Agriculture in Indian Economy

An Overview of Agriculture in India

Agriculture in Indian Economy
Agriculture in Indian Economy

Agriculture is the process in which land is used to grow a variety of crops. It also includes breeding and raising livestock as well as poultry and aquaculture. It is the most important sector of Indian economy. As per census 2011 data about 54% of India’s population depends on agriculture and its allied activities. According to the Food and Agriculture Organisation, “India is the world’s largest producer of milk, pulses and jute, and ranks as the second largest producer of rice, wheat, sugarcane, groundnut, vegetables, fruit and cotton. It is also one of the leading producers of spices, fish, poultry, and livestock and plantation crops.”  Besides the huge number of people dependent on this sector, agriculture also has significant contribution in India’s GDP and in the year 2018-19, agriculture contributed about 15% to India’s GDP as per data of Central statistical office. Agriculture has been the mainstay of Indian economy since ages. Even before independence, agriculture was a significant sector due to its high share in employment and livelihood creation. Due to its share in the economy and dependence of about half of the population on agriculture, it is considered as the backbone of the country and India is known as an agrarian country.


Agriculture is the mainstay of Indian economy. With more than half of the population depending on agriculture and related activities, agriculture forms the backbone of Indian economy. The sector suffers from different issues related to over abundance of labourers, lack of proper irrigation facilities, lack of proper storage, complex marketing methods, complicated credit opportunities etc. These issues have become hurdles in the development of agricultural sector. Government has adopted different policies in order to address these issues and more actions are needed in order to improve the sector. India being an agrarian nation, agriculture cannot be neglected. Carefully planned policies need to be adopted to remove the shortcomings in the sector.

Apart from the above reasons, agriculture is also important for food security of the country. India has the 2nd largest population in the world and hence the domestic demand of food is too high which is sustained by agriculture. As per different studies, it has been found that agriculture also has a crucial role to play in poverty alleviation and development of rural areas. Development of agriculture leads to a decrease in the rural-urban gap in the society thereby enhancing the overall development of the nation. Development of agriculture is inter-linked with development of other sectors as well. However, over the past years it has been seen that the share of agriculture in GDP and the overall development of the economy has been declining due to various reasons.

Evolution of Agriculture in India during Ancient, Medieval Period and Under British Rule

The beginning of Indian agriculture can be traced back to the Mesolithic age. Plant cultivation started during the last phase of Mesolithic age. During the Neolithic age, people used to cultivate land and grew fruits and certain other crops. Proof of cattle herding and cultivation of rice have also been found in excavated sites. Cultivation of different crops like wheat (western India), rice (eastern India), and barley (western India) etc used to be done during the Chalcolithic age. The practise of jhum cultivation was wide spread during this era. The base of agriculture began to expand gradually. In the Harappan civilisation, cotton used to be produced along with other crops like wheat, barley, peas, horse grams etc. Sophisticated irrigation and water storage systems were developed. During the Vedic period also shifting cultivation was common and one of the major crops produced was barley. Use of wooden plough for cultivation during this period is clear from historical evidences. During the later Vedic period, mixed farming was practised in the India along with jhum cultivation. New iron agricultural tools were also used for cultivating the fertile land. In the period between 600-300 BCE, village lands used to be allotted based on family and size of land holding varied. Iron ploughshare was used for cultivating the available fertile lands which led to great advancement of agriculture. Agrarian expansion led to the emergence of food-producing economy with rice being the staple cereal.

 In the Maurya empire iron and iron implements were intensively used and meteorological observations were also made for agricultural purposes. During rule of the Guptas, vast areas of virgin land were brought under cultivation and method used was greatly improved in order to increase the yield. Under the Cholas, land was transferred by an assembly (Sabha or mahasabha) and instances of group land holdings were reported. Under the Mughals, agriculture expanded along with expansion of population. A variety of crops like wheat, rice, and barley, and non-food cash crops such as cotton, indigo and opium were cultivated. The Mughals focussed on agrarian reforms like uniform system of land measurement, classification of land, fixation of rates etc. New land revenue systems were introduced like fixing revenue based on average yield of land assessed on the basis of past ten years etc. The agricultural produce was divided between state and peasants in a fixed proportion and the people used to cultivate on behalf of the state or king who was the owner of land. Due to funding by the Mughals, irrigation was extensively used which increased the crop yield. Use of the seed drill, growing a wide variety of food and non-food crops, increasing their productivity, mulberry cultivation and sericulture etc became common during that phase.

