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Agriculture and rural sector can jump-start economy if we fix its ills

Agriculture can do hugely better if we change the way we farm; focus more on 'allied sectors' and build strong growth links with the non-farm rural economy.

Written by Bina Agarwal |
Updated: November 18, 2020 8:43:28 am
Clearly, agriculture, which contributes only 15-16 per cent of GDP, cannot overturn contraction in other sectors, but along with the rural sector, it could jump-start the economy, if we fixed its ills and transformed it. (Illustration by C R Sasikumar)

In the first quarter of this financial year, India’s GDP contracted by 23.9 per cent but agriculture grew by 3.4 per cent. Can agriculture make up for degrowth elsewhere? And can it do better than 3.4 per cent? To the first question, I would say — yes, up to a point; to the second — definitely.

Clearly, agriculture, which contributes only 15-16 per cent of GDP, cannot overturn contraction in other sectors, but along with the rural sector, it could jump-start the economy, if we fixed its ills and transformed it.

To begin with, we must reduce our preoccupation with prices and markets to first ensure that more farmers produce enough surplus to gain from higher prices and expanded markets. Despite green shoots, agriculture is ailing. Only 44 per cent of irrigable area is irrigated. Groundwater is fast depleting, soils are degraded, extension services barely function and climate change is speeding up.

Consider water, the key to higher yields. Almost 90 per cent of India’s groundwater goes into irrigation and is grossly over-extracted. In Punjab, water tables have been falling by over 2.3 ft/year since 2000, propelled by free electricity and no meters (only West Bengal meters groundwater use). By 2030, 65 per cent of India’s blocks will be over-extracting groundwater (World Bank).

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Moreover, 86 per cent of our farmers cultivate two ha or less, often in fragments; 75-80 per cent borrow credit informally; 70 per cent provide only 4-5 per cent of marketed surplus in wheat and rice, even in surplus states; barely 6-12 per cent sell in mandis, and few gain from MSPs. Farm incomes are low and erratic. Millions have fallen into extreme poverty with COVID-19. In its current state, agriculture cannot lubricate our growth, let alone engine it.

However, agriculture can do hugely better if we change the way we farm; focus more on “allied sectors” — livestock, fisheries and forests — and build strong growth links with the non-farm rural economy which, along with agriculture, contributes some 46 per cent of NDP.


How do we change the way we farm? First, remodel irrigation by expanding rainwater harvesting (for both surface water and recharging groundwater); promoting micro-irrigation for efficient water use; and regulating groundwater extraction. Between 1999 and 2009, Gujarat’s agriculture grew at 9.6 per cent, attributed mainly to rainwater harvesting and BT cotton (T Shah et al, EPW). In 10-15 years, Gujarat built 0.5 million micro-structures: Check dams, bunds, etc. MGNREGA could be put to similar use in other states.

On micro-irrigation, again, a 2014 government study for 13 states found it significantly reduced water and fertiliser use, while raising wheat yields by 25 per cent, and vegetable yields by 52 per cent. However, only 10 per cent of India’s cropland has micro-irrigation. Regulated irrigation expansion will increase yields, cropping intensity and high-value crops.

Second, agroecological farming can save costs, employ more labour and rejuvenate soils. A survey of 286 experiments in sustainable farming across 57 countries found a mean yield increase of 79 per cent (J Pretty et al, 2006). Moving from cereals to multiple products, including poultry, fruits and vegetables, will also fit our changing dietary patterns.


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Third, we need more research into heat-resistant crops and better extension. A study in Science (366, 2019) reported that agricultural information delivered via cell-phones increased yields by 4 per cent and the odds of adopting recommended inputs by 22 per cent, across several countries, including India.

Fourth, and most essential, is institutional change. Our farms are too small for tapping scale economies or effectively exploiting markets. What we need is smallholders pooling resources and farming cooperatively in small groups. People often say: But cooperative farming failed in the 1960s. They forget that we misguidedly pushed large and small farmers into one cooperative. Today we know better. Cooperation works if groups are small, relatively homogenous, constituted by friends and neighbours, cemented by trust.

Kerala is an obvious success story. It has 68,000 all-women group farms with 4-10 women jointly leasing land, pooling labour, sharing costs and returns. My in-depth research on a sample of group and individual farms in two districts showed that groups had 1.8 times the annual value of output/ha and five times the net returns/farm relative to individual family farms (95 per cent male-managed). Mean net return/group farm was Rs 1.2 lakh, thrice the national average of Rs 37,000/farm that year. Groups also enabled women to deliver on banana contracts. Notably, 87 per cent of the 50,000 groups cultivating under COVID survived economically, including vegetable farmers, whereas most individual vegetable farmers lost out due to lack of harvest labour and market outlets.

Is group farming specific to Kerala? No. We have emerging examples in Bihar, West Bengal, Gujarat and Telangana. In Bihar and Bengal, farmers have pooled their land into contiguous plots, and use electric pumps for drip irrigation, which was not possible with scattered plots and few power sources. These smallholder collectives also cooperate for input purchase and farm operations. Many have doubled their wheat and rice yields. And they, as also those in Gujarat, report being more food secure during the pandemic than their smallholder neighbours farming alone. Notably, these are not the Farmer Producers Organisations that market together but cultivate separately. The groups I mention do joint production and have adapted the SHG model. Many of India’s six million SHGs could run group enterprises.


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Fifth, livestock, fisheries and forests, which account for 26 per cent, 5.5 per cent and 8.5 per cent of GVP from agriculture, have huge underused potential. Livestock is much discussed, but what about fisheries? India is the world’s second-largest producer of aquaculture fish and employs 13.5 million people, 32 per cent being women (FAO). In 2017-18, our fisheries grew at 11.9 per cent.


Similarly with forests. They provide an estimated 47 per cent of India’s “GDP of the poor” (TEEB). Since 1990, when we launched joint forest management with community cooperation, forest cover has risen to 21.5 per cent of geo-area. Our target is 33 per cent. Forest protection and plantation, biodiversity restoration and eco-tourism can create millions of jobs.

Finally, we must strengthen farm and rural non-farm linkages: 61 per cent of rural incomes come from non-farm activities. A vast under-tapped potential lies in agro-processing (rural families purchase 80 per cent of the food they eat); machine tools and agro-machinery (consider Ludhiana in the 1980s); farm tourism; and health and education services. In turn, this will boost aggregate demand. Expenditure elasticities calculated by Maitreesh Ghatak et al using CMIE data indicate that a rise in incomes of the bottom 50 per cent of rural households would raise demand for many local products.


Transforming agriculture and its allied sectors and creating synergy with the non-farm rural economy would energise growth and invigorate rural communities. This would also help more rural youth find local jobs, rather than be forced to live as aliens in inhospitable cities.

This article first appeared in the print edition on November 17, 2020 under the title ‘Spot the seeds of growth’. The writer is professor of Development Economics and Environment, University of Manchester, UK

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First published on: 18-11-2020 at 05:52:26 am
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