Agriculture in India

Agriculture is one of the strongholds of the Indian economy and accounted for 14.2 per cent of
the country's gross domestic product (GDP) in 2010-11, according to the Central Statistical
Organisation’s (CSO) estimates. Furthermore, the sector provided employment to 55 per cent of
the work force.

In the first half of 2010-11, farm sector has achieved growth of 3.8 per cent and the full-year
growth in farm sector is estimated to be 5.4 per cent. Substantial expansion in area and
production of major crops has been witnessed in both kharif and rabi seasons.

According to the Annual Report of the Department of Agriculture and Cooperation (Ministry of
Agriculture), the total expenditure in the first four years of the Eleventh Plan is estimated to be
US$ 9.98 billion, up from US$ 3.36 billion in the entire five-year period of the Tenth Plan. The
Gross Capital Formation, or investment, in agriculture sector related to GDP in this sector has
shown a substantial increasing trend from 15.8 per cent in 2005-06 to 22.3 per cent in 2009-10.

The Government is giving highest priority to agriculture and allied sector. The Eleventh Plan
allocation has been considerably higher over the Tenth Plan allocation. An amount of US$ 19
billion has been allocated for the Ministry of Agriculture during the Eleventh Five Year Plan.

Capital investment in agriculture has increased from US$ 1.2 billion in 2007-08 to US$ 3.26
billion in 2010-11 (inclusive of State Plan Scheme Rashtriya Krishi Vikas Yojana), as per a
Ministry of Agriculture press release dated August 3, 2010.

The Indian Agricultural Scenario

The total geographical area of India is 328.7 million hectares of which 140.3 million hectares is
net sown area, while 193.7 million hectares is the gross cropped area, according to the Annual
Report 2009-10 of the Ministry of Agriculture.

Production

India has become the world's largest producer across a range of commodities due to its favourable
agro-climatic conditions and rich natural resource base. India is the largest producer of coconuts,
mangoes, bananas, milk and dairy products, cashew nuts, pulses, ginger, turmeric and black
pepper. It is also the second largest producer of rice, wheat, sugar, cotton, fruits and vegetables.

The country is expected to produce 232.07 million tonnes (MT) of foodgrains during 2010-11
compared to 218.11 MT last year, as per the second Advance Estimates of Crop Production
released by the Ministry of Agriculture. As per the estimates, India is likely to achieve record
production of wheat (81.47 MT) and pulses (16.51 MT) this year.

Exports

According to the government's agri-trade promotion body, Agricultural and Processed Food
Products Export Development Authority (APEDA), India's exports of agricultural and
floricultural products, fruits and vegetables, animal products, cereals and processed food products
was worth US$ 3.98 billion during April-September 2010-11.

India's agri-export turnover is expected to rise to nearly US$ 18 billion by 2014, according to
APEDA.

At present, around 70 per cent of the country's agricultural and processed food exports are to
developing countries in the Middle East, Asia, Africa and South America.

Indian seed companies are eyeing the export markets in SAARC (South Asian Association for
Regional Cooperation) and African countries with a host of hybrid seeds and best farm practices.
While some of the companies like J K Seeds, Namdhari Seeds, Nuziveedu Seeds, Nath Seeds,
Rasi and Vibha Seeds have already ventured into the export markets in the region.

Investments

The public and private sector investment in agriculture have been steadily increasing since 2004-
05. While public sector investments in agriculture have increased from US$ 3.61 billion in 2004-
05 to US$ 5.5 billion in 2008-09, private sector investment has increased from US$ 14 billion in
2004-05 to US$ 25.5 billion in 2008-09, according to the Annual Report 2009-10 of the Ministry
of Agriculture.

Mahindra Samriddhi, an initiative of Mahindra Farm Equipment, eyes having 600 Mahindra
Samriddhi centres and five million farmers under its ambit by 2020, said Pawan Goenka,
President, utomotive and Farm Equipment Sectors, Mahindra & Mahindra.