In the British era commercialisation of agriculture was done on a large scale. Crops like tobacco, indigo, tea and coffee were promoted which were unsuitable for Indian soil. The Britishers focussed on cash crops in order to increase their profits. Cash crops were grown at the cost of subsistence crops i.e food crops. Britishers gave away ownership of land to individual owners. The peasants were divided into different categories like middle peasants, marginal peasants etc. The land revenue was increased to half of the produce that had to given in form of cash. Landlords were assigned to collect the revenue and due to high revenue, another new class of people known as money lenders came into existence. The landlords and the money lenders increased the burden on peasants who were already overwhelmed due to the increase in revenue by the British government. Due to the systems adopted by the Britishers for assessment of land revenue like the Zamindari, Mahalwari and Ryotwari, the agricultural sector in India suffered. The British policies also divided the land into smaller fragments. Further, permanent settlement and other actions of the Britishers including low investment in irrigation and negligence towards other developmental activities to address the issues of agricultural sector led to the decline of overall structure of agriculture.

Changing Dynamics of Indian Agriculture After Independence

During independence, India inherited the burden of bonded labour, commercialised agriculture, fragmented land, zamindars owning land, peasants in pathetic situation due to burden of taxes, lack of proper agricultural facilities for development, money lenders etc. After independence, Indian government had the priority to resolve these issues and to establish a system for the benefit of farmers and the overall agricultural sector. Government adopted different measures in order to address the issues. Zamindari system was abolished and tenancy reforms were brought in with assurance being given to the tenants about their ownership rights. A ceiling was also placed on the size of land holdings besides reducing the rent paid by tenants. Redistribution of land was done in order to give ownership rights to tenants who had cultivated the land based on certain restrictions. These reforms were carried out till 1960s. In mid 1960s another set of reforms in the agricultural sector known as the green revolution was initiated.


Also See: Agriculture and the Pandemic


In 1965, on the recommendation of the Agricultural Prices Commission, certain changes were adopted. Minimum Support Price was introduced to be given to the farmers as remuneration and serve as an incentive in case of falling prices. The Food Corporation of India was also set up to monitor and deal with the logistics of procuring major agricultural commodities. Another significant step taken by the government was the introduction of HYV (high-yielding seed varieties) in order to increase production. These measures significantly increased India’s agricultural harvest. Farmers were supplied with facilities like canal water for irrigation, fertilisers, power and credit. Government started the policy of giving subsidies like fertiliser subsidy, power subsidy etc to aid and assist the farmers. Use of modern methods of cultivation along with use of technology improved the agricultural sector as well as the state of farmers. During 1970s, due to different conditions like repeated droughts, the agricultural sector was affected. Indian government adopted measures like increasing the fertiliser subsidies in response to oil shock in the market that would have led to drop in consumption due to soaring prices. Focus on groundwater irrigation, private investment in tubewells by farmers, extension of HYV from wheat to rice etc gave a boost to green revolution in India. During this phase the subsidies bill of the government also swelled due to factors like increasing power subsidies for pumping groundwater. From 1980 to 1990, the HYV technology spread further and increased the production. However, during this entire phase of green revolution, the agricultural sector was burdened with strict regulated policy measures, wide scale restrictions on production by means of licensing requirements, control on pricing and private trading of produce etc. Besides green revolution, blue revolution and white revolution also contributed to development of agricultural sector in India.

From 1991, India adopted different macroeconomic and structural reforms in economic sector. This significantly impacted the agricultural sector leading to more liberalised and open structure. The high rate of economic growth due to reforms increased the food demand and improved terms of trade for agriculture led to an increase in inflow of private investments. The increased investments in turn boosted the production of horticultural produce, poultry, fish, milk, eggs etc. In 1997, the public distribution system was changed into targeted public distribution system in order to reduce the pressure of rising subsidies on the government. In the subsequent times government has adopted different policies like Antyodaya Ann Yojana (2000), Agricultural Produce Market Committee Act (2003), National Policy for Farmers (2007), National Food Security Act (2013), National Mission on Sustainable Agriculture (2014), direct cash transfer benefit (starting from 2015), Pradhan Mantri Fasal Bima Yojana (2016) etc in order to modify the agricultural sector as well as its related sectors.

