COMMENTARY

Agricultural Oddities
T C A Ranganathan

Low input-use efficiency and

insufficient productivity increases
are key challenges to Indian
agriculture. But are ever-rising
minimum support prices and sops
such as free power and farm loan
waivers appropriate solutions?

I would like to thank Sumana Sarkar and

Prahlathan Iyer and EXIM Bank of India for
their inputs. The responsibility for
interpretation of the data remains mine alone.
T C A Ranganathan (tca.ranganathan@gmail.
com) is retired Chairman and Managing
Director, Export-Import Bank of India.

16

he Indian agricultural story is often

discussed as much in terms of its
successes as it is in terms of rural
distress, debt burden, famer suicides, etc.
The growth and productivity improvements in Indian agriculture, examined on a
purely temporal basis, have been reasonable. While several commentators have bemoaned the stagnation in agricultural productivity, production has largely kept pace
with population growth. In fact, for fruits
and vegetables, it has significantly exceeded
population growth, resulting in increased
per capita availability. It is a different matter
that it has not kept pace with income growth
and the resultant protein shift in the demand curve, resulting in price increases.
Agricultural growth has also resulted in a
significant increase in exports of agricultural
produce (net agricultural exports increased
from $2.2 billion (bn) at the beginning of the
century to over $25 bn now).
Usually, any sector showing decent
export growth rates has healthy internal cash generation and profitability.
However, in case of agriculture, a large
number of stakeholders have voiced
serious claims of growing rural distress.

Governments have resorted to palliative

measures such as grant of free power and
loan waivers to farmers. How did we get
to a system which is growing and apparently competitive (is exporting) and yet
in manifest distress? This article attempts
to reconcile this incongruity. It seeks to
demonstrate the underlying causes that
require serious policy attention, as the
problems experienced by farmers are not
the result of policy neglect, but are in fact
fallouts of the policies originally designed
to alleviate their distress.
Production Data
We first tabulate the production trends
as reported in official data:
It is observed that while inter-year variations are significant, variability is lower
in fruits and vegetables. Floriculture,
though much smaller, is steadier (Table 1,
p 17). What, however, is not often talked
about is whether this growth has come at a
reasonable cost. Two studies were carried
out by the Export-Import (Exim) Bank of
India: Technological Interventions in Indian Agriculture for enhancement of Crop
Productivity (2012) and Indian HorticultureImperatives to Enhance Trade from
Agriculture (2014) (hereafter Exim Bank
Studies). I have drawn from these and
additional published data to offer a more
complex perspective on the ingredients of
rural distress.

may 23, 2015

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COMMENTARY

Land Productivity
While commentators mainly take note
of the insufficient increase in agricultural productivity, the gap between Indian
and world productivity is also striking,
as Table 2 shows.
The numbers need to be further broken down by specific types of cereals,
particularly because corn, included in

The above figures are a cause for concern as land, undoubtedly, is a scarce resource, and we should aim to use it efficientlyand worry when it is not. But, it
is also important to understand that land
is not the only scarce resource.

costs of production and per acre/tonne

profitability. This is presented in Table 5.

Productivity and Input Use

199697
615
199798
609
199899
649
19992000 667
200001 <649
200102
663
200203
608
200304
607
200405
613
200506
685
200607
773
200708
804
200809
746
200910
742
201011
842
201112
885
201213 (P) 874
CAGR (%)
2.22

The other main inputs used in agricultural production are fertilisers,

Year
Production in Million Tonnes
water and bank credit. The
Foodgrain Oilseeds Sugar Cane Fruits Vegetables Flowers Total
199697
198
23
278
40.5
75.1
0.4
615 degree of mechanisation and
199798
192
21
280
43.3
72.7
0.4 609 investment in research and
199899
204
25
289
44.0
87.5
0.4 649 development, protected agri19992000 210
21
299
45.5
90.8
0.5 667 culture, and storage systems
200001
197
18
296
43.1
93.8
0.6 649
are also important aspects,
200102
213
21
297
43.0
88.6
0.5 663
but are not considered in the
200203
175
15
287
45.2
84.8
0.7 608
200304
213
25
234
45.9
88.3
0.6 607 present article for sake of sim200405
198
24
237
50.9 101.2
0.7
613 plicity. Table 4 uses various
200506
209
28
281
55.4
111.4
0.7 685 published data to reflect the
200607
217
24
356
59.6
115.0
0.9 773 usage of other inputs under
200708
231
30
348
65.6 128.4
0.9 804
discussion.
200809
234
28
285
68.5 129.1
1.0 746
It can been seen that while
200910
218
25
292
71.5 133.7
1.0
742
gross
production was roughly
201011
244
32
342
74.9 146.6
1.0 842
apace
with the increase in ir201112
259
30
361
76.4 156.3
1.7 885
201213 (P) 257
31
341
81.3 162.2
1.7
874 rigated area, it was lower than
CAGR (%) 1.63 1.79
1.29
4.46
4.93 10.07 2.22 the draft on fertiliser use, and
CAGR=compound annual growth rate.
Source: Ministry of Agriculture, Government of India; National Horticulture Board. significantly lower than the
growth in bank credit.
Table 2: Percentage of Arable Land and Cereal
We
discuss
each aspect.
Production
Table 1: Agricultural Production in India

