Doubling Farmers’ Income by 2022
The way forward

About This Presentation

  • Doubling the farmers’ income requires improvements in both farm and non-farm income
  • This thought-starter is about matters that concern ‘farm income’

Agricultural Lands in India – Then and Now

Particulars19702018
Total geographical area (mil.ha329329
Population (mil.)5481353
Net sown area (mil.ha)140141
Gross cultivated area (mil.ha)165198
Agricultural production ($ bln.)25394

Sources: Ministry of Statistics and Programme Implementation
Ministry of Agriculture and Farmers Welfare
www.statisticstimes.co
World Bank Database

  • Net sown area remained constant. Gross cropped area increased due to irrigation
  • Agricultural production grew by over 14 times (1476%) while population grew twice (100%)
  • Our agriculture has diversified into high value products- horticulture, milk, eggs, fish and meat.

Population enters an era of De-growth..!

World Population (mil.)
India’s Population (mil.)
Particulars195020182050(E)22100(E)
Population25197594955010853
Growth202%26%14%
Particulars195020182050(E)22100(E)
Population376135316201547
Growth260%20%– 4.5%
  • Population (world and India) grew by ~200% between 1950 and 2018
  • The growth rate drastically declines by 90% between 2018 and 2050
  • We have successfully managed the peak growth era (1950-2018)
  • India’s population actually decreases after 2050

There is no threat to India’s food security

Drivers of Dietary Demand in 21st Century India

  • Higher per capita consumption ( than population growth alone).
    Though population is still growing in absolute numbers, its growth rate has sharply slowed down
  • Urbanization, increasing income, better living standards and impact of globalization etc. changes the family food habits
  • Above all, dietary shift in India is influenced strongly by socio, cultural and religious preferences
  • Growth has accelerated for dairy products, vegetables, fruits, eggs, veg oils, sugars, fish and meat while it has decelerated for staple food grains
    Indian diet has evolved to be “lacto-vegan” and will remain so

Importance of Agriculture to Indian Economy

  • The largest private sector and main source of livelihood for majority Indians
  • Export earnings ( trade surplus) from agricultural sector helps importing capital goods for the services and industry sector
  • Agriculture’s true contribution to the economy extends far beyond its share of GDP (14.5% 2018)
  • Growth in agriculture economy accelerates growth in services and industry sectors – in terms of output & input.

The service and industry sectors are engines of economic growth, but the fuel that powers these engines comes from agriculture
That’s why the entire economy catches a cold when agriculture sneezes

Agricultures linkage with other sectors and businesses : Few examples


Forward Linkage
Kirana Shops :

India has over 12 million Kirana shops.

Maximum in the world.

40 million earn their livelihood Retail market size
~$672 bn 70% of this shared by food & grocery
Textiles industry :

India is world’s largest cotton producer.

The main raw material for textile industry ($108 bn).

It employs to over 45 million people.

Restaurants, food , snacks & beverage industry:

Agriculture supports and sustains this huge sector.

Millions earn their livelihood
Transport & Export :


Agri. commodities are among the largest transported.

India ranks 9th largest in agri. exports in the world.

Millions are engaged in these activities.
.
Backward Linkage
Farm inputs:

Agricultural sector consumes farm inputs
(seeds, fertilizers, pesticides, farm machinery) worth ~
$25 bn.
Farm Credit :

Indian agriculture is a major consumer of loans

India’s Declining agri. Exports and Increasing Imports

YearExportImportNet Trade
2013452421
2014432716
201535287
201634295
201739336

Adverse Effects

  • Market for Indian agricultural commodities shrink in international and domestic market
  • Product substitution occurs at consumers level
  • Import dependency increases
  • With Industry and Services sector failing to generate more employment, steady fall in consumption/demand of Indian agricultural products could be disastrous for our agricultural economy
  • Agricultural imports are not bad per se provided our agricultural exports growth outpaces the imports

India’s Top 5 Export / Import Commodities by Value

Top 5 Exports Commodities by Value


RankProduct2016-172017-18
1Maine Products5.907.39
2Rice5.737.73
Basmati3.214.17
Non-Basmasti2.523.56
3Buffalo Meat3.904.04
4 Spices2.853.11
5 Sugar1.300.81
Total of Top 519.6823.08
% Share of Top 558%59%
Others4.3215.92
Total3439

Top 5 Exports Commodities by Value


RankProduct2016-172017-18
1Vegetable Oil10.8911.64
2Pulses4.242.91
3Fresh Fruits1.681.94
4Cashew1.351.42
5Wheat1.270.36
Total of Top 519.4318.27
% Share of Top 567%55%
Others9.5714.73
Total2933

Just five commodities form > 50% of total agricultural exports and imports.India’s international trade is highly skewed.

Agriculture: Forecasting and Forewarning

Agricultural market is volatile, forecasting the trend is essential.

Recent examples

USA

In FY2017,U.S. exports to China are Pojected at $22.3 billion, up more than $3 billion from 2016….Exports to Canada and mexico are also projected to increase…..overall, U.S. agricultural expots are forecast at $136 billion for FY 2017

India is expected to be the fastest growing major economy in the world. over the next decade…..slowing population growth……higher incomes, along with urbanization, are strengthening demand for more diverse diets, including more fruits, vegetables, edible oils, pulses, and animal poducts.
Canada

Soybeans: Exports are to reach a record of 4.4 mill tons in 2017

Dry Peas: Prices are expected to decrease

Chick Pea: Exports are expected to fall sharply

Such forecasting / forewarning is practically absent in India
This must change, so that farmers’ can take informed decisions

Growth in demand for agrl. products set to fall – FAO

Growth in demand for agricultural products is expected to fall from an average 2.2% a year over the past 30 years to 1.5 % for the next 30 years.

In developing countries, the slow down will be dramatic : from 3.7% to 2%

The decline is not cause for alarm…. slower population growth results in shifts in human diet.

– World Agriculture Towards 2015-2030
Food and Agriculture Organisation of the United Nations

“Problem of Plenty” is affecting the agricultural economy in many countries.

Agricultural Economy – “The Problem Of Plenty”

  • Production has outpaced the consumption for major food grains and vegetables
  • Record production, reduced exports and abundant imported substitutes have led to high inventories leading to non remunerative prices for farmers in many agricultural commodities
  • Prices for most commodities expected to remain flat in 2019-20
  • “Problem Of Plenty” is the most dreaded phrase among policy makers
  • In the absence of consumption pull, more the farmers produce, less they earn

    In agriculture, the law of diminishing returns operate more frequently than the law of increasing returns

    Writing off farm loans and increasing MSP (Minimum Support Price) would not offer long term solution in the absence of “consumption pull”.

Solution to “The Problem Of Plenty”

  • Trade facilitates the consumption
  • Consumption expands the economy – including agricultural economy
  • Therefore, the focus must shift to trade (from production)
  • Over the next several years, the agricultural sector as a whole will continue to adjust lower prices for most farm commodities…

    Increasing agricultural trade remains a key component of future growth in the agricultural economy….”

  • India should adopt similar path to accelerate agricultural growth
  • Agriculture must be recognized as “Export Intensive Sector”
  • Our embassies should be our Agricultural Trade Ambassadors with
  • fixed annual export targets