PROJECT ON SECTORAL SHARE OF AGRICULTURE IN INDIA'S OVERALL GDP

SUBMITTED BY: GROUP-7 PRIYANKA SOAM RACHITA SODHANI RAHUL ELHENCE RAJEEV KUMAR RAKESH SINHA RITESH SINGH RITU DAHIYA ROMA

Introduction To Indian Economy

Since the last two decades Indian economy is on a rise and has proved its mettle. India is one of the fastest growing economies and is often considered as one of the major super powers. India is an Asian nation with seventh largest land base and second largest in term of population. The economy of India is the largest economy by nominal GDP and the fourth largest by purchasing power parity (PP P).

Understanding Indian Economy:

Indian economy stands today as one of the influential and attractive economy. The liberalization move by the Indian Government in 1990s has given a boost to the Indian economy and put her into a fast track economic growth route. With the beginning of the new millennium, India was considered as an emerging super power. In 2009, Indian GDP based on purchasing power parity (PP P) stood at US D 3.5 trillion making it the fourth largest economy. Indias service industry accounts for 62.5% of the GDP while the industrial sector contributes 20% to the GDP. The agricultural sector which was the back bone of Indian economy post-independence took a back seat in 21st century and contributed only 17.5% to the GDP. India growth rate has been an average of 7% since 1997 and has maintained a growth rate above 5% even in times of global recession. The Information Technology and IT outsourcing services has been the biggest contributor to Indias growth. Indias per capital income (PP P) is not too attractive and stands at US D 4542. India currently accounts for 1.5% of the total Indian trade as per WT O, 2007 publications.

SECTORAL SHARE OF AGRICULTURE IN INDIA'S OVERALL GDP

The Gross Domestic Product or GDP is the indicator of the performance of an economy. According to the estimates of 2008, India's GDP is $1.209 trillion and this is slated to make improvement in the coming times. In 2008 the country's GDP was 9%.The growth rate of India GDP is 9.4% in 2006- 2007. The agricultural sector has always been an important contributor to the India GDP. This is due to the fact that the country is mainly based on the agriculture sector and employs around 60% of the total workforce in India. The agricultural sector contributed around 18.6% to India GDP in 2005

STATISTICS REGARDING GDP GDP GDP growth GDP per capita GDP by sector $1.43 trillion (nominal: 11th; 2010) $4.00 trillion (PP P: 4th; 2010) 8.9% (2010,Q2) $1,124 (nominal: 142th; 2009) $3,176 (PP P: 127th; 2009) services (57%), industry (28%), agriculture (15%) (200910)

Inflation(CPI)

8.43% (December 2010) 478 million (2nd; 2009) agriculture (52%), industry (14%), services (34%) (2009 est.)

Labor force Labor force by occupation Main industries

Telecommunications, textiles, chemicals, food processing, steel, transportation equipment, cement, mining,petroleum, machinery, information technology, pharmaceuticals.

Change in the growth rate in the pres and post independence period:
The growth rate of India GDP is 9.4% in 2006- 2007. The agricultural sector has always been an important contributor to the India GDP. This is due to the fact that the country is mainly based on the agriculture sector and employs around 60% of the total workforce in India. The agricultural sector contributed around 18.6% to India GDP in 2005. Agriculture Growth Rate in India GDP in spite of its decline in the share of the country's GDP plays a very important role in the all round economic and social development of the country. The Growth Rate of the Agriculture Sector in India GDP grew after independence for the government of India placed special emphasis on the sector in its five-year plans. Further the Green revolution took place in India and this gave a major boost to the agricultural sector for irrigation facilities, provision of agriculture subsidies and credits, and improved technology. This in turn helped to increase the Agriculture Growth Rate in India GDP The agricultural yield increased in India after independence but in the last few years it has decreased. This in its turn has declined the Growth Rate of the Agricultural Sector in India GDP. The total production of food grain was 212 million tonnes in 2001- 2002 and the next year it declined to 174.2 million tonnes. Agriculture Growth Rate in India GDP declined by 5.2% in 2002- 2003. The Growth Rate of the Agriculture Sector in India GDP grew at the rate of 1.7% each year between 20012002 and 2003- 2004. This shows that Agriculture Growth Rate in India GDP has grown very slowly in the last few years.

India's GDP Composition for the various sectors in the recent years.
Todays ET has a chart on how Indias GDP has evolved post Independence. we have moved from a primarily Agrarian economy to a mainly Service oriented economy.

