The Future of Indian Agriculture

Yoginder K. Alagh
Chairman Institute of Rural Management, Anand Introduction
It is an honor to speak in the memory of Dr. B.P. Pal, an iconic figure in Indian science and together with stalwarts like the Chairperson an architect of self reliance in Indian agriculture. As a tribute to Dr. Pal I will speak on the future of Indian agriculture, a subject which unfolds many possibilities and some concerns. Technology will be the king pin but it has to operate in a congenial atmosphere for agriculture to be effective. Most of the problems lie outside agriculture and my method will be in an iff - then mode or conditional forecasting made famous by my teacher the Nobel Laureate Lawrence Klein. Indian agriculture is already increasingly demand driven. This will accelerate in the future. It has been argued, by the present author and others that agricultural diversification in India is basically driven by domestic demand, (Y.K. Alagh, Shastri Memorial Lecture, reprinted in ICAR, Agricultural Transformation in India, 1989/1995.) The major impact of faster income growth was on domestic demand leading a process of demand diversification in a big way. Expansion and diversification of the consumption basket was basically driven by a higher growth performance since the 1980s.The agro-based items of consumption are important in the demand baskets of different income groups. These consumer items are not for elite consumption alone. As people are better off, they eat more eggs, drink more milk and eat vegetable, fruit and cheese. This has happened in the Nineties and by now this diversification of the food basket is well known. Demand will depend largely on income growth and taste patterns and population growth. The Eleventh Plan does not have a separate population projection exercise but in one of its sections the numbers given are as in Table 1.
Table 1: Population Projections in Eleventh Plan 2011/12 2016/17 1208 million 1283 million

Source: GOI, 2008, Eleventh Plan, Vol.1, p.75

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As compared to these estimates Indias most experienced demographer, Marie Bhat estimated that the growth rate of population would go down to 1.52% annual in the decade 2001-11 to 1.25% annual in the decade 2011-21. This would imply a population level of 1,345.38 million by 2020, which is higher. The demographer Tim Dyson who has been working on Indias demography in his Standard projection estimates Indias population at 1271 million in 2020 and his High projection is close to Marie Bhats figures (T. Dyson, 2003a, 2003b). These alternate estimates suggest that population and therefore future demand projections have a degree of uncertainty to them. However it has to be noted that Indias population is now seen as an asset for its growth process discussed in the discussion of demographic dividends (Y.K. Alagh, 2006b). As compared to our official figures, recently some FAO publications have used slightly higher projections as the following estimates show:
Population (billions) 1.0 (2000) 1.2 (2015) 1.4 (2030)

Source: F.A.O., 2006 as quoted in F.A.O., 2008, p.24.

Economic Growth
To put it in a somewhat stylized manner: India will grow between 6 to 8% annual and will become the third or fifth largest economy of the World in this period.(For a model based on which these projections are derived after some modifications taking into account recent experience, see V. Pandit, 2004 and Y.K. Alagh, 2000. The investment rate and productivity growth will be the drivers. For example, around a third of Indias GDP growth in 97/03 is technology driven. Trade will also matter-will become around 4% of World Trade.

