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Indian Agriculture to 2047: Reshaping Policies for Sustainable Development
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Policy Paper 50
POLICY BRIEF
Agricultural Sustainability in the Indo-Gangeti
Indian Agriculture to 2047
of India
Reshaping Policies for Sustainable
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Citation: Pratap S Birthal, Shivendra K Srivastava, Raka Saxena, Samarth
Godara, Prem Chand, Prabhat Kishore, Jaya Jumrani, Ankita Kandpal,
Purushottam Sharma, and Devesh Kumar Pant. (2025). Indian Agriculture
to 2047: Reshaping Policies for Sustainable Development. Policy Paper
50. ICAR-National Institute of Agricultural Economics and Policy Research,
New Delhi.
Published
March 2025
Published by
Dr P S Birthal
Director
ICAR-National Institute of Agricultural Economics and Policy Research (NIAP)
New Delhi-110012
© 2025, ICAR-National Institute of Agricultural Economics and Policy
Research
Pratap S Birthal, Shivendra K Srivastava, Raka Saxena, Prem Chand, Prabhat
Kishore, Jaya Jumrani, Ankita Kandpal, Purushottam Sharma, and Devesh
Kumar Pant are affiliated with the ICAR-National Institute of Agricultural
Economics and Policy Research (NIAP), New Delhi. Samarth Godara is
associated with the ICAR-Indian Agricultural Statistics Research Institute, New
Delhi. The views presented in this paper are those of the authors and do not
necessarily reflect the official policy or position of the institutions, they are
affiliated.
_________________________________________________________________
Printed at
M/s Chandu Press, 469, Patparganj Industrial Estate, Delhi 110 092.
ii
Foreword
Indian agriculture has reached the stage of unprecedented achievements,
accompanied by unprecedented challenges. It has witnessed an all-time high
growth of approximately 4% during the past decade ending 2023-24, which is
likely to continue with the right set of technologies, policies and institutions.
However, it is pertinent to examine the factors underlying these achievements and
their associated costs to prepare a roadmap for sustainable growth of agriculture
to achieve the national goals of food and nutrition security, and inclusive
development. In some states, agricultural sector has emerged as the primary
driver of economic growth. However, this occurred because of the intensive use
of resources and prioritizing short-term gains over long-term sustainability in most
cases. This is evidenced by the factors such as increased use of fertilizers to produce
the same amount of output, declining groundwater levels, soil degradation, and
environmental pollution.
This paper discusses achievements in Indian agriculture, while simultaneously
highlighting the challenges associated with these. The beauty of this paper lies
in its systematic compilation and presentation of the scattered data and evidence
in a cohesive manner and their interpretations in light of emerging challenges
and opportunities. It quantifies the role of various factors such as technology
and prices in agricultural growth and highlights that the contribution of prices
has surpassed significantly the contribution of technologies in the recent past.
However, price-driven growth has several social and economic implications. The
Working Group and Steering Committee on Agriculture for the Eleventh Five-
Year Plan (2007-2012) highlighted that the growth driven by an increase in real
prices is unsustainable in the long-run. Another implication is the divergence in
the share of agricultural sector in the gross value added (GVA) at constant and
current prices. Between 2011-12 and 2023-24, the share of the agricultural sector
in the total GVA at constant prices (base year 2011-12) decreased by 22%, from
18.5% to 14.5%, whereas at current prices, it did not show any significant change,
indicating that agricultural prices increased at a higher rate than the prices of
non-agricultural commodities. This increase in prices was partially market-driven
and predominantly influenced by the increase in the Minimum Support Prices
(MSP) by the central government and bonuses given by several state governments
over and above MSP. This prevented demand signals from guiding production
decisions, resulting in distortions in cropping patterns and imbalances in the
demand and supply of various commodities. Price intervention also resulted in
significant market distortions, which have had an impact on agricultural trade,
as maintaining artificially high prices through interventions restrict exports and
favors imports. The third significant consequence of price-driven growth is the
decrease in the competitiveness of domestic production, which also translates
into an increase in inflation.
iii
This policy paper shows that the production of commodities, such as rice and
wheat, has increased at a rate exceeding domestic demand, resulting in an
increase in their surplus. This necessitates an increase in exports to dispose of
produce, and, pushing more exports requires improvement in the competitiveness.
However, the sources of recent growth indicate that the real cost of production is
not declining, and this disadvantage is further exacerbated by price distortions.
Maintaining 4% or higher growth in the agricultural sector requires primacy of
technology and an increase in production efficiency. It also requires competitive
prices that correspond to supply and demand dynamics. A significant challenge in
balancing the role of price intervention and ensuring adequate returns for farmers
is identifying the appropriate price intervention measures. India will have to rely
on alternative options beyond MSP to ensure remunerative prices for farmers.
Alternatives include implementing MSP payments without imposing them on the
market dynamics through price deficiency payments, increasing the involvement
of the private sector in marketing, developing efficient and integrated supply
chains, and improved agricultural infrastructure.
For the long-term sustainability of agriculture, non-price factors must receive
adequate attention and price interventions should avoid distorting markets.
The country must promote the responsible use of land, water, and energy, and
implement climate-smart techniques to achieve the overarching goal of net-zero
emissions while ensuring welfare of farming communities.
This paper advocates a shift in the business-as-usual approach toward an adaptive
policy framework that encompasses technologies, market forces, infrastructure,
and institutions to address interconnected challenges for a sustainable future for
agriculture. I congratulate the authors for this valuable and timely contribution on
the current state of Indian agriculture and clearly articulating the set of policies
which may serve as a crucial reference point for future discussions and initiatives
aimed at transforming agriculture into a more resilient, efficient, and sustainable
sector of Indian economy.
Ramesh Chand
Member
NITI Aayog
iv
Preface
India’s agri-food system has undergone significant transformation over the past six
decades, with changes occurring both upstream in production and downstream
in distribution and consumption. As the country looks to the future, these
changes are expected to continue. The ambitious goal of achieving the status of a
developed nation by 2047, the centennial year of its independence, will impact
the transformation of the agri-food system. While this transformation may offer
opportunities for growth, it is accompanied by multiple challenges, including
climate change, water scarcity, land degradation, fragmentation of landholdings,
and limited access to markets and finance. Addressing these challenges will be
crucial to ensure that the ongoing transformation of the agri-food system supports
the progress towards achieving the status of a developed nation.
This paper synthesizes scattered data and empirical evidence to provide a
comprehensive analysis of the existing and potential challenges and opportunities in
the agri-food system transformation. By elucidating both challenges and prospects,
it provides a balanced perspective on the current state of affairs and potential
pathways for fostering a more resilient, efficient, inclusive, and sustainable agri-
food system. It advocates for an adaptive policy framework, developed through
comprehensive consultation with diverse stakeholders, capable of responding to
emerging challenges and opportunities. We hope that the insights provided here
will be useful for policymakers and other stakeholders.
This paper has been built upon the issues raised by the first author in his
presidential address at the annual conference of the Agricultural Economics
Research Association (India) held on December 11-13, 2024 at Indira Gandhi
Krishi Vishwavidyalaya, Raipur (Chhattisgarh). The authors thank the conference
participants for their comments and suggestions. In addition, several professionals
have provided their valuable comments on an earlier draft of this manuscript. The
authors express their sincere gratitude to all of them for their inputs. Particularly
noteworthy are the contributions of Prof Ramesh Chand, Member, NITI Aayog,
Dr P K Joshi, former Director (South Asia), International Food Policy Research
Institute, and Dr Devesh Roy, Senior Research Fellow, International Food Policy
Research Institute, whose expertise in agri-food policy has enriched the paper’s
perspective. The authors are deeply appreciative of their time and effort in
reviewing and offering suggestions that helped us in bringing the manuscript in
its present form.
Authors
v
Contents
Foreword iii
Preface v
Executive Summary xiii
1. Introduction 1
2. Structural Transformation in Agri-food System 5
3. Food Consumption Patterns, Domestic Demand, and Trade 13
3.1 Food consumption patterns 13
3.2 Food demand to 2047 16
3.3 International trade 18
4. Challenges to Agri-food System Transformation 23
4.1 Declining land for agriculture 24
4.2 Indiscriminate and unbalanced use of fertilizers 25
4.3 Inefficient use of water amidst growing demand 27
4.4 Excessive reliance on non-renewable energy sources 30
4.5 Looming threats of climate change 33
4.6 Environmental pollution due to agricultural byproducts 34
4.7 Underdeveloped markets and value chains 35
4.8 Excessive policy emphasis on cereals 36
4.9 Poor market linkages for livestock products 38
4.10 Lack of targeting of institutional credit 38
4.11 Underfunding of agricultural R&D 40
4.12 Lack of sustained investment in agriculture 42
5. Reshaping Agricultural Policies 47
5.1 Enhance and prioritize public investment in agriculture 47
5.2 Holistic management of water-energy nexus 48
5.3 Repurpose fertilizer subsidies 52
5.4 Crop planning 53
5.5 Bundled approach for resilience to climate change 54
vii
5.6 Sustainable increase in agricultural R&D investment 56
5.7 Reform agricultural credit policy 58
5.8 Strengthen circular economy 58
5.9 Strengthen market infrastructure and value chains 59
5.10 Reform agricultural price policy 60
5.11 Trade facilitation 61
5.12 De-stress agriculture from excessive employment pressure 62
5.13 Encourage collective or cooperative farming 63
5.14 Synergy among policies and strategies 63
5.15 Effective coordination between central and state governments 63
5.16 Science-policy interface 64
6. Epilogue 65
References 67
viii
List of Tables
Table Title Page
No
1 % annual growth in agriculture and non-agricultural sectors 6
2 Trend in distribution of landholdings and their average size 7
3 % annual growth in value of output of subsectors of agriculture 8
4 Projections of key parameters 10
5 Changing food consumption patterns 13
6 Household consumption of food commodities 14
7 Trend in composition of food expenditure in rural and urban 15
areas
8 Prevalence rate of malnutrition 16
9 Demand for food commodities by 2047 17
10 Trend in agricultural land 24
11 Relative prices of fertilizer nutrients 26
12 Impacts of climate change on crop yields in medium term 34
13 Disposal of marketed surplus to different agencies 35
14 Economics of cultivation of paddy vis-à-vis other crops in 54
Punjab
15 Average treatment effects of risk management strategies 55
16 Average treatment effects of crop insurance vis-a-vis irrigation 55
17 Average treatment effects of credit 58
ix
List of Figures
Figure Title Page
No
1a Share of agricultural sector in gross value added (GVA) 5
1b Share of agricultural sector in total workforce 5
2 Decennial rolling growth in GVA 6
3 Changes in economic structure of agriculture 7
4 Decennial rolling growth in subsectors of agriculture 8
5 Sources of growth in crop sector 9
6 Trends in agricultural trade 19
7 Composition of agricultural exports 19
8 Composition of agricultural imports 20
9 Comparative advantages in agricultural exports 20
10 Composite index of agricultural sustainability (CIAS) for 23
Indian states
11 NPK use in Indian agriculture 25
12 Trend in fertilizer subsidies 26
13 Ratio of index of agricultural production to index of NPK 26
consumption
14 Regional disparities in NPK use 27
15 Trend in net irrigated area and share of surface and 28
groundwater
16 Status of groundwater extraction 28
17 Regional variation in irrigation 29
18 Spatial variation in groundwater extraction 29
19a Per capita water availability 30
19b Water demand for irrigation 30
20a Trend in well density 31
20b Sources of energy for groundwater extraction 31
21 Trend in electricity consumption in agriculture 31
22 Trend in power subsidies 32
xi
Figure Title Page
No
23 Inter-state variation in power subsidies 32
24 Projections of mean temperature under different SSPs in 33
India
25 Procurement of rice and wheat 37
26 Spatial distribution of production and procurement of rice 37
and wheat
27 Spatial distribution of production and procurement of milk 38
28 Trend in institutional credit to agriculture 39
29 Regional disparities in credit intensity 39
30 Trends in public investment in agricultural R&D 41
31 Sectoral allocation of agricultural R&D investment 41
32 State-wise spending on R&D as percent of AgGDP 42
33 Trend in public sector investment in agriculture 43
34 Composition of agricultural development expenditure 44
35 Share of agriculture in total expenditure 45
36 Trend in micro-irrigation 49
37 Trend in expenditure on major and medium irrigation 49
projects
38 Water pricing and cropping pattern in Punjab 50
39 Impact of volumetric pricing on water use in Punjab 51
40 Required electric power to meet irrigation requirement of 51
existing cropping pattern in Uttar Pradesh
41 Trend in solar pumps for irrigation 52
42 Payoff to investment in agricultural R&D 56
xii
Executive Summary
Over the past six decades, advancements in agricultural research, coupled
with the investments in irrigation, rural infrastructure, and electrification; the
development of institutions and innovations for the delivery of technologies,
information, and financial services; and the provision of financial incentives in
the form of input subsidies and minimum support prices (MSP) for key crops
have transformed India from a food-insecure to a food-surplus nation. Beyond
ensuring food security, this transformation has enhanced the country’s capacity
to mitigate risks to food security arising from extreme changes in climate and
global supply chain disruptions. Furthermore, this enabled India to emerge
as a significant supplier of various agricultural commodities to international
markets, thereby contributing to global food security.
Nonetheless, India’s agri-food system is at a crossroads, confronting both
challenges and opportunities. By the 100th year of its independence in 2047,
India aims to attain the status of a developed nation. Progressing towards this
goal would necessitate an economic growth rate of approximately 8% per
annum, implying a significant increase in purchasing power. By this time, of the
projected 1.6 billion population, approximately half may reside in urban areas.
Thus, the need to produce more and diverse foods remains as urgent as ever.
By 2047, the aggregate food demand is projected to exceed twice the current
demand, whereas the demand for nutrient-rich foods, including horticultural
and animal products, is expected to increase 3-4 times. However, to meet the
growing food demand, the agri-food production system will face numerous
interconnected challenges spanning biotic, abiotic, and structural dimensions.
At the same time, the agricultural sector is expected to experience significant
structural transformations. By 2047, its contribution to the national income
may decrease to 8% from the current 18%. However, the sector will remain
important from the perspective of employment, engaging 29% of the total
workforce, 17 percentage points less than at present. Concurrently, the average
landholding size is expected to decrease significantly to 0.6 hectares from
approximately one hectare now. Nonetheless, in response to these changes,
to maintain and improve their livelihoods, farmers would increasingly diversify
their production portfolios towards less land-intensive activities such as animal
husbandry and fisheries. Projections indicate an increase in the contribution of
livestock to the gross value of agricultural output to 39% from the current 31%,
and of fisheries to 10% from 7%. The fast-growing demand for milk, meat,
xiii
eggs, and fish compared to staple cereals signals this structural transformation
in the agricultural sector.
Furthermore, agricultural land is expected to decrease from 180 million hectares
in 2022-23 to 176 million hectares by 2047. The net cropped area shrinks
marginally, prompting farmers to practice multiple cropping on the same piece
of land. Hence, the cropping intensity is likely to increase to 170% from the
current 156%. However, the intensification of cropland is unlikely to be without
environmental consequences. This increases the pressure on already strained
water and energy resources. Agriculture is a major consumer of water (83%),
and by that time, its demand will be approximately 18% higher than its current
use. Notably, in the past, irrigation expansion occurred primarily by exploiting
groundwater resources facilitated by subsidies on electric power. Nonetheless,
this has resulted in overexploitation of groundwater in some regions, particularly
in northwestern states of Punjab, Haryana, and Rajasthan. Water use efficiency
is also low at 35-40%, which is roughly one-third to one-half of the efficiency
levels observed in China, Brazil, and the United States.
In addition to the growing water stress, there is another equally important
concern of deteriorating soil quality due to intensive agricultural practices,
especially the indiscriminate and imbalanced use of chemical fertilizers. Over
time, fertilizer use has increased substantially, but accompanied by a notable
bias towards nitrogenous (N) fertilizers due to comparatively higher subsidies
relative to phosphatic (P) and potassic (K) fertilizers. Furthermore, fertilizer use
efficiency remains low at: 35-40% for N, 15-25% for P, and 50-60% for K
fertilizers, which prompts increased use of fertilizers leading to their higher cost
of application, while simultaneously affecting the health of natural resources
and the environment.
Climate change is a looming threat to agriculture and agriculture-based
livelihoods. Over the past five decades, extreme climate events such as droughts,
heatwaves, and floods have reduced India’s agricultural productivity growth by
approximately 25%. As the frequency of such events is projected to increase,
they will adversely affect crop yields and food supplies, potentially impacting
the nation’s food and nutritional security. Notably, approximately 14% of the
country’s population remains undernourished, while 35.5% of children under
five years of age are classified as stunted and 32.1% as underweight.
The challenges facing the agri-food system are multifaceted and interconnected,
and their management requires a comprehensive approach encompassing
technological and institutional innovations, investments in infrastructure, and
reforms in incentive structures. Through a careful examination of the existing
policy frameworks in light of the evolving landscape of agri-food system, this
study argues for a dynamic and adaptive policy framework capable of responding
to emerging challenges and opportunities.
xiv
The following are some important technological, institutional, and policy
measures proposed for an efficient, sustainable, and inclusive agri-food
system.
Efficient management of water resources: Rainwater harvesting and
groundwater recharge are crucial for maintaining sustainability of water
resources. The current water use efficiency of 35-40% indicates significant room
for improvement in water management practices. A 10% increase in efficiency
can lead to substantial water conservation, potentially providing enough water
to irrigate an additional 14 million hectares.
Micro-irrigation can significantly enhance water use efficiency. Currently, only
18% of the 88 million hectares suitable for micro-irrigation has been exploited,
saving 11 billion cubic meters (BCM) of groundwater. If fully harnessed, the
country can save 65 BCM of groundwater, which can irrigate 33 million
hectares. Alongside, there is need for increased investment in canal irrigation
systems, which have deteriorated over time. Finally, the integration of digital
innovations in irrigation systems, such as smart sensors, automated controls,
and data-driven decision-making tools, can help optimize water use. Realigning
cropping patterns with the available water endowment is a key strategy for water
conservation. This can be accomplished through a tiered water pricing system,
which incentivizes low consumption and penalizes wastages, potentially
resulting in a shift in cropping patterns away from water-intensive crops such
as rice.
Reforms in power sector: Efforts towards water management may remain
ineffective in the absence of power sector reforms. The gradual phasing out of
electricity subsidies, by targeting those who require such support, is a feasible
option of reducing the indiscriminate use of water and electricity. This may
involve designing a region-specific tiered electricity tariff system built upon
water requirements of the existing cropping patterns.
Repurposing electricity subsidies to renewable energy sources, such as solar
and wind power, can reduce dependence on fossil fuels. India has a significant
untapped solar power potential for agriculture. Only 1% of the 102 Gigawatt
potential is currently exploited despite significant incentives for farmers to switch
over to solar pumps. However, the desired outcomes cannot be achieved, as
long as state governments continue to subsidize electricity for irrigation.
Reforms in fertilizer sector: The fertilizer subsidy policy exhibits a predisposition
towards nitrogenous fertilizers, thereby causing an imbalance in soil nutrients,
potentially compromising long-term soil health and agricultural productivity.
The current NPK ratio stands at 11.8:4.6:1 as against the optimal 4:2:1. Although
the government has implemented initiatives, such as Soil Health Cards (SHCs),
to address these issues, their effectiveness has been limited due to lack of their
xv
integration with fertilizer subsidy distribution. Currently, the distribution of
subsidized fertilizers is linked with Aadhar Cards, which serve as identifiers for
individual farmers. Linking fertilizer subsidies to SHCs can optimize nutrient
applications and restore the nutrient balance.
The reallocation of fertilizer subsidies to organic fertilizers and sustainable
agricultural practices, such as crop rotation, intercropping, and conservation
tillage, can address environmental concerns while enhancing agricultural
sustainability.
Emerging technologies offer promising avenues for enhancing fertilizer use
efficiency and mitigating environmental impacts. Nano-fertilizers, which
release nutrients gradually and precisely, have the potential to minimize
nutrient loss. Unmanned aerial vehicles (i.e., drones) equipped with sensors
and GPS technology can apply fertilizers with high precision, thereby reducing
the risk of nutrient runoff.
Bundled approach to mitigate climate change impacts: Farmers face
multiple risks, sometimes during the same crop growing cycle. Therefore, a
single strategy to mitigate risks is unlikely to be as effective as the combined
implementation of multiple strategies. When jointly implemented, climate-
smart practices, including resilient cultivars, efficient irrigation systems, crop
diversification, and soil and water conservation, can significantly enhance
resilience and productivity in agriculture.
Crop insurance serves as a significant mechanism for risk mitigation; however,
its adoption is constrained by several factors, including its uncertain payoffs,
and the higher and reliable payoffs of alternative risk management strategies,
such as irrigation, and the financial constraints. To address these challenges,
there is a need for risk zoning and differentiated premium rates as well as the
provision of crop insurance as a financial package along with institutional
credit. More importantly, the integration of digital innovations such as
satellite-based remote sensing and unmanned aerial vehicle technology can
enable more accurate risk assessment and the development of region-specific
tailored insurance products.
Parametric insurance, which automates payouts based on predefined weather
triggers, offers a promising alternative to traditional area-yield insurance. It
streamlines claim processes and may incentivize farmers to adopt improved
technologies and practices to improve productivity and resilience of
agriculture.
Stability in investment in agricultural R&D: Agricultural research has
considerable potential to address several challenges, including enhancing
productivity and resilience, combating malnutrition, and reducing poverty.
xvi
The payoffs to investment in agricultural R&D are quite attractive; Rs 13.85 for
every rupee spent. Notably, animal science research generates almost twice the
return compared to crop science research.
Despite such high payoffs, agricultural R&D in India remains underfunded.
In 2022-23, India spent 0.43% of its agricultural gross domestic product
(AgGDP) on research, which is less than the global average of 0.93%. Private
sector investment in agricultural research is low, at approximately 7% of
the total, compared to 35-50% in middle-income and developed countries.
Agricultural extension, which serves as a bridge between research and farming
communities, also remains underfunded, accounting for only about 0.12% of
the AgGDP.
Agricultural research is capital intensive and involves a long gestation period
to generate output. Uncertainty in funding may disrupt the research process.
Thus, there is a need for sustained public investment in agricultural research
and complementing it from other sources such as philanthropic organizations
and the private sector. Furthermore, R&D should prioritize high-value sectors,
including animal husbandry and fisheries, as well as the management of
natural resources and climate change impacts.
Crop planning: Crop diversification as a sustainable agricultural practice has
several benefits such as climate risk mitigation, pest management, improved
resource efficiency, and stable farm income. Aligning cropping patterns with
resource endowments and climate conditions is a crucial step but is not sufficient
to drive the widespread adoption of crop diversification. Understandably,
farmers are primarily motivated by higher profits. Thus, there is a need for
strategies, including financial incentives and market support mechanisms to
offset potential revenue losses during the transition period.
High-value crops, such as fruits and vegetables, are an economically attractive
option in diversification strategies; however, their successful integration into
farming systems requires robust market infrastructure, including cold storage
and refrigerated transport, and financial support to help farmers and other
stakeholders navigate the initial capital costs and market uncertainties.
Strengthen market infrastructure and value chains: The development of
market infrastructure has not kept pace with the increasing commercialization
of agriculture, resulting in supply chain inefficiencies and limited ability
of farmers to realize remunerative prices. Farmers sell 46–99% of their
produce to local traders and other informal buyers. e-NAM (Electronic
National Agriculture Market) is an important initiative towards modernizing
agricultural marketing system. However, its implementation encounters
several challenges, particularly inadequate infrastructure and quality control
measures, which need to be addressed for better functioning. Strengthening
xvii
institutional arrangements, such as Farmer Producer Organizations (FPOs),
cooperatives, and contract farming, can serve as an important mechanism in
linking farmers to remunerative markets, reducing transaction costs and market
risks.
Reform agricultural price policy: The MSP-based procurement policy, although
an income safety net for farmers, has resulted in unintended consequences
for natural resources and agro-biodiversity, which may threaten the long-term
sustainability of agriculture. Thus, there is a need to reform the price policy.
