Introduction xiii
From time infinitum, development theology in all its incarnations and ramifications
has treated Agriculture as the prime mover, a chief energy source to sustain people,
create property and power, the launching pad for celeritous development and a
foundation on which the whole economic edifice can and does rest. The history of
human civilisation is abreast with evidences that agricultural revolution/growth has
preceded industrial growth and economic literature is filled with theories treating
agriculture as precursor for advanced stage of development. Be it the stage of
‘Feudalism’ in Marxist literature that paves the way for the much advanced phase of
capitalism or the antithesis ‘Take-off’ stage in the so called Non-Communist
Manifesto of Rostow that zooms the economy into the stage of high mass
consumption; it is agriculture that provides the base for the advanced and developed
stage of civilisation and economy.
The impregnable position occupied by agriculture is because the roles agriculture
plays. Kuznets classifies the contributions made by agriculture to economic growth as
Product Contribution, Market Contribution, Factor Contribution and Foreign
Exchange Contributioni. In simple terms the contributions made by agriculture to
economic growth can be mentioned as1. Supplying food stuffs and raw materials to the expanding sectors in the
economy,
2. Providing an investible surplus of saving and taxes to support investment in
other expanding sectors of the economyii,
3. Selling for cash a ‘marketable surplus’ that raises the demand of the rural
population for the products of other expanding sectors, and
4. Relaxing the foreign exchange constraint by earning foreign exchange through
exports or by saving foreign exchange through import substitution.
As far as India is concerned Agriculture is not just a profession or a source of
livelihood here, it is rather a way of life, a tradition, which, for centuries, has shaped
the thought, the outlook, the culture and the economic life of the people. Agriculture
was and continues to be the chief source of livelihood/employment for millions of
Indians living in villages and the only sector that till today is the backbone of the
Indian economy and provides a platform to the Indian economy adopting a ‘leap-frog
strategy’ of development Agriculture, therefore, is and will continue to be central to
all strategies for planned socio-economic development of the country. Rapid growth of
agriculture is essential not only to achieve self-reliance at national level but also for
household food security and to bring about equity in distribution of income and wealth
resulting in rapid reduction in poverty levels.iii.
All said and done Indian agriculture from the time of the advent of the British was in a
very bad shape. The land system was obstructive, technology was not obsolete; it was
primitive, scale of production small, agriculturists illiterate and government
Introduction xiv
unresponsive. Agriculture was not in a position to supply the essential foodstuff to the
growing Indian population and the goal of generating an exportable surplus was a
distant dream. Examples of markets being manipulated by organised traders were not
hard to find. These manipulations had sometimes heightened the suffering and misery
associated with famines.iv The status of Indian agriculture at the time of independence
is aptly summarised in a paragraph written by Prof. Dantwala-“For more than half a
century prior to independence, the performance of Indian agriculture was quite dismal.
The disastrous Bengal famine in 1943 rudely awakened India to dire necessity to
rapidly augment food production and streamline the distribution system. The
culpability of food prices in causing millions of starvation deaths was grimly
demonstrated by the Bengal famine. To add to its woes the partition of the country
resulted in a more than proportionate reduction in growth –stimulating assets,
particularly irrigation…. About the time the First Five Year Plan was launched the
country was experiencing severe food shortage and the consequent upsurge in food
prices.”v
The development strategy that was adopted in the post-independence era while
emphasising rapid industrialisation and realising that a precondition to growth is a
structural shift in production from primary to secondary and then to the tertiary sector,
also accepted that the sectoral goals are interlinked and no sector of the economy can
be expected to achieve uninterrupted progress without reinforcing support of other
sectors. The establishment of an agrarian economy which ensures food and nutrition to
India’s growing population, raw materials for its expanding industrial base and
surpluses for exports, and a fair and equitable reward system for the farming
community for the services they provide to the society, became the main target for the
Plans for development in general and agriculture in particular. It was the belief in
‘Agriculture Development as Precursor to Overall Development of the Economy’ that
encouraged the government to give proper place to agriculture in the post
independence era. The policy makers adopted a two-fold strategy for regenerating
agriculture immediately after independence. The first element of this strategy was to
implement land reforms in order to remove institutional bottlenecks and the second
element was to undertake massive investment in irrigation and other infrastructure in
order to update the existing agricultural technology. The Green Revolution that
followed in the 1970s further pepped up the development process through a revolution
in the production technology. The net result of this strategy was the rapid strides that
the Indian agriculture took in the first few decades after independence. In taking the
annual food grains production from 51 million tonnes of the early fifties to 206 million
tonnes at the turn of the century, agriculture contributed significantly in achieving selfsufficiency in food and in avoiding food shortages in our country.
All is however not well at the agricultural front. The pattern of growth of agriculture
has, brought in its wake, uneven development, across regions and crops as also across
different sections of farming community and is characterized by low levels of
productivity and degradation of natural resources in some areas. Capital inadequacy,
Introduction xv
lack of infrastructural support and demand side constraints such as controls on
movement, storage and sale of agricultural products, etc., have continued to affect the
economic viability of agriculture sector. Consequently, the growth of agriculture has
also tended to slacken during the nineties. Agriculture has also become a relatively
unrewarding profession due to generally unfavourable price regime and low value
addition, causing abandoning of farming and increasing migration from rural areas.
The situation is likely to be exacerbated further in the wake of integration of
agricultural trade in the global system, unless immediate corrective measures are
taken.
However, before coming on to discuss the main aspects chosen for analysis in the
book, it would be in the fitness of things to first conceptualise public policies for
developing agriculture. Public policies would broadly include the Vision of
agricultural development, Mission, Objectives, Strategy, Instruments and Organisation
and Management. Such an analysis is important for the following reasons1. An overview of public policies is indispensable to understand different aspects
related to agriculture and give us a complete picture of Indian agriculture, the
place accorded to it in the planning process, the roles expected of it, the targets
set for it and the importance given to it vis-à-vis other sectors of the economy.
2. Agricultural Production in India or in any country of the world depends
directly on the vision, mission, objectives, strategy, instruments and
organisation and management of agriculture chosen by the people and adopted
by the government. Any change in the vision, objective, strategy etc. has
significant impact on production and productivity. Be it the land reforms
policy or introduction of new technology in the pre-reform era or the country
signing the WTO agreement and thereby accepting the patent regime and
reduction in farm subsidy etc. in the post reform era, the strategy, instruments
and management of agriculture has affected and will be affecting agricultural
production.
3. A brief analysis of the public policies and the shift therein would be of help in
assessing the progress made by agriculture and delineating the growth path that
it has taken.
4. Agricultural Price Policy, which the present study attempts to study and
analyse, at length forms an important part of the strategy, organisation and
management of agriculture followed in the country.
I. BRIEF REVIEW OF PUBLIC POLICIES FOR AGRICULTUREvi:
Public policies on Agriculture in India like that in any other nation of the world can be
analysed under the following six heads- Vision, Mission, Objectives, Strategy,
Instruments and Organisation and Management. We may attempt a very brief
discussion of these here.