Demand
Population and Income Growth will give us the base for demand. Decadal Growth of cereal demand is 13% . On the other hand growth of demand of fruits and vegetables, eggs, chicken and milk is much higher. The decadal growth figures for potatoes is twenty four per cent, thirty per cent for vegetables, forty per cent for milk, two hundred per cent for eggs and two hundred and fifty per cent for chicken. Demand for beef, mutton and pork also goes up but given religious reasons the absolute figures are low. The low growth of cereal demand is compensated by very high demand growth of non-cereal based and non-crop based agricultural goods. There are however, two perspectives on the relative importance of grains in Indias agricultural demand projections. G.S. Bhalla and Peter Hazell (IFFPRI, 1997) find that feed demand is low in India as compared to other countries like China. In fact, this is a feature of Indias taste patterns. The argument that India will consume a lot of meat when it grows richer is false since rich households in India consume much less meat as compared to their counterparts in other countries. In fact, in 1975 the US Think Tank, The Hudson Institute had argued that India will not be able to feed itself since it will not have the land and water to meet meat demand. It was shown that if Indians as they grow rich consume as rich Indians did then this outcome did not follow even with the available technologies then. However undeterred by these taste pattern arguments, Bhalla and Hazell project huge demands of grains. Their projections of foodgrain demand in 2020 are as follows; Indian Feed Coefficients 278 to 370 million tones Chinese Feed Coefficients 375 to 616 million tones
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In a later projection they have moderated these numbers to 325 million tones (Bhalla, Hazell and Kerr, 1999). P.C. Bansil (1998) and K.N. Murthy (1998) have convincingly argued that these projections are on the high side since they do not capture the diversification of the food basket away from grains with rising incomes. Also the feed assumptions of the IFFPRI model are absurd since they do not capture inter country and inter cultural differences in food tastes and structure of animal husbandry industry. The IFFPRI Bhalla Hazell argument on Indian food demand particularly of meat determined by global (metropolitan) styles of living or a kind of McDonalds Global Taste Standard is particularly weak. P.C. Bansil points out that Bhalla and Hazel have erroneously rejected P. Kumars work (op.cit., Paroda and Kumar) because it is better founded in consumer behaviour derived from A Food Characteristic Demand System. In this system energy, variety and tastes of individual food are additive in the utility space and the utility of one food depends the level of consumption of every other food. Once the consumption of cereals is stabilized, the income calorie elasticity is zero. Bansil notes that poverty rates were going down, the percentage of households reporting eating two square meals a day was going up and the average consumption of cereals had exceeded the ICMR norm of 165 kgs of cereals a year. He also systematically demolishes the Bhalla Hazel feed projections. K.N. Murthy a student of R. Radhakrishna shows that since the Bhalla Hazel projections are based on a log inverse Engel curve, the elasticity of demand varies with the level of income, which is a reasonable specification for food demand. But Bhalla and Hazel only use the mean level constant elasticity for projections over a very long period which leads to very significant upwards biases. Murthy shows that BPH have overpredicted the aggregate cereal demand by 20 million tonnes (14 per cent) by 1993-94 itself.(K.N. Murthy, 1998, p.2944) and BPH have overpredicted the aggregate demand for cereals in India by 80 million tonnes, a staggering 42 per cent error in the year 2020.(Ibid., p.2944). My projections contained in Table 2 for the UN, include diversification away from grains and are lower for cereals and foodgrains as compared to the IFFPRI and other Normative projections. However the non foodgrain projections are much higher than those of the High Foodgrain Indian Projections. Our projections from the UN Alagh model ( Y.K. Alagh, 2000, 2001, 2006) as described in decadal growth earlier are as follows:
Table 2: Agricultural Projections for India 2020 Commodity Foodgrains Edible Oil Sugar Potato Fruits and Vegetables Milk Meat 2020 (mn.tonnes) 225 19 42 40 176 128 6

Eggs Fish
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On Markets and Strategies

Recently UN studies have established through international comparisons a point we have made that India is urbanized more than what it says and its non-farm employment growth is globally comparable. The FAO bring out that in a global comparison and analysis. FAO and World Bank distinguish three categories of countries: agriculture-based, transforming and urbanized. India is found in the transforming country category, with a clear historical trajectory of moving from being agricultural-based (FAO, 2008, p.4) The FAO note that according to popular statistics India is less urbanized, but they point out that: On the other hand, what constitutes rural is in fact somewhat subjective and what is considered urban or rural varies considerably among countries. The Brazilian definition, which is currently a political controversy, is partly based on administrative divisions, and shows a rural population of 19 per cent. The OECD on the other hand, uses a simple measure of population density of over 150 people per square kilometre, which, for Brazil would give a figure of 25 per cent. If we apply this to India, where only a small proportion people live in areas below this density, it would give a rural population of only nine per centquite a contrast to the normal Indian view of being 70 per cent rural. Although as we have seen, Brazil is much more urbanised, 20 per cent of the population lives in areas with fewer than 50 inhabitants per square kilometre; in India less than one per cent do. (FAO, 2008, p.5) The following picture illustrates; (FAO, p.6)

Source: Center for International Earth Science Informa (2004)