Countries

Land Area Arable Land % Arable Total Cereal

(million ha) (million ha) to Total
(million
Land Area tonnes)

China
933
United States 915
India
297
World
13,003

110
163
158
1,381

12
18
53
11

483
420
249
2,494

Source: FAOSTAT (http://faostat.fao.org/).

Fertiliser Usage
Table 4 indicates that production growth
was lower than fertiliser use. This fall in
efficiency is, however, best understood if
an inter-temporal and cross-country
comparison is done. We do recognise
that fertiliser use depends on crop profiles and land conditions and also understand that the use of fertiliser per acre of
land in India is the highest in the world.
However, inter-temporal increase in useintensity has a significant bearing on

the above composition, is not an important cereal in India, though it is in several other countries. A case study of rice
may be more illuminating, and was
reported in the Exim Bank Studies. The
brief details are shown in Table 3.
Agricultural productivity in
Table 3: Indias Agricultural Productivity Compared with
India is seen as significantly Other Countries
Production % Share in
Area
% Share in
Yield
lower compared to our neigh- Countries
(million
World
Harvested World Area (kg/ha)
bours. A state-wise comparison
tonnes)
Production (million ha)
in the Exim Bank Studies indi- China
196.7
28.7
29.9
18.9
6,582
cated that only Punjab was Japan
10.6
1.5
1.6
1.0
6,521
12.7
1.9
2.9
1.8
4,405
close to Bangladesh in produc- Brazil
7.0
11.4
7.2
4,203
tivity levels. West Bengal, Bangladesh 47.7
32.7
4.8
8
5.1
4,085
though proximate to Bangla- Myanmar
10.3
1.5
2.9
1.8
3,581
desh and with similar agro-cli- Pakistan
99
14.5
41.9
26.5
2,178
matic conditions, had produc- India*
World (total) 684.8
100.0
158.4
100.0
4,324
tivity levels just two-thirds that Source: FAOSTAT; Agriculture Statistics200809, Department of
Agriculture and Cooperation, GoI.
of Bangladesh.
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EPW

may 23, 2015

vol l no 21

Table 4: Fertiliser Use in India

Year

Agricultural
Production
(million
tonnes)
Total

NPK
Agricultural
(lakh
Credit
tonnes)
(Rs bn)

Net
Irrigated
Area
(000 ha)

14
16
17
18
17
17
16
17
18
20
22
23
25
26
28
28
26
3.69

55,112
55,210
57,436
57,531
55,205
56,936
53,897
57,058
59,230
60,838
62,745
63,190
63,639
61,939
63,601

314
349
396
444
519
608
735
905
1,253
1,740
2,304
2,753
3,387
4,161
4,806
5,484
5,899
20.12

1.03

CAGR=compound annual growth rate; NPK fertilisers that

provide nitrogen (N), phosphorus (P) and potassium (K).
Sources: Ministry of Agriculture, Government of India;
Reserve Bank of India; Planning Commission (nd).