The price deficiency approach, which compensates farmers when market
prices fall below the MSP, is an important means of protecting them from
market uncertainty and price fluctuations. The effective implementation of
decentralized procurement can lead to more efficient and localized decision-
making, potentially improving responsiveness to regional needs. Engaging
the private sector in procurement can introduce market-driven efficiency and
potentially expand market access for farmers. Targeted procurement through
futures trading, facilitated by collectives such as FPOs and cooperatives, is an
opportunity for smallholder farmers to benefit from economies of scale and
reduced price risks. On the other hand, direct income support offers a more
straightforward means of financial assistance, bypassing some of the complexities
associated with market interventions.
Reform agricultural credit policy: Institutional credit to agricultural sector has
experienced significant increase, with credit intensity (ratio of credit disbursed
to AgGDP) increasing from 0.05 in 1970-71 to 0.48 in 2022-23, contributing
substantially to the productivity and resilience of agriculture. However, credit
allocation continues to exhibit persistent bias across enterprises, regions,
and purposes. Animal husbandry, for instance, receives only 6% of the total
agricultural credit despite being an important source of income for farmers.
Furthermore, short-term credit dominates credit disbursements, with a share
of approximately 60%, neglecting the long-term essential for private capital
formation in agriculture. Additionally, the prioritizing productivity enhancement
over risk management leaves farmers vulnerable to climate-related challenges.
Geographically, there is a notable imbalance in credit distribution, with the
southern states demonstrating significantly higher credit intensity.
Such persistent biases suggest the need for a comprehensive review and
reform in agricultural credit policy, aligning with emerging challenges and
opportunities. The policy should prioritize financing risk management and
high-value commodities and reducing regional disparities in disbursements.
Stability in public investment in and for agriculture: Public expenditure on
agriculture has increased considerably; however, as a proportion of the total
development expenditure, it has remained relatively low, fluctuating between
2% and 6% over the past three decades. Uncertainty in investment is more
xviii
harmful than low level of investment. Thus, there is a need for renewed emphasis
on agricultural sector in development planning. Furthermore, a notable shift in
investment priorities has occurred in favor of storage and warehousing, currently
accounting for approximately 50% of the total development expenditure, albeit
at the expense of investment in animal husbandry, dairy development, fisheries,
soil and water conservation, and agricultural research, which are crucial drivers
of agricultural growth.
While investing in post-harvest infrastructure is essential, but not at the cost of
production sectors that are crucial for food and nutrition security and farmers’
welfare. Furthermore, given the increasing demand for processed foods,
establishing a conducive business environment for private sector investment in
post-harvest infrastructure by streamlining regulatory processes is necessary.
Trade facilitation: Although India’s agricultural exports have grown remarkably,
there remains untapped potential for several commodities because of issues
related to product quality, food safety compliance, inadequate infrastructure,
and limited market intelligence capabilities.
To leverage its agricultural export potential, India must follow a comprehensive
approach, including prioritizing export commodities and implementing Good
Agricultural and Manufacturing Practices to enhance productivity, quality, and
export competitiveness. Therefore, strengthening quality control measures
along the supply chain is essential to meet international quality standards.
The regulatory framework and compliance mechanisms must be revisited and
aligned with global requirements. Further, investing in value addition and food
processing can significantly accelerate agricultural exports of higher-value
products that command premium prices in international markets.
India’s substantial reliance on imports of edible oils, pulses, and fresh fruits
is a significant challenge. A comprehensive approach is required to address
this issue, emphasizing domestic production through targeted R&D, providing
incentives to farmers, and calibrating import tariffs.
Moreover, a robust market intelligence system is essential for today’s globalized
world. This system can provide valuable insights into consumer preferences,
regulatory requirements, and competitive landscapes in existing and potential
export markets, thus enabling producers and exporters to make informed
decisions regarding strategies to boost exports.
Collective or cooperative farming: Given the decreasing farm size, it is
imperative to develop and promote collective or cooperative farming models
to improve the economic viability of agriculture. This approach offers several
potential advantages including enhanced efficiency, shared risk, and improved
access to resources and markets. By combining their efforts, farmers can achieve
economies of scale, thereby reducing the individual costs for equipment and
xix
inputs. Furthermore, cooperative farming can facilitate knowledge transfer and
innovation, as farmers learn from each others’ experiences.
De-stress agriculture from excessive employment: There is excessive pressure of
employment on agriculture in relation to landholding size, making it increasingly
difficult for farmers to earn livelihoods solely from agricultural activities. Rural
industrialization has been slow to absorb the expanding agricultural labor force.
Thus, there is an urgent need to promote agri-based start-ups and micro-, small-,
and medium-sized enterprises (MSMEs) on a larger scale. These initiatives can
create new employment opportunities and add value to agricultural products.
By encouraging entrepreneurship and supporting the growth of agri-based
enterprises, it is possible to reduce employment pressure on agriculture.
Strengthen center-state relationship: Agriculture is a state subject; however,
the central government provides guidance to states regarding the programs
and strategies for balancing the conflicting objectives of food security, farmers’
welfare, and environmental preservation. Nevertheless, its involvement extends
beyond guidance and encompasses the implementation of various schemes.
States are uniquely positioned to understand the specific needs and challenges
of their agricultural sectors, thereby allowing them to ensure more effective
and targeted interventions. Effective collaboration and coordination between
central and state governments in implementation of schemes is essential.
Improve science-policy interface and synergy among programs: Ensuring
a robust science-policy interface and synergy among various agricultural
strategies is essential to maximize their positive outcomes. This involves creating
robust channels of communication and collaboration between researchers,
policymakers, and other stakeholders. Regular impact assessments and policy
reviews can help identify potential conflicts or overlaps between different
strategies, allowing for timely adjustments and optimization.
The political economy of agricultural reforms is complex because of the diverse
and often conflicting interests of various stakeholders in the agri-food system,
including farmers, input suppliers, processors, distributors, retailers, and
consumers. Each group has distinct priorities and concerns, which can result in
challenges in implementing comprehensive and effective agricultural strategies.
For example, while farmers may demand for higher minimum support prices,
consumers may demand lower food prices. To address these challenges,
a nuanced approach is necessary, involving stakeholder participation in the
decision-making process, enhancing synergy between schemes or programs
of different ministries and departments, and improving coordination between
central and state governments.
xx
1 Introduction
Over the past six decades, the landscape of India’s agri-food system has
undergone a significant transformation. This transformation commenced in
the mid-1960s with the introduction of high-yielding seeds of wheat and
rice and agrochemicals (fertilizers and pesticides) resulted in a significant
increase in yields of these crops within a short span of time, effectively
addressing the food security concerns that had plagued the country for a
long time. In development literature, this transformation is popularly known
as the Green Revolution.
The initial success of the Green Revolution inspired similar transformative
changes in other components of the agricultural sector, such as dairying,
poultry, and fisheries. Beginning in the early 1970s, the Operation Flood
Program, also termed the White Revolution, focused on promoting improved
animal breeds and establishing market linkages through cooperatives,
turned India as the world’s largest milk producer by the end of the 1990s.
Concurrently, driven by private-sector investments in breeding, health,
nutrition, and value chains, poultry production system has evolved from a
small-scale or backyard system into an industrialized system. Similarly, the
Blue Revolution, propelled by scientific advancements in aquaculture and
the mechanization of marine fishing, led to a substantial increase in fish
production, making the country one of the largest suppliers of seafood to
international markets.
Technological advancements in agri-food production system were
supported by public investments, institutions, and incentives. Public
investment prioritized irrigation, rural roads, electrification, and markets.
Institutional developments focused on strengthening linkages between
agricultural research and extension, rural credit flows, and establishing
cooperatives for various commodities. Furthermore, to ensure that farmers
derive maximum benefits from these developments, the central and state
governments provided incentives in the form of subsidies for key inputs,
such as fertilizers, electric power, irrigation, high-yielding seeds, and farm
machinery, and introduced a price support mechanism to mitigate market
uncertainty and price risks.
1
The effects of the transformation of the agri-food system go beyond ensuring
the food security. This enhanced the country’s capacity to cope with threats
to food security stemming from droughts, floods, and heat waves, as well as
supply chain disruptions due to pandemics and geopolitical conflicts. For
instance, during the global COVID-19 pandemic, when global food prices
soared, India managed to provide its population with affordable access to
food. Furthermore, this transformation turned India as a key exporter of
commodities such as rice, sugar, spices, cotton, bovine meat, and seafood.
The social outcomes of the agri-food system transformation are notably
significant: reduced poverty and improved nutritional outcomes. Studies
have shown that agricultural growth in India is more pro-poor than is
growth in non-agricultural sectors (Datt and Ravallion, 2002; Datt et al.,
2016). Gulati et al. (2012) found a significant positive association between
agricultural performance and nutritional indicators. Furthermore, these
effects of agricultural growth have not been limited to rural populations but
have also percolated to urban populations.
Despite these accomplishments, 14% of India’s population is undernourished
(FAO, 2024). Among children under five years of age, 36% exhibit stunting
and 32% are underweight (GoI, 2022). Additionally, one-fifth of adults of
both sexes are overweight or obese. This paradox of the coexistence of
undernutrition and overnutrition amidst abundant food supplies is a matter
of concern and demands inclusivity of food system.
While addressing food and nutritional security is crucial, it is imperative
to acknowledge that the agri-food production system faces significant
threats from various biotic, abiotic, and structural factors. Paradoxically, the
incentives designed to enhance food production have become unsupportive
of sustainable development. Policies regarding input subsidies, especially for
electric power and fertilizers, and MSP have now become counterproductive,
causing quantitative and qualitative deterioration of natural resources,
biodiversity, and the environment, particularly in intensively cultivated
regions, such as Punjab and Haryana, which have been at the forefront of
the Green Revolution. In this context, Chand and Singh (2023) showed that
crops such as rice and wheat, which received the highest policy support,
have ceased to drive agricultural growth. Negi et al. (2020) have shown that
excessive emphasis on cereals has been a disincentive for crop diversification.
Furthermore, cereal-centric policy has contributed to increased economic
disparities across regions and among farmers. Irrigated areas specializing
in rice and wheat production have disproportionately benefitted from this,
whereas rainfed agriculture dominated by the cultivation of pulses, oilseeds,
2
and millets has been at a disadvantage. Furthermore, this policy is claimed
to have exacerbated the economic disparity between resource-rich and
resource-constrained farmers.
Notably, in the recent decade ending 2022-23, propelled by robust
demand-driven growth in livestock and fish production, the agricultural
sector experienced an unprecedented growth rate of approximately 4% per
annum, which seldom exceeded 3% even during the peak periods of the
Green Revolution. Nevertheless, in the foreseeable future, challenges to
sustaining this growth momentum will intensify, potentially compromising
the capacity of the agricultural sector to produce sufficient food and
non-food commodities to meet the increasing demand. Land and water
resources, which are already strained, will face increasing competition from
urbanization and industrialization. Furthermore, climate change exacerbates
these challenges, in addition to direct adverse impacts on productivity of agri-
food system. Rising temperatures, changing precipitation patterns, and more
frequent extreme weather events adversely affect agricultural productivity,
food supplies, and food and nutrition security. Furthermore, climatic shifts
may alter the geographic suitability of certain crops (Birthal et al., 2021a).
The challenges confronting agri-food system are multifarious and
interconnected. A business-as-usual approach to addressing these challenges
is unlikely to sustain the recent momentum of agricultural growth and
achieve a balance among food security, conservation of natural resources,
and safeguarding farmers’ interests. Therefore, it is imperative to reorient
agri-food policies, acknowledging that addressing one challenge in isolation
may precipitate another. This necessitates a reassessment of existing agri-
food policies and institutional frameworks for their implementation in terms
of their positive impacts and unintended consequences, shortcomings
in their design and implementation, and the subsequent reshaping of
existing policies and frameworks or developing new ones aligning with
the overarching objectives of enhancing the efficiency, sustainability, and
inclusivity of the agri-food system.
This study examines the agricultural policies within the context of the
evolving agri-food system, identifies specific interventions that have
become unsupportive of sustainable development, and highlights the lack
of interventions in capturing emerging opportunities. Building upon this
analysis, this study explores potential avenues for policy reorientation,
acknowledging the interconnected nature of the challenges confronting the
agri-food system, and proposes adaptive or flexible policy and institutional
frameworks that effectively respond to evolving economic, environmental,
and socio-political conditions.
3
The political economy of agricultural reforms is complex due to the diverse
and conflicting interests of various stakeholders across the entire agri-food
system, from genetics to end-consumption. This paper advocates for the
development of demand-driven schemes or programs involving multiple
stakeholders in the decision-making process, enhanced synergy between
schemes or programs implemented by different ministries and departments
that have a direct or indirect impact on the efficiency and sustainability of
the agri-food system.
4
2 Structural Transformation
in Agri-food System
Consistent with theories of economic development, share of agricultural
sector in the national income and the workforce has declined in India (Figure
1). However, this transformation has been attenuated. While agriculture’s
contribution to national income has decreased substantially from 43% in
1970-71 to 18% in 2022-23 (Figure 1a), proportion of workforce engaged in
agriculture has declined at a slower rate, reaching 46% in 2022-23 from 74%
in 1972-73 (Figure 1b).
This disparity between sector’s economic contribution and employment share
highlights a critical challenge in India’s development process. This suggests
that while the economy has diversified, there has been a lack of employment
opportunities in other sectors to absorb surplus labor from the agricultural
sector. This phenomenon, often referred to as “jobless growth,” underscores
the need for policies that can facilitate a balanced transition of the workforce
in line with the changing economic structure.
Figure 1a. % share of agricultural Figure 1b. % share of agricultural
sector in gross value added (GVA)
Figure 1a. %1a.
Figure share of agricultural
% share sector
of agricultural in gross
sector value
in gross value Figure 1b. 1b.
Figure % share of agricultural
% share sector
of agricultural in total
sector workforce
in total workforce sector in total workforce
added (GVA)
added (GVA)
74.274.2
68.6
68.6
64.8
64.8
58.5
58.5
48.9
48.9
43.1 43.1 45.8
45.8
36.3 36.3
29.8 29.8
23.623.6
18.418.4 18.218.2
1970-71
1970-71
1980-81
1980-81
1990-91
1990-91
2000-01
2000-01
2010-11
2010-11
2022-23
2022-23
1983
1983
1972-73
1972-73
1993-94
1993-94
2004-05
2004-05
2011-12
2011-12
2022-23
2022-23
Source: Income share computed based on GoI (various years, a), and employment share based
on GoI (various years, b).
Table 1 compares the annual growth in agricultural and non-agricultural
sectors. Agricultural growth has consistently lagged behind the growth in
non-agricultural sector. It is noteworthy that since the mid-1990s, India’s
policymakers have been targeting a 4% annual growth rate for the agricultural
sector, which, however, remained unattainable until the most recent decade
ending 2022-23. This is encouraging; however, it coincides with a broader
economic deceleration. During this period, a significant deceleration occurred
5
Table 1. Percent annual growth in agriculture and non-agricultural sectors (at 2011-12 prices)
Period GVA Agriculture GVA Overall
Non-agriculture
1972-73 to 1982-83 2.3 5.0 3.8
1982-83 to 1992-93 3.0 6.6 5.2
1992-93 to 2002-03 3.0 7.7 6.2
in non-agricultural
2002-03 to 2012-13
growth to 5.9%
3.2
from 7.9% during
7.9
2002-03 to
6.9
2012-13,
pulling down the overall
2012-13 to 2022-23
economic
4.0
growth to 5.6% from
5.9
approximately
5.6
7%.
Source: Computed
Table 1. % based on GoI
annual (various
growth inyears, a).
agriculture
and non-agricultural sectors (at
2011-12
To gain further insights into growth prices)
dynamics, ten-year rolling growth rates for
agricultural
Period vis-à-vis non-agricultural sectors are compared
GVA Agriculture GVA (Figure 2). Three
Overall
significant patterns emerge from this analysis. First,Non-agriculture
for the first time since the
beginning
1972-73oftothe Green Revolution, the
1982-83 2.3correlation between5.0 agricultural growth3.8 and
overall economic growth
1982-83 to 1992-93
has diminished
3.0
in recent years. Second,
6.6
while this growth
5.2
is encouraging, it is important to note that it is characterized by greater fluctuation
than1992-93
growthtoin2002-03 3.0
the non-agricultural sector, primarily because7.7 of its dependence
6.2 on
climatic conditions.
2002-03 to 2012-13Third, notwithstanding
3.2 these developments,
7.9 agricultural6.9
sector
remains crucial for
2012-13 to 2022-23overall economic development
4.0 through its
5.9intersectoral linkages,
5.6
specifically in terms of its contribution of labor and raw materials to the
Source: Computed based on GoI (various years, a).
manufacturing and services sectors and its significant reliance on the latter for its
requirements of input, machinery, equipment, and services.
To gain further insights Figure 2. Decennial rolling growth in GVA (at
into growth dynamics, ten-Figure 2. Decennial rolling 2011-12 prices) (%)
growth in GVA (at 2011-12 prices) (%)
year rolling growth rates Agriculture Non-Cgriculture Overall
for agricultural vis-à-vis
non-agricultural sectors are 9
8
compared (Figure 2). Three 7
significant patterns emerge 6
from this analysis. First, for the 5
first time since the beginning 4
of the Green Revolution, the 3
correlation between agricultural 2
1
growth and overall economic 0
growth has diminished in recent
1993-94
1972-73
1975-76
1978-79
1981-82
1984-85
1987-88
1990-91
1996-97
1999-00
2002-03
2005-06
2008-09
2011-12
2014-15
2017-18
2020-21
years. Second, while this growth
is encouraging, it is important
to note that it is characterized Source: Source: As
As for
for Table
Table 1.
1.
Concurrently, significant changes have occurred
by greater fluctuation than growth in the non-agricultural in the agrarian structure.
sector, primarily
Landholdings have fragmented with a concomitant reduction in
because of its dependence on climatic factors. Third, notwithstanding thesetheir average size.
The number of landholdings has more than doubled from 71 million in 1970-71 to
developments, agricultural sector remains crucial for economic development
over 146 million in 2015-16 (Table 2), resulting in an increase in the proportion of
through
marginal its intersectoral
landholdings (≤1 ha)linkages,
from 51% specifically
to 68%, and in terms of its contribution
a reduction in the average of
labor and raw materials to the manufacturing
landholding size from 2.28 hectares to 1.08 hectares. and services sectors and its
significant reliance on the latter for its requirements of inputs, machinery,
equipment, and
Table services.
2. Trend in distribution of landholdings and their average size
Total Distribution of holdings (%)
Concurrently,holdings
significantAverage
changesMarginal
have occurred
Small in the agrarianLarge
Medium structure.
(million) size (ha) with(≤1ha) (1-2ha) reduction
(2-4ha) in their
(>4ha)
Landholdings have fragmented a concomitant average
size. The number of landholdings has more than doubled from 71 million in
1970-71 to over 146 million in 2015-16 22
(Table 2), resulting in an increase in
the proportion of marginal landholdings (≤1 ha) from 51% to 68%, and a
reduction in the average landholding size from 2.28 hectares to 1.08 hectares.
6
Table 2. Trend in distribution of landholdings and their average size
Year Total Distribution of holdings (%)
holdings Average Marginal Small Medium Large
(million) size (ha) (≤1ha) (1-2ha) (2-4ha) (>4ha)
1970-71 71.01 2.28 50.98 18.92 15.04 15.07
1976-77 81.57 2.00 54.58 18.06 14.30 13.06
1970-71
1980-81 71.01
88.88 2.28
1.84 50.98
56.39 18.92
18.08 15.04
14.01 15.07
11.51
1976-77
1985-86 81.57
97.16 2.00
1.69 54.58
57.79 18.06
18.45 14.30
13.64 13.06
10.12
1980-81
1990-91 88.88
106.64 1.84
1.55 56.39
59.44 18.08
18.84 14.01
13.06 11.51
8.66
1985-86 97.16 1.69 57.79 18.45 13.64 10.12
1995-96 115.58 1.41 61.58 18.73 12.34 7.35
1990-91 106.64 1.55 59.44 18.84 13.06 8.66
2000-01 119.93 1.33 62.88 18.92 11.69 6.51
1995-96 115.58 1.41 61.58 18.73 12.34 7.35
2005-06 129.22 1.23 64.77 18.52 10.93 5.78
2000-01 119.93 1.33 62.88 18.92 11.69 6.51
2010-11 138.35 1.15 67.10 17.91 10.04 4.95
2005-06 129.22 1.23 64.77 18.52 10.93 5.78
2015-16 146.45 1.08 68.45 17.62 9.55 4.37
2010-11GoI (various
Source: 138.35years, c).1.15 67.10 17.91 10.04 4.95
2015-16 146.45 1.08 68.45 17.62 9.55 4.37
These
Source: changes
GoI (various inc).the agrarian structure have a profound impact on the
years,
economic structure of agriculture. The declining landholding size compelled
These changes
farmers to in the agrarian
increasingly structure
diversify have aalternative
towards profound impact
sourcesonofthe economic
livelihood,
structure of agriculture.
both within and outside Thethedeclining landholding
agricultural size compelled
sector. Animal husbandry,farmers
which isto
increasingly diversify
an integral towards
component alternative
of the sources
agricultural of has
sector, livelihood,
emerged both within and
an important
outside the agricultural sector. Animal husbandry, which is an integral component
supplementary source of income. Its share in the gross value of output of
of the agricultural sector, has emerged an important supplementary source of
the agricultural
income. Its share in sector has value
the gross more ofthan doubled
output from
of the 14% in 1972-73
agricultural sector hasto 31%
more
in 2022-23 (Figure 3). Fisheries, including aquaculture and marine,
than doubled from 14% in 1972-73 to 31% in 2022-23 (Figure 3). Fisheries, including have
witnessed
aquaculture and a significant
marine, have increase in their
witnessed share fromincrease
a significant slightly in
more
theirthan 1%from
share in
slightly more than
1972-73 1% in 1972-737%
to approximately to in
approximately
2022-23. 7% in 2022-23.
Figure 3. 3.
Figure Changes
Changes in
in economic structure
economic structure of agriculture
of agriculture (%) (%)
Crops Livestock Forestry and logging Fishing and aquaculture
100% 1.2 1.6 2.8 4.6 4.4 6.9
90% 12.3 16.9 12.3 11.3 7.6 7.0
80% 13.6
16.4 21.2 24.2 26.2
70% 31.1
60%
50%
40%
72.8
30% 65.1 63.6 59.9 61.7
55.0
20%
10%
0%
1972-73 1982-83 1992-93 2002-03 2012-13 2022-23
Source: As As
Source: forfor
Table 1. 1.
Table
Table 3 and Figure 4 show the growth in the 7 components of the agricultural sector.
Livestock and fisheries significantly influence agricultural growth. In the most recent
decade, agricultural growth has been driven by livestock and fishery sectors. These
sectors grew at an annual rate of 6% and 9%, respectively. Moreover, growth in
livestock production is more resilient than the growth in other sectors, thereby
Table 3 and Figure 4 show the growth in the components of the agricultural
sector. Livestock and fisheries significantly influence agricultural growth. In
the most recent decade, agricultural growth has been driven by livestock
and fishery sectors. These sectors grew at an annual rate of 6% and 9%,
respectively. Moreover, growth in livestock production is more resilient than
the growth in other sectors, thereby contributing to the overall resilience of
the agricultural sector and farmers’ livelihood.