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The FAO go on to add: This is particularly important, discussed in more below, when we look at the village-level economies. If we measure how isolated the rural population is in terms of market access, using a definition of more than five hours of travel time to reach a market town of more than 5,000 people, only five per cent of South Asians live in remote areas whereas more than 30 per cent of Africans are in this situation. Similar characteristics hold true for the per cent of the population living in higher potential agricultural areas, as shown below. (FAO, 2008, p.4) Our argument therefore is that urbanization is proceeding much faster than earlier estimates of scholars like A. Kundu, who worked with the low urbanization growth rates of the Census 1991/2001 period. For example for Gujarat, Yoginder. K. Alagh and P.H. Thakkar worked out that a number of habitations which met the Census 2001 criteria of urbanization were still classified as villages. It was found that in the decade 1991-2001, in Gujarat, rural non agriculture main workers increased more than urban non-agriculture main workers. As per the 2001 Population Census, there were 122 big villages in Gujarat, each of them satisfying the three Census criteria of nonstatutory towns. These villages had a total population of 11.21 lakhs. If this is taken as a correction factor, then the revised estimate of degree of urbanization of Gujarat for the period 1991-2001 was 39.57 per cent (earlier estimate being 37.36 per cent and the correction factor being 2.21 per cent). Increasingly, in global work and expert studies higher estimates of urbanization are being projected as compared to the urban pessimist projections. Thus the International Water Management Institutes Strategic Analysis of the National River Linking Project has a demographic projection by A.Mahmood and A. Kundu (Amarasinghe, Shah and Malik, 2008, Paper, 6).However they examine sensitivities to higher urbanization rates in the three volume study on water futures as compared to official figures. According to them: According to others, this is even a conservative estimate of population growth in India (Y.K. Alagh cited by Amarasinghe and Sharma, 2008) (U.Amarasinghe, T. Shah and P.S. Malik,. ed., 2008, p.12) The IWMI studies quote a higher figure of urbanization of 45% by 2025 as compared to a lower figure of 37% for that year (S. Verma and S. Phansalkar, 2008, in Amarasinghe, Shah and Malik, 2008, ed., p.29 and also discuss the 21st century as an urban century, p.40).The United Nations has also recently reproduced the Alagh version of the Krugman model of urbanization as estimated for India as detailed above (See United Nations., 2008). We project that the rural population share will go down to 58% in 2020 and 55% in 2025. This compares with the official projection of 68% in 2020 and 64% in 2025(GOI, 2006, Table 10, p.56). It is not quite clear why the rural urban breakup of the population is not included in the preliminary results declared for all the States in the 2011 Census. But Gujarat and Kerala have done so on 1 April 2011. In Gujarat the urban population was 42.6 per cent of the total population, close to our 2006 estimate. As seen above, in my S K Dey Centenary Memorial Lecture in 2006 at the National Institute of Rural Development (Y.K. Alagh, 2007) I had argued that urbanization in Gujarat was clearly underestimated and that the actual growth of urbanization was around 5% and not half of that. This was around 2.57 crores persons. But the projections of the urban population by the Technical Group on Population Projections after the 2001Census was 2.4 crores and so for almost a decade we have made policies ignoring around two million persons in Gujarat and their needs. The only other State which has released rural urban figures is Kerala which also has a highly decentralized pattern of habitations, as in and actually more so than in Gujarat. Here the missing Rural Urban continuum is more serious. The projected urban population was
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25.4 per cent in 2011 and the actual figure is 47.7 per cent. Such serious mistakes in policies are made on account of an inability to catch major societal trends. In view of the work the author has done for the last seven years or so, and using as we saw the urban projection model Paul Krugman has developed we take the position that urbanization in India is being underestimated and projects that the rural population share will go down to 58% in 2020 and 55% in 2025. This compares with the official projection of 68% in 2020 and 64% in 2025. Rural Population in 2020 will therefore be 738 million out of the total population of 1273 million. The official projection is that this order of urban numbers, namely 538 million will be achieved in 2026 and not 2020. The Planning Commission was using the official projections until this year, including in the Mid Term Review of the Eleventh Plan, but all of a sudden, presumably on some indications from the 2011 Census, in the Power Point Presentation on the Issues in the Approach to the Eleventh Plan, (GOI, 2011)without any explanation they have changed their position and revised the 2011 figure from 358 million to 400 million but kept the increments as in the past and given another figure of 600 million for 2030, which is again a gross underestimate (GOI, 2011, Slide 16). For the country as a whole, we have argued that we are underestimating the needs of ten per cent of the labor force which will move additionally to the official estimates from rural to the urban continiuum as compared to the official projections and this is around forty million persons. Rural Population in 2020 will therefore, be 738 million out of the total population of 1273 million projected above. The Eleventh Plan has projected the rural labor force as 45.7% by 2016/17, the last year for which they have given projections (GOI, 2008, Vol.1, p.75, Table 14A). An earlier projection by G.S. Bhalla and P.Hazell (Bhalla and Hazell, 2003, p.3478) using age specific participation rates separately for rural areas was 46.9%. We assume a participation rate of 46% and get a figure of 340 million as the labor force. This is much lower than the figure of 404 million estimated by Bhalla and Hazell on account of a much lower estimate of urbanization.