Introduction xvi
1. Vision of Agricultural Development:
The policy makers since independence have debated on two alternative visions for
agricultural development in India. Desai nomenclates these as
I. Welfarist &
II. Economic Welfarist
(i)Welfarist: - As per the welfarist vision agriculture is viewed as a source of
food and raw material for the economy and its peoplevii. Such a view however
is very narrow and is suitable only when agriculture is subsistence-oriented and
static. This was the case with Indian agriculture in the pre-independence era.
The situation has however changed completely with agriculture recording
commendable performance in the post- independence era. The welfarist vision
has gradually lost its importance in the independent India.
(ii) Economic Welfarist: - This broader view supported by manyviii, views
agriculture as a means to larger goals of employment-led economic growth,
poverty alleviation and self-reliance. This larger vision is more consistent with
the notion of structural transformation of the economy from a predominantly
agricultural one to an advanced industrialised one. Desai extends support to
this vision also on the ground that –
a. This vision makes the whole process of economic growth people
centred.
b. While the welfarist vision is narrower and passive and leads to myopic
view about allocating and using public resources for agriculture by
neglecting this sector as its relative importance declines in course of
structural transformation of the economy; the economic welfarist
recognises the coexistence of relative decline and the growth of real
agricultural gross domestic product in absolute amount as a natural
phenomenon.
c. The economic welfarist vision recognises farming as an entrepreneurial
economic activity rather than just a way of life and mainly an
uneconomic activity.
The development of the agricultural sector has seen a gradual transition in the
Vision of agricultural development with the policy makers increasingly
accepting and adopting the broader economic welfarist vision.
2. Mission of Agricultural Development:
Desai mentions three main missions of agricultural development that the above vision
calls for. The Missions are like the broad Plans that the government adopts in order to
achieve the vision. These missions have been given credence by the policy makers in
India from time to time. The missions area. Concentrating agricultural growth in regions well endowed with
irrigation resources and facilities. This mission was adopted by the
policy makers under the Intensive Agriculture District Programme
(IADP) in 1959.
Introduction xvii
b. Shifting emphasis away from the areas in (a) above and concentrating
on the rain fed and dry farming areas. This mission was adopted under
the Draught Prone Area Programme (DPAP), Tribal Area Development
Programme (TADP), and Hill Area Development Programme (HADP)
in the 1970s and 1980s by the government.
c. Making agricultural growth broad based, ensure all pervasive
development of agriculture spread all across the country by adopting
measures that promote agricultural growth farm size-wise, and farm
enterprise-wise. This mission is rather broad and is being adopted in
our country since the 7th Five Year Plan.
For a vast nation like India where vision no-2 as stated above is always the
relevant and suitable one, adoption of mission a & b by any means can be
treated only as temporary. Moreover the prolonged adoption of such a mission
would cause iniquitous agriculture growth and further aggravate the distortions
in agriculture that Bhallaix has pointed as the main curse for the Indian
agriculture. Unless the mission is to develop the farm sector of the country
spread all across the country with wide variation existing in terms of the size of
the farm, technique of production used, crop grown and things like that
fostering employment led growth,, achieving self reliance and alleviating
poverty will all look a distant dream. The adoption of the Mission-3 would
“provide higher sectoral growth, narrow regional differences in agricultural
productivity and growth, alleviate poverty more and lead to larger growth
linkages of agriculture”x. The adoption of such a mission would make
agriculture development mass based and develop the non-farm sector sectors
as well. The adoption of this strategy has been supported by many scholars like
Mellor and Lele, Desai and Namboodrixi, Gandhixii and others.
3. Objectives of Agricultural Development:
The objective of economic growth in general and that of agricultural in particular has
been changing with the passage of time and development of new theories of economic
growth. Although the list of objective is very long and includes sustainable economic
and agricultural growth, sustainable use of natural resources, improvement in human
development index that broadly encompasses economic growth, poverty alleviation,
income equality and healthy quality of life: It is important that for agricultural growth
this list is simplified and prioritised. It is imperative for the policy makers to visualise
policy objectives that have roots in the ground rather in an ivory tower. The three
prime objectives that policy makers have emphasised in India area. Increment in the per capita output and real net national product.
b. Alleviating poverty of especially those who are living below the
poverty line by helping agriculture generate employment opportunities
and sufficient surplus &
c. Improving the quality of life in rural India by fostering growth of
education, health facility etc.
Introduction xviii
These objectives of agricultural growth find support from Johnston and
Mellorxiii, Ahluwalia, Rao and others.
5. Strategy of Agricultural Development:
The strategy for agricultural development that has been followed so far by the
government has been very elaborately and systematically explained by Prof.
Dantwalaxiv. Prof. Dantwala has categorised the strategy asa. Extensive Farming- This he believes increases production by bringing
the hitherto uncultivated land under the plough. This strategy was
useful in the first few years after independence but not in modern times
when every single inch of cultivable land is already under plough.
b. Intensive Farming- It calls for intensifying cultivation on lands already
under cultivation through irrigation, better seed and manure and
improved farming practices and grow multiple crops in the plots.
c. Bringing Scientific Knowledge based Technical Change – The main
demerits of the first two strategies, Dantwala himself admitted, are that
they can be applied only for a limited period of time, are agroeconomically non-sustainable and are directly and immediately affected
by the law of diminishing returns. The only long-term growth strategy
is encouraging the growth of scientific knowledge based technical
change in agriculture. Technical change strategy has many advances
over the other strategies e.g. –Technical change by increasing total
factor productivity reduces the number of people living below the
poverty line, ensure complementary of resources and enterprise that is
so common in agriculture that results in larger output response,
technical change in agriculture being embodied in new biological,
chemical, and mechanical innovations and resources ensures their use
and ultimately results in a rather rapid growth in farm productivity (
e.g. success of Green Revolution in India).
Desai claims that the adoption of the third strategy requires three
things-first, promoting adoption of new inputs and resources in which
new technology is embodied, second, encouraging use of inputs and
resources complementary to these inputs and third, extending
knowledge as input on how to use both new and complementary inputs
and resources. It is the third objective, which is being adopted and
promoted by the government.
6. Instruments for Agricultural Development:
The instruments used by government to achieve the objectives can be classified under
two broad headsa. Price Factor- This reflects the ratio of composite index of prices
received to that of prices paid by agriculture. Price policy since it
improves the terms of trade and in turn promotes private investment,
technical change and growth in agriculture, has been given a place of
Introduction xix
prime under the new policy of de-protection and deregulation of trade
and industry. The emphasis should have been on pricing of inputs and
services such as fertilisers, canal-irrigation water, power and credit.
