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RECESSION IN AGRICULTURAL SECTOR DURING REFORMS ERA
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| During the last one and a half decade Indian agriculture has been facing severe challenges, the most serious being the recession in its growth rate from about 3.3% during the period between 1980/81 and 1994/95 to around 2% between 1995/96 and 2004/05. This has serious implications for food security, farmers’ income and poverty. There is widespread rural distress leading to a large number of suicides by the farmers in some parts of the country. The growth rate of non- agriculture sector has accelerated during this period. And strong agriculture - non-agriculture as well as rural-urban divide is seen in the society. |
An indication of slowdown in farm incomes can be obtained by looking at the level and growth of agriculture GDP per agriculture worker. During 1970s Value added per worker in agriculture increased annually by 0.7 percent. The growth rate accelerated to 1.18 percent during 1980s. During the last decade agriculture GDP per worker increased merely by 0.29 percent. |
Table 1 : Level and growth in per worker agriculture GDP at 1993-94 prices |
Period |
GDP agriculture per agriculture worker
( Rs.) |
Growth rate in previous
10 years
(%/year) |
|
|
1979/80 to 1983/84 |
9700 |
0.70 |
|
1989/90 to 1993/94 |
10900 |
1.18 |
|
1999/00 to 2003/04 |
11220 |
0.29 |
|
|
| 2.
Inadequate nutrition intake |
While output of cereals increased at a much faster rate than population during the post-green revolution period till mid 1990s, output of pulses remained almost stagnant. Consequently, per capita availability of pulses, which is a major source of protein in the country, showed a sharp decline. Thus protein deficiency remains quite high in the country. Now, even cereal production has stagnated causing per capita availability to decline. This requires renewed emphasis on food security aspects of agriculture. |
Table 2 : Per capita per day availability of foodgrains in India since 1971
(Unit: grams) |
Period |
Cereals |
Pulses |
Foodgrains |
1971-1975 |
393 |
44 |
437 |
1981-1985 |
417 |
39 |
456 |
1991-1995 |
445 |
37 |
482 |
2001-2005 |
414 |
32 |
446 |
|
2. INTER-SECTORAL INEQUITY: |
Annual rates of growth in GDP agriculture and non- agriculture, based on five- yearly moving average series, beginning with QE 1984-85, are presented in Fig- 2. The two series of growth rates show that till early 1990s growth rate in agriculture sector was accelerating and the difference in growth rates between the two series narrowed down. After mid 1990s growth rate in agriculture decelerated very sharply whereas non- agriculture sector witnessed acceleration of growth to around 7 %. This created a large gap between the two sectors. |
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Faster growth in output of non-agriculture sector did not lead significantly to shifting of workforce from agriculture to non-agriculture sector. Between 1980-81 and 2000-01, the share of agriculture in GDP declined from 38.8% to 25.4 percent. The workforce engaged in agriculture in the same period witnessed a very small decline, from 60.5 percent to 58.4 percent. Slow growth in agriculture with no significant decline in labour force has created a serious disparity between agriculture and non-agriculture as well as between rural and urban India. This can be seen from the figures on value added per worker in agriculture and non-agriculture: During the two decades after 1980/81 value added per worker in the non-agriculture sector has more than doubled whereas in agriculture the increase is less than 12 percent. |
Table 3 : Share of agriculture in economy’s total output and employment |
Year |
Share in GDP at
current price % |
Share in
Employment % |
1980-81 |
38.8 |
60.5 |
1990-91 |
33.2 |
59.0 |
2000-01 |
25.5 |
58.4 |
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Table ): Value added per worker in agriculture and non- agriculture sectors at 1993/94 prices |
| |
Period: |
Value Added per worker (Rs.) |
|
|
Ratio of non- agri. to agri.