Government Initiatives

In the Union Budget 2011-12, the Finance Minister, Mr Pranab Mukherjee has made the
following announcements for the agriculture sector:

• US$ 65.1 million expenditure to promote 60,000 pulses villages in rain fed areas for
increasing crop productivity and strengthening market linkages.
• Proposal to spend US$ 65.1 million to promote oil palm plantation in 60,000 hectares and
US$ 65.1 million for the initiative on vegetable cluster.
• US$ 86.8 million is proposed to be spent to improve rice based cropping system in the
Eastern Region.

A number of other initiatives are already in place for the agriculture sector, which include

• The National Food Security Mission was launched in 2007-08, with an outlay of US$
1.24 billion during the 11th Five Year Plan (2007–2012). It aims at enhancing the
production of rice, wheat and pulses by 10 million tonnes (MT), 8 MT and 2 MT
respectively, by the year 2011-12.
• The Rashtriya Krishi Vikas Yojna (RKVY) was operationalised with effect from August
2007 with an outlay of US$ 5.3 billion during the 11th Five-Year Plan (2007-12). The
RKVY scheme aims at incentivising states to increase outlays for agriculture and allied
sectors in order to achieve 4 per cent growth in the sector in the current five-year plan.
RKVY has encouraged states to step up allocations to this sector. Allocation to
agriculture and allied sectors was 5.11 per cent of total State Plan Expenditure in 2006-07
 and this has gone up to 5.84 per cent in 2008-09, according to the Annual Report 2009-10
of the Ministry of Agriculture.
• The government has allocated US$ 1.43 billion this fiscal to the states under RKVY, 87
per cent more than in 2009-10 at US$ 763.3 million.
• According to the Annual Report 2009-10 of the Ministry of Agriculture, the National
Horticulture Mission (NHM) was launched in 2005-06. During 2009-10, 201 new
nurseries were set up under NHM.
• 100 per cent foreign direct investment (FDI) is allowed under automatic route in
Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisciculture,
Aquaculture and Cultivation of Vegetables and Mushrooms under controlled conditions
and services related to agro and allied sector. Besides the above, FDI is not allowed in
any other agricultural sector/activity, according to the Department of Industrial Policy
and Promotion’s (DIPP), consolidated FDI Policy.

100 per cent Foreign Direct Investment (FDI) is allowed under automatic route in storage and
warehousing including warehousing of agriculture products with refrigeration (cold storage).
Also, the existing policy allows for 51 per cent Foreign Direct Investment (FDI), in only single
brand retail trade, subject to specified conditions.

• The Planning Commission is working on an ambitious action plan to boost secondary

agriculture, which includes value-addition to farm products, in the 12th Five Year Plan
(2012-17). According to K Kasturirangan, Planning Commission Member, the sector was
estimated worth over US$ 12.8 billion three years back and now it could be more than
US$ 21.3 billion.
• The government will provide US$ 6.43 billion in 2010-11 as subsidy to decontrolled
fertilisers under the nutrient-based subsidy policy that came into effect from April 1,
2010, according to Mr Srikant Kumar Jena, Minister of State for Chemicals and
Fertilisers. Under the new nutrient-based subsidy policy (NBS), the government provides
subsidy on decontrolled (whose MRP is not decided by the government) nutrients such as
Phosphorus (K) and Potash (S). A budget estimate of US$ 11.9 billion has been set for
fertiliser subsidy during the 2010-11
• In April 2010, the Cabinet Committee on Economic Affairs (CCEA) approved US$ 142.5
million for the National Horticulture Board to implement its existing schemes and
promote 25,000 integrated commercial horticulture projects in the 11th Plan period
ending 2012.

Road Ahead

The country's demand for horticulture products is expected to grow by over 20 per cent to touch
360 MT in 2020-21, according to a study conducted by the Horticulture Society of India. The
report said that rising income will create more demand for horticultural products, which will
further push the production of such crops in India. The horticulture sector encompasses a wide
range of commodities, including fruits, vegetables, potatoes, tuber crops, ornamentals, medicinals
and aromatic crops.

The Indian organic product market, currently pegged at US$ 322.41 million, is expected to reach
US$ 2.15 billion in the next five years, as per Mukesh Gupta, President, International
Competence Centre for Organic Agriculture.