The livestock sector’s impressive growth and resilience have significant
implications for nutrition, income inequality and poverty. Small landholders,
who are often the most vulnerable, benefit greatly from the growth in livestock
Theproduction. The evidence
livestock impressive growthindicate
rates andthat this nothave
resilience onlysignificant
contributes to more
implications
for equitable
nutrition, income
income inequality and poverty. Small landholders, who are often the
distribution (Birthal et al., 2014a), but also provides a buffer
most vulnerable, benefit greatly from the growth in livestock production. The
againstindicate
evidence climatic that
and economic shocks
this not only (Birthal and
contributes Negi, 2012),
to more andincome
equitable helps
reduce poverty (Birthal and Negi, 2012). Furthermore, the expansion
distribution (Birthal et al., 2014a), but also provides a buffer against climatic and of the
livestock
economic production
shocks (Birthalcreates employment
and Negi, 2012), and opportunities
helps reducealong the (Birthal
poverty value chain
and
Negi,
from 2012). Furthermore,
production the expansion
to processing, of theand
transportation, livestock production creates
marketing.
employment opportunities along the value chain from production to processing,
transportation,
Table 3. %and marketing.
annual growth in value of output of subsectors of agriculture
(at 2011-12 prices)
Table 3. % annual growth in value of output of subsectors of agriculture (at 2011-12 prices)
Period Crops
Crops Livestock
Livestock Fishing and
Fishing and Forestry
Forestry Overall
Overall
aquaculture
aquaculture and
andlogging
logging
1972-73 to 1982-83 1.8 -1.7 2.2
1972-73 to 1982-83 3.0
3.0 4.4
4.4 1.8 -1.7 2.2
1982-83 to 1992-93
1982-83 to 1992-93 2.5 4.3 6.0 0.4 2.6
2.5 4.3 6.0 0.4 2.6
1992-93
1992-93 to 2002-03
to 2002-03 2.3 3.6 4.1 2.9 2.7
2.3 3.6 4.1 2.9 2.7
2002-03 to 2012-13 3.5 4.4 4.1 -1.2 3.3
2002-03 to 2012-13
2012-13 to 2022-23 2.5
3.5 5.8
4.4 9.0
4.1 4.4
-1.2 3.9
3.3
2012-13 to 2022-23
Source: As for Table 1. 2.5 5.8 9.0 4.4 3.9
Source: As for Table 1.
On the other hand, crop subsector Figure 4. Decennial rolling growth in
subsectors of agriculture
in subsectors of(%)
grew at a much slower rate.Figure 4. Decennial rolling growth agriculture (%)
Given the predominance of the 10 CropU
.ivestock
crop subsector, it is imperative 8 Forest & Logging
to understand its growth
sources. These sources include 6
technological advancements 4
(improvements in crop yields,
expansion of cultivated area, 2
diversification from low-value to 0
high-value crops, and increases
-2
in the real prices of agricultural
commodities. Each of these plays -4
1993-94
1972-73
1975-76
1978-79
1981-82
1984-85
1987-88
1990-91
1996-97
1999-00
2002-03
2005-06
2008-09
2011-12
2014-15
2017-18
2020-21
a significant role in shaping the
growth trajectory. Technological
advancements lead to more Source: Source:AsAs
for Table 1.
for Table 1.
On the other hand, crop subsector grew 8 at a much slower rate. Given the
predominance of the crop subsector, it is imperative to understand its growth
sources. These sources include technological advancements (improvements in crop
yields, expansion of cultivated area, diversification from low-value to high-value
crops, and increases in the real prices of agricultural commodities. Each of these
efficient farming practices and higher yields per unit of land. The expansion
of cultivated areas may increase total production. Crop diversification can
potentially improve farmers’ incomes and reduce risk, whereas changes in
commodity prices
diversification can directlyimprove
can potentially impactfarmers'
profitability of crops.
incomes and reduce risk, whereas
changes in commodity prices can directly impact profitability of crops.
As expected, technological advancements contributed significantly to the
growth of crop
As expected, subsector advancements
technological during the initial decadessignificantly
contributed of the Green Revolution
to the growth of
crop sector
(Figure during the1980-81
5). Between initial decades of the Green
and 2000-01, Revolutionin(Figure
improvements 5). Between
yield accounted
1980-81
for and 2000-01,
approximately 40%improvements in yield The
of overall growth. accounted for approximately
next most 40% of
significant sources
overall growth. The next most significant sources included diversification into high-
included diversification
value crops, such as fruitsinto
andhigh-value
vegetables,crops, suchincreases,
and price as fruits and
eachvegetables,
contributing
and price
nearly 28% increases, each contributing nearly 28% to output growth.
to output growth.
Figure
Figure5.5.Sources
Sourcesofofgrowth
growth in
in crop sector
crop sector
800
Technology-led growth (1980/81 to 1999/00) Price-led growth (2000/01 to 2021/22)
Area : 5.88% Area : 13.71%
700
Yield : 38.87% Yield : 28.58%
Price : 27.91% Price : 43.81%
Change in output, Rs billion (at 2011-12 prices)
Diversification : 28.97% Diversification : 12.83%
600
500
400
300
200
100
0
1981-82
1983-84
1985-86
1987-88
1989-90
1991-92
1993-94
1995-96
1997-98
1999-00
2001-02
2003-04
2005-06
2007-08
2009-10
2011-12
2013-14
2015-16
2017-18
2019-20
2021-22
-100
Source: Authors’
Source: Authors’estimates usingusing
estimates data on value
data on ofvalue
output
ofofoutput
crops from GoI (various
of crops from GoIyears, a), and years,
(various on areaa),
and
production from GoI (various years, d).
and on area and production from GoI (various years, d).
Note: Growth was decomposed following Minot et al. (2006) and Birthal et al. (2014b).
Note: Growth was decomposed following Minot et al. (2006) and Birthal et al. (2014b).
Nevertheless, the sources of growth underwent significant changes in the past two
Nevertheless, the sources of growth underwent significant changes in the past
decades, with price emerging as the main driver of growth surpassing the
two decades, with price emerging
contribution of technological as the main
advancements. driver
Price of growth
increases surpassing
accounted theof
for 44%
contribution of technological advancements. Price increases accounted
growth, followed by technological advancements (29%). Notably, during this period, for 44%
of growth, followed
technological by technological
gains of the Green Revolution advancements (29%). Notably,
started decelerating, during
affecting farmers’
income.
this Thistechnological
period, prompted policymakers
gains of thetoGreenraise Revolution
the MSP ofstarted
stapledecelerating,
foodgrains to
maintain the economic viability of farming and ensure farmers' well-being.
affecting farmers’ income. This prompted policymakers to raise the MSP of
Furthermore, the contribution of diversification to growth decreased significantly to
staple
13%. Thefoodgrains to maintain
area expansion the economic
consolidated viability of
its share, primarily farming
because andirrigation-
of the ensure
farmers’ well-being. Furthermore, the contribution of diversification
led increase in the cropping intensity. These findings are consistent with those to growth
decreased
reported bysignificantly
Birthal et al. to 13%. Notably,
(2014b). The areawhileexpansion
prospectsconsolidated its share,
of growth through area
expansion because
primarily are limited andirrigation-led
of the result in environmental
increase indegradation,
the cropping price-driven growth
intensity. These
cannot sustain in the long-run because of its inflationary pressure. Thus, the
changing dynamics of agricultural growth necessitate a re-evaluation of strategies
to support agricultural productivity and diversification.
9
25
findings are consistent with those reported by Birthal et al. (2014b). Notably,
while prospects of growth through area expansion are limited, price-driven
growth cannot sustain in the long-run because of its inflationary pressure.
Thus, the changing dynamics of agricultural growth necessitate a re-evaluation
of strategies to support agricultural productivity and diversification.
Despite the above-mentioned Table 4. Projections of key parameters
changes in growth patterns, the Indicators 2035- 2047-
agricultural sector will continue to 36 48
transform. As India approaches its % share of agriculture in GVA 11.9 8.0
centennial year of independence in % share of agriculture in 34.9 29.1
2047, the share of the agricultural workforce
sector in the national income is Composition of agriculture (%)
projected to decrease steadily
Crops 50.8 46.8
to 8% (Table 4). However, the
Livestock 34.7 38.9
sector will continue to employ
a significant proportion of the Fisheries and aquaculture 8.8 10.2
workforce, approximately 29% Forestry and logging 6.0 4.7
of the total, unless the rate of No. of landholdings (million) 179 198
labor transfer to non-agricultural Distribution of holdings (%)
sector accelerates. This indicates Marginal 74.7 77.4
the need to focus on accelerating
Small 16.8 16.4
skill development programs,
promoting agro-based industries, Medium 7.7 6.8
and enhancing rural infrastructure Large 2.4 1.6
to facilitate a smoother transition Average landholding (ha) 0.78 0.6
of labor while simultaneously Source: Authors’ estimates using data from GoI
and labor (various years, a, b, and c).
1
improving land
productivity in agriculture.
Moreover, the agricultural sector itself will undergo structural transformation.
Land fragmentation is projected to intensify, resulting in a significant increase
in marginal holdings (≤1 hectare) to 77%, consequently leading to a significant
reduction in the average landholding size to approximately 0.6 hectares. This
reduction in farm size will enforce further changes in the economic structure
of the agricultural sector with share of crops in the total value of agricultural
1
Projections have been made employing linear and non-linear time series models based on
the underlying trends in historical data. In instances where the time series had a significant
growth in recent years, a quadratic model has been applied. Conversely, if the time series
exhibited consistent and steady growth, a linear model was more appropriate.
10
output falling to 47% and that of share of livestock and fisheries rising to 39%
and 10%, respectively.
Thus, a combination of diminishing economic contribution of agriculture,
persistent employment pressure and decreasing farm size is a significant
challenge for enhancing the efficiency, sustainability, and inclusivity of the
agri-food system. This necessitates a paradigm shift in the business-as-usual
approach to agricultural development and a reorientation of agri-food policies
to address the emerging challenges.
11
3 Food Consumption Patterns,
Domestic Demand, and Trade
3.1 Food consumption patterns
Upstream changes in the agri-food system have been paralleled by significant
shifts in food consumption patterns downstream. As the economy grew,
the household consumer expenditure pattern underwent a structural shift,
characterized by a marked decrease in the share of food from 62% in 1983
to 43% in 2022-23 (Table 5). This aligns with Engel’s law, which states that,
as household income increases, the proportion of expenditure allocated to
food decreases, even if absolute food expenditure may rise. This indicates
improvements in living standards and an increase in disposable income for
spending on education, healthcare, and leisure activities.
Table 5. Changing food consumption patterns
Particulars 1983 1987- 1993- 2004- 2011- 2022-
88 94 05 12 23
Total expenditure 916 973 1019 1157 1599 2589
(Rs/capita/month, in real terms)
Food expenditure 572 587 633 580 708 1125
(Rs/capita/month, in real terms)
Share of food in total expenditure (%) 62 60 62 50 44 43
Share of commodities in total food expenditure (%)
Cereals & its substitutes 44 36 34 30 22 10
Pulses & its products 6 7 6 6 6 4
Milk & its products 13 15 16 16 19 18
Edible oils 7 8 7 8 7 7
Eggs, meat, & fish 5 5 6 6 7 10
Fruits, nuts, & vegetables 10 12 13 15 14 20
Sugar, salt & spices 8 9 9 8 8 8
Beverages & fast food 7 8 9 11 15 23
Source: Computed using data from GoI (various years, e).
Note: Deflated using consumer price index at 2011-12 prices
Nevertheless, the decreasing share of food in household expenditure has
been accompanied by a significant shift in dietary preferences away from
13
cereals towards nutrient-rich horticultural and animal products (Table 5), often
referred to as nutrition transition. The share of cereals in food expenditure has
declined drastically to 10% in 2022-23 from 44% in 1983, and the share of
nutrient-dense foods, including fruits, vegetables, dairy products, meat, eggs,
and fish, has increased from about one-third to one-half.
Further analysis of the food expenditure patterns by commodity groups reveals
a significant increase in the share of animal-source foods from 18% in 1983
to 28% in 2022-23 and doubling of the share of horticultural products (fruits,
nuts, and vegetables) from 10% to 20%. Notably, the share of beverages
and processed foods has experienced the most significant increase from
approximately 7% in 1983 to 23% in 2022-23.
The changes in the food consumption expenditure could be due to the relative
price changes of commodities, and do not necessarily reflect the changes in
their actual intake. Table 6 presents the trends in intake of food commodities.
There has been a consistent downward trend in cereal consumption and an
increase in the consumption of nutrient-rich foods, albeit differentially across
commodities. Between 1983 and 2022-23, per capita consumption of cereals
declined by one-third. This decline is more pronounced for coarse cereals,
including millets, which have been increasingly replaced by rice and wheat.
Notably, India’s public distribution system (PDS) has predominantly focused
on providing rice and wheat and has expanded significantly over time. Pulse
consumption, the primary source of protein for the majority of Indians, has
remained relatively static. The consumption of horticultural and animal
products has increased to 2-3 times.
Table 6. Household consumption of food commodities (kg/capita/month)
Commodity 1983 1993-94 2004-05 2011-12 2022-23
Cereals & its substitutes 13.98 12.77 11.61 10.72 9.19
Rice 6.24 6.59 6.12 5.71 5.03
Wheat 4.51 4.48 4.38 4.41 3.87
Coarse cereals 3.23 1.70 1.11 0.60 0.29
Pulses & its products 0.94 0.83 0.74 0.82 0.78
Fruits & vegetables 4.01 5.31 5.93 5.49 9.15
Edible oils 0.33 0.42 0.53 0.66 0.91
Sugar 1.26 1.40 1.23 1.33 1.45
Milk 2.98 4.26 4.29 4.78 5.50
Eggs, meat, & fish 0.31 0.38 0.42 0.47 0.96
Source: As for Table 5.
14
The shift towards a more diverse and nutrient-dense diet suggests an
improvement in overall dietary quality. Notably, this nutrition transition is
not limited to any specific consumer group but prevails across socioeconomic
strata and geographical locations, encompassing both rich and poor
consumers as well as urban and rural consumers (Table 7). Nevertheless, this
nutrition transition has been more pronounced in low-income groups and
rural areas, suggesting a trend toward convergence in dietary patterns across
socioeconomic strata (Kapoor et al., 2024).
Table 7. Trend in composition of food expenditure in rural and urban areas (%)
Commodity Rural Urban
1993-94 2004-05 2022-23 1993-94 2011-12 2022-23
Cereals & its substitutes 38.48 32.85 9.29 25.79 19.16 10.57
Pulses & its products 6.03 5.59 3.56 5.56 5.59 4.34
Fruits & vegetables 12.32 14.47 19.40 14.85 14.87 19.60
Edible oils 6.99 8.36 6.05 8.03 6.89 7.77
Egg, fish & meat 5.27 6.05 9.13 6.20 7.25 10.57
Milk 15.03 15.38 18.42 17.93 20.20 17.94
Sugar, spices, etc 9.00 8.82 6.99 8.12 7.31 8.46
Beverages & processed 6.58 8.25 27.15 13.19 18.41 20.74
foods
Share of food in total 63.17 55.05 46.38 54.65 42.51 39.17
expenditure (%)
Source: As for Table 5.
Several economic and demographic factors, including income growth,
urbanization, lifestyle changes, awareness of nutritious diets, and advancements
in supply chains and the emergence of retail chains, have contributed to
this transformation in food basket. As previously noted, over the past four
decades, Indian economy has grown at an accelerated rate, resulting in an
increase in per capita income from Rs 21962 in 1983 to Rs 99404 in 2022-23
at 2011-12 prices. This enabled consumers to access a more diverse range of
foods. Furthermore, the share of the urban population in the total population
increased from 23% in 1983 to 37% in 2022-23.
Despite such an impressive transformation, undernutrition, manifesting as
stunting, wasting, and underweight, continues to affect a significant proportion
of the population, particularly children2. Over time, while the incidence of
1
2 According to the World Health Organization (WHO), stunting is based on whether a child’s
sex-specific height-for-age Z score (HAZ) is 2 or more standard deviations below the WHO
Child Growth Standards median. Wasting is based on whether a child’s sex-specific weight-
for-height Z score (WHZ) is 2 or more standard deviations below the WHO Child Growth
Standards median. Underweight is based on whether a child’s sex-specific weight-for-age
Z score (WAZ) is 2 or more standard deviations below the WHO Child Growth Standards
median. Body Mass Index (BMI) ranging between 25 kg/m2 and 29.9 kg/m2 is considered
overweight, while a BMI greater than 30 kg/m2 is considered obese.
15
stunting among children below five years of age has decreased from 48% in
2005-06 to 36% in 2019-21, it remains higher among children in rural areas
(Table 8). The prevalence of wasting remains relatively unchanged at 19%,
but it decreased in rural areas from 20.7% in 2005-06 to 19.5% in 2019-21,
and increased from 16.9% to 18.5% in urban areas.
This transformation has also brought about new challenges, such as the
overconsumption of certain foods. The prevalence of overweight and obesity
has increased in adult women (15-49 years). The rate nearly doubled from
9.8% in 2005-06 to 17.6% in 2019-21. Similarly, prevalence of obesity has
increased from 2.8% to 6.4%. The prevalence rates of both overweight and
obesity are higher in urban populations, potentially because of sedentary
lifestyles and the consumption of unhealthy food products.
Table 8. Prevalence rate of malnutrition (%)
2005-06 2015-16 2019-21
Indicators
Rural Urban Overall Rural Urban Overall Rural Urban Overall
Stunting 50.7 39.6 48.0 41.2 31.0 38.4 37.3 30.1 35.5
Wasting 20.7 16.9 19.8 21.4 20.0 21.0 19.5 18.5 19.3
Underweight 45.6 32.7 42.5 38.3 29.1 35.7 33.8 27.3 32.1
Overweight 6.2 17.4 9.8 12.0 22.2 15.5 15.2 22.9 17.6
Obese 1.3 6.1 2.8 3.1 9.1 5.1 4.5 10.4 6.4
Source: Computed using data from GoI (various years, f).
This dual burden of malnutrition affects physical capacity, leading to decreased
efficiency and productivity. Furthermore, the development of human capital
is severely compromised because malnutrition in early life can result in
stunted growth, impaired cognitive development, and reduced educational
attainment, limiting the potential of future generations to contribute effectively
to society and the economy.
3.2 Food demand to 2047
To achieve the status of a developed nation by 2047, the centennial year
of independence, the Indian economy must grow at an annual rate of
approximately 8%, implying a significant increase in purchasing power
for the population. At the same time, the country’s population is expected
to reach 1.6 billion with nearly half residing in urban areas. This evolving
economic and demographic landscape is expected to precipitate further shifts
in dietary patterns and the demand for diverse foods, especially nutrient-rich
horticultural and animal products.
By 2047, the demand for fruits is projected to increase to 233 million tons at
an annual rate of 3% and for vegetables to 365 million tons at an annual rate
16
of 2.3% in a business-as-usual scenario (Table 9). The demand for pulses is
anticipated to double to 49 million tons. Driven by a significant increase in
demand for maize, cereal demand is expected to increase at an annual rate of
1.3%, reaching 353 million tons. The demand for edible oils and sugar is also
projected to increase by 50% and 29% respectively.
Table 9. Demand for food commodities by 2047, million tons
Commodity 2019-20 2047-48 Required growth in
production to meet food
demand (% per annum)
BAU HIG-1 HIG-2 BAU HIG-1 HIG-2
Foodgrains 277 402 415 437 1.39 1.51 1.70
Cereals 251 353 363 381 1.27 1.38 1.55
Rice 103 114 114 113 0.40 0.37 0.34
Wheat 100 119 119 120 0.65 0.67 0.71
Nutri-cereals 19 29 31 33 1.60 1.79 2.09
Maize 27 86 94 109 4.39 4.75 5.32
Pulses 26 49 52 57 2.38 2.60 2.93
Animal products
Eggs 5.0 16 18 21 4.32 4.75 5.41
Meat 7 21 24 29 4.31 4.75 5.42
Fish 12 37 41 48 4.27 4.70 5.36
Milk 186 480 527 606 3.56 3.92 4.47
Vegetables 199 365 385 417 2.28 2.48 2.78
Fruits 108 233 252 283 2.90 3.20 3.64
Sugar & products 34 44 45 45 1.05 1.08 1.13
Edible oil 22 31 32 33 1.23 1.32 1.47
Overall 850 1630 1739 1921 2.44 2.69 3.07
Source: GoI (2024a).
Note: BAU: Business as usual (continuation of 6.34% growth in net national income (NNI)
during 2011-12 to 2019-20); HIG-1: High income growth (7% growth in NNI), HIG-2: High
income growth (8% growth in NNI)
While demand for plant-based foods, particularly fruits and vegetables, is
projected to increase considerably, increase in demand for animal-source
foods (i.e., milk, eggs, meat, and fish) is expected to be even more pronounced.
Milk demand is expected to increase to 480 million tons at an annual rate
of 3.6%. The demand for meat, eggs, and fish is projected to increase at a
more rapid rate of over 4%. In a developed-country scenario, as consumers
continue to experience higher disposable incomes, they prefer higher-quality
17
food products, potentially resulting in higher growth in demand for these
commodities.
The projected changes in food demand necessitate a strategic shift in the agri-
food system: enhance the production of specific crops or reallocate resources
from traditional staples to more diverse and nutritionally rich commodities
to prevent commodity imbalances. Fruits, vegetables, pulses, and oilseeds
are key crops that require increased focus to meet the changing dietary
preferences and nutritional needs. Simultaneously, the gradual reallocation
of resources from rice and wheat to alternative crops is crucial. Alternatively,
there is a need to enhance the competitiveness of commodities to increase
their exports while preserving the natural resources.
3.3 International trade
Trade can also significantly influence agricultural growth. Policies such as
tariffs, quotas, subsidies, and trade agreements can either promote or hinder
agricultural trade. When effectively implemented, such policies can stimulate
agricultural productivity, enhance market access, and foster agricultural
growth. Conversely, protectionist policies can shield domestic producers
from international competition and augment their domestic production.
The expanding global market for high-value premium quality agricultural
products is an opportunity for India to increase its share of global exports
(Saxena et al., 2024). The landscape of India’s agricultural trade has transformed
in both growth and composition. Agricultural exports increased significantly
from less than US$10 billion a year in the early 1990s to US$53 billion a year
in 2022-23, contributing approximately 12% to the total merchandise exports
(Figure 6). Concurrently, India’s agricultural imports have risen from less than
US$3 billion to over US$34 billion a year. Notably, despite supply chain
disruptions during the COVID-19 pandemic and the ongoing Ukraine-Russia
conflict, India’s agricultural trade balance has consistently remained positive,
primarily owing to its strategic trade policies.
Furthermore, composition of agricultural exports and imports has changed.
Exports have diversified, encompassing marine products, rice, bovine meat,
sugar, and spices, shifting away from traditional commodities such as tea,
coffee, and oil meals (Figure 7). Over the past two decades, the share of non-
basmati rice, spices, and meat in the total agricultural exports has increased
considerably.
18
Figure 6. Trends in India’s agricultural trade
Agricultural exports to total exports (%) Agricultural imports to total imports (%)
Agricultural Gxports (US$ billion) Agricultural imports (US$ billion)
60 Agricultural exports to total exports (%) Agricultural imports to total imports 25
(%)
60 25
(%) (%)
Agricultural trade (US$ billion)
50
20
trade trade
Figure
6. 6. Trends in agricultural trade
Agricultural trade (US$ billion)
50
Figure Trends in India’s agricultural trade 20
of agricultural
40
Agricultural imports (US$ billion) 15
of agricultural
40 Agricultural Gxports (US$ billion)
30 Agricultural exports to total exports (%) Agricultural imports to total imports15(%)
60 25
(%) Share
30 10
20
trade Share
10
Agricultural trade (US$ billion)
50
20
20
5
of total trade
10
5
of agricultural
40
10
15
0 0
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
2021-22
2022-23
30
% share
0 0
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
2021-22
2022-23
Share
10
20
Source: GoI (various years, d).
Source: GoI (various years, d). 5
10
Furthermore, composition of agricultural exports and imports changed. Exports have
Furthermore, compositionmarine
diversified, encompassing of agricultural exports
products, rice,and imports
bovine changed.
meat, sugar,Exports have
and spices,
diversified, encompassing marine products, rice, bovine meat, sugar,
shifting away from traditional commodities such as tea, coffee, and oil meals (Figure
0 and0 spices,
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
2021-22
2022-23
7).shifting away
Over the from
past twotraditional
decades,commodities
the share ofsuch as tea, coffee,
non-basmati rice,and oil meals
spices, (Figure
and meat in
7). Over the past two decades, the share of non-basmati
the total agricultural exports has increased considerably. rice, spices, and meat in
the total agricultural exports has increased considerably.
