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

For most crops, however, <strong>India</strong>n agricultural productivity is significantly below world
averages, <strong>and</strong> production increases have slowed. 16 With the exception <strong>of</strong> cotton, current
seed varieties used in <strong>India</strong> are not producing the rapid annual gains in crop yields that
existed 20–30 years ago. The overuse <strong>of</strong> fertilizer <strong>and</strong> low-cost electricity for pumping
groundwater has led to deteriorating soils <strong>and</strong> shrinking groundwater supplies. 17 In
addition, large increases in government expenditures for input support programs <strong>and</strong>
migrant farm labor payments over the last five years have crowded out public investment
in agricultural research, extension services, irrigation, <strong>and</strong> other rural infrastructure
projects. Research suggests that <strong>India</strong>’s public expenditure patterns in agriculture have
not maximized long-term sustainable economic growth. 18 In particular, long-term capital
underinvestment in irrigation infrastructure undermined agricultural yields in 2009, as
drought affected planted areas in Delhi, Haryana, Madhya Pradesh, Punjab, Rajasthan,
<strong>and</strong> Uttar Pradesh. 19
Recent Production Trends
During MYs 2003/04–2007/08, the volume <strong>of</strong> production <strong>of</strong> many major commodities
grew rapidly in <strong>India</strong> (table 4.1), despite the slowdown in overall growth <strong>of</strong> <strong>India</strong>n
agriculture relative to previous periods. Most major commodities showed double-digit
increases for the period. The production volume <strong>of</strong> cotton nearly doubled during this
period, a result <strong>of</strong> favorable weather <strong>and</strong> the increased use <strong>of</strong> hybrid varieties <strong>and</strong> Bt
cotton. Poultry, soybean, <strong>and</strong> milk production grew extremely rapidly as well, boosted by
increased domestic dem<strong>and</strong>.
Production <strong>of</strong> food grains is heavily influenced by government procurement prices. These
increased over the period, resulting in faster rates <strong>of</strong> growth after MY 2006/07, following
several poor harvests as a result <strong>of</strong> unfavorable weather. Although the planted area
remained relatively steady, wheat, rice, <strong>and</strong> coarse grains benefited from favorable
weather in MY 2007/08 <strong>and</strong> reportedly from greater distribution <strong>of</strong> improved seeds to
farmers that resulted in higher yields. 20 The area planted with wheat increased slightly
after MY 2005/06, mostly at the expense <strong>of</strong> mustard/rapeseed, because <strong>of</strong> the lower
relative support price for rapeseed vis-à-vis wheat. 21 Pulses (e.g., peas, beans, <strong>and</strong> lentils)
production has generally been stagnant since the 1970s. There have been few varietal
improvements for domestic pulse production, <strong>and</strong> only a small share <strong>of</strong> production is
under irrigation. 22 As a result, yields have not increased compared to other crops, <strong>and</strong> the
planted area has not exp<strong>and</strong>ed, eroding its pr<strong>of</strong>itability relative to other crops, such as
wheat <strong>and</strong> rice. 23
Major oilseed production increased by 18 percent between MY 2003/04 <strong>and</strong>
MY 2007/08, driven in large part by increases in soybeans. High domestic market prices
for soybeans <strong>and</strong> groundnuts (peanuts) toward the end <strong>of</strong> the period encouraged
16 L<strong>and</strong>es, “<strong>India</strong>n Agriculture <strong>and</strong> Policy in Transition,” 2008, 19.
17 Jha et al., “<strong>India</strong>n Wheat <strong>and</strong> Rice Sector Policies <strong>and</strong> the Implications <strong>of</strong> Reform,” May 2007, 2.
18 Persaud <strong>and</strong> Rosen, “<strong>India</strong>’s Consumer <strong>and</strong> Price Policies,” Food Security Assessment, February 2003,
34–35.
19 Balch<strong>and</strong>, “Agricultural Situation to Be Reviewed,” The Hindu, July 9, 2009.
20 Govindan, <strong>India</strong>: Grain <strong>and</strong> Feed, May 6, 2008, 3.
21 Govindan, <strong>India</strong>: Grain <strong>and</strong> Feed, January 10, 2007, 3.
22 Industry representative, interview with Commission staff, New Delhi, <strong>India</strong>, May 26, 2009.
23 Price, L<strong>and</strong>es, <strong>and</strong> Govindan, <strong>India</strong>’s Pulse Sector, May 2003, 3.
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