There are people who however oppose this instrument ambiguous and
not necessarily delivering the right result.
b. Non-Price Factor- Under this head three types of factors are includedTechnological Factor-Agricultural Research and Development and
extension, (ii) Economic Factor-Production cum market infrastructure
for major farm inputs, resources and services and (iii) Institutional
Factor- Agrarian institutions like land tenure, formal credit and poverty
alleviating programmes, wage-paid employment and public distribution
system. While the importance given to the first two is by no means
satisfactory, government has shown sufficient determination and
intention to use them in the right earnest in achieving the objectives; it
is always the institutional reforms which lag far behind the targets and
requirements. It is imperative therefore that the government policy
emphasises on the following- (i) Since concealed tenancy is very high it
causes disincentives and it must be now legitimised with a provision to
protect tenants from eviction. (ii) Consolidation of fragments must be
urgently taken to make smaller plots economically more viable. (iii)
Poverty alleviation programmes like IRDP and wage-paid employment
must be integrated with location specific mainstream sectors like
agriculture, allied agriculture, water shed, rural infrastructure and nonfarm activities and (iv) PDS must be targeted which will reduce FCI
procurement substantially.
7. Organisation and Management of Agricultural Development:
The implementation of strategy and use of instruments depends directly on the
organisation and management of different programme. The real controversy or point
of debate is between adoption of a Uni-agency model and Multi-agency model. While
the former results in concentration of all power in one single organisation and thereby
avoid any possibility of confusion and confrontation and clash of interest between the
multiplicities of agency that exits in the alternative system; it also suffers from the
demerit of creating a monolithic structure that suffers from all the ills of monopoly.
The later seems more sound and useful, as implementation of strategy of agricultural
development requires specialised knowledge and skills that are highly professional in
nature. It results in division of labour and increases efficiency and effectiveness by
having six different agencies dealing with the following sub systems or areas of
agriculturea. Agriculture Research and Development sub system that includes Indian
Council of Agricultural Research and State Agricultural Universities.
Introduction xx
b. Agri-support infrastructure sub system that consists mainly of
government land and agricultural departments, agricultural extension
department, irrigation department, rural electricity department etc.
c. Agri-input subsystem consisting of institutions that sell fertilisers,
seeds, compost manures, plant protection materials, veterinary services
etc.
d. Agri-services sub-system consisting of rural financial institutions,
NGOs and insurance agencies etc.
e. Agro- marketing and processing sub-system that consists of regulated
markets, cold storages and rural go downs, market intermediaries
including FCI etc.
f. Agricultural production sub-system, which constitutes landless and
farm households who are the clientele of the above mentioned five subsystems.
It is these sub-systems that precisely control and manage agricultural development in
India. The extent of cooperation and coordination between thee agencies however
remain a hotly debated issue.
Agricultural development in India can be perceived in the light of the above aspects of
the public policies pursued and debated in the country. It is in the light of the above
vision, missions, objectives, strategies and instruments that the government has
created suitable organisational set up and has tried and is trying to foster agricultural
development. All progress in the field of agriculture be it agricultural production,
pricing, sustainable development, mechanisation and technological improvement or
liberalisation is guided by and can be analysed in the context of these.
Attempting even a brief conspectus of the main aspects of agricultural development in
India however will prove to be a tall order, a Herculean task, a truly demanding but at
the same time very interesting job for any researcher. The present study however does
not attempt to do this for two reasons- he feels that such a compendium will be by and
large dilettante and will not be able to give deep insight into any important aspect of
agricultural development in India and second, attempting such a study is prima-facie
not the main objective of the study. The present study aims at studying the
characteristic trend in agricultural production and prices in India in the post
independence era, comparing the trend in the pre- reform era with the post reform era
and then making an overall comparison of such trends with that at the international
level.
Introduction xxi
II. AGRICULTURAL PRODUCTION & PRICES IN INDIA:
1. Agricultural Production:
Agriculture being the chief source of livelihood for bulk of population and income
elasticity of demand for agricultural products remaining very high in this poor country
of ours, the importance of agricultural production and prices for other sectors of the
economy is self established. Any fluctuation in agriculture production and prices
causes fluctuations not only in the purchasing power of the population dependent on it
(still around 70%) but at the same time because of the forward and backward linkages
causes a change in the cost of living of workers, demand & supply conditions etc. in
other sectors of the economy as well, thereby initiating a process of adjustments and
readjustments.
Instability is the prime feature of any productive activity and as such most industries
are subject to short-term fluctuations, agriculture definitely is no exception and as a
matter of fact it suffers from instability the mostxv. The very nature of supply, demand
and output conditions in agriculture, farmer’s ignorance etc. are such that it creates
inherent instabilityxvihere. These changes at times appear irrational or directionless
beyond realm of reason to explain and beyond the power to control. Instability is
inbred in agriculture in the sense that there are some typical connatural factors, which
move the soil cultivation a persistently unstable occupation. Agricultural production
is subject to year-to-year fluctuations and also fluctuations within a particular year,
owing precisely to the following reasons:
 Seasonal and weather conditions-With Indian agriculture still remaining a
gamble with monsoons and environmental degradation taking place at an
alarming rate and thereby making monsoon become very erratic, instability in
production has become very common. Farming being a biological process the
exogenous variable weather plays an important role in bringing down the
agricultural income drought and dust storms, floods and frost are
manifestations of the straggle that goes on in farming between man and
nature. The chief source of economic disequilibrium in agriculture owes its
origin in the vagaries of nature on which agricultural production is so deeply
dependent out of these vagaries come to agriculture, many forms of economic
risks and uncertainties.xvii
 Variations due to supplies being in abundance in particular month of the yearThese results from a relative failure of the government policy to regulate the
supply of agricultural commodities through adopting proper marketing and
buffer stock technique.
 Deliberate variations attempted by the producer- Indian farmers are largely
illiterate and are not aware of the changes taking place in the market and their
decisions to vary output and change output composition are not well thought
of and depend on whims and fancies rather than any long term objective.
Further agricultural production takes place under different situations by people
who own small plots and work on a small scale. They are busy in the
Introduction xxii




production of a few crops and have neither the time nor the ability and they
seldom bother for studying the markets to put their product at advantage. The
lack of credit facility to the farmer works as on another handicap. This has led
to the development of an independent class of middleman which functions as a
parasite to the farmers. They collect the small surplus of the individual
farmers in the primary market and dispatch them to bigger markets which acts
as a reservoir to which produce comes in from all sources, at all season and of
wide variations in the quantity and quality. These middlemen play a very
destructive role in fluctuating the agricultural production and prices and some
times make it like a share market by their acts.
Frequently changing policies of the government, which at times promotes
agricultural production and at times impedes it.
External factors, incentives and disincentives that are beyond the control of
the government such as international agreements like WTO, changes in the
extent and nature of international demand for agricultural commodities
exported by the country.
Variations resulting from the conditions of marketing of the agricultural
product.
Fluctuations in agricultural prices and the agricultural price policy of the
government.
Fluctuation in agricultural production is harmful not only for the farmers whose
income directly depends on the output that they produce, but because of the forward
and backward linkages it also negatively affects the demand situation in other sectors,
cost of living and income level there. It is of paramount importance for us therefore to
study the trends in agricultural production in India in different time period specially in
the period before the launching of economic reforms and that after it (so as to have a
comparative picture of the two), compare these trends with the same in rest of the
world, find the factors responsible for the fluctuation in the agricultural production and
then evaluate the policy adopted by the government adopted to promote output and
stabilise it.
