The Government planning
Agriculture plays a vital role in India’s economy. Over 58 per cent of the rural households depend on agriculture as their principal means of livelihood. Agriculture, along with fisheries and forestry, is one of the largest contributors to the Gross Domestic Product (GDP).
India is the largestproducer, consumer and exporter of spices and spice products. India's fruitproduction has grown faster than vegetables! making it the second largest fruitproducer in the world. India's horticulture output, comprising fruits,vegetables and spices, has reached to a record high of 283.5 million tonnes(MT) in 2014-15. It ranks third in farm and agriculture outputs. Agriculturalexport constitutes 10 per cent of the country’s exports and is thefourth-largest exported principal commodity. The agro industry in India isdivided into several sub segments such as canned, dairy, processed, frozen foodto fisheries, meat, poultry, and food grains.
The Department ofAgriculture and Cooperation under the Ministry of Agriculture is responsiblefor the development of the agriculture sector in India. It manages severalother bodies, such as the National Dairy Development Board (NDDB), to developother allied agricultural sectors.
Over the recent past,multiple factors have worked together to facilitate growth in the agriculturesector in India. These include growth in household income and consumption,expansion in the food processing sector and increase in agricultural exports.Rising private participation in Indian agriculture, growing organic farming anduse of information technology are some of the key trends in the agricultureindustry.
As per the 3rd AdvanceEstimates, India's foodgrain production has increased marginally to 252.23million tonnes (MT) in the 2015-16 crop year. Production of pulses is estimatedat 17.06 million tonnes.
With an annual outputof 146.31 MT, India is the largest producer of milk, accounting for 18.5 percent of the total world production. It also has the largest bovine population.India, the second-largest producer of sugar, accounts for 14 per cent of theglobal output. It is the sixth-largest exporter of sugar, accounting for 2.76per cent of the global exports.
Spice exports fromIndia are expected to reach US$ 3 billion by 2016–17 due to creative marketingstrategies, innovative packaging, strength in quality and strong distributionnetworks. The spices market in India is valued at Rs 40,000 crore (US$ 5.87billion) annually, of which the branded segment accounts for 15 per cent. Infact, the Spices Board of India has decided to set up a spice museumat Willingdon Island inKochi to attract and educate tourists and seafarers about the history andgrowth of Indian spices industry.
The procurement targetfor rice during marketing season (MS) 2015–16 has been finalized as 30 MT.
Several players haveinvested in the agricultural sector in India, mainly driven by the government’sinitiatives and schemes.
According to theDepartment of Industrial Policy and Promotion (DIPP), the Indian agriculturalservices and agricultural machinery sectors have cumulatively attracted ForeignDirect Investment (FDI) equity inflow of about US$ 2,261 million from April2000 to December 2015.
Some major investmentsand developments in agriculture in the recent past are as follows:
- ITC Ltd, one of India's leading fast-moving consumer goods (FMCG) company, plans to make Andhra Pradesh a hub for its agricultural business operations.
- Mahindra and Mahindra Ltd has acquired 35 per cent stake in a Finnish combine harvesters manufacturer, Sampo Roselnew Oy, for US$ 20.46 million and will jointly focus on the combine harvester business in Asia, Africa and Eurasian Economic Union countries.
- The Small Farmers’ Agri-Business Consortium (SFAC) plans to organize camps in Madhya Pradesh and Chhattisgarh to promote its venture capital assistance scheme (VCAS), which seeks to provide capital and project development facility (PDF) to agri-business entrepreneurs.
- Agri-research institute ICRISAT’s incubation arm is looking to set up a Rs.100 crore (US$ 14.67 million) fund in a year, an initiative that could help small entrepreneurs from the agri-business and nutrition space raise money.
- Mahindra & Mahindra (M&M), India’s leading tractor and utility vehicle manufacturer, announced its entry into pulses retailing under the brand ‘NuPro’. Going forward, the company plans to foray into e-retailing and sale of dairy products.
- Fertilizer cooperative IFFCO launched a joint venture with Japanese firm Mitsubishi Corp for manufacturing agrochemicals in India.
- Acumen, a not-for-profit global venture fund, has invested Rs 11 crore (US$ 1.7 million) in Sahayog Dairy, an integrated entity in the segment, based at Harda district in Madhya Pradesh.
- Rabo Equity Advisors, the private equity arm of Netherlands-based Rabo Group, raised US$ 100 million for the first close of its second fund – India Agri Business Fund II. The fund plans to invest US$ 15–17 million in 10–12 companies.
- Oman India Joint Investment Fund (OIJIF), a joint venture (JV) between the State Bank of India (SBI) and State General Reserve Fund (SGRF), invested Rs 95 crore (US$ 13.94 million) in GSP Crop Science, a Gujarat-based agrochemicals company.
- The world's seventh-largest agrochemicals firm, Israel-based ADAMA Agrochemicals plans to invest at least US$ 50 million in India over the next three years.
Given the importanceof the agriculture sector, the Government of India, in its Budget 2016–17,planned several steps for the sustainable development of agriculture.
Budget 2016-17proposed a slew of measures to improve agriculture and increase farmers’ welfaresuch as 2.85 million hectares to be brought under irrigation, Rs 287,000 crore(US$ 42.11 billion) grant in aid to be given to gram panchayats andmunicipalities and 100 per cent village electrification targeted by May 01,2018.