Source: GoI (various years, d).
Source: GoI (various years, d).
Figure 7. Composition of agricultural exports
Figure 7. Composition
Furthermore, composition of agricultural exports
Figure 7. of agricultural exports
Composition and imports
of agricultural changed. Exports have
exports
diversified, encompassing marine products, rice, bovine meat, sugar, and spices,
shifting away from traditional commodities such as tea, coffee,
2001-05 and oil meals (Figure
2018-22
7). Over the past two decades,
Rice
Rice
the share of non-basmati rice, spices, and meat in
14%
the total agricultural exports
14% has increased considerably.
Others
Others
28%
Others 28% Rice
Others Rice
38%
38% Figure 7. Composition of agricultural exports 20%
20%
Fish
Fish
17%
17% Cotton
Cotton Fish
Fish
4%
4%
Fruits 16%
16%
Cotton Rice Fruits
Cotton Sugar
Sugar 2%
2%2% 14% 2%
3%
3% Others
Vegetables
Vegetables Meat
Meat
Others
Spices
Spices 2%28%
2%
8% Rice
5% 8%
Vegetables
Vegetables
38% 5% Sugar
20% Sugar
2%2% FruitsFruits Meat
Meat Wheat Spices
Wheat Oil
Oil meals
meals Spices 7%
7%
2%2%Wheat
Wheat OilOil
meals
meals5%
5% Fish 2%
2% 8%
4%4% 8% 3%
3% 8%
8%
17%
Cotton
Source: As for Figure 6. 4%
Fish
Source: AsAs
Source: forfor
Figure 6.6.
Figure Fruits 16%
On the other hand, agricultural imports have maintained a relatively consistent
Cotton Sugar 2%
OnOnthe
theother
2%
otherhand, hand,agricultural
agricultural imports
imports
3% have maintained
haveVegetables
maintainedMeat a relatively
relatively consistent
consistent
profile, predominantly comprising edible oils, pulses, and fresh fruits. The
profile,
profile, predominantlycomprising
predominantly comprisingSpices
edible
edible oils,
oils, pulses,
2% and
pulses, and 8% fruits.
fresh fruits. The
The increasing
increasing
increasing imports of edible oils, which currently constitute nearly 60% of
Vegetables
imports
5% Sugar
imports 2%of
of edible
edible oils,which
Fruits oils, whichcurrently
currentlyconstitute
Meat constitute nearly
nearly
Wheat Oil
60%
meals
of domestic
domestic
Spices 7%demand,
demand, isis
adomestic demand,
significant 4%
is a8%significant policy concern (Figure 8).
2% Wheat
policy
Oil meals 5%
concern
a significant policy concern (Figure 8). (Figure 8). 2% 3% 8%
Source: As for Figure 6.
On the other hand, agricultural imports 33 have maintained a relatively consistent
33
profile, predominantly comprising edible oils, pulses, and fresh fruits. The increasing
imports of edible oils, which currently constitute nearly 60% of domestic demand, is
a significant policy concern (Figure 8).
19
33
Figure
Figure8.
Figure 8.8.Composition
Compositionof
Composition ofagricultural
of agriculturalimports
agricultural imports
imports
2001-05
2001-05 2018-22
2018-22
Others
Others
Others
Others
15%
15%
21%
21%
Spices
Spices
5%5%
Spices
Spices
2%2% Cotton
Cotton
3%3%
Vegetabl
Vegetabl
Cotton
Cotton Cashew
Cashew
e oils
e oils Vegetable
Vegetable
6%6% 5%5%
47%
47% oils
oils
56%
56%
Cashew
Cashew Pulses
Pulses Pulses
Pulses Fruits
Fruits
12%
12% 7%7% 9%9%
7%
7%
Fruits
Fruits
5%5%
Source:
Source:AsAsfor
forFigure
Figure6.6.
Source: As for Figure 6.
The
The
Thecountry
country
countryhas has
hasaaa significant
significantcomparative
significant comparative
comparativeadvantage
advantage
advantage ininseveral
inseveral
several commodities
commodities
commodities,
including
including rice,
rice, cotton,
cotton, tea,
tea, spices,
spices,shrimp,
shrimp, and
and bovine
bovine
including rice, cotton, tea, spices, shrimp, and bovine meat (Figure 9). meat
meat (Figure
(Figure 9).
9). This
ThisThis
advantage
advantageisisparticularly
particularlypronounced
pronouncedfor forsemi-milled
semi-milledand andbroken
brokenrice.
rice.The
Theearly
early
advantage is particularly pronounced for semi-milled and broken rice. The
2000s
2000ssawsawa apositive
positivetrade
tradebalance
balanceand andstrong
strongcomparative
comparativeadvantage
advantagefor forsemi-
semi-
earlyrice
milled
milled 2000s
rice alongsaw with
along awith
positive trade balance
crustaceans,
crustaceans, cashews,and coffee,
cashews, strong comparative
coffee, sugar,
sugar, andandadvantage
black
black tea.
tea.
for semi-milled
Interestingly,
Interestingly, somerice,
some crustaceans,
products,
products, suchasascashews,
such broken
brokenrice,coffee,
rice, sugar,
grapes,
grapes, andand
and black tea.
cuttlefish,
cuttlefish, were
were
Interestingly,
competitive
competitive some
globalproducts,
ininglobal markets,such
markets, albeitaswith
albeit broken rice, grapes,
witha arelatively
relatively smallandtrade
small cuttlefish,
trade wereByBy
balance.
balance.
contrast,
contrast, cotton
cotton
competitive inhad
hadthe
theleast
global leastcomparative
comparative
markets, advantage
albeit with advantage and
anda anegative
a relatively negative
small trade
trade trade balance
balance
balance.
ininthe
thecontrast,
By early
early2000s.
2000s.
cotton had the least comparative advantage and a negative trade
balance in the early 2000s.
The
Theintroduction
introductionofofBtBtcotton
cottonenhanced
enhancedcotton
cottonproductivity,
productivity,therebytherebyitsitscomparative
comparative
advantage
advantage ininthe
Figure the
9. global
globalmarket.
market.
Comparative Cuttlefish
Cuttlefishalso
advantages also demonstrated
demonstrated
in agricultural improved
improved
exports, comparative
2020-22 comparative
advantage.
advantage.ByBy2022,2022,most
mostcommodities,
commodities,with withthe theexception
exceptionofofwheat wheatand andcoffee,
coffee,
1.50
had
hada apositive
positivetrade
tradebalance
balanceand andcomparative
comparative advantage.
advantage.
Shrimp and prawns
Wheat
Wheat and
and coffee
coffee
Broken rice maintain
maintain
a acomparative
comparativeadvantage
advantage
Wheatbut
buthave
havea anegative
negativetrade trade balance.
balance.For
Sugar Forwheat,
wheat,
Semi-milled rice its
itslower
lower
Revealed Symmetric Comparative Advantage (RSCA)
yield
yieldcompared
comparedtotomajor
majorexporting
exportingcountries,
countries,
1.00 such
such
Bovine as
meat asthe
the United
Onion United States
States and
Castor oil andCanada,
Canada,
and
anddomestic
domesticconsumption
consumptionconstrain
constrainitsitsGrapes
export
exportcapacity.
capacity.India IndiaCumin
isisa asignificant
significant
producer
producerofofcoffee;
coffee;however,
however,ititfaces
facescompetition
competition
Cutlefish fromfromBrazil
Braziland
Black tea
andVietnam.
Vietnam.
Turmeric
Groundnuts
0.50
Coffee Cotton Dried capscicum
Cashew nuts
Nutmeg
Group B: Net importer, comparative advantage Group A: Net exporter, comparative advantage
0.00
-1.50 -1.00 -0.50 0.00 0.50 1.00 1.50
-0.50
-1.00
Group D: Net importer, comparative disadvantage Group C: Net exporter, comparative disadvantage
-1.50
Trade Balance Index (TBI)
Source: Saxena et al. (2024).
20
34
34
The introduction of Bt cotton enhanced cotton productivity, thereby its
comparative advantage in global market. Cuttlefish also demonstrated improved
comparative advantage. By 2022, most commodities, with the exception of
wheat and coffee, had a positive trade balance and comparative advantage.
Wheat and coffee maintain a comparative advantage but have a negative trade
balance. For wheat, its lower yield compared to major exporting countries,
such as the United States and Canada, and domestic consumption constrain
its export capacity. India is a significant producer of coffee; however, it faces
competition from Brazil and Vietnam.
21
4 Challenges to Agri-food
System Transformation
The evolving dietary patterns and rapidly growing demand for non-cereal food
products, particularly horticultural and animal products, create an opportunity
for diversification of the agri-food production system. This transformation
has the potential to enhance farmers’ income and accelerate agricultural
growth. According to Timmer (2009), diversification in agriculture is a
prerequisite for agricultural transformation, and delaying the diversification
phase in agriculture makes it difficult to achieve rapid productivity growth
and subsequent integration into the broader economy. Negi et al. (2020), and
Chand and Singh (2023) have indicated the need for a shift in agricultural
policies favoring diversification into horticulture, livestock and fisheries
for accelerating agricultural growth, reducing poverty, and combating
malnutrition.
Furthermore, cereal-centric policies have resulted in second-generation
problems: deterioration of land, water, biodiversity, and the environment,
particularly in intensively
Figure 10. Composite index of agricultural
cultivated regions such as
Punjab and Figure Composite sustainability
10.These
Haryana.
(CIAS) for
index of agricultural Indian states
sustainability (CIAS) for Indian sta
problems became evident
during the 1990s; however,
they were overlooked
because of the fear that any
change in the policy stance
could potentially undermine
hard-earned food security.
Nevertheless, if these issues
remain unaddressed, they
could potentially affect the
long-term sustainability of
agri-food system, farmers’
livelihoods, and national
food security.
Figure 10 shows the
sustainability status of
agriculture across states, Source: Chand et al. (2024).
Source: Chand et al. (2024).
23
This section examines the potential challenges to the sustainable transformatio
India’s agri-food system in detail.
4.1 Declining land for agriculture
measured using 51 parameters related to land and water resources, ecology
and biodiversity, and socioeconomic dimensions (Chand et al., 2024). Indian
agriculture is at half the way of sustainability. However, regional disparities
exist in agricultural sustainability with Rajasthan facing the most severe
sustainability challenges, followed closely by Uttar Pradesh and Telangana.
Bihar and Jharkhand also demonstrate concerning levels of unsustainability.
Given that sustainability is a consequence of a complex set of parameters,
interventions to enhance it are likely to vary across states depending on the
relative endowments of resources, ecological fragility and socioeconomic
development. For instance, improvements in socioeconomic conditions may
contribute significantly to agricultural sustainability in Bihar, Jharkhand, and
Uttar Pradesh, whereas in Punjab, Haryana, and Rajasthan, the conservation
of water resources is of paramount importance.
This section examines the potential challenges to the sustainable transformation
of India’s agri-food system in detail.
4.1 Declining land for agriculture
In recent decades, population growth, urbanization, and industrialization have
resulted in increased pressure on agricultural land. From 1990-91 to 2022-23,
agricultural land decreased by 2.7% from approximately 185 million hectares
to 180 million hectares, although the net cultivated area remained relatively
constant at approximately 140 million hectares (Table 10). Currently,
approximately 30% of the total geographical land suffers from various forms
of degradation, including salinity and alkalinity (GoI, 2021a). Projections
suggest a further decline in both agricultural land and cropped area. By 2047,
agricultural land is expected
Table 10. Trend in agricultural land, million ha
to shrink to 176 million
hectares, whereas the net Year Agricultural Net Gross Cropping
land sown sown intensity
sown area will decrease area area (%)
to 138 million hectares. 1970-71 182 141 166 118
Nevertheless, there is 1980-81 185 140 173 123
potential for increasing
1990-91 185 143 186 130
agricultural production
through intensive 2000-01 183 141 185 131
cultivation of cropland. 2010-11 182 141 198 140
Thus, the gross cropped 2022-23 180 141 219 156
area is projected to 2035-36 178 139 222 160
expand by 6.8%, reaching 2047-48 176 138 234 170
234 million hectares by Source: Authors’ estimates using data from GoI (various
2047 with an increase years, d).
24
Table 10. Trend in agricultural land (million ha)
Agricultural land Net sown area Gross sown area Cropping
in cropping intensity to 170%. Nevertheless, the extent of intensification
intensity (%) of
existing cropland is contingent
1970-71 182 on the 141
availability of water,
166 which is118
likely to
be under
1980-81severe stress.185 140 173 123
Furthermore,
1990-91 fragmentation
185 of landholdings
143 is another
186 significant challenge
130
in enhancing
2000-01 agricultural
183 productivity141
and efficiency.185
As the average131 size of
landholdings is projected to decrease to 0.60 hectares by 2047, farmers may
2010-11 182 141 198 140
encounter difficulties in achieving economies of scale and implementing
2022-23 180 141 219 156
modern agricultural technologies, thereby affecting the economic viability of
agriculture and agriculture-based livelihoods.
2035-36 178 139 222 160
2047-48 176 138 234 170
4.2 Indiscriminate and unbalanced use of fertilizers
Source: Authors’ estimates using data from GoI (various years, d).
The use of chemical fertilizers such as nitrogen (N), phosphorus (P), and
4.2 Indiscriminate and unbalanced use of fertilizers
potash (K) has increased dramatically over the past four decades (Figure 11).
Theiruse
The usage pattern fertilizers
of chemical is significantly biased
such as in favor
nitrogen of N. Their(P),
(N), phosphorus application
and potash in (K)
a
ratioincreased
has of 4:2:1 isdramatically
considered overoptimal
the for Indian
past four soils.
decadesImportantly,
(Figure 11). optimality in
Their usage
pattern
this ratiois has
significantly
seldom beenbiasedobserved.
in favor ofThis
N. Their application
persistent in a raises
deviation ratio ofserious
4:2:1 is
considered optimal forits
concerns regarding Indian soils.
effects onImportantly,
the health optimality
of naturalin resources
this ratio has
andseldom
the
been observed. This persistent deviation raises serious concerns regarding its effects
environment. Imbalanced application of fertilizers diminishes soil fertility,
on the health of natural resources and the environment. Imbalanced application of
reduces crops’
fertilizers resilience
diminishes to climate
soil fertility, change,
reduces cropandresilience
negatively
to affects
climateecosystems
change, and
and human health.
negatively affects ecosystems and human health.
Figure
Figure11.
11.NPK
NPKuse
usein
inIndian
Indian agriculture
agriculture
P:K ratio N:K ratio NPK (kg/ha)
14 160
12 140
120
10
NPK (kg/ha)
100
NPK ratio
8
80
6
60
4
40
2 20
0 0
1970-71
1972-73
1974-75
1976-77
1978-79
1980-81
1982-83
1984-85
1986-87
1988-89
1990-91
1992-93
1994-95
1996-97
1998-99
2000-01
2002-03
2004-05
2006-07
2008-09
2010-11
2012-13
2014-15
2016-17
2018-19
2020-21
2022-23
Source:
Source: Authors’
Authors’estimates
estimatesusing
usingdata
datafrom
fromFAI
FAI(2023).
(2023).
One of the main reasons for the persistent imbalance in nutrient use is differential
subsidy rates for N, P, and K (Table 11). Owing to the significantly higher subsidy, N
38
25
One of the main reasons for the persistent imbalance in nutrient use is
differential subsidy rates for N, P, and K (Table 11). Owing to the significantly
higher subsidy, N is approximately five times less expensive compared to
both P and K. This policy-induced distortion in fertilizer pricing inadvertently
incentivizes farmers to use relatively inexpensive nitrogenous fertilizers. In
2022-23, the Government of India provided fertilizer subsidies worth Rs 666
billion at 2011-12 prices (Figure 12). Notably, the share of fertilizer subsidies
in the total expenditure on agricultural subsidies declined considerably from
60% in 2011-12 to 37% in 2019-20.
Table 11. Relative prices of fertilizer nutrients (Rs/kg)
(As on 31st March, 2023)
is isapproximately
Nutrient prices five
approximately fivetimes
timesless
less expensive
expensive compared
comparedNto to both
both PP and
Pand K.
K.This
Thispolicy-
Kpolicy-
induced
induced
Economicdistortion
price (EP) in
distortion in fertilizer
fertilizer pricing
(Rs./kg) pricing inadvertently
inadvertently incentivizes
110.9incentivizes farmers
132.2farmers toto use
86.61 use
relatively
relatively inexpensive
inexpensive
Subsidies (% of EP) nitrogenous
nitrogenous fertilizers.
fertilizers. In
In 2022-23,
2022-23,
88.39 the
the Government
Government
50.63 of
of
27.31 India
India
provided
provided fertilizer
fertilizer subsidies worth Rs 666 billion at 2011-12 2011-12 prices
prices (Figure
(Figure 12).
12).
Market price (% of EP)subsidies worth Rs 666 11.61 49.33 72.69
Notably,
Notably,the theshare
shareofoffertilizer
fertilizer subsidies
subsidies inin the total expenditure
expenditure on on agricultural
agricultural
Ratio of market price (in relation to N) 1.00 5.07 4.89
subsidies
subsidiesdeclined
declinedconsiderably
considerablyfrom from 60%
60% inin 2011-12 to 37%
37% in
in 2019-20.
2019-20.
Source: As for Figure 11.
Table
Table11.
Furthermore, low
11. Nutrient
nutrient
Nutrient price
use in
price in India
India (Rs/kg)
efficiency (As on 31stst
on 31
is a significant
(Rs/kg) March,2023)
concern.
March, 2023)
Nutrient use
Nutrient
Nutrient prices
efficiency has been reported 30-45% for N,N15-25% for
prices PP P, and 50-60%
KK for K
Economic
Economic price
price (EP)
(EP)(Rs./kg)
(Rs./kg) 110.9 132.2
132.2
(Gupta et al., 2021; Singh, 2023). Low use efficiency coupled with distorted 86.61
86.61
Subsidies
Subsidies (%(%ofofEP)
prices compels EP)farmers to apply increased 88.39 quantities of 50.63
50.63 27.31
fertilizers,27.31
which are
Market
Market price
price(%(%ofofexpecting
less expensive, EP)
EP) higher crop yields.11.61 49.33
However,49.33 72.69
the effect of72.69
additional
Ratio
Ratioofofmarket
fertilizermarket price
price(in
application (inrelation
relation
has to
to N)
diminished N) (Figure1.00 5.07 has only
5.07
13). This trend 4.89
4.89 recently
Source: AsAsfor
Source: forFigure
Figure11.
11.
Figure 12. Trend in fertilizer Figure 13. Ratio of index of
Figure
Figure12.
12.Trend
Trendin(at
subsidies infertilizer
fertilizer
2011-12 subsidies
subsidies Figure Ratio
13. Ratio
agricultural of index
of indexof
production oftoagricultural
agricultural
index of
(at
(at2011-12
2011-12prices)
prices) production to
production to index
indexofofNPK
NPK
prices) NPK consumption
consumption
consumption
Fertilizersubsidy
Fertilizer subsidy(Rs
(Rsbillion)
billion) 2.5
2.5
%%share
shareinintotal
total
800
800 70
70
2.0
2.0
Fertilizer subsidy (Rs billion)
Fertilizer subsidy (Rs billion)
700
700 60
60
600
600 50
50 1.5
1.5
total
in total
500
500
40
40
share in
400
400 1.0
1.0
% share
30
30
300
300
%
20
20 0.5
200
200 0.5
100
100 10
10
0.0
0.0
00 00
1980-81
1983-84
1986-87
1989-90
1992-93
1995-96
1998-99
2001-02
2004-05
2007-08
2010-11
2013-14
2016-17
2019-20
2022-23
1980-81
1983-84
1986-87
1989-90
1992-93
1995-96
1998-99
2001-02
2004-05
2007-08
2010-11
2013-14
2016-17
2019-20
2022-23
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
Source:
Source: As
Source:AsAs
forfor
for Figure
Figure
Figure 11.11.
11. Source:
Source:Authors’
Source: Authors’estimates
Authors’ estimatesusing
estimates data
using
using from
data
data from FAI
fromFAI
(2023), and
and GoI
FAI (2023),
(2023), and(various
GoI years,
GoI (various
(various d).
years,years,
d). d).
26
Furthermore,low
Furthermore, low nutrient
nutrient use
use efficiency
efficiency isis aa significant
significant concern.
concern. Nutrient
Nutrient use
use
efficiency has been reported 30-45% for N, 15-25% for P, and 50-60% forKK(Gupta
efficiency has been reported 30-45% for N, 15-25% for P, and 50-60% for (Guptaetet
al.,2021;
al., 2021;Singh,
Singh,2023).
2023).Low
Low use
use efficiency
efficiency coupled
coupled with
with distorted
distorted prices
pricescompels
compels
farmers to apply increased quantities of fertilizers, which are less expensive,
farmers to apply increased quantities of fertilizers, which are less expensive,
stabilized owing to the increasing use of neem-coated urea, nano-fertilizers,
and improved methods of application.
However, significant regional disparities exist in fertilizer use (Figure 14).
States such as Punjab, Haryana, and the western part of Uttar Pradesh have
a more intensive use of fertilizers, while the eastern and north-eastern states
However, significant lower
have substantially regionalapplication
disparities exist
rates.inMoreover,
fertilizer use (Figure
with the 14). States
exception
such as Punjab, Haryana, and the western part of Uttar Pradesh have a more
of Tamil Nadu, Karnataka, West Bengal, and Maharashtra, the NPK ratio is
intensive use of fertilizers, while the eastern and north-eastern states have
considerablylower
substantially skewed towardsrates.
application nitrogen. Regional
Moreover, withvariation in soilofnutrients
the exception is a
Tamil Nadu,
critical factor
Karnataka, to Bengal,
West considerandwhen determining
Maharashtra, theoptimal
NPK rationutrient ratios. Although
is considerably skewed
towards
a 4:2:1 nitrogen. Regional
ratio of NPK variation
is often in soiltonutrients
claimed is a critical
be optimal, it mayfactor
not beto consider
suitable
when
for alldetermining optimal
soil types and nutrient
crops. ratios.
Several Although
factors, suchaas4:2:1
soil ratio of NPK ismatter
pH, organic often
claimed to be optimal, it may not be suitable for all soil types and crops. Factors
content,
such mineral
as soil composition,
pH, organic and localmineral
matter content, climatic conditions,and
composition, canlocal
significantly
climatic
influence plant nutrient availability and uptake.
conditions can significantly influence plant nutrient availability and uptake.
Figure
Figure14.
14.Regional
Regional disparities in NPK
disparities in NPKuse,
use,2022-23
2022-23
300 70
N P K N:K ratio
Ratio
250 60
50
200
(KG/HA)
RATIO
40
(kg/ga)
ratio
150
30
N:K
useUSE
N:K
100
NPK
20
NPK
50 10
0 0
Madhya Pradesh
Andhra Pradesh
Assam
Kerala
Chhattisgarh
Punjab
Bihar
Telangana
Haryana
Maharashtra
Jharkhand
Gujarat
Manipur
Uttar Pradesh
Uttarakhand
Jammu & Kashmir
Odisha
Tamil Nadu
Rajasthan
Tripura
West Bengal
Karnataka
Mizoram
Himachal Pradesh
Source:
Source:As
Asfor
forFigure
Figure11.
11.
4.3 Inefficient use of water amidst growing demand
4.3 Inefficient use of water amidst growing demand
In India, water scarcity is a pressing issue. The country has a potential water
In India, water scarcity is a pressing issue. The country has a potential water
endowment of 1,869 billion cubic meters (BCM) of which 1123 BCM is utilizable. Of
endowment
the of 1,869
utilizable water, 83% billion cubic
is used for meters purposes,
agricultural (BCM) ofunderscoring
which 1123 theBCM is
critical
utilizable. Of the utilizable water, 83% is used for agricultural purposes,
role of irrigation in enhancing agricultural productivity and resilience to extreme
climate events the
underscoring suchcritical
as droughts
role ofand heat waves
irrigation (Birthal etagricultural
in enhancing al., 2015a; Birthal et al.,
productivity
2021b).
and resilience to extreme climate events such as droughts and heat waves
(Birthal et al., 2015a; Birthal et al., 2021b).