2. Agricultural Prices:
Agricultural production acts as a dominant factor responsible for the wide fluctuations
in Agricultural prices. There are three main functions which agricultural prices are
supposed to serve:
a) It is useful in allocating the sources. This determines the level of production &
consumption for producers and consumers respectively.
b) It helps in the income distribution.
c) It exerts an influence on capital formation.
Changes in agricultural prices perform the above three major functions and hence
particular movements of agricultural prices may facilitate the achievement of certain
Introduction xxiii
goals through their operation on one function while those same price movements may
operate against other simultaneously held goals through effect on other functions.
As a resource allocator, it signals to both producers and consumers to decide about
their level of production and consumption. With a change in the relative prices of
various agricultural commodities, the resource allocation by the producer and
allocation of expenditure on consumption by the consumer to the agricultural
commodities is altered. An increase in the price of a particular commodity results in
more allocation of resources by the producers for the production of that commodity.
The consumers try their level best to substitute these commodities by the cheaper
ones.
Apart from providing income to the farmers, agricultural prices affect the levels of
living of the people involved in the other sector of the economy. This result in the
transfer of income between agricultural and non-agricultural sector whenever a change
in the agricultural prices take place disturbing the income distribution pattern of the
economy. Fluctuations are characteristics of prices. They are the normal features of
our competitive system. Fluctuations in the prices agricultural commodities are
therefore a natural phenomenon. A special feature of agricultural prices is that they
show a far greater degree of fluctuations when compared to industrial prices. This is
because of some special characteristics of agriculture that it is the most risky of all
industries. While cultivating a land, a great many things may happen to the land
between sowing and harvesting. In a country like ours, agriculture is a gamble on
monsoon and a delay in the monsoons adversely affect the crops. Apart from the risks
of natural forces, there are other risks arising from human agencies. An agriculturist
may saw the seed expecting a good profit, but owing to some human interference he
may find that he will incur a loss. But he cannot switch over another crop in such a
contingency, because he stands committed to one crop already for the season. The
difficulties faced by an agriculturist in partly social and partly economic in character.
In India agricultural prices fluctuate widely, and some times erratically. The
percentage of this fluctuation and its intensity vary from season to season, region-toregion and commodity-to-commodity. Further, the rise or fall in agricultural prices is
not uniform but selective and owning to the disparity between the prices of competing
crops, the crop pattern is disturbed with disastrous consequences and the result is an
imbalance in the price structure. The agriculturist does not grow the crop that is
required by the nation. As a result, interest of the community suffers. Also, a rise of
fall in the price of agricultural commodities is not accompanied by rise or fall in prices
of manufactured goods in the same proportion. A rise in price is harmful to
consumers, while a fall in price is harmful to agriculturists. Moreover, all fluctuations
create uncertainty instability in the national economy because our country is
predominantly agricultural in character
Introduction xxiv
These fluctuations in the price of agricultural products are the greatest hurdle in the
way of agricultural development, as they ruin many. It was for this reason that
agricultural countries suffered during the depression of 1929. The explanation for
agricultural prices being relatively unstable lies in the fact that in agriculture the
relation between price, cost and production levels takes place differently from that in
industry. Unlike the manufacturing industries, where prices move under free play of
forces of demand and supply, to correspond in the long run to cost of production,
hardly any relation exists between cost of production and prices in agriculture. This
is because of the fact that manufacturing sector is organised on capitalist principles
and hence doesn't permit workers in, unless they contribute to production more than
the wages they receive and leave behind something as profit consequently, the entire
residual population is thrown on agriculture which by its nature and tradition,
employs or accommodates whatever population is thrown on it without reference to
how much it may a to the total production. So, in agriculture sector, we find that, due
to inertia, lag and absence of any other alternative, production is carried whether the
prices and cost of production are remunerative or not. If the prices of some
manufactured products fall far below the cost of production of industrial
manufacturers, the latter would be driven out of business very quickly, thus
decreasing supply and tending to raise prices.xviii But the case is different for
agricultural sector especially in a developing nation like India where the marginal
productivity of more than 20% of the work force is zero; production is being carried
on uninterrupted. Further most farmers cannot easily adjust, in response to changes in
the price level, the quantity and quality of their output. There is basic difference in
instability in the agricultural sector and that in any other sector of the economy. This
fact is explained by many actors Agriculture is a biological industry and once investment is sunk, the resources
cannot be withdrawn; farmers do not stop their production even if the prices
are going down. This results in a rather steady supply of agricultural products.
In contrast, the producers in other sectors of the economy sometimes run and at
other times simply standstill, farmers mainly stay in full production,
irrespective of the impact of business fluctuations upon the demand for farm
products. This behaviour of the farmers assures consumers a large and steady
supply of food and other farm products, but it means great instability in farm
prices and income.xix
 Further primary producers are not well organised and are thus not in a position
of pushing their interest in the marketxx. Thus, when the prices fall, the total
agricultural production fails to adjust itself and so in times of adversity, the
experiences of agriculture are more embarrassing and the problem more acute
than commonly confront other industries.xxi Hence while the producers in other
sectors influence market prices by controlling supply, farmers look pathetically
at market prices for favour in the observe control on supply.
 Agricultural prices typically tend to respond more rapidly than do the prices of
industrial products to changes in the balance between supply and demand.xxii
Introduction xxv
 Agricultural products cannot be stored for a long period of time and some
products not even for few days. Also, they are always in need of cash and
having no proper storing facilities.
 The farmers in under-developed countries having some other problems like
efficient acreage allocation, which acts as a hindrance in shifting their
resources in response to change in relative prices of crops. Every farmer plans
in his own way guided by his own traditional instinct and many a time the
whole host of them come to grief owing to an unexpected change in the
conditions of the market.
 Agricultural prices in a developing economy are highly influenced by the
interaction between producer, consumer and trader groups.
Agricultural
marketing is crucial in this regard as the function of modern marketing are
enormously increased and complicated which, inter-alia, include moving
products from the producer and bringing it to the consumer at the right time, in
the right form at a reasonable cost and price. In the absence of any direct
contact with the consumer, the farmer doesn't realise the fact that the
consumers play such an important role in determining the volume and nature
of production. As the supply is not adjusted to adjust with a change in nature
and volume of demand prices fluctuate widely.
 Agriculture in India is in private sector and due to a large number of producer,
no single producer have any knowledge regarding the total product and hence
can't exert an influence on market price.
An in-depth study of the trends in agricultural production and prices is required for a
country like India in order to get an idea about the peculiarities of this sector and
understand the precise reasons for fluctuation in production and prices of not just
specific commodities but for all the commodities taken together. This would help us
not only in understanding the phenomenon of fluctuation in production and prices, but
also to judge against the same with the happenings on this issue in other nations.
III. REVIEW OF LITERATURE:
Due to its very inherent nature of showing wide fluctuations, may studies have been
conducted to work out the problems of behaviour of agricultural prices and production
over a period of time. The studies are mainly concentrated to investigate into the
following four types of problems:
a) The major field of interest has been to find out the long term & short-term
trends.
b) Fluctuations in agricultural prices and production.
c) Factors influencing behaviour of prices.
d) Impact of liberalisation & WTO on Indian agriculture.
