Indian Agriculture In 2030
India is an agricultural country. Agriculture is “only” ~16 % of GDP but the largest sector for employment. Officially farmers are only a few hundred million, but adding family members who help or occasionally farm, as also wage labourers, the number of farm workers is likely to be closer to half a billion people. But how many people would India need farming if it were as labour efficient as the US for growing crops? I am not suggesting it is possible, or even desirable (large, mechanised farms with massive chemical and water inputs) but as a thought exercise? Just four million people. Under the leadership of former Prime Minister P.V Narasimha Rao and Finance Minister Manmohan Singh the noble initiative was started.Due to better policies and the country’s quest to emerge as a leading economy in the world, India opened its market to foreign investors. India would be a developed country by 2030 with proper implementation of economic goals.According to predictions of some of the leading newspapers like Economic time, India will be the 3rd largest economy by the year 2030.
Aspirations for 2030:
The pessimism surrounding India’s self-sufficiency in the future underestimates the potential of both the Indian consumer and the Indian farmer. Not only is India more than capable of fulfilling its own food demand, it is also poised to become a top five exporter of food over the next two decades. It will also make the Indian food business an exciting investment destination for global private capital.What India eats, how it is grown and the policies that govern the industry can be the three pillars on which the future of Indian agriculture is likely to rest. Both quantity and quality are expected to drive the India story. People can demand higher value food items. More importantly, supply of premium food items is expected to increase demand, just as it did in the areas of mobile telephony and cable television.India’s growing tribe of new-gen tech entrepreneurs could help create solutions to overcome information and logistical challenges. Greater use of internet and mobile technology can ease outreach and make pricing transparent. Such transparency will benefit not just the farmers but the consumers as well.
CONSUMPTION SHIFT TO PREMIUM PRODUCE, INCREASED TECHNOLOGY
India’s population is expected to rise from 1.18 billion in 2010 to 1.5 billion in 2030, at an annual growth rate of 1.1 per cent. By 2030, more than 43 per cent of India’s population is likely to reside in cities, compared to 31 per cent in 2010. Both these factors could influence consumption as India demands more food and higher quality with every passing year. Overall food consumption will rise by 4 per cent per annum to reach USD 483 billion in 2030 . In urban India, consumption will grow by 5 per cent, while in rural India it will grow by 2.5 to 3 per cent. Per capita consumption is expected to increase from USD 206 to USD 346 at current prices (an increase of 3 per cent per annum). This represents a huge investment opportunity across the food value chain.In comparison to China, India is moving at a slower pace but some economists believe India will surpass the Dragon by 2050.
FOOD AND AGRICULTURE VISION FOR 2030:
India in 2030 could present a different picture from today’s reality. We have already discussed how trends such as rising income, and increase in quantity demanded coupled with the demand for quality and premium produce could steer the way forward for the agriculture and food sector. Other catalysts that could enable the sector to work towards that enhanced reality include a more participative governance model that will further empower states in agriculture; a changed taxation regime due to the Goods and Services Tax; progressive infrastructure such as ports, special zones and cold chains; lesser restrictions on farm gate access; and more farmer–industry interaction. Keeping these factors in mind, we have envisioned India as an agricultural powerhouse by 2030—a self-sufficient food producer and leading food exporter. Three levers that could drive the future . India’s agriculture growth are improved production yields, enhanced export opportunities and increased scope of the processing industry.Accelerate agricultural production to achieve potential Given India’s potential to better yield and efficiency, we estimate that for most cereals and pulses, improvement ranging between 20 and 50 per cent is possible. For most fruits and vegetables, the range stands at 30 to 200 per cent of current yield; for most oilseeds, it is possible to improve yield by 80 per cent and even over 100 per cent in some cases such as soya bean.