The irrigation system has expanded and transformed over time. Irrigation coverage
expanded from a relatively low level of 23% of the net sown area in the early 1970s
to approximately 56% in 2022-23 (Figure 15). Nevertheless, this expansion occurred
at the expense of groundwater resources. As agricultural intensification progressed,
farmers' dependence on groundwater increased, with its share rising from 41% in the
early 1970s to 63% in 2022-23. This shift27 in irrigation sources can be attributed to
factors such as the cultivation of water-intensive crops, subsidies for electric power
for agriculture, and availability of cost-effective pumping technologies.
40
The irrigation system has expanded and transformed over time. Irrigation
coverage expanded from a relatively low level of 23% of the net sown area in
the early 1970s to approximately 56% in 2022-23 (Figure 15). Nevertheless, this
expansion occurred at the expense of groundwater extraction. As agricultural
intensification progressed, farmers’ dependence on groundwater increased,
with its share rising from 41% in the early 1970s to 63% in 2022-23. This
shift in irrigation sources can be attributed to factors such as the cultivation
of water-intensive crops, subsidies for electric power for agriculture, and
availability of cost-effective pumping technologies.
Figure 15. Trend in net irrigated area and share of surface and
groundwater
Figure 15. Trend in net irrigated area and share of surface and groundwater
Irrigation coverage Share of surface water Share of groundwater
70
63
60
50
Percent
41 56
40
30
23 23
20
10
0
1972-73
1974-75
1976-77
1978-79
1980-81
1982-83
1984-85
1986-87
1988-89
1990-91
1992-93
1994-95
1996-97
1998-99
2000-01
2002-03
2004-05
2006-07
2008-09
2010-11
2012-13
2014-15
2016-17
2018-19
2020-21
2022-23
Source: Computed by authors using data from GoI (2024b).
Source: Computed by authors using data from GoI (2024b).
This increasing reliance Semi-critical itsCritical Over-exploited particularly
Figure 16. has
This increasing reliance on groundwater Status
led of to groundwater extraction (%)
overexploitation,
on groundwater has led
in the north-western states of40Punjab, Haryana, and Rajasthan. At the national level,
Semi-critical Critical Over-exploited
to its overexploitation,
approximately 11% of the assessment units have been overexploited and 14% are at
36
the critical orinsemi-critical
particularly the north- stages
40 of exploitation (Figure 16). Notably, studies have
reported that ofwhile 32 remains important for enhancing crop yield and
irrigation
western states Punjab, 36
resilience
Haryana, to andclimatic shocks,28its effects on both have slowed
Rajasthan. (Birthal et al., 2015a;
17.24 15.99
32
Birthal et al., 2021b). 24
At the national level, 28 Figure 16. Status
16.21 15.70of groundwater
17.24 15.99
14.19
extraction (%)
14.66
approximately 11% 2024 13.73 11.23 11.13
Semi-critical 14.19
of the assessment 16 14.66 16.21 15.70 Critical
4.55 3.88Over-exploited
20 3.67 11.23 11.13
40 13.73 3.28 3.84
units have been 12
16 3.95 2.89 4.55 3.88
3.04 3.05
overexploited and 14% 8 36
3.28 3.84 14.13 15.18 12.48
3.67
3.04 3.05
12 3.95
are at the critical or 2.89
9.61 8.95 10.55 10.34 10.65 10.54
4 32
8 14.13 15.18 12.48
semi-critical stages of 0 28
9.61 8.95 10.55 10.34 17.24 15.99 10.65 10.54
4
exploitation (Figure 16). 2004 2009 2011 2013 2017 2020 2022 2023 2024
0 24 14.19
Notably, studies have Source: GoI (2024c).
200414.66
16.21 15.70
2009 2011 2013 2017 2020 2022 2023 2024 20 11.23 11.13
13.73
4.55 3.88
16
28 3.67
12 3.95 3.28 3.84 3.04 3.05
2.89
8
14.13 15.18 12.48
9.61 8.95 10.55 10.34 10.65 10.54
4
reported that while irrigation remains important for enhancing crop yield and
resilience to climatic shocks, its effects on both have slowed (Birthal et al.,
2015a; Birthal et al., 2021b).
Nevertheless, significant disparities exist in the endowment and utilization
of water resources (Figure 17). While both surface water and groundwater
are abundant in the eastern states of Bihar, West Bengal, and Odisha, these
Nevertheless, significant disparities exist in the endowment and utilization of water
resources have not been effectively utilized. Conversely, semi-arid regions,
resources (Figure 17). While both surface water and groundwater are abundant in
including
the easternthe states
states of Punjab,
of Bihar, West Haryana,
Bengal, andand Rajasthan,
Odisha, have higher
these resources havelevels of
not been
effectivelybut
irrigation utilized. Conversely,
at the cost semi-arid of
of overextraction regions, including
groundwater the states
resources of Punjab,
(Figure 18).
Haryana, and Rajasthan, have higher levels of irrigation but at the cost of
This contrast between
overextraction water-abundant
of groundwater resourcesregions
(Figurewith
18). low
This irrigation development
contrast between water-
and water-scarce
abundant regions
regions with lowwith high irrigation
irrigation developmentdevelopment and overexploited
and water-scarce regions with
high irrigation
water resourcesdevelopment
underscores andtheoverexploited
necessity forwater resourcesand
a balanced underscores the
sustainable
necessity for a balanced and sustainable approach to water resource management
approach to water
and irrigation resource
development management
across India. and irrigation development.
Figure 17.17.
Figure Regional variation
Regional variationininirrigation
irrigation (% of net
(% of net cropped
croppedarea),
area),2022-23
2022-23
99
93
87
82
66 63
61 60 59
56 55
52 50
45 42
38 35
33 33 31
21 21 21 20 19
North-east
Punjab
Haryana
Telangana
Bihar
Tamil Nadu
All India
Uttar Pradesh
Rajasthan
Jammu & Kashmir
Nagaland
Kerala
Gujarat
Andhra Pradesh
Tripura
Orissa
Jharkhand
Maharashtra
Karnataka
Meghalaya
Uttarakhand
Madhya Pradesh
West Bengal
Chhattisgarh
Himachal Pradesh
Source: As
Source: Asfor
forFigure
Figure15.
15.
While water demand for irrigation Figure 18. Spatial variation in
Figure 18. Spatialgroundwater extraction,
variation in groundwater 2023
extraction, 2023
has increased, its use efficiency
remains low; 30-40% for surface
irrigation and 60-65% for pressurized
irrigation systems. This inefficiency is
particularly pronounced compared
with other countries such as China,
Brazil, and the United States (GoI,
2016). To produce the same quantity
of output, India uses 2-3 times more
water than these countries.
Driven by the compounding effects of
the growing population, urbanization,
and industrialization, per capita water Source: Prepared using data from GoI (2024c).
Source: Prepared using data from GoI (2024c).
42
While water demand for irrigation has increased, its use efficiency remains low; 30-
29
40% for surface irrigation and 60-65% for pressurized irrigation systems. This
inefficiency is particularly pronounced compared with other countries such as China,
Brazil, and the United States (GoI, 2016). To produce the same quantity of output,
India uses 2-3 times more water than these countries.
Driven by the compounding effects of the growing population, urbanization, and
availability declined by 30% from 2209 cubic meter in 1991 to 1544 cubic
meter in 2011 (Figure 19a) which is approximately 10% less than the stressed
norm of 1700 cubic meter. It is projected to decrease to 1140 cubic meters
by 2050. As agricultural production system intensifies, absolute demand for
water for irrigation will increase by 18%, although its proportion of the total
utilizable water will decrease to 74% (Figure 19b).
Figure 19a. Per capita water Figure 19b. Water demand for
Figure
Figure19a.
19a.Per
Percapita
capitawater
water Figure
Figure19b.
19b.Water
Waterdemand
demandfor
for
availability (cubic metre/annum) irrigation
availability
availability(cubic
(cubicmetre/annum)
metre/annum) irrigation
irrigation
Share
Share
Share (Axis
(Axis
(%) II) II) Quantity
Quantity(BCM)
(BCM)
2209
2209 1200
1200 8888
8686
1816
1816
1700
1700 1000
1000
1544
1544 8484
1340
1340
Quantity (BCM)
Quantity (BCM)
(BCM)
8282
1140
1140 800
800
1000
1000 8080
% share
Quantity
cent
Pe cent
600
600 7878
Pe
7676
400
400
7474
7272
200
200
1991
1991
2001
2001
2011
2011
Stress condition
Stress condition
2025
2025
2050
2050
condition
condition
Scarecity
Scarecity
7070
00 6868
2000
2000 2010
2010 2025
2025 2050
2050
Source:
Source:GoI
GoI
Source: (various
(various
GoI years,
years,
(various g).
g).g).
years,
4.44.4
4.4 Excessive
Excessive
Excessive reliance
reliance
relianceon on non-renewable
onnon-renewable
non-renewableenergy energy
energysources
sources sources
There
There
There isstrong
isisa a a strong
strong relationship
relationship
relationship between between
between groundwater
groundwater
groundwater and
andenergy anduse
energy energy
use use in
ininagriculture.
agriculture.
agriculture.
AsAsreliance As reliance increases,
relianceonongroundwater
groundwater on groundwater
increases, energy
energyincreases,
use energy also
useininagriculture
agriculture use
alsoin agriculture
increases.
increases. This
This
isisevident
evident
also from
fromthe
increases. the significant
Thissignificant increase
is evident increase
frominthe
inwell
well density,
density,number
significant numberofin
increase ofelectric
electric pumps,
pumps,
well density,
and
and corresponding
corresponding
number electricity
of electricelectricity
pumps,consumption.
consumption. Well
and correspondingWelldensity,
density, defined
defined
electricity asasthe
thenumber
consumption. number
Wellofof
wells
wells per
per hectare
hectare ofofnet
netsown
sown area,
area,increased
increased from
from 4242inin1982-83
1982-83
density, defined as the number of wells per hectare of net sown area, increased to
to 158
158inin2017-18
2017-18
(Figure
(Figure20a),
20a),and andthetheproportion
proportionofofelectricity-operated
electricity-operatedwells wellsalmost
almostdoubled
doubledfrom
from
39%
from 42
39% inin 1986-87
in 1982-83
1986-87 toto 76%
to 1582024
76% inin 2024
in (Figure
2017-18 (FigureThe
(Figure 20b).
20b). The
20a), and the proportion
electricity
electricity consumption
of
consumption inin
electricity-operated
agriculture
agricultureexperienced wells
experienceda a13-fold almost doubled
13-foldincrease
increasefrom from
from127 39%
127Kwh/ha in 1986-87
Kwh/hainin1983-84 to 76%
1983-84toto1620 in
1620
2024in(Figure
Kwh/ha
Kwh/ha in2022-23 20b).
2022-23 The21).
(Figure
(Figure electricity consumption in agriculture experienced
21).
a 13-fold increase from 127 Kwh/ha in 1983-84 to 1620 Kwh/ha in 2022-23
Figure
Figure20a.
(Figure 20a.Trend
21). Trendininwell
welldensity
density Figure
Figure20b.
20b.Sources
Sourcesofofenergy
energyfor
for
(number/1000
(number/1000ha)
ha) groundwater
groundwaterextraction
extraction(%)
(%)
Electric
Electric Diesel
Diesel Others
Others
158
158
141
141 145
145 100
100 2 2 2 2
131
131 1212 1212 1212
3131 2525 2222
8080
3939 3535 3232
8282 8282 6060
3030
4040 7676
7373
4242
5353 5656
30 2020 3939
4949
0 0
1986-87
1986-87
1993-94
1993-94
2000-01
2000-01
2006-07
2006-07
2013-14
2013-14
2017-19
2017-19
1982-83
1982-83
1986-87
1986-87
1993-94
1993-94
2000-01
2000-01
2006-07
2006-07
2013-14
2013-14
2017-18
2017-18
Source:
Source:GoI
GoI(various
(variousyears,
years,h).
h).
(Figure
(Figure
20a),20a),
and and
the the
proportion
proportion
of electricity-operated
of electricity-operated
wells
wells
almost
almost
doubled
doubled
fromfrom
39% 39%
in 1986-87
in 1986-87to 76%
to 76%
in 2024
in 2024
(Figure
(Figure
20b).20b).
The The
electricity
electricity
consumption
consumption
in in
agriculture
agriculture
experienced
experienced
a 13-fold
a 13-fold
increase
increase
fromfrom
127 127
Kwh/ha
Kwh/hain 1983-84
in 1983-84
to 1620
to 1620
Kwh/ha
Kwh/ha
in 2022-23
in 2022-23
(Figure
(Figure
21).21).
Figure
Figure 20a.20a.
Figure 20a. Trend
Trend
Trend in
in well
in well well density
density
density Figure
Figure 20b.20b.
Figure
20b. Sources
Sources of
Sources energy
of energy for
of energy
for for
(number/1000
(number/1000
(number/1000ha) ha)
ha) groundwater
groundwater
extraction (%) (%)
extraction
ElectricElectricDiesel Diesel
Others Others
158 158
141 145
141 145 100 100 2 2 2 2
131 131 12 12 12 12 12 12
31 31 25 25 22 22
80 80
39 39 35 35 32 32
82 8282 82 60 60
30 30
40 40
73 73 76 76
42 42
49 49 53 53 56 56
20 2039 39
0 0
1986-87
1986-87
1993-94
1993-94
2000-01
2000-01
2006-07
2006-07
2013-14
2013-14
2017-19
2017-19
1982-83
1982-83
1986-87
1986-87
1993-94
1993-94
2000-01
2000-01
2006-07
2006-07
2013-14
2013-14
2017-18
2017-18
Source:
Source:
GoI (various
Source:GoI
GoI(various
years,
years,
(various h). h).
years, h).
Figure 21. Trend in electricity consumption in agriculture
Figure 21. Trend in electricity consumption in agriculture
250000 35
228451
31.38
200000
44 44 30
25
Giga-watt hour
150000
20
Percent
20.11
17.82
15
100000
10
50000 18234
5
0 0
1983-84
1985-86
1987-88
1989-90
1991-92
1993-94
1995-96
1997-98
1999-00
2001-02
2003-04
2005-06
2007-08
2009-10
2011-12
2013-14
2015-16
2017-18
2019-20
2021-22
Consumption of Glectricty for agriculture (GWh)
Share of Cgriculture consumption(%)(II-axis)
Source:
Source: GoI
GoI(various
(variousyears,
years,d).d).
The
The increase
increaseininenergy intensity
energy can can
intensity be largely attributed
be largely to the heavy
attributed to thesubsidized
heavily
for electric power for agriculture. Most state governments
subsidized electric power for agriculture. Most state governments provide subsidies
provide for
electricity for agricultural purposes. Over time, there has been a significant increase
subsidies
in for electricity
electricity for agricultural
subsidies. The purposes.
real expenditure Over time,
on electricity there has
subsidies hasbeen
seenaa
significant
dramatic increase
surge, in electricity
escalating from Rssubsidies.
176 billionThe real expenditure
in 2011-12 on electricity
to Rs 663 billion in 2019-
subsidies
20, has seen
as illustrated a dramatic
in Figure 22. Assurge, from Rsof176
a proportion thebillion in 2011-12
total subsidy to Rs 663
expenditure, the
share of electricity subsidies increased from 15% in 2011-12 to 37% in
billion in 2019-20 (Figure 22). As a proportion of the total subsidy expenditure,2019-20. This
trend raisesofquestions
the share about
electricity the sustainability
subsidies increased of such15%
from subsidy policies, their
in 2011-12 to 37%impact
in
on agricultural practices, and the potential long-term consequences for both the
2019-20. This trend raises questions
agricultural sector and broader economy.
about the sustainability of such subsidy
policies, their impact on agricultural practices, and the potential long-term
consequences for both
Figure the agricultural
22. Trend sector and
in power subsidies (atbroader
2011-12economy.
prices)
Power subsidy (Rs billion) % share in total
700 45
40
600
31
ubsidy (Rs billion)
35
500
hare in total
30
400 25
300 20
share of electricity subsidies increased from 15% in 2011-12 to 37% in 2019-20. This
trend raises questions about the sustainability of such subsidy policies, their impact
on agricultural practices, and the potential long-term consequences for both the
agricultural sector and broader economy.
Figure22.
Figure 22.Trend
Trend in
in power
power subsidies
subsidies (at
(at 2011-12
2011-12prices)
prices)
Power subsidy (Rs billion) % share in total
700 45
40
600
(Rs billion)
35
500
% share in total
30
Rs billion
400 25
Power subsidy
300 20
15
200
10
100
5
0 0
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
Source:
Source:Authors'
Authors’computations based
computations on data
based fromfrom
on data PFCLPFCL
(various years).
(various years).
Note: The subsidies were deflated using the wholesale price index at 2011-12 base
Note: The subsidies were deflated using the wholesale price index at 2011-12 base.
However, there are significant regional disparities in electricity consumption
in agriculture
However, there and
are subsidy rates.
significant While disparities
regional Punjab incurs the highestconsumption
in electricity expenditurein
agriculture and and
on electricity subsidy rates. subsidies,
fertilizer While Punjab incursby
followed theHaryana,
highest expenditure
subsidies areon
45
electricity and lower
significantly fertilizer subsidies,
in the easternfollowed
states of by Haryana,
Bihar, subsidies
Jharkhand, andare significantly
West Bengal
lower in the eastern states of Bihar, Jharkhand, and West Bengal (Figure 23).
(Figure 23).
Figure 23.
Figure 23. Inter-state
Inter-state variation
variation in
in power
power subsidies
subsidies (Rs/ha
(Rs/ha of
of net
net sown
sown area),
area),
2019-21 at current prices
2019-21 at current prices
16000
12000
8000
4000
0
Haryana
Tamil Nadu
Rajasthan
All India
Uttar Pradesh
Bihar
Jharkhand
Punjab
Telangana
Maharashtra
Jammu & Kashmir
Karnataka
Andhra Pradesh
Gujarat
Madhya Pradesh
Chhattisgarh
West Bengal
Source:
Source: Authors’
Authors’ computations
computations based
based on data
on data from
from PFCL
PFCL (various
(various years).
years).
4.5 Looming threats of climate change
Agriculture is a source, victim, and solution to climate change. In India, agricultural
sector contributes approximately 14% of the total greenhouse gas emissions, with
ruminants and rice cultivation being the primary
32 sources. Changing climate patterns,
including rising temperatures, altered precipitation regimes, and increased
frequency of extreme weather events, can significantly disrupt agricultural
activities. Their effects extend beyond direct impacts, potentially causing
degradation of water and land resources, compromising biodiversity and ecosystem
4.5 Looming threats of climate change
Agriculture is a source, victim, and solution to climate change. In India,
agricultural sector contributes approximately 14% of the total greenhouse
gas emissions, with ruminants and rice cultivation being the primary sources.
Changing climate patterns, including rising temperatures, altered precipitation
regimes, and increased frequency of extreme weather events, can significantly
disrupt agricultural activities. Their effects extend beyond direct impacts,
potentially causing degradation of water and land resources, compromising
biodiversity and ecosystem health, and altering the dynamics of pests and
diseases of crops and livestock.
Developing countries that lack resources for investment in research and
infrastructure to build resilience in agriculture are more vulnerable to climate
change. According to Ortiz-Bobea et al. (2021) since 1960, climate change
has reduced the productivity growth of world agriculture by 21%, with more
pronounced effects (25-30%) in developing countries. Evidence from India is
consistent with these findings. Birthal et al. (2020) showed a 25% reduction
in agricultural productivity growth owing to extreme climate events (i.e.,
droughts, floods, heat waves, and cold waves) over the past five decades.
Climate change is projected to intensify in the future. The Intergovernmental Panel
Similar Change
on Climate to Ortiz-Bobea et al. a(2021),
(IPCC) predicts they also
1.5°C increase foundtemperature
in global that underdeveloped
above pre-
regionslevels
industrial are more affected
by the by climate
mid-century. change.
Figure Furthermore,
24 presents droughts
projections have
of mean
been found
temperature fortoIndia
cause significantly
under differentmore
Shareddamages than other
Socioeconomic extreme(SSP).
Pathways events.
The
SSP2-4.5 (modification of earlier RCP4.5-Representative Concentration Pathways) is
Climate the
considered change
mostisplausible
projected to intensify
climate scenarioin the
for future. The Intergovernmental
India indicates 0.67°C increase
in temperature between
Panel on Climate 2023(IPCC)
Change and 2047. In contrast,
predicts the extreme
a 1.5°C increase scenario
in global RCP5-8.5
temperature
indicates a more alarming situation
above pre-industrial levels with a temperature increase of 1.1°C.
Figure 24. Projections of mean temperature
by the mid-century. Figure under
Figure 24. Projections of different SSPs (0under
mean temperature C) in different
India SSPs (0C)
24 presents projections
SSP1-2.6 SSP2-4.5 SSP3-7.0 SSP5-8.5
of mean temperature
30
for India under different
Shared Socioeconomic 29
Pathways (SSP). The SSP2- 28
4.5, (modification of earlier 27
RCP4.5-Representative 26
Concentration Pathways)
25
is considered the most
24
plausible climate scenario
for India, indicates 0.67°C 23
increase in temperature 22
between 2023 and 2047.
2014
2019
2024
2029
2034
2039
2044
2049
2054
2059
2064
2069
2074
2079
2084
2089
2094
2099
In contrast, the extreme Source: World
World Bank
Bank (2025).
(2025).
Source:
Birthal et al. (2021a) assessed the yield changes for important crops under the RCP
33
4.5 scenario for the medium-term (2040-2060). They reported yield being over 5%
less for paddy, chickpea, pigeon-pea, and rapeseed-mustard than without climate
change. However, under the extreme climate scenario RCP 8.5, difference is
considerably larger for all crops (Table 12). Furthermore, they also found that
climate change may not influence area shares of crops but may result in regional
scenario RCP5-8.5 indicates a more alarming situation with a temperature
increase of 1.1°C.
Birthal et al. (2021a) assessed the yield changes for important crops under
the RCP 4.5 scenario for the medium-term (2040-2060). They reported yield
being over 5% less for paddy, chickpea, pigeon-pea, and rapeseed-mustard
than without climate change (Table 12). However, under the extreme
climate scenario RCP 8.5, the difference is considerably larger for all crops.
Furthermore, they also found that climate change may not influence area
shares of crops but may result in regional shift of some crops. For example,
chickpea shows a strong tendency to shift to southern region from north-
western and central regions.
Table 12. Impacts of climate change on crop yields in medium term
(2040-2060) (%)
Winter crops Rainy crops
Climate Rapeseed- Pigeon-
Wheat Chickpea Barley Paddy Maize Millets Groundnut Cotton
scenario mustard pea
RCP4.5 -3.1 -6.61 -5.08 -3.76 -5.52 -4.72 -3.92 -5.97 -3.8 -1.83
RCP8.5 -7.08 -15.1 -11.59 -8.59 -21.22 -18.13 -15.06 -22.95 -14.6 -7.03
Source: Birthal et al. (2021a).
The ripple effects of extreme climate events extend beyond the farm, affecting
the entire agricultural supply chain, leading to reduced food availability and
increased price volatility. In the absence of adequate food security measures,
this situation may lead to an increase in poverty rates and the prevalence
of malnutrition, particularly among women and children (Hazrana et al.,
2025).
4.6 Environmental pollution due to agricultural byproducts
India’s agricultural sector generates huge quantities of byproducts, with crop
residues and dung being the major components. Crop husbandry produces
approximately 755 million tons of crop residues annually, with two-thirds
utilized for various purposes such as animal feed, fuel, and construction
materials. However, of the remaining one-third approximately three-fourths
being burnt. This practice releases particulate matter and noxious gases into
the atmosphere. The livestock sector, comprising 303 million ruminants (i.e.,
cattle and buffaloes), generates approximately 1271 million tons of dung
annually, of which one-third is utilized as cooking fuel in rural areas, the
remainder is primarily used as manure.
The management of these agricultural byproducts presents significant
challenges. The current practices of crop residue burning and unscientific
34
manure management cause environmental pollution and health hazards.
