Agriculture
Background
• Largest Employer: Share of employment moved from 42.5% in 2018-19 to 45.5.%
in 2021-22.
• Economic & Growth Trends – The agriculture sector contributes 16% to GDP
(FY24 PE) and employs 46.1% of the population
• 5% CAGR (FY17-FY23) and recorded 3.5% growth in Q2 FY25, up from previous quarters.
• Increasing fragmentation of farm holdings (with the average size of household
ownership holdings declining from
• 1.23 ha in 2005-06 to
• 1.10 ha in 2010-11 and further to
• 1.08 ha in 2015-16
• Components: Crops, livestock, fishing (pisciculture), horticulture, forestry and
logging
• Livestock (12.99% CAGR) and Fisheries (13.67% CAGR) lead the sector, while
Floriculture emerges as a "sunrise industry" with strong exports. Horticulture
expansion, especially in grapes, is transforming rural economies
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
Crops
• How is the farmer’s work/ returns different from any other business?
• Lower landholdings
• Climate related uncertainty in production: hailstorms, monsoon
uncertainty, floods
• Fluctuating prices due to volume of production hitting the market
• Near zero market power of each farmer (perfect competition)
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
Agricultural credit
• Kisan Credit Card Scheme (KCC) : to 3.89 crore eligible farmers with a KCC limit of
₹4,51,672 crore. 2022
• Agriculture credit has grown significantly, with 7.75 crore Kisan Credit Card (KCC) accounts
and ₹9.81 lakh crore loan outstanding, reducing reliance on non-institutional credit from 90%
(1950) to 25% (FY22).
• Modified Interest Subvention Scheme (MISS) : Short-term agriculture loan up to ₹3 lakh is
available at 7 per cent per annum to farmers engaged in Agriculture and other Allied activities,
including Animal Husbandry, Dairying, Poultry, Fisheries, etc.
• 3 per cent subvention (Prompt Repayment Incentive) is also given to the farmers for prompt
and timely repayment of loans.
• The Kisan Rin Portal (KRP), launched in 2023, digitized the processing of interest subvention
and repayment incentives, benefiting 5.9 crore farmers and processing ₹1.08 lakh crore in
claims.
• Fertilizer subsidies: ₹ 1.75 trillion allocated in 2023-24 budget
• PM KiSan : supplement the financial needs of land-holding farmers. DBT scheme
• About 11.3 crore farmers were covered under the Scheme in its April-July 2022-23 payment
cycle.
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
Post harvest
• Agriculture infrastructure fund: operational from the year 2020-21 to 2032-33
for the creation of post-harvest management infrastructure and community farm
assets, with benefits including 3 per cent interest subvention and credit guarantee
support.
• 8,076 warehouses, 2,788 primary processing units, 1,860 custom hiring centres,
937 sorting & grading units, 696 cold store projects, 163 assaying units and
around 3613 post-harvest management projects and community farming assets.
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
Mechanization, Market Infrastructure & Climate
Resilience
1.Agricultural mechanization is expanding with 26,662 Custom Hiring Centers (CHCs) and
drone-based services for 15,000 Women SHGs, supported by 80% financial assistance.
2.The Agriculture Marketing Infrastructure (AMI) scheme has sanctioned 48,611 storage
projects with ₹4,795 crore in subsidies, while the e-NAM platform now connects 1.78
crore farmers and 9,204 FPOs.
3.The National Mission for Sustainable Agriculture (NMSA) promotes climate resilience
through improved irrigation, soil health, organic farming, and crop diversification,
ensuring long-term sustainability.
Fasal Bima
• PMFBY is currently the largest crop insurance scheme in the world in terms of farmer
enrolments, averaging 5.5 crore applications every year and the third largest in terms of
the premium received
• 4 crore farmers and 600 lakh hectares, with technology-driven transparency and a 32% reduction in
premium costs
• The scheme promises minimal financial burden on the farmer, with farmers paying only
1.5 per cent and 2 per cent of the total premium for the Rabi and Kharif seasons,
respectively, with Centre and State Governments bearing most of the premium cost.
• During the last six years of its implementation, farmers paid a premium of ₹25,186 crore
and received claims amounting to ₹1.2 lakh crore (as of 31 October 2022).
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
MSP
• Introduced in 1966-67 to support farmers from distress
• A2, FL, C2
• Typically announced at the start of Kharif and Rabi season
• Optional for farmers to sell to the government
• C2+ 50%
• Announced for 22 crops accounting for <30% of total agricultural
produce
• Existing MSP mostly covers wheat and rice benefiting 6 to 7 states
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
MSP –current developments
• Legally binding
• Must cover 23 crops!
• Could it help reduce imports?
• Way Forward?
• Futures market
• Rationalizing all support provided into one stabilization fund?
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
APMCs and Minimum Support Price (MSP)
• APMC Reforms – APMC laws introduced organized markets with licensing relaxation,
contract farming, and special markets for perishables. A Model Law (2003) was passed to
streamline markets, but many states have not implemented it fully, causing interstate
barriers.
• Minimum Support Price (MSP) – MSP ensures a fair price to farmers, covering costs like
land, labor, and equipment. Initially applied to wheat and paddy; by 2019, it expanded to
23 crops, reviewed annually. Farmers can sell crops below MSP at Mandis or to the Food
Corporation of India (FCI).
NFSA
• National Food security Act 2013: To address nutritional deficiencies in
the population
• Government has taken a decision to give free foodgrains to about
81.4 crore beneficiaries under the NFSA for one year from January 1,
2023
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
MSP Implications
• Dependence on MSP – States like Punjab and Haryana, which rely heavily on MSP and
government procurement, face more significant impacts. In contrast, states with minimal
MSP reliance are less affected, but systemic reforms are still necessary.
