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Agriculture (Introduction): India constitutes one of the largest agrarian economies in the world.

Indias agriculture sector contributed approximately 14.2 per cent to Indias gross domestic product (GDP (at 2004-05 prices)) during 2009-10. Agriculture sector is vital for the nation and is the principal source of livelihood for more than 58 per cent of the population. Agriculture sector has touched a growth rate of 4.4 per cent in the second quarter of 2010-11 thereby achieving an overall growth rate of 3.8 per cent during the first half of 2010-11. The growth of the agriculture and allied sectors would be around 5.4 per cent during 2010-11 contributed by a good monsoon, according to the Economic Survey 2010-11. The need for a second Green Revolution has become imperative, with focus on growing more of nutritious fruits, vegetables and pulses which were never considered in the initial Green Revolution, as per the Economic Survey. India targets to achieve 9.5 per cent average economic growth in the 12th Five Year Plan (201217), on back of an estimated agriculture growth rate of 4.2 per cent. The growth target for agriculture for the 12th Five Year Plan. "The Planning Commission has emphasised on a minimum 4 per cent growth in agriculture as it provides broad based income benefits to the rural population and also because it is necessary to avoid inflationary pressure, which could arise if high levels of growth are attempted without corresponding growth in domestic food production capabilities," according to Dr Manmohan Singh, the Prime Minister. The Government has earmarked US$ 40.66 billion for various programmes in 2011-12, he added. The Indian Agriculture and food industry can be categorised into five broad segments, namely:
y y y y y

Fresh fruits and vegetables Floriculture, comprising fruit and vegetable seeds and flowers Processed fruits and vegetables and other processed foods Animal products, including meat, poultry, dairy and honey Cereals such as rice and wheat

Global Agriculture Industry:

Introduction: Since 1960, the world population has more than doubled, from approximately 2.9 billion in 1960 to more than 6.7 billion today. The demands placed on global agricultural production arising out of population and income growth almost tripled. Global agriculture has been successful in meeting this increase in demand. Steady growth in agricultural output and a long-term decline in real commodity prices attest to this success. While the 820 million undernourished people in developing countries must not be forgotten, it should also be recognized that the proportion of people suffering from hunger has fallen by half since the 1960s, from more than one-in-three to one-in-six, even as worlds population has doubled. Progress is possible. Agricultural growth contributes directly to food security. It also supports poverty reduction. And it acts as an engine of overall economic growth in much of the developing world. The success of the agricultural sector has not been shared uniformly across regions and countries, however, and it is unclear whether this success can be sustained much less extended to those left behind. By 2050, world population is projected to grow to between 9 and 10 billion people. Most of the growth is expected to occur in poor developing countries, where income elasticity of demand for food continues to be high. The population increase, combined with moderately high income growth, could result in a more than 70 % increase in demand for food and other agricultural products by 2050. Without modern agricultural techniques, current population levels could not be sustained and projected near-term population growth would create stresses that would destabilize the current global social and political order. Relatively recent innovations in seeds, chemicals and fertilizers have enabled agricultural producers to meet the ever-growing demands of a hungry world population. Even with the rapid increases in agricultural productivity, however, challenges for the agriculture industry to supply the growing global economy with sufficient supplies of agricultural staples are greater now than ever before. A new green revolution similar to the one that took place during the latter part of the 20th century is taking place all over the world to meet the expected demand by the growing world population and its increased standard of living. Problem setting: The economic, political and climatic conditions in which farmers around the world have to make their production and investment decisions are changing quite dramatically. On the one hand, world agricultural demand continues to grow rapidly. On the other hand, it is apparent that global agricultural supply is not keeping pace with the growth in demand. Several global trends are directly and indirectly affecting agricultural markets globally.