The Vision and Issues

In the next two decades, Indian agriculture will meet the requirements of food security and rapidly diversify itself. It will function in a rural urban continuum, with rapid developments of markets and shifting of working populations from villages to linked small towns and also from crop production to value added activities. Employment growth will be high in these activities chasing a high rate of economic growth. All this will happen if the institutional structure gives the appropriate signals in term of technology and organizational support and the necessary economic support in terms of pricing and infrastructure support. Otherwise there will be rising food prices chasing few goods and immiserisation. There are apart from this two big question marks. They relate to non-renewable resources, particularly land and water and returns to investments. The agricultural growth rate, in the nineties went down and employment growth in agriculture was low. Profitability of agriculture fell by 14.2 per cent in the 1990s. Public capital formation fell initially and as anticipated by the present author, private investment also stagnated in response to the declining profitability of the sector. Irrigation and fertilizer growth slackened. These negative trends outlined by Indian economists were noted in the mid term appraisal of the Tenth Plan and Government gave a high priority to agriculture arising from the mid term review of the Tenth Plan and in the Eleventh Plan. This led to a substantial revival of public
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capital formation in agriculture .This period also saw an improvement in the terms of trade for agriculture and a revival of private investment. Table 3 shows a distinct improvement in the profitability of Indian agriculture.
Table 3: Agriculture Terms of Trade based on GDP Implicit Price Deflators Year 2004-05 2005-06 2006-07 2007-08 2008-09 Term of Trade for Agriculture 93.4 96.8 97.7 101.4 103.4

Note: GDP implicit price deflators for agriculture and non-agriculture are used to derive agricultural terms of trade Source: Estimated based on National Accounts Statistics, CSO.

Agricultural capital formation as a percentage of Agricultural GDP rose from 14.07 per cent in 2004/05 to a high of 21.31 per cent in 2008/09, rising both in the public and private sector according to recent estimates at 2004/05 prices. Private agricultural capital formation as a percentage of Agricultural GDP according to the new series of CSO estimates at 04/05 prices fell from 12.41 per cent in 05/06 to 11.58 per cent in 06/07, but preliminary estimates show an increase to an impressive rate of 17.55 per cent in 08/09. More generally, it was argued in the low capital formation phase that a gross rate of capital formation of about 12% of Agricultural GDP was necessary to support an agricultural growth rate of around 3.5% to 4% annual and this rate was not being achieved then. For example: It would be nave to plan agricultural growth and policies with low incremental capitaloutput ratios (ICORs). In terms of gross capital formation, past ICORs are estimated as follows: Period 1978/79 to 1986/87 1987/88 to 1991/92 ICOR 4.37 3.32