A number of studies have been made in this area. A review of some of these studies
will be very useful.
Introduction xxvi
 K.Krishnamurthyxxiii on the basis of the data for five centers located in four
states, found that the seasonal fluctuations were relatively higher in the
primary markets than in the secondary markets and seasonal fluctuations were
wider in northern states like U.P., Bihar and West Bengal then those in Andhra
Pradesh, Madras or Madhya Pradesh. The further observed that in Madras and
Andhra Pradesh there were two seasonal peaks where as in other states there
was seasonal peak.
 P. Kamaladevixxiv studied the behaviour of seasonality of price in jowar in
southern zones in 1950 and 1960. The districts, one each from Madras,
Mysore and Andhra Pradesh were chosen and found that the Inter-regional
disparities have tended to narrow down over a period. This was applicable not
only to the trend but also to the seasonal variations.
 V.S. Vyas and A.K. Parikh-xxv have made a study of the trend and fluctuations
in food prices for the years from 1948 to 1957. In a systematic analysis they
fitted regression to find the trend. Their study shows that, during the
preplanning period 1948 to 1951, there was an upward movement in prices
except in the case of wheat and bajra. Between 1951 and 1957 all prices
showed an upward trend with larger random variations during the planning
period a wider seasonal variation around the trend after 1951. It was also
observed that upward of strides of prices were more rapid compared to the
downward swing since 1951. On the whole wheat, Jowar and bajra, prices
were highly correlated.
 P.V. Johnxxvi investigated into the seasonality in farm prices in Madhya
Pradesh. He confined his study to rice, Jowar, Wheat, gram, groundnut,
seasum, linseed and gur (raw sugar). He observed that the ranges of variations
for different varieties of the same crop are almost identical. With a few
exceptions the ranges in seasonal variations for different crops were
comparable in magnitude.
 Nilakantha Rath and V.S. Satyapriyaxxvii investigated into the seasonality of
Jowar Prices. Their results show no identifiable seasonal pattern in the
movements of jowar prices. They further found that the seasonal rise in prices
in excess of storage cost was as frequent as prices equal to or less than the
storage cost.
 Reserve Bank of Indiaxxviii has also conducted a study regarding fluctuations in
farm prices for the period 1951-52 to 1964-65. The study found that there
were regular cycles of length varying between 16 and 25 months for prices of
creature crops. It also found that seasonal fluctuations were wider for food
grains that for non-food grains. For the entire period there was a tendency for
seasonal fluctuations to gradually narrow down.
 L.C. Guptaxxix studied the behaviour of maize price in Madhya Pradesh and
observed that major production districts had relatively narrower seasonal
fluctuations compared to those districts where maize was an important crop.
However for the period, which covered 1952 to 1965, he didn't find either a
Introduction xxvii




trend for convergence or divergence. The year-to-year variations in harvest
prices of maize tended to increase. The result of the wholesales prices in three
selected markets was found to be uneven. Fluctuations tended to widen in one
market, but narrow down in the other two markets.
P.V. Georgexxx in his analysis into the behaviour of agricultural and nonagricultural covered the period from 1952 onwards. His results show that
agricultural prices in money terms are flexible both ways. In contrast, price of
manufactured goods are found to be flexible only upward but they are
inflexible downward.
Divatia and Panixxxi in a set of five-equation model to study the behaviour of
agricultural prices for the period 1951-52 to 1966-67 took the variables such as
equilibrium stocks, realised prices, expected stock, actual stock and intended
prices. The model included the variables based on current observations as sell
as expected values. Out of eleven equations fitted, seven were linear in log
and the rest four simple linear equations. The elasticity of prices with respect
to supply was found to be negative (-2.29) and equal in magnitude to that
obtained with respect to real income in the non-agricultural sector (2.82). The
elasticity with respect to liquid resources was, however, much lower. Shortterm elasticities were almost half of the long-term elasticities in all the three
cases, i.e. supply, real income in non-agricultural sector and monetary
resources. Values of R2 were above 0.94. The elasticity with respect to liquid
resources was however, much lower.
J.R. Rao and K.S. Murthyxxxii tried to explain the movement in food prices at
three different levels (the farm level, the wholesale level and the retail level)
taking the help of production, availability and real income of consumers. They
set up a model of three equations in which three variables were simultaneously
explained. The current farm harvest prices were explained in terms of the
previous year’s retail prices and production. The wholesale prices were
explained by retail prices ad availability of food grains. The retail prices were
explained in terms of wholesale prices and real income of consumers. R2 was
medium to high. The results suggest little influence of production on prices.
However, prices at the three levels were closely inter-liked and the influence of
previous year's retails prices on current year's farm harvest prices was
significant.
M.V. Nadkarnixxxiii has analyzed the agricultural prices for the period 1951 to
1968. An exponential equation to the data was fitted in order to know the
trend. He calculated the adjusted index number. His findings show no
regularity in the fluctuations of food grains prices. The prices, which were
above the trend in the beginning of the first plan period, are seen to have
moved below the trend by the end of period. During the second plan period
the degree of fluctuation around the trend are seen to be lower than during the
first and third plans.
Introduction xxviii
 Lal Singhxxxiv studied the trend and seasonality in agricultural prices for the
period 1951-52 and 1977-78. He fitted a linear equation to the data to know
the trend. The R2 values for all the equations are very high, which suggest that
trend component of the wholesale price index series is very important one. As
for seasonality of prices in concerned, he found, that the extant of seasonality
is very high in case of rice and the extant of seasonality in the wholesale price
index of wheat is much less than rice.
 Thingalayaxxxv analysed the relative stability of agricultural and nonagricultural prices. He found the former unstable than the latter. N.A.
Khanxxxvi has studied the problem of stability in more comprehensive way. For
the period 1918 to 1938, he found high correlation among price of current year
with that of the previous year in case of cash crops and between prices of
current year and those of the preceding three years for cereals. His findings
further shows that instability in cash crop prices is higher equal that in
production. In case of cercal prices, instability is less than that of cash crops,
and production instability is still lower.
 A study at the national level by Prasadxxxvii revealed that annual rate of increase
in agricultural prices decelerated during 1969-70 to 1972-73 as compared to
the annual average rates of increase during the period 1962-63 to 1968-69.By
and large there was a marked decline in the rate of increase in food grain prices
including of rice, wheat and pulses. A study by George and Singhxxxviii also
revealed a declining trend in prices of different crops from 1967-68 to 197071.
 Singhxxxix examined the relative variability in harvest prices during ten years
period (1953-54 to 1961-62) by working out the co-efficient of variation. The
Co-efficient of variation in prices was 12.5, 17.8, 17.1, 11.6 and 20.3 for rice,
Jowar, Gur, Cotton and Groundnut respectively. Jowar prices didn't reveal
wide fluctuations within a market, not did the degree of variation differ greatly
from market to market.
 Antanixl estimated the linear trend in annual wholesale prices for cereals and
pulse crop of Rajasthan during 1961 to 1975 and found that the wholesale
prices of all the six-food grain increased significantly during the study period.