Open field burning of crop residues also negatively impacts soil health and
microbial populations. Similarly, inefficient manure management practices
result in increased greenhouse gas emissions, particularly methane.
4.7 Underdeveloped markets and value chains
India’s agri-food production system has transitioned from subsistence to
commercial production, with farmers marketing 46–99% of the output of
different commodities (Table 13). However, the market infrastructure has not
kept pace with this trend. There has been little improvement in the number of
regulated markets and their area coverage (Birthal et al., 2024). On average,
one market serves approximately 20000 hectares of net cropped area. The
country also has a significant deficit in storage infrastructure, especially for
perishable commodities, including fruits and vegetables. In 2022-23, it had
a cold storage capacity of 33 million tons, as against a production of 110
million tons of fruits and 213 million tons of vegetables.
Table 13. Disposal of marketed surplus to different agencies, 2018-19
Crop % of % share in marketed surplus
output Local APMC Government Farmer Private All
sold market agencies collectives and
others
Paddy 70.6 62.4 4.7 16.8 5.1 10.9 100
Wheat 58.1 66.1 12.7 13.5 3.3 4.3 100
Jowar 74.4 89.1 4.0 1.5 0.8 4.6 100
Bajra 55.7 82.4 10.1 3.8 0.0 3.7 100
Maize 81.5 88.1 3.7 1.9 0.5 5.8 100
Ragi 46.3 75.0 19.3 0.0 0.0 5.7 100
Gram 80.7 70.1 15.1 3.1 3.9 7.8 100
Arhar 83.6 72.4 20.6 1.5 0.3 5.2 100
Urad 88.2 86.3 9.3 2.9 0.9 0.5 100
Moong 66.9 85.8 10.9 0.7 0.2 2.4 100
Masur 66.0 76.6 6.5 0.1 6.0 10.8 100
Groundnut 82.9 54.7 18.6 0.6 0.2 26.0 100
Mustard 80.6 75.0 13.2 6.3 0.1 5.4 100
Soybean 85.2 63.1 21.6 6.7 1.0 7.6 100
Coconut 70.7 80.7 3.9 0.0 0.3 15.0 100
Sugarcane 97.7 14.2 3.0 11.2 21.1 50.4 100
Cotton 97.4 61.8 14.3 8.0 0.5 15.2 100
Potato 82.1 84.0 6.3 0.7 0.0 9.0 100
Onion 99.4 87.5 5.2 0.0 0.0 7.4 100
Source: Authors’ estimates using data from GoI (2021b).
35
Inadequate market infrastructure results in reduced market access for farmers,
increased transportation costs, and potential post-harvest losses. This also
contributes to price volatility and diminished bargaining power for farmers,
particularly smallholders. Furthermore, it enhances farmers’ reliance on local
traders to dispose of their produce. Table 13, which also presents the disposal
patterns of farm produce, reveals the significant dependence of farmers on
local traders. Insufficient infrastructure leads to inefficiencies in the supply
chain, higher trade costs, and increased price margins.
The food processing sector is crucial for transformation of raw commodities
into high-value products, reducing post-harvest losses, and enhancing farmers’
income. India is a major supplier of many value-added products such as
frozen bovine meat, marine products, spices, dairy, and fruit pulp to global
markets. This sector has experienced steady growth, driven by rising domestic
and global demand, agricultural surplus, technological advancements,
government support, and export opportunities. Increasing disposable incomes,
urbanization, and changing dietary habits have fuelled growth in demand for
processed foods. Government initiatives, including the Pradhan Mantri Kisan
Sampada Yojana (PMKSY), Production Linked Incentive Scheme (PLIS), and
Pradhan Mantri Formalisation of Micro Food Processing Enterprises (PMFME),
have strengthened the ecosystem.
Despite its potential, the sector faces multiple challenges. Supply chain
inefficiencies, such as weak farm-to-fork linkages and lack of primary
processing, reduce competitiveness. Compliance with global food safety
standards is a major hurdle for small and medium enterprises (SMEs). High
capital requirements and limited access to credit deter small processors from
scaling operations.
4.8 Excessive policy emphasis on cereals
Government of India has significantly intervened in agricultural markets
through the procurement of farm produce at government-determined, pre-
announced MSP to reduce market uncertainty and price risk for farmers.
However, procurement efforts have primarily concentrated on rice and wheat,
the principal staple crops. The MSP for both rice and wheat (at 2011-12
prices) has experienced a notable increase, particularly since the mid-1990s,
incentivizing farmers to sell their produce to the government procurement
system. In 2022-23, the government procured approximately 57 million tons
of rice and 19 million tons of wheat, representing 42% and 17% of their
respective production levels (Figure 25).
36
for both rice and wheat (at 2011-12 prices) has experienced a notable increase,
particularly since the mid-1990s, incentivizing farmers to sell their produce to the
government procurement system. In 2022-23, the government procured
approximately 57 million tons of rice and 19 million tons of wheat, representing 42%
and 17% of their respective production levels (Figure 25).
Figure
Figure25.
25.Procurement
Procurementof
of rice
rice and
and wheat
wheat
Rice_MSP Wheat_MSP Rice procured(%) Wheat procured(%)
1800 60
MSP (Rs/quintal, 2011-12 prices)
1600
50
1400
% output procured
1200 40
1000
30
800
600 20
400
10
200
0 0
1975-76
1977-78
1979-80
1981-82
1983-84
1985-86
1987-88
1989-90
1991-92
1993-94
1995-96
1997-98
1999-00
2001-02
2003-04
2005-06
2007-08
2009-10
2011-12
2013-14
2015-16
2017-18
2019-20
2021-22
2023-24
Source:
Source: GoI
GoI(various
(variousyears,
years,d).
d).
The disproportionate
The disproportionateemphasis
emphasis of of price
price policy
policy on and
on rice rice wheat
and wheat
has ledhas
to led
their
intensive cultivation and consequently degradation of groundwater
to their intensive cultivation and consequently degradation of groundwater resources,
particularly in Punjab and Haryana (Kishore et al., 2025). Punjab and Haryana
resources,
together particularly
contribute morein than
Punjab
28%and Haryana
to the total (Kishore
procurement et al.,
of 2025).
rice andPunjab
50% of
and Haryana together contribute more than 28% to the total
wheat, approximately double than their share in both crops (Figure 26). procurement of
rice and 50% of wheat, approximately double than their share in productionet
Procurement at the MSP discourages diversification of production portfolios (Negi
al., 2020)
of both and (Figure
crops private26).
investment in markets
Procurement at theand
MSPvalue chains. Moreover,
discourages India’s
diversification
public stockholdings of foodgrains have come under scrutiny by member countries
of the
of production portfolio
World Trade (Negi et(WTO)
Organization al., 2020) and potential
for their private investment in effects
distortionary marketson
and value
global food chains.
markets.Moreover, India’s public stockholdings of foodgrains have
come under scrutiny by member countries of the World Trade Organization
(WTO) for their potential distortionary effects on global food markets.
Figure Figure
Figure
26. 26.distribution
Spatial Spatial
26. Spatial distribution
distribution of production
of production
of production andand and procurement
procurement
procurement of rice
of rice andand
of rice and 2021-22
wheat,
wheat,
wheat, 2021-22
2021-22
Rice Rice Wheat
Wheat
100 100 100 100
PB PB
HR HR PB PB
80 80 80 80
CG CG HR HR
Procurement (%)
Procurement (%)
Procurement (%)
Procurement (%)
MP MP
AP AP
60 60 TL 60 60
TL MP MP
OD OD
50
40 40 40 40
UP UP RJ
TN TN Others
Others 20 20 RJ
20 20 UP UP
WB WB
Others
Others
0 0 0
0
0 10 20 30 0 0 10 10 20 20 30 30 40 40
0 10 20 30
Production Production
Production (%) (%)
Production (%) (%)
Source: GoI (2023).
Note: AP- Andhra Pradesh; CG- Chhattisgarh; HR- Haryana; MP- Madhya Pradesh; OD-
Odisha; PB-Punjab; RJ- Rajasthan; UP- Uttar Pradesh; TN- Tamil Nadu; TL-Telangana; WB-
West Bengal.
37
4.9 Poor market linkages for livestock products
Expansion of market infrastructure for livestock products has not kept pace with
the growth in their production. Most trade in livestock and livestock products
occurs in informal markets. Although dairy cooperatives have experienced
significant expansion; the proportion of milk output procured by them has
increased from 6.6% in 1980-81 to 10% in 2015-16 and subsequently it
remained relatively stable.
Moreover, spread of Figure 27. Spatial distribution of production and
dairy cooperatives procurement of milk, 2022-23
has remained limited 50
to a few regions. GJ
Gujarat accounts for 40
a disproportionate
share (45%) of total 30
Procurement (%)
milk procurement
compared to 9% in
20
production (Figure KT
27). Regional TN
RJ
disparities are also 10 OD KLJH TL BR MH
AP
reflected in the UK
WB
PB
UP
MP
concentration of 0
0 J&K 5
HR
10 15 20
the private dairy HP CG Production (%)
industry (Birthal Source: NDDB (2023).
and Negi, 2012). Note: AP-Andhra Pradesh: BR-Bihar; CG-Chhattisgarh; GJ-Gujarat; HR-
Most private dairy Haryana; HP-Himachal Pradesh; J&K-Jammu & Kashmir; JH-Jharkhand; KT-
Karnataka; KL-Kerala; MP-Madhya Pradesh; MH-Maharashtra; OD-Odisha;
firms are located in PB-Punjab; RJ-Rajasthan; TN-Tamil Nadu; TL-Telangana; UP-Uttar Pradesh;
Punjab, Haryana, UK-Uttarakhand; WB-West Bengal
Uttar Pradesh, and Maharashtra, which have a higher milk production
potential, leaving the eastern and north-eastern regions largely underserved
by cooperatives and private sector. The poultry industry stands out as an
exception, achieving a high level of industrialization (Nanda Kumar et al.,
2022). However, its value chains are predominantly concentrated in the
southern states, including Telangana, Andhra Pradesh, Tamil Nadu, and
Karnataka.
4.10 Lack of targeting of institutional credit
The availability of financial resources enables agricultural producers to adopt
advanced technologies and invest in the agricultural infrastructure. Over the
past five decades, flow of institutional credit to agricultural sector has increased
significantly, from approximately Rs 1219 to over Rs 100000 per hectare of
net cropped area between 1970-71 and 2022-23 (at 2011-12 prices), resulting
in credit intensity (i.e., the ratio of outstanding credit to AgGDP) increasing
38
from 0.05 to 0.48 (Figure 28). Notably, the flow of credit has accelerated
significantly in the past two decades.
However, significant Figure 28. Trend in institutional credit to agriculture
biases exist in credit Rs/ha (2011-12 prices) Intensity
0.6
allocation across
100000
enterprises and 0.5
regions. Animal 80000
Rs/ha at 2011-12 prices
0.4
Credit intensity
husbandry, which
60000
has been driving 0.3
agricultural growth, 40000
0.2
has remained
20000 0.1
underrepresented
in credit allocation, 0 0.0
receiving only 6% of 1985-86
2015-16
1970-71
1973-74
1976-77
1979-80
1982-83
1988-89
1991-92
1994-95
1997-98
2000-01
2003-04
2006-07
2009-10
2012-13
2018-19
2021-22
the total
Source: agricultural
Authors’ estimates based on data GoI (2023) and RBI (2024).
credit (Birthal
However, significant biases exist
Source: in credit
Authors’ allocation
estimates across
based on enterprises,
data GoI (2023) and regions,
RBI (2024).and
and Negi,
thematic emphasis. 2012).Animal husbandry, which has been driving agricultural growth,
Additionally,
has a significant proportion
remained underrepresented in credit(60%) of thereceiving
allocation, total credit
onlyis6%allocated to
of the total
meet short-term
agricultural creditfinancial requirements,
(Birthal and Negi, 2012). ignoring the long-term
Additionally, requirements
a significant proportion
(60%) of theformation.
for capital total credit is allocatedcredit
Furthermore, to meetpolicyshort-term financial requirements,
has predominantly focused on
ignoring the long-term requirements for capital formation. Furthermore, credit
productivity enhancement, neglecting risk management,
policy has predominantly focused on productivity enhancement, neglecting risk
which is becoming
increasingly which
management, crucialis becoming
due to climate change.
increasingly crucialFinally,
due to aclimate
significant
change. regional
Finally,
aimbalance
significant exists
regionalin imbalance
credit disbursements,
exists in creditwith the southern
disbursements, with states having
the southern
states having disproportionately
disproportionately higher credit higher credit(Figure
intensity intensity
29).(Figure 29).
Figure
Figure29.
29.Regional
Regional disparities in credit
disparities in credit intensity
intensity
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
Kerala
Tamil Nadu
Telangana
Haryana
Bihar
Odisha
Jharkhand
NE region
Karnataka
Uttar Pradesh
Rajasthan
Punjab
Jammu & Kashmir
Andhra Pradesh
Maharashtra
Himachal Pradesh
Gujarat
Goa
A&N Island
Uttarakhand
West Bengal
Madhya Pradesh
Chhattisgarh
Assam
Source:AsAsforforFigure
Source: Figure
28.28.
The implications of these patterns are evident.
39 Neglecting high-value sectors, such
as animal husbandry and fisheries, could result in missed opportunities to accelerate
agricultural growth, enhance farmers’ income, reduce poverty and combat
undernutrition. Emphasis on productivity enhancement at the expense of risk
management renders farmers vulnerable to climate-related challenges. Regional
The implications of these patterns are evident. Neglecting high-value sectors,
such as animal husbandry and fisheries, could result in missed opportunities
to accelerate agricultural growth, enhance farmers’ income, reduce poverty
and combat undernutrition. Emphasis on productivity enhancement at the
expense of risk management renders farmers vulnerable to climate-related
challenges. Regional disparities in credit disbursements may exacerbate
existing economic inequalities among states. An insufficient emphasis on long-
term credit may adversely affect capital formation in agriculture, essential for
long-term sustainability of agricultural growth.
4.11 Underfunding of agricultural R&D
Agricultural research, a remedy to multiple challenges, has remained
underfunded in India. In 2022-23, the country spent Rs 127 billion (at 2011-
12 prices) on agricultural research, nearly quadrupling the amount spent
in 1990-91 (Figure 29). Nevertheless, as a proportion of agricultural gross
domestic product (AgGDP), it seldom exceeded 0.7%. After attaining a peak
of 0.71% in 2011-12, it declined to 0.43% in 2022-23, not even half of the
global average of 0.93% and considerably less than 1-5% in several developed
countries (Jayne et al., 2023). It is noteworthy that India has yet to attain a
research intensity of one percent that developed countries like the US had in
the 1960s (FAO, 2023).
Similarly, agricultural extension system remains inadequately developed to
address the farmers’ growing requirements of technical advice and information.
Approximately half of farm households have access to technical advice or
information, but only a small proportion (10%) relies on the government
extension system (Kandpal et al., 2024). The expenditure on public extension
system comprises approximately 0.12% of the AgGDP, or one-fifth of the total
R&D expenditure (Figure 30).
Moreover, both research and extension efforts have predominantly
concentrated on crops, whereas livestock and fisheries, which have been
driving agricultural growth, have received significantly less resources than
their economic contributions (Figure 31). In addition, the allocation of both
research and extension resources to natural resources is minimal. Inadequate
resource allocation for research on livestock and fisheries could result in
missed opportunities for diversification-driven agricultural growth, which is
crucial for reducing poverty and addressing malnutrition. Insufficient funding
for research on natural resources may compromise the long-term sustainability
of agriculture.
40
Approximately half of farm households have access to technical advice or
information, and of these, only a small proportion (10%) rely on the government
extension system (Kandpal et al., 2024). The public extension system accounts for
approximately 0.12% of the AgGDP, or one-fifth of the total R&D expenditure (Figure
30).
Figure
Figure30.
30.Trends
Trendsininpublic
public investment in agricultural
investment in agriculturalR&D
R&D
Research expenditure Extension expenditure
Research intensity (%) Extension intensity (%)
200 0.8
180 0.7
prices
160
0.6
(Rs billions)
140
at 2011-12
0.5
% of AgGDP
120
100 0.4
Expenditure
80 0.3
Rs billion
60
0.2
40
20 0.1
0 0.0
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
2021-22
2022-23
Source:
Source:Authors’
Authors’estimates
estimatesbased
basedonondata
datafrom
fromGoI
GoI(various years,
(various i), i),
years, and GoIGoI
and (various years,
(various a). a).
years,
Moreover,
Figure 31.both research
Sectoral and extension
allocation ofof efforts haveR&Dpredominantly concentrated on
Figure
Figure
crops, 31.
31.
whereas Sectoral
Sectoral
livestockallocation
allocation
and fisheries, ofagricultural
agricultural
agricultural
which R&D
have been
investment,
R&Ddriving
investment,
investment, 2019-2023
2019-2023
2019-2023
agricultural growth,
have received Research
significantly
Research
Research less resources than their economic Extension
Extension
contributions (Figure
Extension
31). In addition, the allocation of both research and extension resources to natural
Fisheries Soil
Soil&&water
FisheriesInadequate water Fisheries
Fisheries Soil
Soil&&water
water
resources is minimal.
Livestock
Livestock resource allocation for research
conservation
conservation 2%
2% on livestock
conservationand
conservation
9% 2%
2% Livestock
Livestock
9% result in missed opportunities for diversification-driven agricultural
fisheries could 2%
2% 6%
6% 0.23%
0.23%
growth, which is crucial for reducing poverty and addressing malnutrition.
Insufficient funding for research on natural resources may compromise the long-term
sustainability of agriculture.
Crops
Crops Crops
Crop
Crop
87%
87% s92%
s…
…
Source:GoI
Source:
Source: GoI
GoI (various
(various
(various years,
years,
years, i).i).
i). 54
Significantregional
Significant
Significant regionaldisparities
regional disparities exist
existininR&D
in R&Dexpenditure.
R&D expenditure.
expenditure. States in the
States
States in Himalayan
in the
the Himalayan
Himalayan
region,
region,
region,including
including
including Jammu
Jammu
Jammu &&Kashmir,
Kashmir,
& Kashmir,Himachal
Himachal Pradesh,
Pradesh,
Himachal and
andUttarakhand,
Pradesh, Uttarakhand, along
alongwith
and Uttarakhand, with
Kerala,
Kerala,
along Assam,
Assam,
with and
andBihar,
Kerala, Bihar,
Assam,allocate
allocate aahigher
higher
and Bihar, percentage,
percentage,
allocate ranging
ranging
a higher from
from0.80%
percentage, 0.80% to
to1.45%
ranging1.45%
of
of their
their
from agricultural
agricultural
0.80% to 1.45% GDP
GDP of
(Figure
(Figure
their 32).
32). Tamil
Tamil Nadu,
agricultural Nadu,
GDPHaryana,
Haryana, Meghalaya,
Meghalaya,
(Figure 32). Mizoram,
Mizoram,
Tamil Nadu,
Tripura,
Tripura, Karnataka,
Karnataka, Maharashtra,
Maharashtra, Jharkhand,
Jharkhand, andand Gujarat
Gujarat allocate
allocate between
between 0.50%
0.50%
Haryana, Meghalaya, Mizoram, Tripura, Karnataka, Maharashtra, Jharkhand,
and
and 0.69%
0.69% ofof their
their agricultural
agricultural GDP.
GDP. Conversely,
Conversely, the the allocation
allocation isis less
less than
than 0.25%
0.25% in
in
and Gujarat
Odisha,
Odisha, allocate
Rajasthan,
Rajasthan, between
Madhya
Madhya 0.50%West
Pradesh,
Pradesh, and 0.69%
West Bengal,ofand
Bengal, theirUttar
and agricultural
Uttar Pradesh,
Pradesh,GDP.which
which
Conversely,
collectively
collectively the allocation
account
account for
for 43%
43% ofis the
of less than 0.25%
the country's
country's net in
net sownOdisha,
sown area. Rajasthan, Madhya
area.
Pradesh, West Bengal, and Uttar Pradesh, which collectively account for 43%
Unfortunately,
Unfortunately,
of the country’s spending
spending
net sownon
on area.
agricultural
agricultural R&D
R&D has
has not
not only
only remained
remained much
much less
less than
than
the
the desired
desired level
level of
of approximately
approximately one one percent
percent ofof AgGDP,
AgGDP, but but also
also has
has fluctuated
fluctuated
over
over time.
time. Agricultural
Agricultural research
research isis capital-intensive
capital-intensive and and involves
involves aa prolonged
prolonged
gestation
gestation period;
period; hence,
hence, insufficient
insufficient investment
investment coupled
coupled with
with significant
significant
fluctuations
fluctuations cancan potentially
potentially impede the41continuity
impede the continuity of
of scientific
scientific progress,
progress, which
which in
in
turn
turn affect
affect food
food and
and nutritional
nutritional security,
security, and
and farmers’
farmers’ livelihoods.
livelihoods.
Unfortunately, spending on agricultural R&D has not only remained much
less than the desired level of approximately one percent of AgGDP, but also
has fluctuated over time. Agricultural research is capital-intensive and involves
a prolonged gestation period; hence, insufficient investment coupled with
significant fluctuations can potentially impede the continuity of scientific
progress, which in turn affect food and nutritional security, and farmers’
livelihoods.
Figure 32. State-wise spending on R&D as percent
of AgGDP, 2011-2020
Research Extension
Jammu & Kashmir 1.20 0.25
Himachal Pradesh 1.12 0.22
Bihar 0.41 0.68
Uttarakhand 0.92 0.14
Kerala 0.63 0.30
Assam 0.56 0.24
Tamil Nadu 0.49 0.20
Meghalaya 0.30 0.35
Haryana 0.34 0.30
Mizoram 0.44 0.15
T r i p u r a 0.01 0.58
Karnataka 0.47 0.07
Maharashtra 0.41 0.11
Jharkhand 0.31 0.20
Gujarat 0.41 0.09
Arunachal Pradesh 0.28 0.15
Andhra Pradesh 0.40 0.02
Punjab 0.31 0.08
Nagaland 0.19 0.17
S i k k i m 0.00 0.36
Chhattisgarh 0.23 0.10
Uttar Pradesh 0.10 0.15
Manipur 0.12 0.12
G o a 0.07 0.16
West Bengal 0.08 0.11
Madhya Pradesh 0.07 0.09
Rajasthan 0.11 0.02
Odisha 0.09 0.03
0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60
Source: As for Figure 30.
4.12 Lack of sustained investment in agriculture
Public expenditure on the agricultural sector, measured in 2011-12 prices,
has increased considerably from a modest Rs 452 billion in 1990-91 to
Rs 7491 billion by 2020-21 (Figure 33). However, this trend has not been
42
uniform. The period spanning 1990-91 to 2002-03, experienced slow growth
in public investment. Thereafter, there was a more pronounced increase in
it, but with significant fluctuations. It reached its peak in 2020-21, possibly
due to increased government support to agriculture during the COVID-19
pandemic. However, this peak was followed by an equally sharp decline,
with investment dropping to Rs 4927 billion in 2022-23.
Figure 33. Trend in public sector investment in agriculture
Figure 33. Trend in public sector investment in agriculture
Public expenditure on Cgriculture Share
share of agricultural expenditure in total (%)
8000 7
7000 6
6000
prices
5
(Rs billions)
% share in total
5000
at 2011-12
4
4000
3
Total
3000
Rs billion
2
2000
1000 1
0 0
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
2021-22
2022-23
Source: As
Source: As for
forFigure
Figure31.
31.
Nonetheless, as
Nonetheless, proportion of
as a proportion of the
thetotal
totaldevelopment
developmentexpenditure,
expenditure,agriculture’s
agriculture's
share did not exceed 6% (Figure 34). It remained between 5% and 6% during the
share seldom exceeded 6% (Figure 34). It remained between 5% and 6%
1990s, followed by a gradual decline, reaching a minimum of 2.1% in 2006-07. It
during the 1990s,
subsequently followed
increased by a gradual
but remained below decline,
4% untilreaching
2019-20.aThereafter,
minimum it ofrose
2.1%to
in 2006-07.