Contribution of Agriculture in Indian Economy

Agriculture has different roles to play in the economy. It is the major source of food supply in the economy. It serves as the primary source of income mainly for the rural people. It also contributes to the national income. Government also earns significantly from agriculture by means of internal as well as external trade. Export of agricultural products to different countries serves as a source of revenue for the government. India exports agricultural as well as horticultural products to about 100 countries mainly Middle Eastern nations, Southeast Asian countries, SAARC countries, the EU and the US. Different sectors like railways earn from the transportation of agricultural products. Agriculture is also the major source of raw materials for certain industries like cotton industry, jute industry etc. The major agricultural products in India include rice, milk, wheat, corn, sugarcane, cotton, maize, millets, guava etc. India being a major rice producer, exports rice mainly basmati rice to the global market. In 2019-20 about 117 million tonnes of rice was produced in India and in 2019 India accounted for about 32% of total rice exports all over the world. India also is a major producer of pulses and in financial year 2020 India produced about 23 million tonnes of pulses. India’s food grain production was about 295 million tonnes in the year 2019-20 which included rice, wheat, coarse cereals, oilseeds and cotton. In 2019-20, about 107 million tonnes of wheat and 27 million tonnes of maize were produced.

Contribution of Agriculture in Indian Economy Info 1
Contribution of Agriculture in Indian Economy

In 2019-20 total production of horticultural products in India was about 310 million tonnes. In 2019-20, India produced about 24 million tonnes of onion and exported about 2 million tonnes from it. The potato production in 2019-20 was about 51 million tonnes and tomato production stood at about 19 million tonnes. As per estimates, total fresh vegetables production was about 97 million tonnes and about 16 lakh tonnes of it was exported. Grapes production in 2019-20 was about 1.9 lakh million tonnes, mangoes stood at about 49 thousand million tonnes (besides processed mango pulp adding another 85 thousand tonnes). As of 2019, India’s livestock population rose to around 530 million including cattle, buffaloes, goats, sheep, pigs and poultry. India is world’s largest milk producer and exports milk to countries like Bangladesh, Nepal, Bhutan, the UAE, and Afghanistan etc. In 2019-20 about 190 million tonnes of milk was produced. In 2019-20, poultry meat in India accounted for about 4 million tonnes and buffalo meat for about 1.5 million metric tonnes. India’s fish production in 2019-20 was approximately 13 thousand tonnes. In terms of export, India exported about 11 lakh million tonnes of buffalo meat, 14 thousand million tonnes of sheep/goat meat and 3.5 lakh million tonnes of poultry products in 2019-20.

Issues in Indian Agricultural Sector

Marketing of agricultural products is one of the issues affecting Indian agriculture. India adopted the APMC model under which major wholesale markets of agricultural commodities (mandis) are managed. Under the Agricultural Produce Marketing Regulation Act, states are divided geographically into markets and all produce needs to be brought to market in that area on mandatory basis for 1st time sale. There are agents who deal with buying and selling of agricultural produce. However APMCs have various lacunae. Monopoly in such markets has prevented private companies from entering the markets thereby restricting competition. Agents in the markets form cartels and work in biased manner for personal benefit which adversely affects both the customers and the farmers. Entry barriers like license fees etc also exist in these markets. APMCs play a dual role of regulator as well as market player thereby giving rise to conflict of interests wherein the role of regulator is affected. There also is delay in payments to farmers by the agents. Lack of Transport Facilities and too many intermediates has complicated agricultural marketing. There exist a long supply chain which leads to delays in movement of products, increases cost of procurement, transportation etc.

Issues in Indian Agricultural Sector Info 2
Issues in Indian Agricultural Sector

Another issue is fragmented land holdings existing in the sector. Due to the fragmented and scattered nature of land, the produce obtained from the land is low and collecting surpluses for marketing of produce from these lands becomes a serious problem. Inequality in land distribution also poses threat to the sector. Inadequate use of fertilisers (excessive use of chemical fertilisers), manures etc, lack of proper irrigation facilities, lack of adequate knowledge about best practises etc act as hindrance in the development of the sector. Lack of farm equipments also deteriorates the production. These issues lead to decline in productivity of land thereby decreasing the production.  Another major issue grappling the sector is that of debt on farmers. In India, erratic nature of rainfall makes the agricultural produce and its quantity quite erratic. Indian agriculture is primarily dependent on timely monsoons and the erratic nature of monsoon has significant effect on the sector. Further, the terms under which money lenders give loans to the farmers are discriminatory and even the rates charged are high. When the farmers take up loans from money lenders in order to procure fertilisers and other necessary products, and the production fails due to unstable climatic conditions, they enter into a debt trap which circulates through generations and in extreme cases forces farmers to commit suicide. Even with MSP in place farmers face the issues of under weighing of their produce, delayed payments etc. Lack of proper infrastructure is also an issues affecting Indian agriculture. There exist only limited storage facilities for storing the agricultural produce. Further, the facilities that exist are inadequate and not well maintained thereby causing loss of huge quantities of agricultural produce. The storage facilities also are not well placed which gives rise to the issue of transportation from and to the facilities thereby increasing overall cost and causing inconvenience. Recently a government appointed task force stated that Indian agriculture is affected by issues like ‘grading and certification facilities, ineffective cold chain management and low level of processing of agriculture produce’.

