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The Crisis in India's Agriculture Sector Which No One is Really Talking About

Dec 21, 2017

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The slow growth of agriculture remains a weak link in the overall Indian economy. Let's take a look at Figure 1. Figure 1 uses the new gross domestic product (GDP) series, which was launched in January 2015, to plot the GDP growth and the growth of agriculture, forestry and fishing, within that, over the last few years.

What does Figure 1 tell us? It tells us very clearly that the overall GDP growth is much faster than the growth in agriculture on the whole. There are exceptions to this rule. In the period of three months ending December 2013 and March 2014, growth in agriculture was a little faster than the overall GDP growth.

Figure 1:

The trouble is that the new GDP series has data starting from only June 2011. Given this, we have growth rates from June 2012 onwards. In order to look at periods before June 2012, we need to use the old GDP series. On the Centre for Monitoring Indian Economy website, I could find data from December 1999 onwards.

I have plotted that data in Figure 2. Figure 2 plots the overall GDP growth along with the growth in agriculture, forestry and fishing.

Figure 2:

Figure 2 like Figure 1 clearly tells us that even as per the old GDP series, the GDP growth as a whole was much faster than the growth in agriculture, forestry and fishing. Of course, there were occasions (though not many) where the overall GDP growth was slower than growth in agriculture.

The result of this slower growth has been the size of agriculture as a part of the overall economy has been shrinking over the years. This becomes clear from Figures 3 and 4. Figure 3 uses the new GDP series data, whereas Figure 4 uses, the old GDP series data.

Figure 3:

Figure 4:

What Figures 3 and 4 tell us very clearly is that the size of agriculture as a part of the overall economy (measured by the GDP) has shrunk rapidly over the years. This has happened because the overall GDP (i.e.the non-agriculture part of the economy) has grown at a faster rate.

As can be seen from Figure 4, in 1950-1951, agriculture formed more than 40 per cent of the economy. By now it is down to 12 per cent. This has happened as the average land holding on which farming is carried out has fallen over the years, as land has been divided across generations. The average size of the land farmed by the Indian farmer has fallen over the decades and in 2010-2011, the last time the agriculture census was carried out, stood at 1.16 hectares. In 1970-1971 it had stood at 2.82 hectares. This fall in farm size has made farming in many parts of the country, an unviable activity, leading to the size of agriculture as a part of the economy becoming smaller and smaller.

The trouble is that agriculture still employs a large portion of the workforce. While, it's contribution to the overall economy has come down, a large number of people continue to remain dependent on income from agriculture. Take a look at Table 1.

Table 1:
YearAgriculture's share in the rural economic output (in per cent)YearShare in rural employment (in per cent)
1970-197172.41972-197385.5
1980-198164.4198383.6
1993-199457.01993-199478.4
1999-200051.41999-200076.3
2004-200538.92004-200572.6
2011-201239.22011-201264.1

Source: Changing Structure of Rural Economy of India Implications for Employment and Growth, Ramesh Chand, S. K Srivastava and Jaspal Singh, Discussion Paper, NITI Aayog, December 2017.

As can be seen from Table 1, the share of agriculture in the rural economy has fallen from 72.4 per cent to 39.2 per cent, over the four-decade period between 1970-1971 and 2011-2012. During the same period, the proportion of people dependent on agriculture as a mode of employment, hasn't come down at the same rate.

In 1972-1973, the share of agriculture in rural employment was 85.5 per cent. This came down to 64.1 per cent in 2011-2012. So, 64.1 per cent of the rural workforce produced 39.2 per cent of the rural economic output in 2011-2012. Hence, agriculture has many more people dependent on it, than is economically feasible.

It is clear from Table 1 that between 2004-2005 and 2011-2012, the proportion of people dependent on agriculture as employment has come down. This is a trend that would have continued. Even with that many more people continue to be dependent on agriculture than is economically feasible.

Also, given their lack of technical skills, it remains difficult for people trying to move out of agriculture to find other jobs. Or find jobs that pay better.

Table 2: Education level (general and technical) of usually employed rural workers of age 15-59 years
(per cent)
Percent of rural workersMaleFemalePersons
 2004-052011-122004-052011-122004-052011-12
Secondary Education and above19.727.16.811.814.922.3
With technical education1.71.60.70.71.31.3
With vocational training14.215.413.012.713.814.6

Source: Authors estimation based on unit-level NSS data on employment and unemployment survey.
Source: Changing Structure of Rural Economy of India Implications for Employment and Growth, Ramesh Chand, S. K Srivastava and Jaspal Singh, Discussion Paper, NITI Aayog, December 2017.

Table 2 tells us that the education and technical skills of rural India are fairly limited. Given this, their ability to find a job outside agriculture remains limited. Also, the secondary education which more than a quarter of men had had in 2011-2012, cannot be taken very seriously. Madhav Chavan, of the Pratham Education Foundation, estimates that in the period of the ten years up to 2015, 10 crore children completed primary school without the ability to do some basic reading and mathematics.

If people are to be moved out of agriculture, first and foremost the quality of education being imparted in rural India needs to improve. The focus, at least in the initial years, needs to be on teaching basic skills of reading, writing and the ability to do basic maths, rather than complete the syllabus, as is the case currently. Also, the current system of no exams till class VIII needs to change. Further, skill development in order to make individuals employable, needs to be encouraged further and happen at a much larger scale than it currently is.

There are a whole host of issues that are holding Indian education back. These need to be tackled with obvious as well as out of the box solutions. And for this to happen, the ministry of human resource development needs to be a high-profile ministry, in fact the most important ministry in the government, which it currently isn't, nor was it earlier.

Vivek Kaul is the Editor of the Diary. He is the author of the Easy Money trilogy. The books were bestsellers on Amazon. His latest book is India's Big Government - The Intrusive State and How It is Hurting Us.

Disclaimer: The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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2 Responses to "The Crisis in India's Agriculture Sector Which No One is Really Talking About"

Vimal

Dec 25, 2017

Hi Vivek,

Article is very good , as usual only collection of past data/stats (It sounds like "Operation was successful,but patient died"). Please try to Provide states how current situation can be improved with four or five options" to government to act.
Create a subscriber group who can continuously tweet or can use social media to take your views to masses and government will be forced to take suggested action.

You are doing partial part to publish researched articles but not leading to any implementation.

My sincere request and suggestion is to complete the loop and figure out a mechanism to implement," make a difference".

Vimal

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Babar

Dec 24, 2017

As usual Mr kaul has touched the basic issue of the country growth and development

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