5.3% It subsequently
in 2020-21. This pattern increased but remained
of expenditure indicates below 4%
a lack of until 2019-20.
a sustained policy
emphasis onitagriculture
Thereafter, in development
rose to 5.3% in 2020-21.planning.
This pattern of expenditure indicates a
lack of a sustained
Furthermore, policy emphasis
the investment prioritiesonhave
agriculture
undergonein significant
development planning.
changes over the
past three decades. The share of storage and warehousing in the total investment
Furthermore,
has more than the investment
doubled, reachingpriorities have undergone
51% in 2020-23 from 23% in thesignificant changes
early 1990s. Crop
over the past
husbandry three
remains decades. The component,
the second-largest share of storage and its
consolidating warehousing
share to 31%in in
2021-23 from 24% in 1991-93. Nevertheless, these increases
the total investment has more than doubled, reaching 51% in 2020-23 have occurred at the
expense of other activities. Animal husbandry and dairy development have
from 23% in the early 1990s. Crop husbandry remains the second-largest
experienced a substantial decrease in their share, from 11% to a mere 3%. Likewise,
component, consolidating
the share of fisheries and soilits
andshare
watertoconservation
31% in 2021-23 from
has been 24% in
reduced 1991-93.
significantly.
Of particular concern is the decline in allocation for agricultural
Nevertheless, their shares have increased at the expense of other activities. R&D from 6% to
2.3%.
Animal husbandry and dairy development have experienced a substantial
decrease in their
These changes share,
reflect from 11%
concerns to the
about 3%.agricultural
Likewise, share of long-term
sector's fisheries and soil
viability
and
and water
abilityconservation
to diversify has beenasreduced
as well significantly.
the potential Of particular
consequences concern
for both rural
communities'
is the declinelivelihoods and ongoing
in allocation efforts for
for agricultural environmental
R&D from 6% topreservation.
2%. Failure
to prioritize livestock and fisheries sectors may lead to undernutrition, fewer
economic prospects for farmers, and reduce agricultural growth. Similarly,
insufficient allocation for natural resource management may thwart efforts to check
43
the degradation of land, water and biodiversity. Moreover, underinvestment in
agricultural research can impede innovation, limiting the capacity of the agricultural
sector to adapt to the changing market demands and emerging challenges of climate
change.
These changes reflect concerns about the agricultural sector’s long-term
viability and ability to diversify as well as the potential consequences for
both rural communities’ livelihoods and ongoing efforts for environmental
preservation. Failure to prioritize livestock and fisheries sectors may lead to
undernutrition, fewer economic prospects for farmers, and reduce agricultural
growth. Similarly, insufficient allocation for natural resource management
may thwart efforts to check the degradation of land, water and biodiversity.
Moreover, underinvestment in agricultural research can impede innovation,
limiting the capacity of the agricultural sector to adapt to the changing market
demands and emerging challenges of climate change.
Figure 34. Composition of agricultural development expenditure
1990-93 2020-23
Agricultural
Agricultural
OtherOther financial
financial Co-operation
Co-operation OtherOther
agricultural
agricultural institutions
institutions 3% 3% Agricultural
Agricultural agricultural
agricultural
programmes
programmes 0.25% 0.25% financial
financial programmes
programmes
11% 11% Agricultural
Agricultural institutions
institutions 2% 2%
research
research
& & 3% 3%
Co-operation
Co-operation education
education Soil &
Soil
water
& water
8% 8% 2% 2% conservation
conservation
Soil &
Soil
water
& water 1% 1%
CropCrop CropCrop
Agricultural
Agricultural conservation
conservation
husbandry
husbandry husbandry
husbandry
research
research
& & 4% 4% Animal
Animal
24% 24% 31% 31%
education
education
husbandry
husbandry
6% 6% Animal
Animal 3% 3%
husbandry
husbandry
FoodFood
storage
storage
& & 6% 6% FoodFood
storage
storage
& &
warehousing
warehousing
warehousing
warehousing Fisheries
Fisheries
23% 23% DairyDairy
51% 51% 1% 1% DairyDairy
development
development
development
development
5% 5%
Fisheries
Fisheries 0.5%0.5%
Plantations
Plantations
Forestry & 1%
Forestry & 1% 0% 0% Forestry
Forestry
& &
Plantations
Plantations
wildlife
wildlife wildlife
wildlife
0.58%0.58%
11% 11% 3% 3%
Source:
Source:
Source: As
AsAs
for
forfor
Figure
Figure
Figure31.31.
31.
Furthermore, there is significant regional variation in agricultural investment
(Figure 35). Himachal Pradesh, Uttarakhand, Tripura, Andhra Pradesh,
Nagaland, Meghalaya, Rajasthan, and Karnataka allocate approximately 5%
of their total development expenditure to agricultural sector, aligning closely
with the national average. On the other hand, Bihar, Uttar Pradesh, West
Bengal, Haryana, Manipur, Gujarat, Jharkhand, Assam, and Jammu & Kashmir
allocate less than the national average. Notably, Chhattisgarh and Telangana
accord a very high priority to agriculture in development planning, allocating
16% and 11% of their total development expenditure, respectively.
44
Gujarat, Jharkhand, Assam, and Jammu & Kashmir allocate less than the national
average. Notably, Chhattisgarh and Telangana accord a very high priority to
agriculture in development planning, allocating 16% and 11% of their development,
respectively.
Figure35.
Figure 35.%%share
shareof
ofagriculture
agriculture in
in total
total expenditure,
expenditure,2020-2023
2020-2023
Chattisgarh 15.8
Telangana 10.7
Punjab 7.4
Maharashtra 6.9
Odisha 6.6
Madhya Pradesh 6.5
Mizoram 6.4
Tamil Nadu 6.3
Arunachal Pradesh 6.1
Sikkim 6.1
Himachal Pradesh 5.8
Uttarakhand 5.2
Tripura 5.1
Andhra Pradesh 5.1
Kerala 5.1
Nagaland 5.0
Meghalaya 5.0
Rajasthan 4.9
Karnataka 4.9
Jammu & Kashmir 4.5
Assam 4.5
Jharkhand 4.1
Gujarat 3.8
Manipur 3.7
Haryana 3.4
West Bengal 3.1
Uttar Pradesh 2.8
Goa 2.8
Bihar 2.5
0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0
Source: As for Figure
Source: Figure 31.
31.
58
45
5 Reshaping Agricultural
Policies
The assessment of the current policy frameworks in light of the changing
economic landscape and environmental challenges suggests the need for
a fundamental shift in agricultural policies. This paradigm shift is crucial
to effectively address and adapt to emerging challenges, capitalize on new
opportunities, and meet evolving societal needs. The new policy paradigm
must balance among ensuring food security, preserving natural resources, and
protecting farmers’ interests.
5.1 Enhance and prioritize public investment in agriculture
Inadequate and inconsistent public investment slows down improvements
in infrastructure, markets, institutions, and R&D systems, which may
consequently lead to low agricultural productivity and susceptibility to
climate shocks, ultimately adversely affecting farmers’ livelihoods and
food and nutrition security. Hence, a renewed emphasis on agriculture in
developmental planning is imperative to achieve the desired objective of
efficient, sustainable, and inclusive transformation of agri-food system.
Furthermore, it is important to prioritize investment in the agricultural sector
to maximize its efficiency and social outcomes. While it is indisputable
that investment in post-harvest management infrastructure is essential to
support agricultural growth, investment in activities that enhance agricultural
productivity and farmers’ income, preserve natural resources, and mitigate
climate risks remains critical. The livestock and fisheries offer particularly
promising opportunities for accelerating growth, improving nutrition, and
alleviating poverty. Nonetheless, a decline in their may restrict the realization
of their production potential. Notably, growth in the livestock production has
largely been driven by an increase in the number of animals. This approach
is unsustainable and puts additional pressure on already strained resources.
Feed and fodder scarcity is the main constraint. The country is deficit in all
types of feed: dry fodder (23%), green fodder (11%), and concentrate feed
(29%) (USDA, 2023). The shortage is expected to worsen owing to competing
demands for land and climate change impacts. Furthermore, the livestock sector
confronts the challenge of inadequate animal breeding services, as evidenced
by the low success rate of approximately 35% for artificial insemination.
The diminishing utility of male cattle due to decreasing landholdings and
47
increased mechanization of agricultural operations necessitates promotion of
sex-sorted semen technology, which offers producers a choice of offspring
(Thakur and Birthal, 2023). Furthermore, improving the efficiency of animal
health services is crucial given the significant prevalence of foot and mouth
disease (FMD) and the emergence of diseases such as lumpy skin disease
(LSD).
The fishery subsector, which has also experienced a rapid growth in the recent
decade, is facing significant challenges. Overexploitation of marine resources
has resulted in declining fish stocks, while environmental degradation
poses a threat to aquatic ecosystems. Inadequate post-harvest infrastructure
further exacerbates these issues, leading to substantial losses and reduced
quality of fish products. It is therefore, essential to reorient the production
landscape towards cage farming and mariculture, and invest in post-harvest
infrastructure.
Management of natural resources and addressing climate change impacts
must be critical priorities for sustainable development of agriculture. As
temperatures continue to rise and extreme weather events become more
frequent, the need for effective resource management and climate adaptation
strategies has become increasingly important. Natural resources, including
land and water, are under pressure from population growth, urbanization,
and economic development.
5.2 Holistic management of water-energy nexus
Sustainable agricultural development necessitates a comprehensive approach
to the water-energy nexus. This entails strategies, such as the capture and
storage of rainfall water, enhancement of groundwater recharge, diversification
of crop portfolios, and application of efficient irrigation methods, including
pressurized systems, to reduce water consumption.
Improving water use efficiency can significantly address growing water scarcity.
There is significant potential to enhance water use efficiency from the current
35-40% to 60%. A 10% increase in water use efficiency could irrigate an
additional 14 million hectares (Swaminathan, 2006). Towards this, Pradhan
Mantri Krishi Sinchayee Yojana (PMKSY) aims to enhance irrigation coverage
and promote water-efficient practices, including pressurized irrigation systems
such as drips and sprinklers (Srivastava et al., 2024a). Although there has been
a notable expansion in area under pressurized irrigation, the potential remains
underutilized (Figure 36). Only 18% of the potential 88 million hectares for micro-
irrigation has been exploited. Currently, micro-irrigation saves approximately
11 billion cubic meters of groundwater; if fully harnessed, approximately 65
BCM of groundwater can be conserved, which can irrigate 33 million hectares
or can be used for other purposes (Srivastava et al., 2024a).
48
(Figure 36). Only 19% of the potential 88 million hectares for micro-irrigation has
been exploited. Currently, micro-irrigation saves approximately 11 billion cubic
meters of water; if fully harnessed, approximately 65 BCM of water can be
conserved, which can irrigate 33 million hectares or can be used for other purposes
(Srivastava et al., 2024).
Figure 36.36.
Figure Trend in in
Trend micro-irrigation, million
micro-irrigation, millionhectares
ha
16 15.59
14
12
10
7.78
8
6 PMKSY-PDMC
4.47
4
2.22 NMMI
2 NMSA
0.23 NHM, CSMI
RKVY
0
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
Source:
Source:Srivastava
Srivastavaetetal.
al.(2024a).
(2024a).
Note: NHM- National Horticulture Mission, CSMI- Centrally Sponsored Scheme on Micro-Irrigation,
Note: Rashtriya
RKVY- NHM- National Horticulture
Krishi Vikas Yojana,Mission, CSMI- Centrally
NMMI-National Mission onSponsored SchemeNMSA-
Micro-Irrigation, on Micro-
National
Irrigation,
Mission RKVY- Rashtriya
on Sustainable Krishi PMKSY-
Agriculture, Vikas Yojana,
PradhanNMMI-National Mission Yojana,
Mantri Krishi Sinchayee on Micro-Irrigation,
PDMC- Per Drop
NMSA-
More National Mission on Sustainable Agriculture, PMKSY- Pradhan Mantri Krishi Sinchayee
Crop.
Yojana, PDMC- Per Drop More Crop.
Rejuvenating canal
Rejuvenating canal irrigation
irrigation is
is crucial for
for reducing
crucial 60 reducing pressure
pressureonongroundwater
groundwater
resources. This requires a significant increase in investment for thethe
resources. This requires a significant increase in investment for operation
operation and
and maintenance
maintenance of canals,
of canals, whichwhich has declined
has declined in recent
in recent decades
decades (Figure
(Figure 37).37).
The
conjunctive use of use
The conjunctive surface water and
of surface groundwater
water can preventcan
and groundwater falling groundwater
prevent falling
levels.
groundwater levels.
Figure
Figure37.
37.Trend
Trendininexpenditure
expenditureon
on major
major and medium
mediumirrigation
irrigationprojects
projects
Total (Rs billion) Capital (%) Working (%)
800 100
% SHARE OF CAPTIAL AND WORKING EXPENSES
% share of captial and working expenses
700
80
Rs billion at 2011-12 prices
RS BILLION AT 2011-12 PRICES
600
500
60
400
40
300
200
20
100
0 0
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2019-20
2020-21
2021-22
2018-19
Source:As
Source: Asfor
forFigure
Figure31.
31.
The integration of digital innovations (e.g., sensors and IoT-enabled controllers) in
49
irrigation systems offers solutions for conserving water and electricity resources.
Vatta et al. (2018) showed that the use of tensiometers for irrigation scheduling can
reduce the consumption of water and electricity by approximately 13%.
Effective management of groundwater resources is unlikely to be achieved without
The integration of digital innovations (e.g., sensors and IoT-enabled
controllers) in irrigation systems offers solutions for conserving water and
electricity resources. Vatta et al. (2018) showed that the use of tensiometers
for irrigation scheduling can reduce the consumption of water and electricity
by approximately 13%.
Effective management of groundwater resources is unlikely to be achieved
without simultaneous reforms in the power sector. Gradual reduction or
targeting electricity subsidies to those who require them can help promote
the efficient use of energy and conservation of water resources. The
implementation of a tiered volumetric pricing system of water can help reduce
the area under water-guzzling crops, such as paddy (Figure 38), and thus a
significant reduction in water consumption (Figure 39).
Figure 38.
Figure 38.Water
Waterpricing
pricing and
and cropping patternininPunjab
cropping pattern Punjab
Wheat Rice Maize Others
8.0
1.31
1.29 1.29 1.29 1.29 1.33 1.37 1.29 1.33 1.39 1.57 1.57
7.0
0.14
0.11 0.11 0.11 0.11 0.11 0.11 0.11 0.11
0.50
6.0 0.64 0.65
Million ha
3.18
5.0 3.20 3.20 3.20 3.20 3.19 3.11 3.20 3.10
2.64
2.46 2.46
4.0
3.0
2.0
3.52 3.37 3.37 3.37 3.37 3.34 3.39 3.37 3.44 3.44 3.29 3.29
1.0
0.0
Rs 1 Rs 2 Rs 3 Rs 4 Rs 5 Rs 1 Rs 2 Rs 3 Rs 4 Rs 5
Current Resource Uniform volumetric water pricing @ Differentiated volumetric water pricing @
reallocation
Source: Chand
Source: Chandetetal.
al.(2022).
(2022).
Note: Resource reallocation indicates
Note: Resource reallocation indicates optimization
optimization with with existing
existing policies;
policies; uniformuniform water
water pricing
pricing
means charging unfirmly from all the farmers; differentiated pricing implies that those who use those
means charging unfirmly from all the farmers; differentiated pricing implies that water
who use water
over and above over
4488 and above
m3/ha 4488
pay for an m
3
/ha pay tariff,
additional for anwhile
additional
those tariff, while
using less those
than thisusing less
pay lower
than
tariff.this pay lower tariff.
Figure 39. Impact of volumetric pricing on water use (BCM) in Punjab
Uniform Differentiated
34
33
32
31
30
29 50
28
27
26
25
24
Existing Optimium 1 2 3 4 5
Note: Resource reallocation indicates optimization with existing policies; uniform water pricing
means charging unfirmly from all the farmers; differentiated pricing implies that those who use water
over and above 4488 m3/ha pay for an additional tariff, while those using less than this pay lower
tariff.
Figure 39.39.Impact
Figure Impactofofvolumetric
volumetricpricing
pricing on
on water usein(BCM)
water use in (BCM)
Punjab Punjab
Uniform Differentiated
34
33
32
31
30
29
28
27
26
25
24
Existing Optimium 1 2 3 4 5
(current water
policy) Volumetric water prices (Rs./m3)
Source:Source:
Chand Chand
et al. (2022).
et al. (2022).
Similarly, the implementation
Similarly, of a oftiered
the implementation electricity
a tiered tariff
electricity tariffsystem
systembased
based on
on crop
water crop
requirements is another promising approach. Figure 40 presents
water requirements is another promising approach. Figure 40 presents the energy
the energy requirements for two different groundwater environments in
Uttar Pradesh: shallow groundwater (Sitapur district), and deep groundwater
62
(Baghpat district). There is a significant variation in electricity requirements
across regions and farm sizes. In shallow groundwater areas, 80% of farmers,
particularly those with marginal and small landholdings, require less than
400 kWh per month. Conversely, in deep groundwater areas, only 28% of
the farmers require 460 kWh monthly. This marked disparity underscores the
necessity of a targeted subsidy approach that considers variations in water
requirements and water levels.
Figure 40. Required electric power to meet irrigation requirement of
existing cropping pattern in Uttar Pradesh
Shallow groundwater Deep groundwater
1400
1400 7.0
7.0 1500
1500 5.0
5.0
1200
1200 6.0
6.0
Required
Requiredenergy
energy 1200
1200 Required
Required energy
energy 4.0
4.0
1000
1000 5.0
5.0
Farm
Area size
Area (Axis-II)
(Axis-II)
Farm size
Kwh/month
Kwh/month
Kwh/month
Kwh/month
Area
Area(Axis-II)
(Axis-II)
Hectare
Hectare
Hectare
800
800 4.0
4.0 900
900 3.0
3.0
600
600 3.0
3.0 600
600 2.0
2.0
400
400 2.0
2.0
300
300 1.0
1.0
200
200 1.0
1.0
00 0.0
0.0 00 0.0
0.0
00 25
25 50
50 75
75 100
100 00 25
25 50
50 75
75 100
100
Percent
Percentof
offarmers
farmers Percent
Percent of
of farmers
farmers
Source: Srivastava et al. (2024b).
51
one of the most significant approaches for addressing the energy scarcity challenge.
Srivastava et al. (2024) have calculated that solarization of existing groundwater
pumps has a capacity to generate 102 Gigawatt (GW) of energy. However, only one
percent of this has been exploited with the installation of approximately 500,000
solar pumps (Figure 41). If all water pumps are solarized, it will not only address the
challenge of energy security, but also reduce CO2 emissions by 45 million per annum
from approximately
Redirecting subsidies one to million tons at present.
Figure 41. Trend in solar pumps for irrigation
renewable energy sources Figure 41. Trend in solar (number)
pumps for irrigation (number)
such as solar and wind
501673
power is one of the most
significant approaches
334886
for addressing the energy
272700
237120
scarcity challenge.
147527
Srivastava et al. (2024a)
100521
have calculated that
61834
29669
solarization of existing
11626
groundwater pumps has a
capacity to generate 102 2013 2014 2015 2016 2017 2019 2020 2021 2022
Gigawatt (GW) of energy. Source: Srivastava et al. (2024a).
Source: Srivastava et al. (2024a).
However, only one percent
of this has been exploited with the installation
63 of approximately 500,000 solar
pumps (Figure 41). If all water pumps are solarized, it will not only address
the challenge of energy security, but also reduce CO2 emissions by 45 million
per annum from approximately one million tons at present.
5.3 Repurpose fertilizer subsidies
The current subsidy regime disproportionately favors the use of N over P and
K, resulting in nutrient imbalance and adverse effects on the soil and water
health. To promote balanced application of NPK, it is imperative to align the
subsidy structure with the nutrient requirements of various crops and soil
conditions. The Government of India has implemented several initiatives to
optimize fertilizer utilization. The most recent intervention is the provision of
Soil Health Cards (SHCs), which provides comprehensive information on soil
nutrients. However, given the increasing trend in the consumption of different
fertilizers without balanced application, this initiative appears to have been
ineffective. This can be attributed to the linkining of subsidized fertilizers
with the Aadhar Cards rather than SHCs. Mandatory linking of the distribution
of fertilizer subsidies to SHCs can be a significant intervention for improving
soil health.
Nano-fertilizers have the potential to enhance fertilizer use efficiency,
potentially resulting in a reduction in fertilizer consumption. The use of
unmanned aerial vehicles, such as drones, for fertilizer application may further
contribute to the reduction in fertilizer use. Furthermore, the Government of
India’s initiative to establish 10,000 Bioinput Resource Centers will promote
52
local bioinputs, including organic fertilizers. The promotion of natural farming
represents another significant intervention aimed at restoring soil health.
These interventions are likely to improve soil health and decrease the burden
of the subsidies.
The reallocation of fertilizer subsidy expenditures to environmentally friendly
agricultural practices, such as the incorporation of legumes in cropping
systems, conservation tillage, biofertilizers, and biostimulants, can address
environmental concerns and promote sustainable agriculture (Kumara et al.,
2024).
Carbon trading presents a potential mechanism to incentivize farmers to adopt
sustainable farming practices. However, carbon markets in agriculture face
numerous challenges. A significant obstacle lies in accurate quantification and
valuation of ecological services provided by sustainable farming techniques.
This necessitates the use of monitoring technologies, standardized carbon
accounting methodologies, and rigorous validation procedures to ensure the
veracity of carbon credits. Moreover, it is imperative to establish institutional
frameworks to facilitate payments of carbon credits to farmers. Recognizing
the potential of carbon markets, the Government of India has initiated efforts
to develop protocols that provide a regulatory framework for carbon trading
within the agricultural sector.
5.4 Crop planning
Crop diversification is one of the best options for sustainable development
of agriculture. It offers several benefits, including mitigation of climate risks,
reduced infestation of insect pests, improved resource use efficiency, and
higher and stable farm incomes.
Crop plans are often developed considering local natural resource endowments
and climatic conditions. However, such resource-based crop planning is an
essential but not a sufficient condition for crop diversification. Farmers will not
replace an existing crop with another if their potential profits do not match.
For example, in Punjab and Haryana, there are hardly any crops, except fruits
and vegetables, that can generate as much revenue as paddy (Table 14). To
address this challenge, policymakers should consider mechanisms to offset
the potential revenue losses from crop switching. Furthermore, high-value
crops, such as fruits and vegetables, provide significantly higher profits and
must be supported by markets, and finances.
53
Table 14. Economics of cultivation of paddy vis-à-vis other
crops in Punjab, 2019-22
Crop Gross return Cost of cultivation (Rs/ha) Revenue Financial net return
(Rs/ha) terms of (Rs/ha)
trade
Cost A2 CostA2+FL Cost A2 Cost
A2+FL
Punjab
Paddy 136636 48349 54599 1.00 88287 82037
Cotton 142239 52765 60658 0.96 89474 81582
Maize 63921 50663 60475 2.14 13258 3446
Moong 102047 26791 29328 1.34 75256 72719
Haryana
Paddy 134220 47121 55240 1.00 87099 78980
Cotton 78017 35940 50946 1.72 42077 27072
Maize 52914 50833 58079 2.54 2081 -5165
Jowar 71109 50778 94147 1.89 20330 -23038
Bajra 39929 19097 29367 3.36 20832 10562
Moong 17030 9643 12844 7.88 7387 4187
Source: Authors’ estimates using data from GoI (various years, j).
Note: FL represents the imputed value of family labor. Cost A2 includes all actual expenses in
cash and kind in production, including expenses on seeds, fertilizer, manure, labor, insecticides
and pesticides, hired machinery, irrigation charges, land revenue, interest in working capital,
depreciation on implements and machinery, and so on.
5.5 Bundled approach for resilience to climate change
Climate-smart practices, which encompass a range of technologies and
agronomic practices, have the potential to enhance the resilience of
agriculture, while maintaining productivity. Notably, when implemented
independently or in combination, these practices demonstrate a significant
positive impact on agricultural productivity and resilience (Table 15).