Agricultural gross fixed investment is around two thirds of agricultural gross investment. It would be imprudent plan for an ICOR of less than 3 for agricultural fixed capital formation. (Y.K. Alagh, 1997, p.283). These kinds of investment levels have been consistently exceeded, but the agricultural growth rate does not show the resilience that a twenty per cent capital formation would provide. This in turn raises in a fundamental way questions of productivity of investment and non renewable resource constraints of land and water. Real resource scarcities remained. Cropped area, earlier a constant, was falling whilst the area under irrigation was a matter of concern. There was recognition that faster diversification of the sector was required to achieve growth objectives, and this required policies relating to market reform and infrastructure in the context of the rural urban continuum.
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Since widespread growth was required, a policy of walking on two legs was needed with improved productivity of cereal producing areas allowing land to be released for high value crops. In the short run, technology and input intensification were seen as the source of growth as policies of land and water management take effect. Institutional reform of markets, empowerment of small farmers to leverage their assets for strategic partnerships with corporates, new technology and market linkages and the establishment of farmer groups and local institutions to build up the support bases for emerging Indian agriculture is advocated. The Big-ticket central sector schemes now demand as preconditions responsibility and empowerment mechanisms at local levels (For details, see, Y.K. Alagh, 2009, FAO). There has been a revival of these ideas in Indias Eleventh Plan. Many of the Eleventh Plans blue ribbon schemes are in the agro-climatic mould. An important innovation during the 11th Plan was the new Rashtriya Krishi Vikas Yojana (RKVY), which was designed to give more flexibility to States and provide incentives for them to spend more on agriculture and to do so, on the basis of properly designed district and state plans. The state agricultural plan, it said, should be based on (these initial) district plans, subject to reasonable resources from its own plan and adding those available from the centre, aimed at achieving the states agricultural growth objective, keeping in view the sustainable management of natural resources and technological possibilities in each agro-climatic region (emphasis and paranthesis added). This plan should then determine each districts final resource envelope, their production plan and the associated input plan. The recent Mid Term Appraisal of the Eleventh Plan has a sober review of this approach. It says: States like Madhya Pradesh, Uttarakhand, Kerala, Tripura, Punjab, and West Bengal have adopted the approach to some extent while others are still dragging their feet in this regard. Again.Comprehensiveness and convergence was the other important objective of C-DAP preparation. Madhya Pradesh, Uttarakhand, Haryana, Andhra Pradesh and Himachal Pradesh have achieved this objective to some extent. But convergence of non-governmental programmes has been invariably omitted by the states.(GOI, 2010, p.76) The National Food Security Mission is a new centrally sponsored scheme, which was launched starting with Rabi 200708. This scheme included three components viz. NFSM Rice, NFSM-Wheat and NFSM-Pulses. The main objectives of the NFSM are to increase production of rice, wheat and pulses through area expansion and productivity enhancement in a sustainable manner in certain identified districts of the country. Results are again uneven. A rudimentary district agricultural plan exists for each district. But an IRMA State of Panchayats Report for 08/09 did not find any District very savvy on such a plan. So there may be some disconnects to remedy. As regards banking finance for projects in the agro-climatic approach, NABARD had in 1990 introduced a concept of agro-climatic planning in its lending but that was allowed to get into disuse. This concept is being reintroduced. NABARD was in 1990 to write its annual report on financing agro-climatic plans, but under the V.P. Singh and Narasimha Rao governments the entire system was dismantled.The earlier NABARD report was in the old style, funding each program. NABARDs new thinking is state of the art in the rural development game. It sees its role as developing refinancing for financial products to suit each regions agricultural priorities leaving the State funding to the Plan. This is fascinating and can really go far. Very few private and no foreign
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banks, apart from the Dutch coop Rabo, give rural credit. Some States have worked it out for example Maharashtra has an easy scheme to finance watershed development, ridge furrows, seeds for tree crops, even expensive ones as in Bt, drips and for the tree growing cycle for horticulture, but thats an exception. There can be many new needs. Fodder crops, money for innovative water management, combinations of farm ponds and drips, piped delivery systems, certifying organics and meeting the preliminary costs of leaching the soils of accumulated muck and so on. The usual examples are to the contrary say in many States Producer Groups incorporated in the Companies Act do not get working capital since the rules are there only for coops. Technology is going to be the kingpin of solutions. We saw earlier that the high rate of capital formation in India agriculture of 21 per cent of agricultural GDP is not leading to a commensurate increase in agricultural growth. Groups pushing technology should be in the drivers seats and that should be with performance markers. Since the land base has stopped