On an average, the wholesale price index of wheat, barely, bajra, cereals, gram
and pulses increased by about 17.61, 91.45, 18.74, 19.09, 33.87 and 26.26
points per year respectively. Antani's study also revealed that the rate of linear
increase in prices was more than twice during 1970-75 (40.2 to 82.0 points per
year) compared to period 1961-69 (16.3 to 30.1 points). Among all food
grains, rate of increase in prices was the highest for gram and lowest for wheat
in seventies. The difference in the rate of increase between sixties and
seventies was more pronounced for bajra and least for wheat.
 Mandavawallaxli in his analysis of seasonal price variations between 1970-71
to 1977-78 showed that the difference between the highest or lowest levels of
normal seasonally adjusted price index number was 9.6 percent for rice and
wheat and 7.7 percent for all food grains, while the cost of storage was around
Introduction xxix







5 to 6 percent of the economic cost of purchases by the FCI. On the basis of
unadjusted price index, the lowest level of rice price index has shifted from
December to March since 1975-76. In the case of wheat it is generally located
in March-June. No such uniformity is noticed in respect of highest level for
rice while for wheat it was mostly noted in January.
Shukla and Mishraxlii based on the analysis of growth trend of wholesale
prices for food and non-food crops during the plan periods in Uttar Pradesh
concluded that price decreased for all crops during the first plan period but was
significant only for rice (8.6%), maize (4.1%) arhar (7%), castor seed (1.5%)
and grant nut (8.6%). There was further decrease during the second plan for
crops like wheat, barley and Jowar among the cereals and for mustard, sugar
cane and potato among the non-food crop. After this period there was a rising
trend and price rose by more than 12 percent per annum up to 1973-74.
Auloker and Kahlonxliii studied the impact of zonal policy of food grains on the
seasonal price behaviour of selected food grains by taking three types of
markets (producing, consuming and terminal) in Punjab. The study concluded
that the extent of seasonal price variation in the case of wheat diminished
during the zonal restriction period. In the free trade period seasonal price
fluctuation was more. However, in the case of gram and maize no such trend
was observed.
Gill and Johlxliv examined the price structure of gram in Punjab. Linear trend
for gram prices during 1952 to 1966 was worked out. The prices of gram
tended to move continuously upward due to the general shortage of food grains
and the general inflationary trend of the economy for the period under study.
Violent seasonal price fluctuations reduced producer’s income as the major
portion of the produce was sold during post-harvest period (April to July)
when the prices were generally the lowest. The price index moves up when
sowing of gram starts in September.
Lelexlv based on her study for Jowar, rice and wheat in the states of Punjab,
Maharashtra, West Bengal and Tamilnadu come to the conclusion that the offseasonal price rise doesn’t always cover storage.
Kamla Devixlvi studied the regional, cyclical and seasonal variations in the
prices of Jowar in the markets of Andhra Pradesh, Madras and Mysore during
1950s an 1960s. She reported that regional variations are getting reduced over
the period both within the southern zone and between southern zone and the
rest of the country.
Cummingsxlvii examined the spatial price relationships between Khanna
(Punjab) and Delhi markets for wheat during 1958-59 to 1963-64.
The
average price difference between the two markets during the period was
Rs.0.88. 82% of the monthly differences were less than Rs.2.99 and in six
months only the price differences exceeded Rs.4.00.
Lele'sxlviii study brings out that regional price differences are not greater than
what the costs of shipment would warrant them to be. This study covered three
Introduction xxx





major food grains namely, Jowar, rice and wheat in the states of Punjab,
Maharashtra & West Bengal and Tamilnadu.
Shahxlix studied the variation in prices for gram in four secondary markets of
Uttar Pradesh, during the period 1963-64 to 1969-70 and found that there is no
significant difference in prices between regions.
Subramanianl assessed the impact of trade liberalisation through a multimarket approach. The results of Subramanian are largely in accordance with
that of Parikh et al. Subramanian found that about two-third of the impact of
liberalization in agriculture comes from liberalization of manufacturing sector.
Therefore, liberalizing agriculture sector alone is not advisable. Liberalisation
in agriculture sector, if preceded by that in manufacturing sector, leads to
acceleration of growth in agriculture. Subramanian also opined that liberalizing
agriculture would lead to rise in poverty, specially when agricultural
commodity price rises without commensurate increase in production. The
reduction of tariff in manufacturing sector would, however, help in reducing
poverty. This is another reason for preceding liberalization in manufacturing
sector over the agricultural sector.
Likely implications of liberalisation on different sectors and sections of the
Indian economy have been assessed by various other researchers. The studies
done by Parikh et alli (1996) and Subramanian (1993,1994), involving
Computable General Equilibrium (CGE) modeling, are worth mentioning.
Parikh et al indicate that liberalization triggers growth in agriculture, the
impact is more when this is combined with the liberalization in manufacturing
sector. In the short run, trade liberalization in agriculture, however, increases
poverty. This further stresses the need for strong safety nets for the poor.
Nayyar and Senlii (1994) point out that larger participation by India in a
number of crops like rice and cotton would worsen its terms of trade and
unless the volumes are adjusted quickly their would-be a decline in the balance
of trade. They also point out that the real export potential from agriculture
does not lie in the major crops but it is in the development of horticulture and
food processing. According to them, for these commodities, improved
marketing, quality control and logistics are the real drivers are not trade policy
restrictions.
Vyasliii (1994) also argued for the careful approach towards agricultural
exports. He pointed out that India should continue with its policy of selfsufficiency in food grains. According to him, trade in food grains should be of
secondary importance over domestic requirements and the sector should be
protected from the international competition for the time being. However, for
commercial crops, export orientation is justified, if these satisfy three
conditions,viz., (a) there is a genuine and growing surplus after meeting
domestic requirements,(b) ratio of export to domestic prices is favorable and
(c) there is a growing international demand. He also advocates prioritisation of
crops where India has comparative advantage. In his view Cotton, tea and
tobacco export should be emphasised, whereas exports of sugar should be de-
Introduction xxxi
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


emphasized. Vyas also agreed with Nayyar and Sen (1994) that fruits, vege
tables, flowers, herbs, etc., could-be important export product for India.
The impact of trade liberalisation will, however, be different for different
crops, agro-climatic regions and farms of different sizes. Sharma, Gulati and
Pursellliv (1996) have assessed the impact of agricultural trade liberalisation on
major crops of India. The study, using a multi-market model, indicates that
liberalising of wheat by 6.4 per cent, of cotton by 6.4% and sugar cane by
about 4.5% from their current levels. Prices of cereals will, however, fall by
about 10 per cent, of pulses by about 9% and of oilseeds and edible oils by
about 38 per cent. These changes in prices will influence allocation of land
under crops. They showed reasonable gains in income, employment, wage rate
and tax revenue following liberalisation; the combined index of all these gains
called efficiency index went up by about 4% over the base period.