Table 5 (p 18) shows that several countries have secured absolute reductions in
fertiliser use. The United States (US) uses
less fertiliser than India. Also, while intensity of fertiliser use is higher in China, the
rate of growth of fertiliser intensity has
slowed. On the contrary, India still shows a
high rate of increase, despite modest production growth.
Water Use
While on a purely temporal basis, the
compound annual growth rate (CAGR) of
irrigated area is only 1.03% (Table 4),
and thus seems to be moving in tandem
with productivity growth, this should be
read against the fact that India has the
highest area under irrigation in the
world and one of the highest intensities
of water use in the world. Further, the
comparision with the US and China is
seen in Table 6 (p 18).
An inter-temporal comparison of water use to evaluate water efficiency is
somewhat difficult as not all countries
report data on similar timelines, but the
available data is in itself interesting. Table
7 (p 18) depicts that water consumption in
India has gone up in the past two decades, while other countries secured significant reductions in water usage.
17

COMMENTARY

What is often forgotten is that India is

one of the few countries to have relied
primarily on pushing bank credit by
mainline commercial banks to secure
Table 5: Total NPK Fertiliser Consumption
agricultural growth. It has been manCountries
Total NPK Consumption (in thousand tonnes)
CAGR
dated that the mainline domestic com1961
1971
1981
1991
2001
2005
2009 196171 197181 198191 199101 200105 200509
mercial banks lend a minimum of 18% of
China 1,012 4,311 15,271 29,125 35,556 46,668 49,100 15.6 13.5
6.7
2.0
5.6
1.0
their gross lendings to agriculture. In
India
418 2,383 5,724 12,728 17,359 20,364 26,493 19.0
9.2
8.3
3.2
3.2
5.4
US
7,879 15,579 19,427 18,785 19,614 19,273 18,908 7.1
2.2
-0.3
0.4 -0.4 -0.4
the alternative, penalties are imposed in
Brazil
228 1,165 2,747 3,386 7,090 8,720 9,045 17.7
9.0
2.1
7.7
4.2
0.7
the form of a compulsory deposit into
Turkey
53
494 1,304 1,769 1,671 2,068 2,054 25.1 10.2
3.1
-0.6 4.4 -0.1
the Rural Development Fund at exceedJapan 1,640 1,913 1,882 1,752 1,354 1,294
921 1.6
-0.2 -0.7 -2.5 -0.9 -6.6
ingly low rates of interest. Achievement
Israel
37
62
90
94
89
105
91 5.3
3.8
0.4
-0.5 3.3 -2.7
CAGR=compound annual growth rate; NPK fertilisers that provide nitrogen (N), phosphorus (P) and potassium (K).
of priority sector lending norms is also
Source: International Fertiliser Association 2012.
an important factor in evaluating a
Table 6: Water Usage in India
rates of interest has not happened. And banks annual performance. The moniCountries Total Agricultural Irrigation Water Arable Land
this implies increased rural indebtedness toring of budgetary achievements of
Water Withdrawal
Withdrawal
(million ha)
banks has been tightening over the
in excess of rural cash flow.
(10^9 m3/yr)
(10^9 m3/yr)
years. To ensure achievement, banks
India
688.0
550.4
158.0
Why Rural Distress
China
358.0
286.4
108.6
usually sub-allocate the macro target to
US
192.4
153.9
163.7
It is against this background that we the constituent field units usually based
Source: AQUASTAT 2011 (http://www.fao.org/nr/water/
must evaluate the frequently talked on its history. The annual performance
aquastat/main/index.stm).
of each field functionary is evaluated, inabout rural distress.
Table 7: Water Usage in India, US and China
ter alia, against the statistical achieveAs
a
start,
it
is
not
our
intent
to
sugYear
India
US
China
ment of budgets. The internal pyramids
gest
that
there
are
only
ineffi
ciencies
in
199697
407.7 in 1993
for career progress within banks are relIndian
agriculture.
A
large
number
of
in199899
558
200001
196.5
dividual or even area-specific success atively steep and career promotions
200506
192.4
358
stories exist and have often been docu- rather competitive. At the field level this
200809
mented. These relate equally to produc- implies that the desire to push lending to
201011
688
tion as also resource-use efficiencies as meet preset targets is strong. The steady
CAGR (%)
1.75
-0.42
-1.08
also highly successful innovations. The growth in bank credit stands testimony.
CAGR = compound annual growth rate.
The Exim Bank Studies on Indian agriproblem is that these are the exceptions
Source: AQUASTAT 2011.
and not the rule, and more importantly, culture had documented the near colBank Credit
despite their acknowledged successes, lapse of the state extension services in alTable 4 had depicted the secular and are not getting replicated sufficiently. It most all states. This has been happening
strong growth in bank credit even up to is seen that we seem to be one of the few by default over the years, as fiscal con200708, and apparently uncorrelated countries showing sharp increases in straints experienced by most state govwith production/input-use growth even both fertiliser production and water use. ernmentspartly occasioned by the imallowing for input price increases or Even China seems to be more conserva- plementation of pay commission reports,
even the cotton revolution (output grew tive in its usage practices, at least on an and partly because of various pre-comfrom 140 lakh bales in 200001 to 307 inter-temporal basis, than India. This mitted drafts on state budgetsresulted
and 353 lakh bales in 200708 and 2011 also raises the interesting question of in adoption of the soft option of allowing
12 as per Cotton Corporation of India the medium-term unsustainability of posts to remain vacant on the retirement
of incumbents. The current vacant posiour current agricultural use practices.
website, cotcorp.gov.in).
tions in state extension
Credit increases after 200809 have Table 8: Groundwater Abstraction in India
Population 2010
Groundwater Abstraction
services are significantly
been sharper. It could be argued that Country
(in thousands)
Estimated
Breakdown by Sector
in excess of 1,00,000.
bank credit has replaced private moneyGroundwater
Abstraction Abstraction Abstraction
Abstraction 2010 for Irrigation for Domestic for Industry This makes the farmer
lender credit, but had it been so, such a
(km2/ yr)
(%)
Use (%)
(%)
rely upon extension
vast substitution of formal credit for inIndia
12,24,614
251
89
9
2
support offered by the
formal credit should have resulted in a
China
13,41,335
111.95
54
20
26
non-governmental secsharp increase in farmer savings (and im- United States
3,10,384
111.7
71
23
6
tor. Since contract culproved sense of well-being) as also a re- Turkey
72,752
13.22
60
32
8
tivation by industry
duction in offtake from the informal mar- Japan
1,26,536
10.94
23
29
48
1,73,593
64.82
94
6
0
players is frowned
ket, and hence a fall in the price of this Pakistan
1,48,692
30.21
86
13
1
upon, or at least not eninformal credit. This has not been report- Bangladesh
1,13,423
29.45
72
22
6
couraged, the biggest
ed anywhere. Also, the high decibel hue Mexico
Source: National Groundwater Association (http://www.ngwa.org/Fundamentals/
players in extension
and cry, some years ago, regarding the use/Documents/global-groundwater-use-fact-sheet.pdf).
It would be noted that India is an outlier
in securing inter-temporal efficiencies. This
aspect needs to be read with the draft being
made on groundwater resources (Table 8).

