India: Effects of Tariffs and Nontariff Measures on U.S. ... - USITC

CHAPTER 4
<strong>India</strong>n Agricultural Production <strong>and</strong> Policies
Overview
<strong>India</strong>’s agricultural production, valued at $176 billion 1 <strong>and</strong> representing 17 percent <strong>of</strong>
<strong>India</strong>n gross domestic product (GDP) in 2007, 2 has been heavily influenced by domestic
government policies emphasizing food security, food self-sufficiency, <strong>and</strong> income
support for farmers. <strong>India</strong>n food consumption is overwhelmingly supplied by domestic
production, with imports playing a minor role for most commodities.
Agriculture is an important sector <strong>of</strong> <strong>India</strong>’s economy. It employs more than 60 percent
<strong>of</strong> the population, 3 dominated by millions <strong>of</strong> extremely poor farmers working small to
marginal l<strong>and</strong>holdings, who account for more than one-half <strong>of</strong> total <strong>India</strong>n agricultural
production. <strong>India</strong> is a leading global producer <strong>of</strong> a number <strong>of</strong> commodities—including
various grains, dairy, fruits, <strong>and</strong> vegetables—because <strong>of</strong> its significant natural resource
base. The country has the world’s second-largest arable l<strong>and</strong> base after the United States 4
<strong>and</strong> is endowed with all <strong>of</strong> the world’s major climates. 5 While grains remain the
foundation <strong>of</strong> the <strong>India</strong>n diet, production has recently increased for other foods, such as
milk, meat, fruits, <strong>and</strong> vegetables, in response to increasing <strong>India</strong>n dem<strong>and</strong>. 6 The valueadded
food processing sector <strong>of</strong> the <strong>India</strong>n economy is small but growing.
During marketing years (MYs) 2003/04–2007/08, <strong>India</strong>n production volumes <strong>of</strong> many
commodities increased, some with annual double-digit growth rates. Many <strong>of</strong> the
increases were aided by favorable weather <strong>and</strong> prices, increased planted area, <strong>and</strong> rising
yields. Yet growth in the overall value <strong>of</strong> agricultural production slowed relative to past
performance 7 <strong>and</strong> lagged behind the growth in population. 8 The 2.5 percent growth
recorded during fiscal years (FYs) 2002/03–2006/07 (the years covered by the
government’s Tenth Five-Year Plan) is not considered by the <strong>India</strong>n government
sufficient to sustain food security objectives. 9 Consequently, the government is currently
looking for ways to improve performance in the sector, which suffers from fragmented
l<strong>and</strong>holdings, an incentive program that distorts crop planting decisions, the overuse <strong>of</strong>
fertilizer <strong>and</strong> groundwater, inadequate postharvest treatment, <strong>and</strong> inefficient market
channels. 10
1 U.N. Food <strong>and</strong> Agriculture, FAOSTAT, “Gross Production,” 2007.
2 Government <strong>of</strong> <strong>India</strong>, Ministry <strong>of</strong> Agriculture, Agricultural Statistics at a Glance, 2008. In contrast,
agriculture accounts for 1.2 percent <strong>of</strong> U.S. GDP. CIA, The World Factbook: <strong>India</strong>, updated June 1, 2009.
3 Government <strong>of</strong> <strong>India</strong>, Ministry <strong>of</strong> Agriculture, National Policy for Farmers 2007, 1.
4 Agriculture <strong>and</strong> Agri-Food Canada, <strong>India</strong> Agricultural Policy Review, September 2008, 1.
5 USIBC, written submission to the USITC, June 26, 2009, 2.
6 The World Bank, “From Competition at Home to Competing Abroad,” June 28, 2005, 1; McKinsey
Global Institute, “The ‘Bird <strong>of</strong> Gold,’” May 2007, 87.
7 National five-year average growth rates for agriculture were in the 3.5–3.7 percent range during the
1980s <strong>and</strong> 1990s, but slowed to 2.5 percent during fiscal years 1997/98–2001/02 <strong>and</strong> 2002/03–2006/07.
Government <strong>of</strong> <strong>India</strong>, Planning Commission, Eleventh Five Year Plan: 2007–12, vol. 3, 2008, 4.
8 In FY 2006/07, per capita output <strong>of</strong> some major crops, such as cereals, pulses, oilseeds, <strong>and</strong> some fruits
<strong>and</strong> vegetables, was below FY 1996/97 levels. Government <strong>of</strong> <strong>India</strong>, Planning Commission, Eleventh Five
Year Plan: 2007–12, vol. 3, 2008, 5.
9 Ibid., 5.
10 <strong>India</strong>n agricultural market channels <strong>and</strong> postharvest treatment are discussed in chapter 7.
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