Comparison of Indias GDP with that of other countries:

If we look at the data it is clear that some of the biggest successes over the last decade have been companies in the IT/ITeS sector and other service sectors like BFSI, Retail and Telecoms. The graph below shows how the share of services sector has expanded compared to the contraction in the Agriculture sector. It is a disturbing trend that the share of Agriculture as a % of GDP is dwindling given that it employs 60% of Indias population (directly or indirectly).

The chart shows how there is an uncanny similarity in the sectoral composition of these economies irrespective of the level of liberalization, time since liberalization, government regulation, domestic savings rate, exports growth, gross capital formation, demographics, development of capital markets etc. This is really strange as all these countries have vastly different underlying economies.

Reasons for reduction in the share of agriculture in Indias GDP:

Agriculture Growth Rate in India GDP has slowed down for the production in this sector has reduced over the years. The agricultural sector has had low production due to a number of factors such as illiteracy, insufficient finance, and inadequate marketing of agricultural products. Further the reasons for the decline in Agriculture Growth Rate in India GDP are that in the sector the average size of the farms is very small which in turn has resulted in low productivity. Also the Growth Rate of the Agricultural Sector in India GDP has declined due to the fact that the sector has not adopted modern technology and agricultural practices. Agriculture Growth Rate in India GDP has also decreased due to the fact that the sector has insufficient irrigation facilities. As a result of this the farmers are dependent on rainfall, which is however very unpredictable. Agriculture in India has a long history, dating back to ten thousand years.

Today, India ranks second worldwide in farm output. Agriculture and allied sectors like forestry and logging accounted for 16.6% of the GDP in 2007, employed 52% of the total workforce and despite a steady decline of its share in the GDP, is still the largest economic sector and plays a significant role in the overall socioeconomic development of India. India is the largest producer in the world of fresh fruit, anise, fennel, badian,coriander, tropical fresh fruit, jute, pigeon peas, pulses, spices,millet,castor oil seed, sesame seeds,sunflower seeds, lemons,limes, cow's milk, dry chillies and peppers, chick peas, cashew nuts, okra, ginger, turmeric, guavas, mangoes, goat milk and buffalo milk and meat. It also has the world's largest cattle population (281 million). It is the second largest producer of cashews, cabbages, cotton seed and lint, fresh vegetables, garlic, egg plant, goat meat, silk, nutmeg, mace, cardamom, onions, wheat, rice, sugarcane, lentil, dry beans, ground nut, tea, green peas, cauliflowers, potatoes, pumpkins. It is the third largest producer of tobacco, sorghum, rapeseed, coconuts, hens' eggs and tomatoes. India accounts for 10% of the world fruit production with first rank in the production of mangoes, papaya, banana and sapota. India's population is growing faster than its ability to produce rice and wheat.

Slow agricultural growth:

Slow agricultural growth is a concern for policymakers as some two-thirds of Indias people depend on rural employment for a living. Current agricultural practices are neither economically nor environmentally sustainable and India's yields for many agricultural commodities are low. Poorly maintained irrigation systems and almost universal lack of good extension services are among the factors responsible. Farmers' access to markets is hampered by poor roads, rudimentary market infrastructure, and excessive regulation. World Bank: "India Country Overview 2008" The low productivity in India is a result of the following factors: According to World Bank, Indian Branch: Priorities for Agriculture and Rural Development", India's large agricultural subsidies are hampering productivity-enhancing investment. Over regulation of agriculture has increased costs, price risks and uncertainty. Government intervenes in labor, land, and credit markets. India has inadequate infrastructure and services. World Bank also says that the allocation of water is inefficient, unsustainable and inequitable. The irrigation infrastructure is deteriorating. The overuse of water is currently being covered by over pumping aquifers, but as these are falling by foot of groundwater each year, this is a limited resource. Illiteracy, general socioeconomic backwardness, slow progress in implementing land reforms and inadequate or inefficient finance and marketing services for farm produce. Inconsistent government policy. Agricultural subsidies and taxes often changed without notice for short term political ends. The average size of land holdings is very small (less than 20,000 m) and is subject to fragmentation due to land ceiling acts, and in some cases, family disputes. Such small holdings are often over-manned, resulting in disguised unemployment and low productivity of labor. Adoption of modern agricultural practices and use of technology is inadequate, hampered by ignorance of such practices, high costs and impracticality in the case of small land holdings. Irrigation facilities are inadequate, as revealed by the fact that only 52.6% of the land was irrigated in 200304, which result in farmers still being dependent on rainfall, specifically the monsoon season. A good monsoon results in a robust growth for the economy as a whole, while a poor monsoon leads to a sluggish growth