The government has alreadytaken steps to address two major factors (soil and water) critical to improveagriculture production. Steps have been taken to improve soil fertility on asustainable basis through the soil health card scheme and to support theorganic farming scheme ‘Paramparagat Krishi Vikas Yojana’. Other steps includeimproved access to irrigation through ‘Pradhanmantri Gram Sinchai Yojana’;enhanced water efficiency through `Per Drop More Crop’; continued support toMahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and thecreation of a unified national agriculture market to boost the incomes offarmers.
The Government of India recognises the importance of microirrigation, watershed development and ‘Pradhan Mantri Krishi Sinchai Yojana’;thus, it allocated a sum of Rs 5,300 crore (US$ 777.6 million) for it. It urgedthe states to focus on this key sector. The state governments are compelled toallocate adequate funds to develop the agriculture sector, take measures toachieve the targeted agricultural growth rate and address the problems offarmers.
The Department ofAgriculture and Cooperation under the Ministry of Agriculture has inkedMOUs/agreements with 52 countries including the US. In addition, the Departmentof Agriculture Research & Education (DARE) and the Department of AnimalHusbandry, Dairying & Fisheries (DAHD&F) under the Ministry ofAgriculture have signed MOUs/agreements with other countries, taking the numberof partnerships with other countries to 63. These agreements would provide betteragricultural facilities in areas such as research and development, capacitybuilding, germ-plasm exchange, post-harvest management, value addition/foodprocessing, plant protection, animal husbandry, dairy and fisheries. Theagreements could help enhance bilateral trade as well.
Given the correlationbetween improvement in agriculture and the development of the country, theGovernment of India adopted several initiatives and programme to ensurecontinuous growth. It allocated Rs 25,000 crore (US$ 3.67 billion) for theRural Infrastructure Development Fund (RIFD), Rs 1,500 crore (US$ 220 million)for the long-term rural credit fund, Rs 45,000 crore (US$ 6.60 billion) for theshort-term cooperative rural credit finance fund and Rs 25,000 crore (US$ 3.67billion) for the short-term Regional rural bank (RRB) refinance fund. It alsomarked an ambitious target of Rs 8.5 lakh crore (US$ 124.71 billion) ofagriculture credit during 2015–16.
Some of the recentmajor government initiatives in the sector are as follows:
- Prime Minister Mr Narendra Modi has unveiled the operational guidelines for the Pradhan Mantri Fasal Bima Yojana which aims to provide farmers with crop insurance as well as
- The Cabinet Committee on Economic Affairs (CCEA) has approved ‘Blue Revolution’, an umbrella scheme for integrated development and management of fisheries by Government of India, with total financial outlay of Rs 3,000 crore (US$ 440.15 million) for a period of five years.
- Mr Piyush Goyal, Minister of Power, Coal, New and Renewable Energy has announced that government’s plans to invest Rs 75,000 crore (US$ 11.08 billion) in an energy-efficient irrigation scheme over the next three to four years.
- The new crop insurance scheme for farmers 'Bhartiya Krishi Bima Yojana' aims to cover 50 per cent of the farmers under the scheme in the next two-three years,
- India and Lithuania have agreed to intensify agricultural cooperation, especially in sectors like food and dairy processing.
- Gujarat Government has planned to connect 26 Agricultural Produce Market Committees (APMCs) via electronic market platform, under the National Agriculture Market (NAM) initiative.
- The State Government of Telangana plans to spend Rs 81,000 crore (US$ 11.88 billion) over the next three years to complete ongoing irrigation projects and also undertake two new projects for lifting water from the Godavari and Krishna river.
- The National Dairy Development Board (NDDB) announced 42 dairy projects with a financial outlay of Rs 221 crore (US$ 32.42 million) to boost milk output and increase per animal production of milk.
- Government of India has set up an inter-ministerial committee, which will look into ways to examine the potential of Indian agriculture, identify segments with potential for growth, and work towards doubling farm incomes by 2022.
- The Government of India has allocated Rs 200 crore (US$ 29.9 million) for electronically linking 585 major wholesale agriculture markets across the country, thereby creating a National Agriculture Market (NAM). in July 2015 for three years
The agriculture sectorin India is expected to generate better momentum in the next few years due toincreased investments in agricultural infrastructure such as irrigationfacilities, warehousing and cold storage. Factors such as reduced transactioncosts and time, improved port gate management and better fiscal incentiveswould contribute to the sector’s growth. Furthermore, the growing use ofgenetically modified crops will likely improve the yield for Indian farmers.
According to the NationalInstitution for Transforming India Aayog (NITI Aayog), India’s agriculturesector is expected to grow 6 per cent in FY 2016-17 in case of normal monsoonduring the June-September period. The 12th Five-Year Plan estimates thefoodgrains storage capacity to expand to 35 MT. Also, a 4 per cent growth wouldhelp restructure the agriculture sector in India in the next few years.
Exchange rate used:INR1= US$ 0.0149 as of May 16, 2016
References: TheEconomic Survey 2015–16, Agricultural and Processed Food Products ExportDevelopment Authority (APEDA), Department of Commerce and Industry 2015–16,Union Budget 2016–17, Press Information Bureau, Ministry of Statistics andProgramme Implementation, Press Releases, Media Reports