Trends and changing terms of agricultural trade:

y Trade: Since the early 1960s the value of agricultural exports has increased by tenfold, while the share of agricultural trade in total merchandise trade has followed a long-term downward trend from above 20 % in the early sixties to less than 10 percent in recent years. Over this period the net flow of agricultural commodities between developed and developing countries has reversed direction. In the early 1960s, developing countries had an overall agricultural trade surplus of almost US$ 7 billion per year. By the end of the 1980s, however, this surplus had disappeared. During most of the 1990s and early 2000s, developing countries were net importers of agricultural products. Without Brazil, the deficit of the rest of the developing world would have been considerably bigger. It would have grown from US$ 20 billion in 2000 to US$ 27 billion in 2004. y Prices: Agricultural commodity prices over the past 40 years reveal some striking features:  Real prices of agricultural commodities relative to prices of all manufactured goods have declined significantly, even as nominal prices have risen;  Real prices have fluctuated considerably ;  Both the fluctuations and the long-term decline have been less pronounced since the mid1980s. Several factors have contributed to the long-term decline of almost 2 percent per year. Technological advances have reduced costs and made it possible, at given prices, to expand production at a rate that has outstripped both population growth and increases in demand spurred by rising incomes. Prices of some commodities have also been driven lower by oversupply, fuelled by intense global competition in production, reduced transportation costs and new technologies that have increased productivity and introduced synthetic alternatives to some commodities. Subsidies to producers and for export in some developed countries have also contributed to pushing down world prices for many agricultural products grown in temperate zones, reducing the export earnings of developing countries that export commodities such as cotton, sugar and rice. Projected increase in world crop demand: Commodity

2006 (Million Tons)

738 812 167 493 279 52 31

2015 (Million Tons)

817 950 177 524 334 63 37

Increase (Percent)
11 17 6 6 20 21 19

Corn Barley Rice Soybean Rapeseed Sunflowers

Sources of agricultural growth

The past four decades have seen solid growth in agricultural productivity. This productivity increase has been particularly strong in developing countries, and especially for cereals such as rice in Asia, wheat in irrigated and favorable production environments worldwide, and maize in Mesoamerica and selected parts of Africa and Asia. Other crops have also seen productivity increases. Agricultural growth occurs if i) the amount of arable land increases, or ii) the cropping intensity increases, or iii) output per unit of input (i.e. workers, land or water) increases, or iv) the composition of output changes towards higher valued products with a constant value of inputs. The relative importance of these factors depends on the situation faced by a particular country. A country like the United States, which has 1.4 hectares of agricultural land per head, can continue to rely on land as a source of agricultural growth in a manner that is not open to a country like India, which has only 0.2 hectares of agricultural land per head. For the latter, growth has to come primarily from sources that economize on land and water, the two main constraints. This in turn implies that cropping intensity must increase or yields have to grow, i.e. there has to be an increase in productivity.

Trade and Competition Issues in the Agriculture sector

The agri-food sector is now "global", in that both international trade and foreign investment are a substantial part of the food system. State enterprises and multinational firms play an important role in the food system. Global trade rules for agriculture were agreed in the Uruguay Round of trade negotiations. Competition regulations at the domestic level often give special treatment to agricultural markets. At the international level, almost no discussion has taken place on the way in which global agricultural markets could be regulated for non-competitive behavior. Competition Issue in the Input Supply Markets: One of the competition issues that is most apparent in the agri-food sector is the increasing concentration of firms in the input supply sector. It has been true for years that agricultural chemicals and agricultural machinery are sectors dominated by a few large firms. More recently, concerns have been voiced about concentration in the seed industry, where a small number of firms produce much of the seed sold to farmers. Competition at the Farm level: Concentration among input suppliers within an increasingly global market has implications for farmers in many countries. A parallel concern in the more developed world is that there is the trend for the seed companies themselves to become associated with the firms that buy the produce. Farmers naturally feel that they are caught in the middle of a commercial operation in which they buy from and sell to related corporations. Both their freedom of decision-making and their profit margins are possibly compromised.

The Distribution Sector: The concentration of the food retailing sector is a development which is causing concern in some countries. The problem for food consumers and farmers alike is the extent to which these segments of the food chain can extract rents from others. When those "others" are overseas, the issue becomes one of international concern. This is happening as the supermarket chains spread their operations abroad. Other issues also related to intellectual property and the distribution chain include the protection of geographical names and other trade marks commonly used in food and beverages.