Increasing yield and creating demand can increase the worth of India’s agricultural produce from USD 266 billion in 2011 to USD 615 billion by 2030 (Exhibit 2.4). Analysis suggests that for most cereals and pulses, improvement ranging between 20 and 50 per cent is possible. For most fruits and vegetables, the range stands at 30 to 200 per cent of current yield; and for most oilseeds, it is possible to improve yield by 80 per cent, and even over 100 per cent in some cases such as soya bean.Increase processing in the agricultural value chainThe full potential of processing is yet to be tapped, making this a big opportunity for the sector. With the correct investments, processing in India can move from 10 per cent of produce to 25 to 30 per cent of produce. As an outcome, food processing GDP could grow from USD 24 billion in 2010 to USD 124 billion by 2030Increase agricultural exports.
As the second largest producer of agricultural products globally, India has the potential to increase exports by five to six times from USD 29 billion in 2011 to USD 162 billion by 2030. Agriculture could then contribute 15 per cent to total exports and India could become a top five exporter of food in the world growth rate of GDP or Gross Domestic Product annually of India in the year 2000 was 3.8 %; in the year 2010 was 10.3 %; so as per the prediction this may go up by the year 2030.
Even the per capita income will see a rise by 2030 and is estimated to reach USD 3000 on an average. It can be seen as a developed nation catering to welfare and development of the entire citizen.
China is expected to jump to the 1st spot by the year end 2030 being followed by the USA. The projected economy of India in the year 2030 will be approximately USD 10,000 billion.
The Indian economy will be retaining the top spot among the Commonwealth nations by the targeted year.Even it will be far superior to some of the European counterparts like France and Italy. The day is not far when India will be counted among the elite G8 members.
India was ahead of China in the year 1970 in terms if economic conditions but the Dragon nation left India behind in the year 1980 and still growing at a faster rate.Some of the European nations are witnessing a slowdown in their economy and may continue to see in coming years.Indian GDP is shared by Agriculture and allied, Industry and Services. At present, the Services sector is the vital contributor to Indian GDP and is believed to contribute by the end of next decade.It can be considered as a major boost for employment directly or indirectly. By contributing more than 52 % to the GDP of India, service sector is considered to be a boon for coming years.Whereas, the contribution of Agriculture has decreased to mere 16 % and that of Industry is 31 %.By the beginning of 2030, the statistics might be different as Industrial sector is seen as an attractive zone for investors and is crucial for improving the economy of India.For the successful sustenance of Indian economy, the CAD or Current Account Deficit should be minimized.This can be achieved by increasing the exports and decreasing the imports. The Information technology sector is considered as a boon for the Indian export industry.The foreign currency reserves will see an increase from USD 368 billion in 2016 to USD 600 billion by the year 2030.India will be one of the leading economies in the world by the year 2030. JobsJobs aside, India needs to shift from basic farming to more efficient, sustainable, and productive farming. Unfortunately, today’s agriculture policies fail to recognise how crop choices, input costs, and the supply chain are intertwined, perpetuating marginal farming. Moreover, growing more food isn’t the solution to providing employment. There is enough food, especially considering calories as opposed to micronutrients. Exports are possible but require extensive value add, and it is not clear how much of this would benefit the farmer as opposed to the processor or trader. Fundamentally, India must figure out a way to provide meaningful employment to hundreds of millions of people outside agriculture. Failing to do so means not just a failure of human development, it represents a political if not social powder keg – underemployed and disaffected youth are a national security threat, becoming fodder for radicalisation, a life of crime, or worse.
Farming as a Viable Livelihood?
Agriculture is dying, OK, not as in the production of food but as a desirable profession. For all the bucolic if not romanticised portrayals of farming and a rural lifestyle, it is really a thankless, risky, and even back-breaking job, especially as undertaken by the masses, which is subsistence agriculture. One bad yield, whether due to errant rains, pests, etc., and most farmers have no buffer available. This also makes farmers risk averse, with an implicit cost of capital some 50-100% (!), which is essentially one season or one year of horizon. Most are not able to undertake long term investments, innovation, or major change.