• Mandi Fee – The removal of cess for APMC Mandis threatens their financial
sustainability. Without this revenue, Mandis may struggle to maintain operations, risking
the collapse of a vital market infrastructure.
• Ecological and Cropping Challenges – Farmers face significant ecological issues, including
falling water tables, soil exhaustion, and inefficient cropping patterns driven by MSP-
focused cultivation. These challenges are compounded by climate change and a lack of
diversification, which threaten long-term agricultural sustainability.
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
Comparison with China: Lessons for India
• China's Approach – Focused on agriculture reforms in 1978 by dismantling communes,
liberalizing prices, and boosting rural incomes, reducing poverty to 15% by 1984.
• China water management prioritized way earlier including usage of sprinklers and drip
farming techniques from early on. (https://www.hindustantimes.com/analysis/why-
china-has-taken-a-lead-over-india-in-farm-production/story-
UJ1DYlVWVnlXrUmPb75DiJ.html )
• Key Insights – Agriculture growth is 2–3 times more effective in reducing poverty than
non-agriculture sectors. Reforming agriculture is crucial, as 75% of India's poverty lies in
rural areas.
Water Management
• Expanding Irrigation Coverage & Water Conservation
• Irrigation coverage up from 49.3% (FY16) to 55% (FY21).
• PDMC Initiative: ₹21,968 crore allocated; 95.58 lakh hectares covered.
• Micro-Irrigation Growth (8% of irrigated area in India) vs. USA (68.6%) & China
(13.7%).
• Technology & Innovation in Water Management
• Drip Irrigation Efficiency: Water savings of 39-55%, yield increase of 33-41%.
• Geo-tagged water restoration projects (CLART GIS, AVNI Gramin app) improving
rural water security.
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
New Agricultural Laws of 2020
• Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 – This law
allows farmers to sell their produce anywhere, beyond the physical premises of APMC
Mandis. It promotes barrier-free inter-state and intra-state trade, reduces marketing
costs, and enables electronic trading of agricultural goods.
• Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm
Services Act, 2020 – This law establishes a framework for contract farming, where
farmers can legally agree with buyers on production terms, prices, and quality. It includes
a three-tier dispute settlement mechanism and ensures transparent pricing and
agreements.
• Essential Commodities (Amendment) Act, 2020 – This law removes stock limits on
agricultural commodities except under extraordinary circumstances like war or famine. It
deregulates the production, supply, and distribution of key commodities such as cereals
and pulses to encourage private investments.
Key Areas for Agricultural Reforms
• Getting the Markets Right – Liberalize trade policies, reform restrictive acts like APMC
and ECA, allow private markets to compete, and invest in infrastructure like storage and
grading facilities.
• Rationalizing Subsidies – Shift inefficient food and fertilizer subsidies to direct benefit
transfers (DBT) and reallocate savings to water management and agricultural R&D.
• Investing in Technology – Bridge gaps in technology access by promoting precision
farming tools like drip irrigation, robotics, and drones to increase productivity.
• Vision for the Future –Align Indian agriculture with global financial and market
frameworks to ensure it becomes stable, sustainable, and competitive on a global scale.
ITC
• ITC gross turnover in excess of USD 7.5 billion annually
• Procures agricultural and aquaculture products (soyabeans, wheat,
coffee, prawns)
• Long chain of intermediaries => delays and inefficiencies in the chain
• Middlemen used unscientific means to gauge quality and price
• Price differential between good and bad miniscule => no incentive for
farmers to improve quality
• E-choupal
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
ITC e-choupal
• Exploitative power of middlemen challenged
• Computer based Choupal (Investment 40k to 1 lakh), operated by
sanchalak earning commission of 0.5% per ton of processed product
• Seed, fertilizer prices, weather updates
• Agri Best practices
• Facilitating Sale of farm inputs
• Selling to ITC directly
• Farmer to show sample in local kiosk
• Receive spot quote
• Transport produce to ITC Collection centre directly to receive payment in 2 hours
• https://www.youtube.com/embed/clcrnsqu2f8?rel=0
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
Organic Farming
• Harmful effects of Fertilizers on land and humans recognized with growing
awareness of Organic crops
• India has 44.3 lakh organic farmers, the highest in the world, and about
59.1 lakh ha area was brought under organic farming by 2021-22.
• Sikkim voluntarily adopted going organic, and the process of getting the
total cultivable land of 58,168 hectares under organic farming commenced
at ground level in 2010. It became the first State in the world to become
fully organic.
• Other States, including Tripura and Uttarakhand, have set similar targets.
• Financial assistance of ₹50,000 per ha for three years is provided to the
farmer, out of which ₹31,000 is given as incentives for organic inputs
provided directly through Direct Benefit Transfer (DBT).
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
Food Processing
• PLISFPI for food processing march 2022, INR 10,900 crore
• marine products, processed fruits & vegetables, and ‘Ready to Eat/
Ready to Cook’ products, are covered for support
• https://pib.gov.in/PressReleasePage.aspx?PRID=1946647
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
Allied activities: Animal husbandry, dairy
fisheries
• The livestock sector grew at a CAGR of 7.9 per cent during 2014-15 to 2020 21 (at
constant prices)
• Animal Husbandry Infrastructure Development Fund (AHIDF) worth ₹15,000 crore was
launched in 2020.
• 3 per cent interest subvention to the borrower and credit guarantees up to 25 per cent
of total borrowing.
• A dedicated Fisheries and Aquaculture Infrastructure Development Fund (FIDF)
proposals to the tune of ₹4,923.9 crore have been approved and have benefitted over
9.4 lakh persons, through direct and indirect employment
Slides used by Deeparghya Mukherjee for the Indian Economy
Course, IIM Nagpur