Agriculture Laws/policies:
Agricultural protection continues to be the most debatable issue in global trade negotiations. Although protection for manufacturing products in both industrial and developing countries has declined significantly and overall trade reforms have been adopted in developing countries, agricultural protection in industrial countries has changed very little. Until the 1990s industrial countries generally protected agriculture while developing countries generally taxed it. Industrial countries supported their agricultural sectors through subsidies to producers, high tariffs, and other nontariff measures such as import restrictions and quotas. Until the late 1980s and 1990s many developing countries generated a large portion of their agricultural gross domestic product (GDP) in lower efficiency production for the domestic market, supplying the world market with tropical commodities that industrial countries could not easily produce. Some countries exported limited amounts of products, such as sugar and beef, in which they competed with industrial countries under preferential-access programs. Many governments levied export taxes on agricultural products to generate revenues while protecting manufacturing through high tariffs and other import restrictions. These countries also used price controls, exchange rate policies, and other restrictions to keep agricultural prices low for urban consumption. Thus, many policy analysts focused more on the taxation of agriculture and its negative effects on supply in developing countries than on protection in industrial countries. In industrial countries the higher returns created by protection led to capital-intensive and supposedly efficient agricultural sectors, creating the impression that their higher yields reflected comparative advantage rather than public support. This pattern of incentives began to change with the reforms in developing countries. Over the last two decades many developing countries have moved from taxing agriculture to protecting it. Most of this change has come not through increasing protection on agricultural products but through eliminating import restrictions and lowering tariffs on manufactured products, devaluing exchange rates, abandoning multiple exchange rate systems that penalized agriculture, and eliminating export taxes. Meanwhile, reforms in most industrial countries have been modest despite the inclusion of agriculture under the World Trade Organization (WTO) Uruguay Round of international trade negotiations. Increasing the incentives for agricultural production in many developing countries without lowering the incentives in industrial countries led to overproduction and price declines for many commodities, reducing opportunities for many developing countries to expand exports and rural incomes.

Uruguay Round Agreement on Agriculture: Since the 1980s major reforms have been made in protection regimes around the world, both through unilateral reform of tariffs and quantitative import restrictions and through undertakings within the Uruguay Round of multilateral trade negotiations. Most developing countries have eliminated export taxes; average tariffs have declined rapidly; and other import restrictions, such as foreign exchange allocations for import, have effectively disappeared. Industrial countries have also started to reduce distortions in their agricultural trade policies. Agricultural trade policies were brought into the global trade negotiations for the first time in the 1994 Uruguay Round Agreement on Agriculture (URAA). Before then, import barriers in agriculture were coupled with the widespread use of production-related subsidies, such as price supports, which in some countries increased production above the competitive market equilibrium level. With the intention of aligning agricultural trade rules with the rules applying to trade in other goods, negotiators agreed that all barriers to imports, other than those in place for health and safety reasons, should be subject to tariffs only. Developed countries were to reduce tariffs by an average of 36 percent and a minimum of 15 percent over 6 years. Developing countries had lower targets of a 20 percent reduction and a minimum of 10 percent over 10 years. Usually, a minimal tariff rate (called a tariff rate quota, or TRQ) was set for a limited volume of imports. With the removal of nontariff measures, some countries were concerned about not being able to prevent sudden surges in imports. To allay these concerns, negotiators agreed that a special agricultural safeguard could be applied to certain products. The URAA offered limited opportunities for undertaking minimum import commitments for certain products rather than adopting tariffs for them. Similar efforts were made to reduce the distorting effect of subsidies. Subsidies were classified by degree of distortion: a Red Box for prohibited subsidies, an Amber Box for subsidies that had to be reduced, and a Green Box for non distorting subsidies. The negotiators decided to treat export subsidies separately, so the Red Box disappeared, and the Amber Box became the core of the negotiations. A new Blue Box was created to cover direct payments to producers under production-limiting programs that were considered to be less trade distorting than pure market price supports. Amber Box: To measure domestic support and establish a basis for reductions, a total aggregate measure of support was created based on support to agriculture during the base period, 198688. The measure covered market price support and production-related subsidies to farmers. Each country agreed to reduce its supports on the basis of this measure. Industrial countries committed to reduce support by 20 percent by 2000, and developing countries committed to a 13.3 percent reduction by 2004. Green Box: To qualify as a Green Box measure, requiring non reduction, a subsidy must have no or almost no trade-distorting effect and must be provided through publicly funded government programs. Despite these general requirements, the Green Box covers a wide range of programs. Blue Box:

A special exemption from reduction commitments covers payments made under productionlimiting programs, provided that the payments are based on fixed areas, crop yields, livestock numbers, or, if the payments are variable, on 85 percent of the base level of production.

Opportunities and challenges in the future to Global Agriculture:

Population growth: Global population growth has been the major driving force for growth in world food demand and production. The population will continue to grow, but longer term projections suggest that population growth may slow down by the middle of this century. World population is expected to increase from the current 6.7 billion to 9.2 billion by 2050 (UN 2007). Almost all of this increase is expected to take place in developing countries, and especially in the group of the 50 least developed countries. These countries may still have inadequate consumption levels in 2050 and therefore there is significant scope for further increases in demand for food even when population growth slows down. Growth in agricultural production slows down: World agriculture is expected to fall to 1.5 percent p.a. in the next two and a half decades and on to 0.9 percent p.a. in the succeeding 20 years to 2050, compared with 2.1 percent per year since 1961. This slowdown reflects the lower population growth and the gradual achievement of medium-high levels of per capita consumption in a number of countries. All the major commodity sectors (except for the milk sector) are expected to take part in the deceleration of agricultural growth. Food security: Historical trends towards increased food consumption per capita as a world average and particularly in the developing countries will, according to FAO scenarios, continue in the near future, but at a slower rate than in the past as more and more countries approach medium-high levels. By the middle of the century more than 90 percent of the world population may live in countries with more than 2700 kcal per day. However, not all countries are likely to achieve appropriate food consumption levels. This is especially the case for countries that already have high rates of undernourishment, high population growth rates, poor prospects for rapid economic growth and often meagre agricultural resources. Today 32 countries are in this category with an average undernourishment rate of 42 percent. The population of these poor countries is expected to increase from the current 580 million people to 1.39 billion by 2050. In the developing countries the numbers well-fed could increase from 3.9 billion in 1999/01 (83 % of the population) to 6.2 billion (93 %) in 2030 and to 7.2 billion (96 %) by 2050. The problem of undernourishment will tend to become smaller in terms of both absolute numbers affected and, even more, in terms of the proportion of the population.

Increased energy prices:

As the availability of fossil fuels declines, the only renewable carbon resource large enough to substitute for or replace fossil resources for the production of fuels and electricity is biomass (MEA 2005). Recent high energy prices are now creating new markets for products which can be used as biomass feed stocks for the production of bio fuels as substitutes for petroleum-based fuels. Brazil, after a period of shrinkage during the 1990s when oil prices were low, has now reverted to using some 50 percent of its sugar cane output to produce fuel ethanol, both for domestic use and export. The use of vegetable oils to produce biodiesel is expanding in certain EU countries. The competitiveness of bio fuels may be further enhanced if the savings of greenhouse gas emissions resulting from substituting ethanol for gasoline were to be monetized in the form of tradable carbon credits (Certified Emission Reductions of greenhouse gases) through the Clean Development Mechanism under the provisions of the Kyoto Protocol. If world agriculture is to become a major source of feed stocks for the bio fuel industry, this might have implications for food security if feed stocks become a competitor to food, and for the environment if further deforestation takes place from the eventual expansion of land under the feedstock crops. Water shortages: It takes 1,000 litres of water to grow a kilo of wheat, between 2,000 and 5,000 litres to grow one kilo of rice, and 16,000 litres to grow the feed it takes to make one kg of beef. Agriculture accounts for 70 percent of all water use in the world and as much as 95 percent in many developing countries, almost all of this is for irrigating crops. Per capita use of water has decreased from about 700 to 600 cubic meters per year since 1980, and water productivity in agriculture increased by at least 100 percent between 1961 and 2001, but total water use is still increasing and is expected to continue to increase due to population growth, urban expansion and increasing industrialization. The gap between available water supply and water demand is increasing in many parts of the world, limiting future expansion of irrigation. In areas where water supply is already limited, water scarcity is likely to be the most serious constraint on development, especially in drought-prone areas. This presents an important risk to world food production, as 10 percent of the worlds food is produced in areas experiencing groundwater depletion. Increases in the frequency of droughts and floods due to climate change are projected to affect local production negatively. If todays food production and environmental trends continue, we will probably have to face crises in many parts of the world. To avoid this we need to act to improve water use in agriculture. The hope lies in closing the gap in agricultural productivity in parts of the world through better water management and changes in production techniques, including the use of new drought resistant crops. Climate change: Climate change is a serious and urgent issue. The earth has already warmed by 0.7 C since 1900, and based on current trends, average global temperatures could rise by 2 3 C within the next 50 years. Food production is particularly sensitive to climate change, since crop yields depend in large part on climate conditions such as temperature and rainfall patterns. There are still large uncertainties as to when, how and where climate change will affect agriculture production and food security. But recent research has suggested that the impacts will derive primarily from:

Higher temperatures: It is virtually certain that temperatures over most land areas will increase. We will have fewer cold days and nights, and more frequent hot days and nights. This might lead to increased yields and larger agricultural areas in colder environments where the planting season will become longer and more favorable for crop production. But in warmer environments, and especially in arid and semi-arid areas higher temperatures and increased evaporation will lead to decreased yields. More frequent heat waves: We will very likely experience more frequent warm spells and heat waves. Increased heat stress will lead to reduced yields in warmer regions. Heat waves will also cause more frequent fires.

Total agricultural output expanded by almost 170 percent globally since 1961, an average increase of 2.2% per year, always keeping ahead of global population growth rates. Much of this growth originated in developing countries (3.4 3.8 percent p.a.). But many of the least developed countries, continue to experience low agricultural productivity, rising food deficits and high levels of hunger and poverty. The recent success in accelerating growth in some countries gives hope for the future. The growth in these poor countries must be sustained, and extended to the neighboring countries that have not yet participated in this growth. The world made significant progress in raising food consumption per capita. Real prices for agricultural commodities declined by approximately two percent per year since 1961, but the rate of decline varied. Traditional commodities such as raw materials, tropical beverages, oil crops and cereals experienced the steepest decline. Some developing countries managed to take advantage of these trends by shifting production and trade into higher-value nontraditional products. The least developed countries, however, increased their dependence on traditional export crops. Over the last four decades, their agricultural exports earnings fell by more than 40 percent, and they have changed from being net exporters to significant net importers of agricultural commodities. The use of inputs such as fertilizer, modern varieties, tractors and irrigation are other determinants of yield growth. While modern varieties increasingly seem to play a more important role in yield growth, growth in the use of the other inputs appears to be leveling off, at very low levels. It is encouraging to note that TFP (Total Factor Productivity) growth rates have become positive in the 1981-2000 period. Even Asia and Sub-Saharan Africa were showing solid TFP growth rates for this period. Increased growth in TFP might offer the only feasible solution to the problem of ensuring continued productivity growth. This will require investments in research and development as well as institutional reforms and infrastructure development. World agriculture faces many future challenges. One major challenge is to accelerate production growth in poor agriculture based countries. Additional challenges will include satisfying increasing global demands for food, including that for animal products, sustaining the natural resource base (soil, water, air and biodiversity), coping with water shortages, climate change and vulnerability, and navigating the potential conflict between devoting land to animal food and bio fuels relative to direct human food.