Value Added |
Growth in last decade (%/year) |
Agriculture |
Non- agriculture |
|
|
|
1978/9 to 1983/4 |
9961 |
28430 |
2.85 |
|
|
1988/9 to 1993/4 |
11179 |
39355 |
3.52 |
1.16 |
3.31 |
1998/9 to 2003/4 |
11496 |
59961 |
5.22 |
0.28 |
4.30 |
|
Since 1990s, decline in agricultural growth combined with increasing costs of inputs affected the profitability of agricultural production. The growth of agriculture both in terms of gross product and in terms of output has visibly decelerated during the post-reform period compared with that during the eighties. For example, the growth rate of GDP from agriculture decelerated from 3.08 per cent during 1980-81 to 1990-91 to 2.61 per cent during 1992-93 to 2002-03 at 1999-2000 constant prices. The annual growth rate for all crops taken together decelerated to 1.58 per cent during 1990-91 to 2003-04 from a growth rate of 3.19 per cent during 1980-81 to 1990-91. The growth rates of agriculture both in terms of GDP from agriculture and agricultural output (and yield) have also decelerated in most of the states. Except for the states of Bihar, Gujarat and Orissa, a deceleration took place in the growth rates of agriculture in all the other states during 1993-94 to 2003-04 as compared with 1983-84 to 1993-94. Even in these three states, which had a low base, the growth rates were very low and statistically insignificant in two of them. |
Table 5)
Growth of Gross Domestic Product (GDP), Sectoral GDP
and Per Capita Income (1999-2000 prices) |
Year |
Agri-culture |
Indu-stry |
Services |
GDP at factor cost |
Per capita NNP at factor cost |
1980-81 to 1990-91 |
3.08 |
5.79 |
6.54 |
5.15 |
2.82 |
1992-93 to 2002-03 |
2.61 |
5.82 |
7.65 |
5.85 |
3.89 |
1992-93 to 2005-06 |
2.57 |
6.05 |
7.72 |
6.00 |
4.10 |
1950-51 to 2005-06 |
2.54 |
5.19 |
5.40 |
4.26 |
1.94 |
Note: Growth is Compound Annual Growth Rate, NNP denotes Net National Product.
Source: CSO, National Accounts Statistics, Various Years |
| (Pl. see Aennxure for Table Nos: 7 to 10) |
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More importantly, foodgrains growth fell from 2.85 per cent in the 1980s (1980-81 to 1990-91) to 1.16 percent in the 1990s (1990-91 to 2003-04), which was lower than the rate of growth of population of 1.9 per cent during this period. The 1990s was thus the first decade since the 1970s in which the rate of growth of food production fell below the rate of population growth. This is essentially due to the gradual decline in the growth of yield levels, especially of some food crops. While the annual yield growth for all crops taken together decelerated from 2.56 per cent during the eighties to 0.90 per cent during the latter period, for rice the yield growth rate decelerated from 3.47 per cent to 0.99 per cent and for wheat from 3.10 per cent to 1.35 per cent. In the case of cotton, the yield growth rate has gone down from 4.10 per cent during the eighties to -0.69 per cent during the nineties. In this case, the effectiveness of pesticides is declining and the spurious pesticides have failed to prevent complete loss of the crop. |
2. Wide Regional Disparity in Productivity and Growth |
Regional disparity in agricultural development can be measured in many ways such as, variations in the levels of output, agricultural income, growth rates of agriculture and per worker productivity in agriculture. Variations in state-wise per worker GDP in agriculture are highlighted to portray contrasts in levels of living of agricultural workers across states. |
 |
Source: NSSO, Employment and Unemployment Situation in India and CSO, GrossState Domestic Product, Various Years. |
Among states, there are only a few peak achievers in agricultural productivity, as may be seen in Figure 1.5. For instance, Punjab’s worker productivity of Rs. 35,000 during 2004-05 was 7.5 times that of Bihar. It is basically this difference in per worker productivity that accounts for large differences in standards of living of agricultural workers across states. The cause for concern is that during 1999-2000 to 2004-05, there was a decline in per worker productivity in agriculture in eight out of seventeen states. This is further aggravated by growing state level differences in per worker productivity in agriculture and non-agriculture. The high ratio of agricultural and non-agricultural productivity in relatively more industrialised states like Maharashtra, Gujarat and Karnataka indicates very weak linkages between agricultural and non-agricultural sectors. |
| 3. Wide Regional Disparity in Productivity and Growth : |
Regional disparity in agricultural development can be measured in many ways such as, variations in the levels of output, agricultural income, growth rates of agriculture and per worker productivity in agriculture. Variations in state-wise per worker GDP in agriculture are highlighted to portray contrasts in levels of living of agricultural workers across states. |
Among states, there are only a few peak achievers in agricultural productivity, as may be seen in Figure 1.5. For instance, Punjab’s worker productivity of Rs. 35,000 during 2004-05 was 7.5 times that of Bihar. It is basically this difference in per worker productivity that accounts for large differences in standards of living of agricultural workers across states. The cause for concern is that during 1999-2000 to 2004-05, there was a decline in per worker productivity in agriculture in eight out of seventeen states. This is further exacerbated by growing state level differences in per worker productivity in agriculture and non-agriculture. The high ratio of agricultural and non-agricultural productivity in relatively more industrialised states like Maharashtra, Gujarat and Karnataka indicates very weak linkages between agricultural and non-agricultural sectors. |
| 4. Deficiency in Rural Infrastructure : |
Since 1980-81, public sector capital formation in Indian agriculture has continuously shown a declining trend, with some short breaks. Of late, there is some improvement in rural road connectivity and communications, but progress in respect of irrigation, technology and in institutions bearing on producer incentives and efficiency of resource-use is far from satisfactory. There was an increase in private investment nonetheless the ratio of total investment to GDP agriculture declined.