18

practices of, and more importantly the

rates charged by micro credit companies
in Andhra Pradesh and other states, indicates that decline in non-formal market

may 23, 2015

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EPW

Economic & Political Weekly

COMMENTARY

services are the fertiliser companies and

distributors, and on a much smaller scale,
the agricultural machinery and micro-irrigation product vendors. The thrust on
securing production efficiencies for these
extension service providers may not be as
important as, possibly, meeting their sale
targets. Possibly, the uncertainties in
power availability as also its off market
pricing could also be influencing choice
of technology, to the long-term detriment
of the farmer.
These trends are intersecting in an environment where land and field holdings
are steadily getting fragmented due to
steady population growth, and state advised minimum support prices are announced for major cereals/sugar but not

Economic & Political Weekly

EPW

may 23, 2015

for other agro products. A quasi-guaranteed procurement support is also offered

for these same items whilst for other
items the farmer is forced to sell in a
quasi-monopsonistic market created by
the operations of the Agricultural
Produce Marketing Act. Crop selection
gets impacted.
The above is one interpretation of a
recipe that subsequently gets portrayed
as rural distress against the backdrop of
rising production and export. Maybe
there could be others.
But could the solution to the documented patterns of input use and productivity
gaps be ever rising support prices and in
some cases sops such as free power and
farm loan waivers? Is not the farmer being

vol l no 21

misled? Could the theory of unanticipated

consequences, first enunciated by Adam
Smith and popularised by the sociologist
Robert K Merton in the 1930s be having an
impact on Indian agriculture?
References
Exim Bank (2012): Technological Interventions in
Indian Agriculture for Enhancement of Crop
Productivity, Occasional Paper No 155, Export-Import Bank of India, Mumbai.
(2014): Indian HorticultureImperatives to
Enhance Trade from India, Occasional Paper
No. 162, Export-Import Bank of India, Mumbai.
Planning Commission (nd): Report of the Working
Group on Fertilizer Industry for the Twelfth
Plan (201213 to 201617), Planning Commission, Government of India.
International Fertiliser Association (2012): Fertilizer Outlook 2012-2016, International Fertiliser Association, 80th IFA Annual Conference,
Doha, Qatar, 2123 May.

19