growing, productivity growth will have to be much higher. At the request of the present author, a Indian Statistical Institute team (Rabin Mukherji et al., 2001) worked out that the past growth of productivity in agriculture was 1.62 % annual in the decade 1981-90 and 1.55 % annual in the decade 1991-2000. This growth will have to be 1.72 to 2.08% annual in the period 2001-2020 if agriculture grows at roughly 3.5 to 4% annual and 1.9 to 2.5% annual if agriculture grows at 3.8 to 4.8% annual in the period 01-20. Thus to source higher growth factor productivity will have to rise at least by a third, which is difficult in agriculture. The discussion of agro-climatic planning and policies highlights the importance of holistic approaches given the resource endowments of a region. These would include agricultural diversification, including animal husbandry and the neglected sector of tree crops and forestry. The technology interface is important, both for land and water management and for cropping and non-crop farm systems that are optimal, in this class of issues. While a lot of research has been done and is available, (Alagh, FAO/ UNESCO, 2002) the real issues are policy rules for fast replicability of existing knowledge and success stories. Community institutions have to be at the heart of this process. Successful projects examined have varied considerably. Watershed development, for settled agriculture alternately tree crops, reclamation of saline lands, farmers run lower level irrigation systems, aquifer management in difficult situations, like coastal aquifers, tribal irrigation cooperatives, tank irrigation have all been reported as success stories and studied. The question is replicability on a larger scale. We have (YK Alagh, 2003) tried to set out some policy rules which we argued if applied in functioning policies may reverse the tide. Progress has recently been reviewed (Planning Commission, 2007). The seed economy is critical to Indias development. The reasons are many. Apart from a few projects, canal irrigation is expanding slowly and is concentrated only in select areas. Groundwater use is under stress. Cropped area is at best constant. A slowly growing agriculture, at 3 per cent a year at the outside, is constraining the sustainability of economys level 8 per cent growth. In such a situation, seeds, nutrients and crop protection are the main sources of growth. The 3 per cent growth economy is facing a very slow growth of grain demand, but there is a 5-8 per cent growth in the annual demand for commercial crops, fruits and horticulture. A fast growth in animal husbandry will also mean requirement of fodder maize or corn for poultry and Lucerne and other green fodder for cattle. Our seed systems are honed for cereals and we are particularly good in self-pollinated crops first wheat and now paddy. But, here, the next round of technology needs spread of super
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seeds, hybrid paddy and so on since the land under cultivation of grains should come down to release land for crops where demand elasticity is more like fruits, vegetables and feed for animal husbandry products. It is quite a tall order and we are only now dimly understanding it. India is too big for the world to feed its growth and we can only use trade to adjust at the margin. The department of agriculture has on its website and pulses portal given some details of an excellent pulses development program, to raise yield to, say, 12 to 15 quintals per hectare as strongly endorsed by an Expert Group we chair on pulses. William Dar, the Director-General of the International Crops Research Institute for the Semi-Arid Tropics (ICRISAT), has recently endorsed this for the development, in different agro-climatic regions where pulses are grown, of seeds with the highest yields in the world, which are above two tonnes per hectare. If we get on the drawing board now, it would take four to five years. We need such strategies for many crops, in the PPP mode (GOI, 2010). To meet such needs, both money and mobilization of scarce technical talent are required. We also need great management and organizational abilities to cover the last mile in a long-haul problem. Sometimes we despair but we have to constantly remind ourselves that when we set clear goals, commit resources and persevere, our systems perform. Since entry costs are high, this is probably not a highly competitive industry. Since product obsolescence too is high, the public-private partnership (PPP) mould is probably very effective. The hybrid paddy project was being developed two decades ago, but it failed because of lack of perseverance once the technology was jointly developed by public-sector groups like the seed corporations and companies like Indo American Hybrid Seeds, Lever and so on. Recently, the Sadguru Foundation has reported that tribal farmers are taking to hybrid maize that gives yields up to two and a half tones per hectare. Under Project Sunshine in Gujarat, seeds developed by an MNC were distributed at subsidized rates to tribal farmers. Given the long-term nature of the problem and the fact that large investment is needed to develop new molecules, a degree of regulation will be needed. Investors need a reasonable assurance of returns or they will not commit financial and, more importantly, experienced managerial and technical resources. For pulses itself for example, the research plan will cost hundreds of crores of rupees, if the experience of hybrid paddy is any indication. Such PPP projects will need publicresource commitments in terms of meeting the so-called viability gaps. Also, public-sector involvement is essential for sustainability and environmental-safety aspects. A Central organization working on what are called long-range, marginal cost principles, which have been advocated for