National Council of Applied Economic Research
Opinion: Souryabrata Mohapatra and Sanjib Pohit.
There are several challenges but also opportunities.
India’s agricultural sector faces challenges, including climate change, land degradation, and market access issues. The Pradhan Mantri Fasal Bima Yojana (PMFBY), introduced in 2016, provides financial assistance for crop losses. With 49.5 crore farmers enrolled and claims totalling over ₹1.45 lakh crore, the scheme is a cornerstone of agricultural risk management.
The Electronic National Agriculture Market (eNAM), launched in 2016, integrates existing markets through an electronic platform. By September 2023, 1,361 mandis had been integrated, benefiting 1.76 million farmers and recording trade worth ₹2.88 lakh crore. This initiative improves market access and ensures better price realisation for farmers.
Despite agriculture engaging nearly 46% of the workforce, agriculture’s contribution to GDP is about 18%, highlighting a stark imbalance. If current growth trends continue, this disparity will worsen: while overall GDP has grown at 6.1% annually since 1991-92, agricultural GDP lags at 3.3%. Under the Narendra Modi administration, overall GDP growth was 5.9%, and agriculture grew at 3.6%. However, this is insufficient for a sector so critical to the nation’s socio-economic fabric.
By 2047, agriculture’s share in GDP might shrink to 7%-8%, yet, it could still employ over 30% of the workforce if significant structural changes are not implemented. This indicates that merely maintaining the current growth trajectory will not suffice.
The expected 7.6% overall GDP growth for 2023-24 is promising. However, the agri-GDP’s anaemic growth of 0.7%, primarily due to unseasonal rains, is alarming.
Further, according to United Nations projections, India’s population is expected to reach 1.5 billion by 2030 and 1.59 billion by 2040. Following the agricultural challenges, meeting the food requirements of this burgeoning population will be imperative. With an estimated expenditure elasticity of food at 0.45, the demand for food is expected to grow by approximately 2.85% annually, considering the population growth rate of 0.85%.
India’s real per capita income increased by 41% from 2011-12 to 2021-22 and is projected to accelerate further. However, the expenditure elasticity post-2023 is anticipated to be lower, correlating a 5% rise in per capita expenditure to a 2% growth in demand. The anticipated food demand will vary among commodities, with meat demand growing by 5.42% and rice demand by a mere 0.34%.
To address these challenges, rationalising food and fertilizer subsidies and redirecting savings towards agricultural research and development innovation and extension services are crucial.
Some initiatives
Several initiatives have been rolled out to bolster farmer prosperity and sustainable agricultural growth. The Pradhan Mantri Kisan Samman Nidhi (PM-KISAN), launched in 2019, disburses ₹6,000 annually to farmers in three instalments. This scheme has already benefited over 11.8 crore farmers, offering much-needed financial support. Another critical initiative, the Soil Health Card (SHC) scheme, aims to optimise soil nutrient use, thereby enhancing agricultural productivity. Over 23 crore SHCs have been distributed, providing farmers with crucial insights into soil health and nutrient management.
The government also championed the International Year of Millets in 2023, promoting nutritious coarse grains, both domestically and internationally.
The Agriculture Infrastructure Fund, with a ₹1 lakh crore financing facility, supports the development and modernisation of post-harvest management infrastructure. Within three years, over 38,326 projects have been sanctioned, mobilising ₹30,030 crore in the agricultural infrastructure sector. These projects have created employment for more than 5.8 lakh individuals and improved farmer incomes by 20%-25% through better price realisation.
Moreover, the Survey of Villages and Mapping with Improvised Technology in Village Areas (SVAMITVA) initiative aims to ensure transparent property ownership in rural areas. As of September 2023, over 1.6 crore property cards have been generated, enhancing land security and facilitating credit access for farmers.
Strategic planning
The government’s strategic planning for agriculture, leading up to 2047, focuses on several key areas: anticipated future demand for agricultural products, insights from past growth catalysts, existing challenges, and potential opportunities in the agricultural landscape. Projections indicate that the total demand for food grains in 2047-48 will range from 402 million tonnes to 437 million tonnes, with production anticipated to exceed demand by 10%-13% under the Business-As-Usual (BAU) scenario.
However, to meet this demand sustainably, significant investments in agricultural research, infrastructure, and policy support are required. The Budget for 2024-25, with an allocation of ₹20 lakh crore for targeted agricultural credit and the launch of the Agriculture Accelerator Fund, highlights the government’s proactive approach to fostering agricultural innovation and growth.
The road to 2047 presents both challenges and opportunities for Indian agriculture. By embracing sustainable practices, leveraging technological innovations, and implementing strategic initiatives, India can enhance farmer incomes, meet the food demands of its growing population, and achieve inclusive, sustainable development.
Souryabrata Mohapatra is with the National Council of Applied Economic Research (NCAER), New Delhi. Sanjib Pohit is with the National Council of Applied Economic Research (NCAER), New Delhi. Views are personal.