Ramesh Chandlv (1999) has studied the effect of trade liberalisation on selected
crops like rice, maize, chickpea, rapeseed & mustard. Estimating the impact on
the wholesale and farm level prices studied the effect at National level by
estimating the consumer and producer surpluses. The study showed a sharp
positive impact on net return following free trade from production of
exportable such as maize and rice. The impact was negative for importable
such as rapeseed-mustard. Thus, impact of trade liberalisation would vary
from commodity to commodity.
Raolvi(2001) worth of the view that trade liberalisation would not affect India's
food security. “ In the prices of foodgrains at the moment are out of reach of
the poor, it is not due to the rise in exports but to the steep rise in procurement
and issue prices”.
A study by Sekharlvii(2003) has eluded a longer period: 1970-2001 for
international prices and 1980-2001 for domestic prices. The comparision
revealed that inter-year variability is generally lower in the domestic markets
than in international markets. The regression analyses on the determinants of
price volatility found international prices to be significant in some cases while
output fluctuations where observed to be insignificant.
A brief review of the literature on agriculture production and prices in India
prompts one to profusely praise the researchers for their commendable job. Some
finer aspects related to the variables chosen have been brought to the fore by them
and some neglected aspects have been given their due. However, there is always a
scope for improvement. The present study finds the following gaps in the studies
conducted so far:
1. Most of the studies conducted so far are grain specific studies whereby the
researchers have endeavoured to analyse the fluctuations in prices and
production of the grains under study. There is a dearth of study that takes into
account agricultural prices and production as a whole i.e. for all food and nonfood items taken together.
Introduction xxxii
2. The studies have investigated the seasonality of farm prices and very little
effort has been done to make comparison between fluctuation in production
and prices in time periods spanning more than half decades. The impact of the
shift in policy paradigm or agricultural growth strategy has not been explored
sufficiently.
3. Most of the studies have taken price and production trends in the pre-reform
period. Very few works have been carried over recently to study the trends in
the post-reform period and compare the trends in the pre-reform period with
that of the same in the post reform period.
4. The impact of the Structural Adjustment Programme and India joining the
W.T.O. wand wagon is another aspect that has not been sufficiently dealt with
so far. This is a very interesting and at the same time debatable area with
economists owing allegiance to different ideology bitterly criticising or openly
supporting the liberalisation policy and trade policy reforms and the W.T.O.
provisions for India. Issues like reduction in farm subsidy, patenting etc. have
scarcely been taken for in-depth study.
5. There is exiguity of work that takes into account the agricultural development
of India in the international perspective and compares the trend in production
and prices in India with that of it at the international level.
IV.THE PRESENT STUDY:
This book makes a modest attempt to bridge this gap and come up with findings that
are of help not only to the students of economics or those interested on the issue but
also to the future researchers in the field and the policy makers. The study aims at
analysing the long–term behaviour of agricultural prices and production in India. It
takes the entire period after independence for discussion, as this has been the period in
which the nation shrugging-off the age-old subjugation and exploitation launched
economic planning for rapid economic growth. Agriculture was accorded a prominent
place in the development strategy that followed henceforth.
Since the introduction of Structural Adjustment Programme in India in 1991 that
introduced reforms at the fiscal level, exchange rate, trade and capital market without
making explicit reference to agriculture. But it has made a significant difference to it
and it stands clear as dividing line for any study of Indian agriculture in the post
independence era.
1.Hypotheses: - The study attempts to test the following hypotheses –
1. Prices and Production levels of Indian agriculture in both Pre and Post reforms
era have been much below the International Standard.
2. Agricultural Price Policy of Government of India has been thoroughly
confusing for a competitive global environment under WTO regime.
3. The policy of subsidy to agriculture in India has been a point of concern.
4. There would be a net gain to Indian agriculture under WTO.
Introduction xxxiii
2.Methodology:
Methodology is the skeleton, the base on which the whole edifice of any work is built.
It is often said that if hypothesis is the pole star always guiding a person in the desired
direction and helping him to keep himself focussed; methodology is the tool kit, the
apparatus, the instrument which helps to successfully complete the journey, solving
the intricate problems and tackling the obstacles on the way.
The present study relies on both historical and comparative research methods. In order
to know the existing view on agriculture production and specially prices, it uses
historical method and takes a journey down the history lane, briefly reviewing the
works done relating to production and prices in India in the post independence era.
Such an exercise has given the present study a deeper insight in the problem under
study, idea about the gaps in the works done so far and strategy to fill the gaps.
Comparative method has been used to make a comparison between – (i) Production
and price levels in the pre-reforms and post reforms period. (ii) Production and prices
in India with that of the rest of the world. The data collected from various sources such
as Planning Commission, Ministry of Agriculture, Various issues of Economic survey,
RBI Bulletin, World Development Report, WTO & UNCTAD websites and different
international agencies both for the period before and after reforms have been analysed
using various statistical tools such as average, variation, fitting of exponential trends
etc.
In order to get the average values for prices and production, the sum total has been
divided by the number of years under study.
For knowing the instability of prices we have calculated the coefficient of variation by
using the following formula;
Coefficient of Variation =
Standard deviation =
Standard Deviation X 100
Arithmetic Mean
----------------------------------------------------------Sum of the squares of deviations around Mean

Number of observations
Since the agricultural prices and production have not behaved in a consistent way and
have fluctuated considerably over the period, fitting of linear trend will not give
satisfactory results. So, we have fitted the following growth/exponential equations to
the price and production data of different periods as sub classified in our study to
discern the trend. Though, to make a comparison linear trend has also been fitted and
results mentioned. As the datas for the entire period (1951-52 to 2006-07) are
available with different Bases, all the datas for price and production have been shifted
to a common base 1993-94 and 1981-82 respectively in order to bring uniformity in
Introduction xxxiv
the comparison. For this we have used the formula for base shifting of index number
and splicing of data.
The estimated exponential equation is given by:
Y = b0 e b1t
The estimated equation in the log form can be written as-ln Y = ln b0 + b1t
The estimated growth equation is given by:
Y= e b0 +b1 t
The estimated equation in the log form can be written as-ln Y = b0 + b1t
The estimated linear equation is given by:
Y = b0 + b 1 t
Where, Y is variable in equation.
t is time variable.
b0 is intercept.
b1 is coefficient.
For base shifting of index number we used the following formula:
New base year Index =
Old Index number for current year X 100
Old Index number for new Base year
For Splicing the data, we used the following formula:
Spliced Index = Current year index X old Index No. of new Base year
100
3. Scheme of Work: The present work is arranged in the following manner:
INTRODUCTION:
This briefly introduces the work, outlining the main aspects of public policy on
agriculture, the role and importance of agricultural production and price, review of
literature and hypotheses, methodology and scheme of work thus giving an indication
of the shape of things to come in the work.
Introduction xxxv
CHAPTER-1: INDIAN AGRICULTURE IN THE PRE-REFORMS ERA:
The first chapter of the present work studies the Price and Production trends in the
Indian agriculture in the period between introduction of economic planning and
economic reforms in the country. The entire period spanning about four decades
(1951-52 to 1990-91) has been divided into three sub periods for analytical
convenience and to facilitate comparison- (i). 1951-52 to 1966-67, (ii) 1967-68 to
1979-80 and (iii) 1980-81to 1990-91.