Government Initiatives to Address The Issues in Agricultural Sector

Government has taken number of steps to deal with the issues in agricultural sector. As discussed earlier, government adopted the MSP and PDS schemes to support the farmers. Besides this different policies have been enacted at different times to develop the sector. The APMC act was introduced to form a common platform for the farmers to sell their produce. However, due to the issues in the model government has modified the act. In 2003, government introduced the model APMC act to overcome the issues with the APMC act. As per the new act, the farmers could sell his produce directly to any parts of choice without bringing it to the mandis, exporters, packers and other players could buy products directly from the farmers, it also allowed entry of private players in APMC mandis to deal with the issue of monopoly and also allowed for PPP in agricultural produce markets. Government brought in others changes in the sector as well. In 2017, another modification to the model APMC act was introduced. The modifications were- there would be no reserved areas for mandis and farmer was free to sell produce as per choice to any mandi, private mandis to be allowed to operate in physical as well as electronic mode, a particular market could be declared only for a particular commodity by the state governments and the central government could declare a mandi to be of national importance. Establishing an e-trading platform was allowed after obtaining a license that had low cost. The farmers were left free to sell their produce either through government markets or to any other party; a limit was also set on the fee to be paid by farmer in order to participate in market yards. Interstate trading between markets of national importance was also allowed.

Government Initiatives Info 3
Government Initiatives

Government introduced nutrient based subsidy in 2010 under which subsidies were given to farmers per kg of nutrient on annual basis. In 2013, government introduced the National Food Security Act in order to improve the existing targeted PDS. In the year 2015, government brought in the soil health card scheme. Under this scheme the farmers would be recommended nutrients and fertilisers needed crop wise in order to increase the productivity based on the soil quality of the land. Under this scheme farmers could reclaim benefits of nutrient based subsidy scheme and also purchase fertilisers. Subsequently in 2016, government launched the E- NAM (electronic national agriculture market). E-NAM was introduced to create a network of APMCs and would help to reduce the information asymmetry among buyers and farmers. It aimed to create a transparent information flow channel which would deal with the issues of fragmented agricultural market, monopoly of APMCs etc. National Mission for Sustainable Agriculture (NMSA) has also been launched by government to enhance agricultural productivity by means of integrated farming techniques, efficient use of water and soil health management etc.

In 2015, Pradhan Mantri Krishi Sinchayee Yojana was launched with the aim of increasing the coverage of irrigation and improving water efficiency. Paramparagat Krishi Vikas Yojana (PKVY) was also launched in 2015 to promote organic farming in India. Pradhan Mantri Fasal Bima Yojana (PMFBY) was launched in 2016 to provide insurance cover to farmers in case of damage of notified crops due to natural calamities, pests & diseases. Other measures by the government like the National Scheme on Welfare of Fishermen to provide financial assistance to fishers, Livestock insurance Scheme to provide protection to cattle rearers and farmers and the Micro Irrigation Fund (MIF) to increase the land cover under micro irrigation etc have been initiated to improve agricultural sector.


India is an agrarian country with about 50% of the population depending on it for livelihood. It has significant contribution in country’s overall economic development as well. The agriculture sector has certain issues like lack of proper infrastructure, complex marketing framework, lack of proper irrigation facilities, lack of proper credit facilities etc. These issues are being addressed by the government through its various schemes and policies. However, more effort is needed in order to develop the sector and the existing issues. It has also been noticed that the contribution of agriculture in economy has been declining in the last few years. This poses serious threat to a significant portion of the population and needs to be addressed at the earliest. On comparing the percentage contribution of agriculture in GDP with its share in total employment, it can be clearly noticed that issue of disguised unemployment exists in the sector. This over abundance of labour force in agriculture reduces the per capita income which leads to poverty. This issue also needs to be addressed as it has significant impact on the economy and the livelihood of the farmers.



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