization, adulteration and such other practices lead the farmers to lose motivation to produce superior quality products.
  • ƒThe farmers earn their livelihood just for survival. Hence, their marketable surplus is very low.

Steps taken to develop marketing infrastructure, storage and warehousing

  • ƒReforms in agricultural marketing through the amendment of Agricultural Produce Market Committee (APMC) Act are undertaken by various states.
  • ƒDepartment of Agriculture and Cooperation has set up Agri Clinics and Agri Business Centres (ACABC), Kisan Call Centres and has assumed the responsibility of developing Kisan Knowledge Management System (KKMS).
  • ƒAdoption of The National Policy for Farmers, 2007
  • ƒThe Agriculture Insurance Company of India has implemented schemes to protect the farmers against the loss of crops and losses that arise due to bad weather. These schemes are Modified National Insurance and Weather Based Crop Insurance.

Agriculture in the 11th plan

The 11th plan aims to double the growth rate in agriculture which was less than 2% as achieved in the 10th plan to around 4% in the 11th plan

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