It is pertinent to observe that the decline in public sector investments in agriculture after 1981-85 coincided with the increase in subsidies on surface irrigation, power and fertilizers . During the five years from 1980-81 to 1984-85, the level of public investment was at 3.5% of GDP agriculture while subsidies were at 4.0%. Between 1985-86 and 1989-90, the magnitude of public investments declined to 2.96% of agriculture GDP whereas the level of subsidies rose to 4.96%. This trend is continuing since then. During 2001-2003, public investment declined to 1.89 % of agriculture GDP as against the rise in subsidies to 7.42% of this GDP. |
Table 6: Trend in investments and subsidies in agriculture expressed as percent of GDP agriculture |
Period |
Total |
Public |
Private |
Subsidy |
Public investment and subsidy |
1971-1975 |
4.99 |
2.04 |
2.95 |
1.21 |
3.25 |
1976-1980 |
7.07 |
3.39 |
3.68 |
2.95 |
6.34 |
1981-1985 |
7.28 |
3.51 |
3.77 |
4.01 |
7.52 |
1986-1990 |
7.05 |
2.96 |
4.09 |
4.96 |
7.92 |
1991-1995 |
6.69 |
2.09 |
4.60 |
5.17 |
7.26 |
1996-2000 |
6.36 |
1..91 |
4.45 |
5.67 |
7.58 |
2001-2003 |
6.69 |
1.89 |
4.80 |
7.42 |
9.31 |
|
Source: National Accounts Statistics. |
 |
 |
Burgeoning subsidies are thus competing for scarce resources impinging upon the government’s ability to invest in key areas. The above figures suggest that a reduction of farm subsidies even to the extent of one-fourth could enable the government to nearly double its investments in agriculture in crucial areas like irrigation and other infrastructure. |
Some studies show that a rupee going into public investments is several times more productive in terms of output growth than when it is deployed as a subsidy. Diversion of resources from public investments to subsidies has other adverse consequences: Subsidy schemes are more prone to misuse and leakages. In several cases they are doing more harm than good through the over-use of water resources, degradation of land, and imbalances in the use of plant nutrients resulting in wastage and inefficiency in resource use. |
| 4. Stagnation in Terms of Trade : |
Another important manifestation of the crisis in agriculture is the stagnant if not deteriorating terms of trade for agriculture after the introduction of economic reforms. It may be emphasised that a major objective of economic reforms was to initiate policies that would end discrimination against agriculture and improve its terms of trade vis-à-vis other sectors of the economy. The whole set of macro-economic policies such as devaluation of the currency, ending of protection to industry were all expected to benefit tradable agriculture. But this has not happened. The terms of trade became favourable to agriculture from 1984-85 onwards till 1996-97 and thereafter it more or less stagnated. |
The barter terms of trade calculated through GDP deflator also bring out an improvement in terms of trade in the latter half of 1980s that continued till 1996-97. But TOT stagnated since then. Further, unlike during the 1980s when a notable improvement in terms of trade was accompanied by a significant increase in growth of agricultural output, during the 1990s, a small improvement in terms of trade up to 1996 was accompanied by a decline in output growth rate. Sources: Report of the Expert Group on Agricultural Indebtedness- Steering Committee on Agriculture2007-Compiled by.K.Ramasubba Reddy-080509 |
Table 7 ANNEXURE:
Growth of Agricultural GSDP and GSDP across States |
|
State |
1983-84 to 1993-94
(at 1980-81 Prices) |
|
|
|
1993-94 to 2003-04
(at 1993-94 Prices) |
|
|
|
|
|
Andhra Pradesh |
3.05 |
|
4.58 |
|
2.80 |
|
5.63 |
|
|
Assam |
2.12 |
|
3.51 |
|
0.51 |
|
2.93 |
|
|
Bihar |
-0.45 |
*** |
2.69 |
|
2.50 |
|
5.34 |
|
|
Gujarat |
0.84 |
*** |
5.00 |
|
1.13 |
*** |
6.19 |
|
|
Haryana |
4.86 |
|
6.18 |
|
1.77 |
|
5.96 |
|
|
Himachal Pradesh |
3.08 |
|
5.89 |
|
1.30 |
|
6.53 |
|
|
Karnataka |
3.54 |
|
5.86 |
|
3.12 |
|
7.10 |
|
|
Kerala |
4.40 |
|
5.33 |
|
-2.00 |
* |
4.85 |
|
|
Madhya Pradesh |
2.82 |
|
5.21 |
|
0.23 |
*** |
4.14 |
|
|
Maharashtra |
5.39 |
|
7.42 |
|
1.27 |
|
4.92 |
|
|
Orissa |
-0.57 |
|
3.39 |
|
0.17 |
*** |
3.96 |
|
|
Punjab |
4.62 |
|
5.13 |
|
2.15 |
|
4.13 |
|
|
Rajasthan |
3.93 |
|
6.19 |
|
1.21 |
*** |
5.32 |
|
|
Tamil Nadu |
4.43 |
|
7.45 |
|
-0.60 |
*** |
5.08 |
|
|
Uttar Pradesh |
2.8 |
|
4.66 |
|
2.18 |
|
3.76 |
|
|
West Bengal |
4.45 |
|
4.73 |
|
3.45 |
|
7.03 |
|
|
India |
3.05 |
|
5.32 |
|
2.19 |
|
6.01 |
|
|
CV for States |
58.72 |
|
25.43 |
|
102.88 |
|
22.75 |
|
|
Note: Growth is Compound Annual Growth Rate. GSDP denotes Gross State Domestic Product. All growth rates are significant at 5 per cent but for * which is significant at 10 per cent and *** which is insignificant even at 20 per cent. CV denotes coefficient of variation.