Therefore, it is essential to acknowledge the urgency of implementing
climate-smart agricultural programs, with a focus on integrating various
practices that function synergistically to enhance agricultural productivity,
increase resilience to climate risks, and mitigate greenhouse gas emissions.
54
Furthermore, the successful adoption of climate-smart agricultural practices
necessitates the establishment of robust extension services, the utilization of
digital technologies, and the development of knowledge-sharing networks
among farmers, researchers, and policymakers.
Table 15. Average treatment effects of risk management strategies (%)
Strategy Mean farm income Downside risk
Risk mitigation 24.51 -11.20
Risk transfer 14.35 -6.83
Risk coping 10.42 -13.02
Risk mitigation + transfer 40.58 -12.90
Risk mitigation + coping 15.41 -10.86
Risk transfer + coping 16.80 -12.35
Risk mitigation + transfer + coping 32.23 -15.84
Source: Birthal et al. (2021c).
Crop insurance is an important risk-mitigation mechanism. A nationwide
program on crop insurance is implemented in India; however, its coverage
has rarely exceeded 30% of the cultivated area owing to several factors such
as lack of awareness, liquidity constraints, and delay in claims, among others.
However, the primary reason is the uncertain payoff from crop insurance
compared with that from other mitigation measures, such as irrigation. Birthal
et al. (2022) found that the risk and productivity benefits of crop insurance are
lower than those of irrigation (Table 16). However, benefits of crop insurance
and irrigation are almost equal in rainfed environments, but benefits of
insurance are significantly lower in irrigated environments. This regional
variation indicates the need to tailor risk management strategies to specific
agricultural contexts.
Table 16. Average treatment effects of crop insurance vis-a-vis
irrigation (%)
Overall Low rainfall High rainfall
Mean farm income
Insurance 6.91 4.29 11.7
Irrigation 19.74 25.88 12.34
Insurance + irrigation 25.73 32.73 16.85
Downside risk
Insurance -6.84 -5.11 -8.92
Irrigation -13.74 -17.02 -10.22
Insurance + irrigation -16.50 -22.76 -13.81
Source: Birthal et al. (2022).
55
Further, premium for crop insurance is to be paid before the crop-growing
season, when farmers face competing demands on their limited financial
resources. Therefore, farmers tend to prioritize immediate requirements
such as the purchase of seeds and fertilizers, rather than buying an insurance
contract. Until recently, in India, crop insurance was provided as a package,
along with short-term crop loans.
Digital innovations in crop insurance have the potential to significantly
be complemented
enhance farmers’ riskby the deploymentand
management of drone technology
improve for detailed
the overall field-level
efficiency of
assessments, which offers precise and timely information regarding crop conditions.
insurance programs. Satellite-based remote sensing technology for risk zoning
andParametric
premium insurance
differentiation can helpalternative
is an innovative the development of tailored
to traditional area-yieldinsurance
insurance.
products that more
It automates accurately
payouts based on reflect specificweather
predefined risks intriggers,
differentand
agro-climatic
reduces the
requirements
regions. for physical
This approach can be losscomplemented
assessments. Parametric insurance streamlines
by the deployment of drones for the
claims process, enabling faster and more efficient compensation for the farmers.
detailed field-level assessments, which offers precise and timely information
Moreover, decoupling payouts from actual crop losses is an incentive for farmers to
regarding croppractices
adopt best conditions.
to maximize crop yields.
Parametric insurance
5.6 Sustainable is an
increase innovative R&D
in agricultural alternative
investment to traditional area-yield
insurance. It automates payouts based on predefined weather triggers, and
Investment
reduces in agriculturalfor
the requirements R&D has proven
physical highly
loss beneficial on
assessments. many counts.
Parametric Kandpal
insurance
et al. (2024) estimated a payoff of Rs 13.85 for every rupee spent on agricultural
streamlines the claims process, enabling faster and more efficient compensation
research in India (Figure 42). The payoff from animal science research is almost
for twice
the farmers.
that fromMoreover,
crop sciencedecoupling payouts
research. This impliesfrom actual
(i) the need crop losses is
for sustained an
public
incentive for farmers to adopt best practices to maximize crop yields.
investment in agricultural research and (ii) a greater allocation of resources for
animal science research. Note that at an equal rate of growth, livestock has a more
5.6pro-poor
Sustainable increase
effect than the cropinsector
agricultural
(Birthal andR&D
Negi, investment
2012). Gulati and Terway
(2018) showed that every million rupees spent on agricultural research in India could
Investment in agricultural
help 328 individuals escape poverty.
Figure 42. Payoff to investment in agricultural
R&D has proven highly
Figure 42. Payoff to investment in R&D (Rs/rupee
agricultural R&D spent)
(Rupees/rupee spent)
beneficial on many
counts. Kandpal et al. Research Extension
(2024) estimated a payoff
20.81
of Rs 13.85 for every
rupee spent on agricultural
research in India (Figure 13.85
42). The payoff from 11.69
10.80
animal science research
7.40
is almost twice that from 6.17
crop science research.
This implies (i) the need
for sustained public CropU Livestock
Agriculture
investment in agricultural
Source: Kandpal et al. (2024). Source: Kandpal et al. (2024).
research and (ii) a greater
allocation of resources
Furthermore, for in
investment animal science research.
crop biofortification researchNotehasthat
beenatdemonstrated
an equal rateto
of growth, livestock
yield improved has a more
nutritional pro-poor
outcomes comparedeffect
to than
food the crop sector
fortification (Birthal
(Fuglie et al.,
and2022).
Negi,Investment in research
2012). Gulati andonTerway
climate adaptation
(2018) showedand mitigation has been
that every shown
million
to significantly enhance agricultural resilience compared with investments in other
measures (Birthal et al., 2015a; Coger et al., 2021; Fuglie et al., 2022).
56
The substantial economic and social outcomes of agricultural research underscore
the necessity to increase public investment in R&D to at least match the global
average of approximately one percent of AgGDP. Besides, efforts should be made
rupees spent on agricultural research in India could help 328 individuals
escape poverty.
Furthermore, investment in crop biofortification research has been
demonstrated to yield improved nutritional outcomes compared to food
fortification (Fuglie et al., 2022). Investment in research on climate adaptation
and mitigation has been shown to significantly enhance agricultural resilience
compared with investments in other measures (Birthal et al., 2015a; Coger et
al., 2021; Fuglie et al., 2022).
The substantial economic and social outcomes of agricultural research
underscore the necessity to increase public investment in R&D to at least
match the global average of approximately one percent of AgGDP. Besides,
efforts should be made towards exploring additional sources of funding from
philanthropic organizations and the private sector. Currently, private sector
investment constitutes only approximately 7% of the total investment in
agricultural research (Kandpal et al., 2024) compared to 35-50% in middle-
income and developed countries (Pardey et al., 2016). Nevertheless, there is a
concern that the private sector, driven by profit motives, may charge exorbitant
prices for research outputs, potentially rendering these unaffordable for
smallholder farmers. Moreover, it is apprehended that private investments may
potentially crowd out public investments. Kandpal et al. (2024) have reported
a complementary relationship between public and private investments in
agricultural research. Hence, facilitating the participation of the private sector
in research can leverage additional resources, expertise, and innovations.
This requires various mechanisms, including streamlining regulatory, fiscal
incentives, and strong protection of intellectual property rights.
Furthermore, given the emerging challenges and opportunities in agriculture,
farmers’ information requirements on technologies, inputs, natural resource
management practices, markets, prices, and trade are expected to increase
exponentially. Notably, investment in extension services also generates
significant returns; Rs 7.84 for every rupee. Several other studies have
demonstrated that information-based agricultural decisions lead to significant
improvements in farm incomes, ranging from 11% to 18% (Birthal et al.
2015b; Varshney et al., 2022; Birthal et al., 2023). Farmers rely on both
formal and informal sources, and the effect of formal sources on farm income
is significantly greater (Birthal et al., 2015b; Birthal et al., 2023).
Agricultural research is a complex and resource-intensive activity that requires
substantial initial investment and long-term commitment. Moreover, the
long gestation period inherent in agricultural research compounds financial
57
requirements, as it may take several years or even decades to realize tangible
outputs. Thus, inconsistent or inadequate investment can lead to gaps in
knowledge, missed opportunities for breakthrough discoveries, and slowdown
in the development of agricultural innovations.
Of equal importance is the prioritization of agricultural R&D that aligns
with national development goals and adapts to changing economic and
environmental conditions. There is a need to reorient the research agenda by
placing greater emphasis on high-value sectors, natural resource management,
and climate change mitigation and adaptation.
5.7 Reform agricultural credit policy
Despite significant increase in Table 17. Average treatment effects of
the flow of institutional credit credit (%)
to agriculture, the credit policy
must be redesigned to address Source Productivity Downside risk
the biases in credit allocation Formal credit 21.43 -13.05
across activities and regions. Informal credit 11.82 -11.24
First, the credit policy remains Both 24.01 -16.31
anchored to productivity Source: Birthal et al. (2025).
enhancement, neglecting risk
management. Integrating climate finance as an essential component of the
agricultural credit policy can leverage its potential to mitigate climate change
(Table 17). Second, the enhanced focus of the credit policy on livestock
and fisheries is essential to harness their potential for income generation,
employment creation, and poverty alleviation. Third, there is a need to enhance
long-term credit for capital formation, which can have a significant impact on
sustainability of agriculture. Currently, approximately 40% of the total credit is
allocated for capital formation. Furthermore, reduction in regional imbalances
in credit disbursements is essential for balanced agricultural development.
5.8 Strengthen circular economy
Agriculture generates significant quantities of byproducts, often considered as
waste, which can be transformed into valuable resources. For example, crop
residues can be incorporated into soil to enhance organic matter content,
improve soil structure, increase water retention capacity, reduce the need for
synthetic fertilizers, and promote soil biodiversity and carbon sequestration.
The residues also serve as important sources of animal feed. The importance
of agricultural byproducts extends beyond soil improvement and animal
feed, encompassing bioenergy production, such as biogas or biofuels, which
contribute to renewable energy sources and reduce the dependence on fossil
fuels. Additionally, agricultural waste can be processed into value-added
products, such as compost, biochar, and packaging materials.
58
Likewise, animal dung can be used for biogas or bio-CNG production, offering
multiple environmental benefits such as reducing methane emissions by
relacing fossil fuels. The resulting biogas could be used for heating, electricity
generation, and transportation. Moreover, the process yields a nutrient-rich
slurry, which serves as an excellent organic fertilizer.
Policies should offer financial incentives in terms of tax breaks, subsidies for
eco-friendly equipment, and low-interest loans for agribusinesses to adopt
circular economic practices. Furthermore, investment in infrastructure
should be strategically planned to transform agricultural waste into valuable
resources.
5.9 Strengthen market infrastructure and value chains
Underdeveloped market infrastructure and value chains are significant
challenges for farmers. In the past, initiatives have been taken to improve
efficiency and transparency in markets, the most recent being the launch of
an online trading platform, the e-NAM in 2016, to allow farmers to sell their
produce to buyers across the country, provide real-time price discovery, and
reduce information asymmetry and transaction costs. As of March 31, 2024,
1410 regulated markets and 3979 FPOs have been linked with e-NAM.
However, its implementation faces challenges, primarily of the inadequate
infrastructure in many agricultural markets. The lack of proper storage facilities
and insufficient quality control measures makes it difficult to standardize
produce across different markets. Addressing these infrastructure gaps is
essential for e-NAM to achieve its goal of creating a truly integrated national
agricultural market.
Similarly, the Open Network for Digital Commerce (ONDC) is poised to
transform agricultural supply chain by creating an open-source network
for all aspects of digital commerce. ONDC does not exclusively focus on
agricultural commodities; it has significant implications for the marketing
of farm produce. This would enable smallholder farmers and agricultural
businesses to participate equally in the digital economy.
Farmer producer organizations (FPOs), cooperatives, and contract farming
offer several benefits beyond beyond market access. These create economies
of scale, share risks, and leverage the collective bargaining power. By
aggregating produce and standardizing quality, these institutions can meet
the volume and quality requirements of large buyers including supermarkets,
processors, and exporters. These also help to reduce post-harvest losses
and improve overall supply chain efficiency. Additionally, by acting as
intermediaries, these organizations can facilitate better access to credit and
insurance products tailored to the needs of farming communities.
59
Investment in food processing is essential to bridge the gap between agricultural
production and consumer demand for processed foods. Improving ease of
doing business with a single-window clearance system for food processing
enterprises can streamline regulatory approvals. Increased investment, low-
interest loans, and microfinance schemes can provide access to affordable
credit to micro-, small-, and medium- enterprises (MSMEs) to improve their
competitiveness. Establishing research system for food technology, safety
standards, and sustainable packaging solutions can promote innovation.
5.10 Reform agricultural price policy
For a long time, MSP-based procurement policy has persisted without any
significant realignment with changing market dynamics and environmental
challenges. There is no denying that this system serves as an income safety
net for farmers, but given its negative externalities on natural resources, it
is imperative to rethink the price policy that strikes a balance between food
security, conservation of natural resources, and farmers’ interests.
There are several options for reforming price policy. The price deficiency
approach, which involves compensating farmers for the difference between
open market prices and MSP, is an important solution for reducing the
government’s fiscal burden while protecting farmers’ interests without
distorting cropping patterns and global markets. However, the scheme is
vulnerable to moral hazards such as price manipulation by buyers and the
disposal of substandard produce by sellers. Hence, the effectiveness of this
approach depends on the establishment of robust implementation mechanisms
for price monitoring and quality assessment.
The decentralized grain procurement scheme introduced during the late
1990s to empower states in the procurement of foodgrains has not achieved
significant success, except in a few states, such as Chhattisgarh, Madhya
Pradesh, and Odisha. A potential solution could be the central government
procuring the requirements of strategic reserves while leaving procurement
of requirements for the PDS and welfare schemes to the states and allowing
inter-state trade.
Through another scheme called the Pilot of Private Procurement & Stockist
Scheme (PPPS), the Government of India authorizes states to engage the
private sector to procure farm produce (mainly oilseeds) at the MSP from
registered farmers in the notified areas during the notified period when the
open market prices fall below the MSP. The scheme provides 15% of the
MSP as a service charge, which is deemed low for a profitable business, given
13-16% incidental charges of the pooled grain cost in the present MSP-based
procurement system. This scheme needs to be revisited to address existing
shortcomings.
60
The current open-ended procurement system allows farmers to sell unlimited
grains at the MSP, which implies that the benefits of the MSP are directly
proportional to the level of output or marketed surplus. Notably, nearly
half of smallholder farmers (≤2 ha) produce in excess of their consumption
requirements (Kishore et al., 2025). However, their participation in the MSP-
based procurement system is restricted because of their small marketable
surplus. To reduce the fiscal burden and improve equity in the procurement
system, the government should consider implementing targeted procurement
strategies that focus on procurement from smallholder farmers.
Futures’ trading can be a potential means of mitigating price risk. However,
for individual farmers it is difficult to participate in it due to scale limitations.
Nonetheless, they may participate in futures trading through collectives
such as FPOs and cooperatives. These organizations can engage in ‘put
options’ by paying a premium (approximately 5% on the strike price), which
also allows for selling in the open market if the market price exceeds the
strike price during the lock-in period, albeit forfeiting the premium. Given
the incidental change of 15% in the current procurement system (Kishore
et al., 2025), the government may consider subsidizing the premium to
enhance the attractiveness of futures trading in agriculture. Nevertheless,
frequent government intervention in the form of bans on futures’ trading in
commodities is a significant barrier. For futures’ trading to operate effectively,
there is a need for long-term policy for agricultural commodity derivatives. A
well-regulated futures market can facilitate price discovery and mitigate the
fiscal burden of price support mechanisms.
Direct income support for farmers, such as through the PM-KISAN scheme, is
a viable alternative to the existing price support system. This approach aligns
with the World Trade Organization (WTO) provisions. The most flexible
strategy involves direct payments decoupled from production and prices,
which fall within the Green Box category. These payments are not subject
to support limitations, and offer the greatest policy flexibility. Furthermore,
India can use production-linked payments with output restrictions under the
Blue Box category, which does not impose caps on support levels. However,
support measures tied to production without limitations require careful design.
Such measures fall within the Amber Box category and must be maintained
within the de minimis threshold, which is 10% of a commodity’s output value.
Hence, schemes should be designed in such a way that these align with the
provisions in the Green and Blue Boxes.
5.11 Trade facilitation
To fully capitalize on its export potential, India must invest in developing
and modernizing commodity- and location-specific production technologies,
improve post-harvest handling and storage facilities, and enhance quality
61
control measures throughout the supply chain. Furthermore, efforts should
be made to strengthen the country’s regulatory framework and compliance
mechanisms to align with international standards.
Establishing a robust system of market intelligence is essential for gaining
competitive advantage in the contemporary dynamic business environment.
This approach involves systematic collection, analysis, and dissemination of
pertinent information regarding market trends, consumer preferences, and
competitors. Furthermore, the application of advanced technologies, such as
artificial intelligence and big data analytics, can facilitate more precise and
informed decision-making.
Integrating blockchain technology into supply chains is a promising solution
for improving food safety measures and building consumer confidence through
comprehensive tracking, monitoring, and traceability systems for agricultural
products.
India’s significant reliance on imports of edible oils, pulses, and fresh fruits
is a significant challenge. A comprehensive approach emphasizing domestic
production through targeted R&D, providing incentives to farmers, and
calibrating import tariffs is essential to reduce import dependence. Evidence
indicates that technological advancements can facilitate increased production,
while simultaneously protecting domestic producers from an influx of
inexpensive imports (Balaji et al., 2022).
5.12 De-stress agriculture from excessive employment pressure
The declining size of landholdings will make it increasingly difficult for
farmers to generate sufficient livelihoods solely through agricultural activities.
Consequently, farmers seek income opportunities in rural non-farm sector,
including the labor market and small-scale enterprises, to supplement their
income and mitigate economic constraints. This shift in income sources is
evident in recent data, which show a continuous decline in the share of
agriculture, in the income of farm households (Saxena et al., 2023). This trend
highlights the growing importance of diversifying income streams for rural
communities to maintain economic stability and improve living standards.
However, current pace of rural industrialization has been insufficient to
absorb the expanding labor force, creating a pressing need to promote agri-
based start-ups and MSMEs on a broader scale. This approach serves multiple
purposes, fostering entrepreneurship and innovation in agriculture-related
industries. It not only diversifies rural economies, but also has the potential to
create a more robust and sustainable agricultural ecosystem. This ecosystem
can provide supplementary income opportunities for farming communities,
thereby reducing their dependence on farming. Additionally, the development
of agri-based enterprises can lead to improved value chains, enhanced
62
processing capabilities, and better market linkages, ultimately benefiting the
farmers and contributing to rural development.
5.13 Encourage collective or cooperative farming
Given the decreasing farm size, it is imperative to develop and promote
collective or cooperative farming models to improve the economic viability
of agriculture. This approach offers several potential advantages including
enhanced efficiency, shared risk, and improved access to resources and
markets. By combining their efforts, farmers can achieve economies of scale,
thereby reducing the individual costs for equipment and inputs. Furthermore,
cooperative farming can facilitate knowledge transfer and innovation, as
farmers learn from each other ‘s experiences and methodologies.
5.14 Synergy among policies and strategies
Policymakers must recognize that strategies implemented in isolation may
result in unintended consequences. A salient example is the heavily subsidized
electricity for agriculture in some states, such as Punjab and Haryana, which
has led to the over-extraction of groundwater resources. Efforts to contain
this through regulations have not been successful because of the excessive
procurement of rice and wheat at the MSP (Kishore et al., 2024). Hence, an
integrated approach to policymaking is imperative for aligning strategies to
address the complex challenges. To this end, there is a need for collaboration
among diverse stakeholders, including government agencies, industry
representatives, academic institutions, and civil society organizations. Such
an integrated approach could result in a more efficient resource allocation
and enhanced policy outcomes.
5.15 Effective coordination between central and state governments
Agriculture is the subject of the states. Nevertheless, the central government
guides states and provides financial support for the implementation of various
schemes. Notable examples include the Pradhan Mantri Kisan Samman Nidhi
(PM-KISAN), which provides direct income support to farmers; the Pradhan
Mantri Fasal Bima Yojana (PMFBY), the crop insurance scheme; the Pradhan
Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM), which
promotes solar energy for agriculture; and the Pradhan Mantri Krishi Sinchayee
Yojana (PM-KSY) that focuses on irrigation infrastructure and optimal use
of water resources. In addition, the central government provides fertilizer
subsidies to farmers. Notably, the central government contributes over 60% of
the total development expenditure on the agricultural sector in the country.
States are uniquely positioned to understand the specific needs and challenges
of their agricultural sectors, thereby allowing them to ensure more effective
and targeted interventions. Effective collaboration and coordination between
63
the central and state governments in the implementation of various programs
is essential. This includes regular dialogue and information sharing, joint
planning and monitoring mechanisms, and flexible policy frameworks that
allow state-specific adaptations. These can lead to more efficient resource
utilization, reduced duplication of efforts, and improved policy outcomes.
Additionally, it can foster innovation in agricultural sector by leveraging the
strengths of both the central and state-level institutions.
5.16 Science-policy interface
The science-policy interface facilitates evidence-based solutions to address
complex challenges in the agri-food system. It facilitates the sharing of
knowledge and information among stakeholders, as well as feedback on
performance and implementation constraints. More importantly, the science-
policy interface contributes to determining R&D priorities. Thus, it is imperative
to establish robust communication channels between scientific institutions
and policymaking bodies through regular briefings, workshops, and policy
forums and to provide evidence in an appropriate format and timely manner
tailored to the needs of policymakers.
64
6 Epilogue
During the past six decades, propelled by technological advancements in
and for agriculture and facilitated by strategic investments in irrigation and
rural infrastructure, as well as the provision of incentives such as minimum
support prices and input subsidies, India’s agri-food system has undergone
a significant transformation, addressing food security concerns that have
plagued the country for long. However, agri-food system now faces complex
challenges of depleting groundwater resources, fragmenting landholdings,
increasing frequency of extreme climate events, and inefficient supply chains
that threaten its long-term sustainability.
These challenges are inter-connected, and policymakers should recognize
that addressing one challenge in isolation may potentially exacerbate
another. This interconnectedness necessitates a systems thinking approach,
considering the broader implications of policy decisions across multiple
domains. Consequently, addressing these requires an integrated approach,
encompassing the prioritization of public investment in agriculture,
strengthening of research and development systems, reforms in markets, price
policy, financial institutions, and subsidy regimes.
Overall, this paper advocates for an adaptive policy framework that can respond
to changing economic, environmental, and socio-political circumstances
to facilitate the efficient, sustainable, and inclusive transformation of agri-
food system. The framework aims to strike a balance between these often-
competing interests, ensuring that the transformation of the agri-food system
benefits all while maintaining its long-term viability and resilience in the face
of emerging challenges.
Nonetheless, the political economy of agricultural reforms is complex
because of the diverse and often conflicting interests of various stakeholders,
including farmers, input suppliers, processors, distributors, retailers and
consumers. Each group of stakeholder has distinct priorities and concerns,
which can result in challenges in implementing comprehensive and effective
agricultural policies. For example, while farmers may advocate for higher
minimum support prices, consumers may prefer lower food prices. To address
these challenges, an integrated approach is necessary, involving stakeholder
participation in the decision-making process, enhancing synergy between
65
schemes or programs implemented by different ministries and departments,
and improving coordination between central and state governments.
The paper raises critical questions for researchers working across the agri-
food system landscape. It emphasizes the necessity for comprehensive and
interdisciplinary studies to generate robust scientific evidence on various
aspects, including the efficacy of diverse technologies and agricultural
practices, environmental impacts, consumer preferences, market intelligence,
supply chains and logistics, and the integration of digital innovations in the
food system. Furthermore, this paper suggests to undertake more field-based
evidence that can provide empirical insights into the real-world implications
of various interventions and strategies, which is essential for informing policy
formulation, devising appropriate strategies, and conducting concurrent
evaluation to address emerging challenges and capitalize on opportunities.
66
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