CHAPTER-2: INDIAN AGRICULTURE IN THE POST-REFORMS ERA:
The introduction of Economic Reforms in India in 1990-91 has brought in
significant changes in almost all spheres and agriculture definitely is no exception. A
number of changes affecting the agricultural sector have taken place after 1990-91
and the second chapter makes an effort to study the impact of these changes on
agricultural production and prices in India. It also makes a modest attempt to
compare the trends in production and prices in the pre and post reforms period. In
order to understand where the Indian economy stands vis-à-vis other economies,
efforts are made to compare the trends in production and prices in India with that in
rest of the world.
CHAPTER-3: AGRICULTURAL PRICE POLICY IN INDIA
Agricultural Prices play important roles in allocating resources, distributing income
and inducing capital formation. Government control over agricultural prices is
therefore necessary to have control over these and as such in India the government
declares agricultural price policy and has a system to regulate the prices. The third
chapter of the present work studies in detail the agricultural price policy of the
government since independence and examines the claim that it has been misdirected,
confusing and inappropriate.
CHAPTER-4: ISSUE OF AGRICULTURAL SUBSIDY
The fourth chapter of the present work attempts to study one of the most contentious
issues in contemporary Indian agriculture- the issue of farm subsidy. For generations
farm subsidy had been a regular and essential feature of the Indian agriculture,
regarded as essential support to the poor Indian farmers enabling them to carry
agricultural work as means of livelihood. The situation has changed dramatically
after the introduction of economic reforms and India signing WTO agreement. India
is under tremendous pressure to do away with farm subsidy by the West and critics
are debating the implications of such a policy on Indian agriculture in general and
the conditions of the farmers in general. An attempt has attempted to analyse these
interesting issues in this chapter.
CHAPTER-5: IMPACT OF WTO ON INDIAN AGRICULTURE
The penultimate chapter of the present work sees Indian agriculture in the global
perspective – under WTO regime to be more precise. It analyses the impact of
different WTO provisions/ agreements such as Market Access, Export Subsidy,
Introduction xxxvi
Domestic Support, Sanitary & Phyto-sanitary Measures, TRIPS and reduction in
tariffs on the Indian agriculture.
CHAPTER-6: CONCLUSION AND POLICY RECOMMENDATIONS:
The final chapter as common to most studies concerns itself with the main findings
of the work. It also attempts to prescribe some policy recommendations for the
government. There is a sincere feeling that after adopting these recommendations the
position of agriculture can be improved in India to a considerable extent.
Notes & References
Kuznets Simon (1965), “Economic Growth and Structure”, New York. As per Kuznets agriculture makes
four types of contribution to economic growth-Product Contribution, Market Contribution, Factor
Contribution and Foreign Exchange Contribution. Product Contribution is made by agriculture by
supplying food grains to the non- agricultural sector for the sustenance of the latter’s labour force and
making available important raw materials for the agro-based industries of these sectors. ‘Market
Contribution’ to economic growth is made when agriculture sector purchases some products from other
sectors at home or abroad and sells some of its product to dispose of its surplus product, get some
items needed for continuing production and buy consumer goods from other sectors. Similarly as the
relative importance of agriculture in the economy declines with economic growth and development,
agriculture becomes a principal source of supply of capital and surplus labour to other sectors of the
economy. This has been called Factor Contribution. Finally agriculture contributes to the foreign
exchange kitty of the economy either by contributing to the exports earning of the economy or by
producing agriculture import substitutes. This has been termed as the foreign exchange contribution of
agriculture. For a detailed and scientific treatment of these contributions one should refer to Ghatak,
Subrata & Ken Ingersent, “ Agriculture and Economic Development’ Select book Service SYNDICATE,
New Delhi
i
Agriculture as a matter of fact provides four broad types of growth linkages to the non-a-agricultural
sectors. These are –(i) Production Linkage- This occurs when agriculture provides its outputs as inputs
to the non-agricultural sectors e.g. agriculture providing raw materials to a number of agro-based
industries like cotton, food-processing, sugarcane etc. (ii) Demand Linkage- This arises when agriculture
Introduction xxxvii
makes available market for consumer non-durables and durables produced by non-agricultural sector
e.g. in India as for a very considerable period of time when agriculture was contributing more than 50%
of country’s GDP , agriculture was the main source of demand for products in the non-agricultural sector.
(iii) Saving Linkage- This occurs when agriculture provides financial savings and demand for insurance
services. In India where the household saving constitutes more than 70% of the gross domestic savings
and agriculture is the main source of occupation saving linkage is automatically very strong.
(iv)Investment Linkage- This emerges because agriculture provides demand for the intermediate inputs
and capital goods produced by the non- agricultural sectors.
Mellor John W( 1973), “Accelerated Growth in Agricultural Production and Inter-sectoral Transfer of
Resources” in Economic Development and Cultural Change, October 1973,p-5, writes , “ ----- both in
concept and in practice it is possible to make large net transfers of resources to other sectors. If these
transfers are used productively, the rate of economic growth can be accelerated.”
ii
iii
Quoted from the New Agricultural Policy of Government of India.
Sen, Amartya and Dreze, Jean, “ India Economic Development and Social Opportunity” ,Oxford
University Press, New Delhi, 1995.
iv
Dantwala, M.L., “Strategy of Agricultural Development Since Independence.” In M.L.Dantwala and
Others (EdS) Indian Agricultural Development Since Independence, Oxford and IBH Publishing Co. Pvt.
Ltd. 1986
v
This section draws heavily from Bhupat M Desai’s , “ Policy Framework for Reorienting Agricultural
Development” Presidential Address delivered at the 61st Annual Conference of The Indian Society of
Agricultural Economics, held at the Gulbarga University, Gulbarga-585106 (Karnataka), December
27,2001
vi
See for example Government of India (1959), Report on India’s Food Crisis ad Steps to Meet it’ Report
prepared by the Agricultural Production Team sponsored by the Ford Foundation , New Delhi and also
Pinstrup- Anderson, Per and Rajaul Pandya- Lorch (1994), Alleviating Poverty, Intensifying Agriculture
vii
Most of the modern researchers in the field of Indian agriculture support the Economic Welfarist view.
Vocal support has come from Johnston, Bruce F and John W Mellor {(1975), The Role of Agriculture in
Economic Development’ American Economic Review Vol-51, No-4 September}, Dantwala {The Two
Worlds of Food and Agriculture’ The Economic Weekly, Vol-14,No.43, October 27 & ‘Incentives and
Disincentives in Indian Agriculture’ Indian Journal of Agricultural Economics, Vol-22, No.2, AprilJune},Raj, K.N. {1969,Some Questions Concerning Growth, Transformation and Planning of Agriculture
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rates since mid-sixties. On the other hand the Eastern region comprising of Orissa, Bihar and West
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southern region has not been very satisfactory. Being primarily dependent on rains the central region
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xxxviii
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