The clearest indicator of the problems of agriculture as a profession is how there are actually shortfalls of labour in some areas, with larger farms relying on imported farm labourers, drawn not just from the neighbouring states but from the far ends of the country (especially the north-east) and even Nepal. Younger generations do not want to follow their parents’ footsteps, which pushes urbanisation. Unfortunately, urban areas, while offering more opportunities, also relegate many to low-end jobs.
Farmers tell me the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA or MGNREGA, formerly NREGA) has heightened the problem. In fact, Schedule I Clause 12 of NREGA (2005) states, “As far as practicable, a task funded under the Scheme shall be performed by using manual labour and not machines.” This highlights how MNREGA has really been about jobs, instead of output or productivity. But instead of slicing the pie, agriculture needs to focus on growing the pie. Adding employment into farms is unlikely to change yields much, and certainly will not increase revenues sufficiently to compensate for increased labour costs. One possibility is for MNREGA to coordinate with cropping cycles, to enable a more steady balance of opportunities (and labour supply). Not only are farm sizes in India very small, they are declining due to population growth and competition for land. Per National Sample Survey Organisation (NSSO) estimates the average size is some 1.2 hectares only, and the median is lower. Other estimates places indicate 70% of farmers operating below one hectare in size. In farming, size matters. On average, smaller holdings lose money, i.e., their household costs are higher than revenues, a chunk of which come from non-farming activities. The smallest farms are afloat since they do not pay for labour, relying entirely on the family, and they consume much of what they produce, influencing the choice of crops.
So how does a farmer make more money? Let us hold off on changing crops, as market-focused changes often lead to future risks with debt and price volatility, such as for the fabled guar plant, whose gumhas been exported for shale gas production to the US. The simplest means to make more money is to produce more with less input, meaning productivity. But herein lays the fundamental problems. Indian productivity is not so low, and is very good in selected crops, especially sugar. For cereals, using Food and Agricultural Organization (FAO) data for 2012, the yield of Indian cereals is 2.88 tons/ha, versus 3.67 for the world average. Even Western Europe showed a yield of 6.65 tons/ha, implying we can double our output per hectare, but not much more.
However, even if we doubled or tripled our output, would that double or triple farmer’s earnings? No, since a glut would reduce prices. I have met cutting edge farmers who use high-tech methods (importing their seeds from Israel and the Netherlands), whose per acre yields are 20 times the average. But their much higher yield does not even require additional labour – and much of what they need is for packaging, which is seasonal.
More than simple supply-demand equilibria, the agricultural sector has many distortions and dislocations, not just middlemen, but also a very poor supply-chain, with lack of cold storage and efficient transport. While not precisely known, India wastes some 20% of its fruits and vegetables, and highly perishable/seasonal ones (which are often worth much more in rupee terms) may lose more. As economist Ajit Ranade and others point out, a number of improvements are needed in terms of markets, flexibility, etc., allowing farmers to choose whom they sell to, at what terms, etc.
The last point worth considering is that food and agriculture are not the same. Expenditures on food span the value-add, including processing, preparation, service in restaurants, etc. This is why in the US, food is now one of the biggest household expenditures, with extensive “eating out”. In India, eating outside the home is still low, but the trend is rising, not just as a luxury but with changes in demographics.
Importantly, farming revenues will not rise much even as India’s income rises. In fact, the ratio of total agriculture income to total population is relatively flat across countries regardless of per capita income. Rising GDP means growth of non-agricultural incomes. As Figure 1 below shows (in log scale), India is not very different from a number of advanced countries in absolute GDP coming from agriculture spread per capita. There is some room for growth, but far less than growth in GDP. This tells us farmer incomes normally rise only when there are fewer farmers. India can support inclusive and sustainable growth, raise agricultural productivity and farmer incomes, and scale up existing food and agriculture businesses—growing food exports fivefold, from $29 billion today to $162 billion by 2030.
by -Dr Aamir ahmad raina
Mvsc LPM IVRI Izzatnagar
rainaaamir99@gmail.com
6005807907