 The growth rates of production of major crops are

Horticulture Sector
Agriculture in Maharashtra is diversifying into high value crops of which horticultural crops are a major component. The state utilises the largest area and has the highest production in the country devoted to fruits and fifth largest area under vegetables. It had a 20 per cent share in the countrys fruit production and 5 per cent share in the vegetable production in 1999-2000. Maharashtra, renowned for its exclusive production of the Alphonso mangoes, ranks first in the country for grape, cashew nut, pomegranate, orange and banana production and also has the highest share in onion production (MSDR 2005). Fertilisers and Pesticides Like seeds, the fertiliser consumption in Maharashtra has been rising continuously. In fact, it is one of the major fertiliser-consuming states in India with a share of around 10 per cent in the countrys total fertiliser consumption. Annually around 3.8-4.0 million tonnes of fertilisers are consumed in terms of material and 1.8 to 2.0 million tonnes in terms of nutrients such as nitrogen, phosphate and potassium (N, P, K). In 1995, per hectare consumption was highest in Punjab (167kg/ha.). Comparatively, in Maharashtra, it was around 65 kg for the same year. However, it has increased from just 14 kg /ha in 1970-71 to currently around 75 kg/ ha thus registering a fivefold growth and a growth rate of 7.4 per cent per annum. As far as the level of NPK ratio is concerned, it was distorted from the normal level (4:2:1) to 8.1:2.3:1 due to the decontrol of phosphatic and potash fertilisers in 1992. It subsequently improved to 5.4:2.4:1, after the government introduced the Concessional Scheme of fertilisers to increase the consumption after 1992. The estimated consumption of fertiliser during the year 1999-2000 and 2000-2001 is 88.8 and 75.7 kg, respectively (Agricultural Statistics at a Glance 2002, Ministry of Agriculture, Govt. of India). With increasing area under horticultural and other high value export crops (which have significant nutrition requirement), fertiliser consumption might increase further. Application of fertilisers is governed by their prices. At the regional level, in districts of Western Maharashtra, per hectare usage of fertilisers is very high (as compared to other districts) and this has adversely affected soil fertility. Among various crops grown in the state, sugarcane consumes very high quantity of fertilisers; its was reported that the per hectare consumption of fertilisers for this crop moved up from 226 kg per hectare in 1972-73 to 501 kg per hectare in 1990-91 (Sawant et al, 1999). Bio-fertilisers are economical and pollution-free sources of plant nutrients. The state has about 41 production units of bio-fertilisers with capacity of 5000-6000 tonnes (www.agri.mah.nic.in). Under the integrated approach, implemented by the GoI, balanced use of chemical fertilisers and bio-fertilisers / organic manure is suggested to maintain the soil health. The state hardly uses 1500 tonnes of these fertilisers as against the potential of 85000 tonnes. On the other hand, the state consumes around 4 million tonnes of the chemical fertilisers. In the case of pesticides, the consumption in Maharashtra has come down to 173 kg/ha from 320 kg/ha during VII plan due to Integrated Pest Management (IPM). However, there is irrational distribution of pesticide use with maximum use on cotton at about 54 per cent (GoI, 2003). Table 1.32 gives the demand/consumption and production of different fertiliser nutrients.

Conclusions
Agriculture occupies a prominent position in Indian policy-making not only because of its contribution to GDP but also because of the large proportion of the population that is dependent on the sector for its livelihood. The growth in population and wealth has stimulated demand to the extent that domestic production has not always been able to keep up and there is increasing speculation that the Indian economy may be overheating leading to inflation. The downside of the increased import demand and the current commodity boom is that Indias food import bill will rise sharply. However it is clear that Indias agricultural sector has made huge strides in developing its potential. The green revolution massively increased the production of vital food grains and introduced technological innovations into agriculture. This progress is manifested in Indias net trade position. Where once India had to depend on imports to feed its people, since 1990 it is a net exporter of agri-food products. Its agriculture is large and diverse and its sheer size means that even slight changes in its trade have significant effects on world agricultural markets. How India will develop is still a big unknown, with the picture changing rapidly. Questions have arisen about Indias capacity to compete in global markets under the current farm structure and farm policy. As the service economy grows, the share of agriculture will diminish, which may also have implications for Indias stance on trade and agriculture policy in the future.

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