power projects, for example, could work out fair pricing solutions. Anybody doing better than the average efficiency cost estimates, giving a fair rate of return, would keep the profits. It has been demonstrated time and again that the nation gains in such strategies. For example, pricing strategies which rely on group efficiency cost norms have given very powerful returns in terms of energy savings in the nitrogenous fertilizer industry and after eight years of discussion, it is reported that a committee under a planning commission member is suggesting this approach, which was the basis of pricing which a committee that I chaired had recommended many years ago. It is important that the approach of a national regulator suggested in the proposed Seeds Bill is properly designed and implemented by law. Instead, we are going through an extremely destructive regulation of states like Andhra Pradesh, Gujarat and Maharashtra, through State Price Control Acts. This is short-sighted. By cutting down normal profits in the industry after R&D has been done, this will discourage investment in the sector. In April 2011 the Gujarat High Court has
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struck down the right of the State Government to regulate seed prices. Then, there are, of course, the Luddites who dont want any research in this area at all. Space has been an area discussed in relation to agriculture. The use of space technology is well known and Sharma et al. (Vaidyanathan and Dubey, 2000), have listed all the possibilities comprehensively. A Seminar conducted by ISRO with the Indian Society of Agricultural Economics on Remote Sensing and Agricultural Statistics has shown the way ahead. A. Vaidyanathan and Y.K. Alagh noted that strategies and programs have been set from the last decade and a half and substantial progress is now possible if coordinated policies are followed. The Vaidyanathan-Alagh proposals emphasized the relevance of National Natural Resources Management System (NNRMS). Included in this was Crop Acreage and Production Estimation as a major project on generation of crop statistics using remote sensing data. Under the sponsorship of the Ministry of Agriculture (MOA), Government of India, the joint MOA-ISRO formulation of forecasting Agricultural Output using Space, Agro-meteorology and Land-based observations (FASAL) project aims at integration of land, space and weather data. Y.K. Alagh argued for a sixpoint programme for using satellite data to supplement traditional sources of agricultural statistics, included timely data on Land Use Statistics (LUS) where the traditional Crop and Season Reports were generally available with a time lag of three to five years. This was important in view of the acute land scarcity emerging from the constancy of net area sown. Second space data should be used for checking estimates of errors of crop area and yield statistics. While at the national level Timely Reporting Scheme (TRS) and National Sample Survey Organisation (NSSO) sample checks gave low errors on production, at the state level, area and yield errors could be between 6 per cent and 12 per cent. Space data would be another check and would give timely results. Third, geographic mapping systems should be used not only for public sector projects as earlier in. watersheds, etc., but also for co-operative, NGO and private sector projects since around 40 per cent of foreign investment was in the agro-processing sector. The earlier drafts of the Space Policy enunciated provided marketing of space data by ISRO. It was noted that the ISRO subsidiary Antrix was successful both at home and abroad. Fourth, two-way information systems would be developed with the help of space facilities. The farmer should not only be a source of data to the Patwari and for yield statistics, but should also be the recipient of technology and agro-economic data he needs for agriculture in a liberalizing economy. Finally, a small nucleus institute, centre with experts on deputation from ISRO, Central Statistical Organisation (CSO), NSSO, MOA, Indian Meteorological Department (IMD) to build up new systems of man and machine working together in a restructured agricultural information system, was necessary. The relavence to agro-climatic planning to dryland areas is well known, from the inception of agro climatic planning (Y.K. Alagh, 1988). Taking the AESR classification as the basis, a new approach to agro-climatic planning has been suggested by the Parthasarathy Committee (GOI, 2005). The mandate of the PC was to assess and suitably modify the existing criteria for categorization of arid, semi-arid and dry sub-humid areas taking into account the changed climatic/ biotic factors and identify the blocks for the implementation of DDP and DPAP. A similar exercise was done earlier by Hanumantha Rao Committee (1994), which used moisture index at district level as the basis of classification. The PC has suggested a method by which crop production potential and the extent of drought vulnerability could be assessed at the block level using a composite drought index combining bio-climates, rainfall, irrigation and extent of vegetation.
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The Producers Company legislation now on the statute book provides an important method of strengthening farmer groups to take advantage of strategic alliances for growth, following the cooperative principle. Farmers groups, stakeholder organizations and cooperatives, apart from playing a larger role themselves, will also play a larger role in strategic partnerships with business groups. We saw the need in the seeds sector. The more we encourage organizations of smaller producers to organize their interests and strategize their relations with large companies, the better and more enduring will be the working systems.