Source: CSO, GrossState Domestic Product, Various Years. |
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| |
Table 8
Growth of Area, Production and Yield of Major Crops in India: 1980-81 to 2000-01 |
|
1980-81 to 1990-91 |
1990-91 to 2003-04 |
|
| Area |
Prdn |
Yield |
Area |
Prdn |
Yield |
|
| 0.40 |
3.56 |
3.47 |
0.15 |
1.14 |
0.99 |
|
| 0.46 |
3.57 |
3.10 |
0.74 |
2.13 |
1.35 |
|
| -1.34 |
0.40 |
1.62 |
-1.58 |
0.25 |
1.87 |
|
| -0.26 |
3.03 |
2.90 |
-0.25 |
1.32 |
1.58 |
|
| -0.09 |
1.52 |
1.61 |
-0.87 |
-0.74 |
0.16 |
|
| -0.23 |
2.85 |
2.74 |
-0.44 |
1.16 |
1.11 |
|
| 1.44 |
2.70 |
1.24 |
1.41 |
1.22 |
-0.16 |
|
| 1.51 |
5.20 |
2.43 |
-1.07 |
0.18 |
1.26 |
|
| -1.25 |
2.80 |
4.10 |
0.82 |
0.15 |
-0.69 |
|
| 1.12 |
3.77 |
2.31 |
-0.09 |
1.20 |
0.62 |
|
| 0.10 |
3.19 |
2.56 |
-0.25 |
1.58 |
0.90 |
|
Note: Growth is Compound Annual Growth Rate. Prdn denotes Production.
Source: Ministry of Agriculture, Area and Production of Principal Crops in India, Various Years |
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Table 9
Per Worker Productivity in Agriculture and Non-Agriculture – Various States: 2004-05 |
Agriculture
(Rs.) |
Non-Agriculture
(Rs.) |
Non-Agriculture/ Agriculture |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: CV denotes Coefficient of Variation
Source: NSSO, Employment and Unemployment Situation in India, 2004-05 and CSO, GrossState Domestic Product, 2004-05. |
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Table 10
Per Worker Productivity in Agriculture and Non-Agriculture – Various States: 2004-05 |
| State |
Agriculture
(Rs.) |
Non-Agriculture
(Rs.) |
Non-Agriculture/ Agriculture |
|
| Andhra Pradesh |
11,245 |
56,414 |
5.02 |
| Assam |
9,205 |
49,592 |
5.39 |
| Bihar |
4,862 |
22,392 |
4.61 |
| Gujarat |
12,934 |
104,512 |
8.08 |
| Haryana |
26,192 |
85,128 |
3.25 |
| Himachal Pradesh |
9,796 |
69,818 |
7.13 |
| Jammu & Kashmir |
14,672 |
45,400 |
3.09 |
| Karnataka |
9,653 |
82,316 |
8.53 |
| Kerala |
16,139 |
56,318 |
3.49 |
| Madhya Pradesh |
6,606 |
44,980 |
6.81 |
| Maharashtra |
9,130 |
106,912 |
11.71 |
| Orissa |
7,871 |
41,341 |
5.25 |
| Punjab |
35,087 |
70,138 |
2.00 |
| Rajasthan |
10,609 |
56,830 |
5.36 |
| Tamil Nadu |
10,789 |
58,793 |
5.45 |
| Uttar Pradesh |
10,367 |
42,683 |
4.12 |
| West Bengal |
17,113 |
60,307 |
3.52 |
| All India |
12,371 |
61,432 |
4.97 |
| CV for States |
57.24 |
36.27 |
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