The Underlying Process

Detailed analysis of the past was necessary to understand the basic processes at play before the future is postulated. As agricultural growth takes place with rise in diversification and productivity labor is shifted out of agriculture and this is now marked. India has now reached a state where the absolute level of employment will fall and is falling in agriculture. The Planning Commission has estimated that agricultural employment will fall by 3.97 million persons in the period 2006/072016/2017 (GOI, Planning Commisssion, 2008, Vol.1, p.76). This is happening simultaneously with a rise in agricultural wages. The real issue for India is, whether this process will be benign with rising wages or will be a cruel process of the kind witnessed in the early phases of industrialization in UK for example. In many countries rising wages have been the trigger for beneficial technical change in processes like harvesting, clearing the land in time for multiple crops and agro processing activities. There is anecdotal evidence that this is happening in India after the introduction of NREGA. NREGA of course would also set a floor to the wage level in the transformation of the rural economy.

Employment Strategies and the Future

As far as employment is concerned, therefore, in the next two decades, Indian agriculture will meet the requirements of food security and rapidly diversify itself. It will function in a rural urban continuum, with rapid developments of markets and shifting of working populations from villages to linked small towns and also from crop production to value added activities. Employment growth will be high in these activities chasing a high rate of economic growth. All this will happen if the institutional structure gives the appropriate signals in term of technology and organizational support and the necessary economic support in terms of pricing and infrastructure support. Otherwise there will be rising food prices chasing few goods and immiserisation. These trends can be presented quantitatively in terms of the parameters discussed. After the near stagnation of employment until 2000, there was in the next five years a return to the trend growth of rural employment of around two per cent annual. There was simultaneous increase in casualisation of the work force and a rise in real wages. These are processes which are going to continue with the fast growth of the economy and the diversification and commercialization of agriculture. NREGA inspite of its inefficiencies sets a floor to all this and beyond it policies will make a difference. It is not being recognized that India is urbanizing faster, its agriculture is diversifying and that it has a widespread locus of markets and a distinct possibility of growth in a rural urban continuum. If this is recognized the perspectives will be different and NREGAs role clearer.
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The upshot of all this is that rural and agricultural employment will rise much slower and in fact agricultural employment will fall and the big jobs will come in the larger villages and smaller towns. As labour moves away from agriculture wages and standards of living will rise faster there. It is this we have to aim at and NREGA has to be a part of that goal, rather than some distorted vision wrongly parodying Gandhiji of the poor stuck in poverty clinging to NREGA. Policy must believe and work for the fact that in the next decade, Indian agriculture will meet the requirements of food security and rapidly diversify itself. It will function in a rural urban continuum, with rapid developments of markets and shifting of working populations from villages to linked small towns and also from crop production to value added activities. Employment growth will be high in these activities chasing a high rate of economic growth. All this will happen if the institutional structure gives the appropriate signals in term of technology and organizational support and the necessary economic support in terms of pricing and infrastructure support. Otherwise there will be rising food prices chasing few goods and immiserisation. Two alternative processes can be visualized. One a Normative scenario where the process of rural transformation India is going through is benign. The other Business As Usual, which is present trends going into the future. To sharpen these choices, these two scenarios are presented in Table 4 in a larger framework :
Table 4: Employment Scenarios: 2020 -Normative and BAUIndia 2020 Total Population (million) Rural Population (million) Labour participation rate % Labour Force (million) GDP growth (% annual) GDP agricultural growth (% annual) Employment elasticity w.r.t. Agricultural growth (Low) Employment elasticity w.r.t. Agricultural growth (High) Land augmentation through Increase in cropping intensity (High) Increase in cropping intensity Source: Text Discussion 1273 738 46 340 8.5 4% -0.3% -0.1% 0.5% 0.0 to 0.2%

In the Normative benign framework of development, agriculture will grow at 4% annual, technological change and diversification will be high so the shift away from agricultural on this account will be 20% over the decade 2010-2020 (Elasticity of employment -0.3%). This will mean a corresponding increase in real wages of the agricultural labour force. If the shift does not take place on account of poor agricultural productivity increase, with an employment elasticity of minus 0.1, and a growth rate of three per cent annual, the shift will be 4% and an insignificant increase in real wages of the agricultural sector. The need for programme
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like NREGA will be intense with the present trends of casualisation of the labour force increasing. This will be a very cruel process of economic transformation. The only other factor which will affect outcomes in this logical framework is the augmentation of the land base of Indian agriculture. This aspect is discussed in the context of the Land and Water. If land augmentation emerges again with success of the interrelated issues of land and water management, cropping intensity can rise by 0.5% annual and in the decade 2010 /2020, real wages would rise by 7% additional or 27% in the total and rural-urban inequality would go down.

Conclusion
The prospects for Indian agriculture are good. Demand will grow fast and if we create the correct incentive and organization systems the Indian farmer will not fail us as he has responded well in the past when our policies were supportive. Research systems will have to concentrate on a much larger cafeteria of crops and support to non-crop agriculture, including animal husbandry, fish and forests. The real dangers, apart from anti-agricultural policies, are in running into real resource constraints. Again here the strategies for land and water management are known and agricultural research can fill in the gaps. Unfortunately, the Eleventh Plan is the first plan without a chapter on the Perspective of the Economy and we have to rely on the efforts of people concerned on Indias future outside the government like me. We may hope for a more serious effort in the mid term review of the Eleventh Plan. As member of the Planning Commission it was my good fortune to develop this vision of a detailed agro-climatic strategy for India. It is more urgent now.

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