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

The Farm Sector
soybeans 29 —but are still below the world average, leaving room for production gains
despite limited additional area for planting cotton. 30
Milk production showed steady growth throughout the period. In response to increased
dem<strong>and</strong> for milk <strong>and</strong> value-added dairy products because <strong>of</strong> several factors—rising
incomes, changing food habits <strong>and</strong> lifestyles, <strong>and</strong> urbanization—private sector milk
processing capacities continued to exp<strong>and</strong>. 31 The expansion was aided by foreign direct
investment (FDI) in the sector <strong>and</strong> resulted in strong farmgate milk prices. 32 With regard
to meat, poultry is the fastest growing segment, exp<strong>and</strong>ing by over 50 percent between
MY 2003/04 <strong>and</strong> MY 2007/08. Consumer dem<strong>and</strong> for processed poultry increased as
prices decreased, which can be attributed to the increasing presence <strong>of</strong> integrated
growing, processing, <strong>and</strong> distribution operations with higher production efficiencies. 33
FDI also aided the growth <strong>of</strong> this sector. 34
Although large-scale agricultural production exists in <strong>India</strong>, the agricultural sector
consists overwhelmingly <strong>of</strong> small (1–2 hectares) <strong>and</strong> marginal (less than 1 hectare)
l<strong>and</strong>holding farmers who do not benefit from economies <strong>of</strong> scale. Of approximately
500 million workers in the country, 234 million were farmers in 2001: 19 percent <strong>of</strong> these
were considered small, <strong>and</strong> 62 percent were considered marginal in 2000–2001. 35 Small
farms produce 41 percent <strong>of</strong> <strong>India</strong>’s total grains, 49 percent <strong>of</strong> rice, 40 percent <strong>of</strong> wheat,
29 percent <strong>of</strong> coarse grains, 27 percent <strong>of</strong> pulses, <strong>and</strong> more than 50 percent <strong>of</strong> the fruits
<strong>and</strong> vegetables. 36 The average size <strong>of</strong> farmer l<strong>and</strong>holdings has decreased in recent
decades, as plots are customarily divided when inherited. In addition, l<strong>and</strong> ownership
laws <strong>and</strong> government restraints on bank lending for l<strong>and</strong> acquisition may reinforce the
pressures that keep holdings in agriculture small. 37
Many <strong>of</strong> the marginal holdings are merely for subsistence needs. But even for farmers
who sell surplus production on the open market, returns are generally low. 38 Poor <strong>India</strong>n
farmers have little access to input or output markets, credit, or extension services, <strong>and</strong>
limited investment options. 39 They therefore make very little investment in improved
seeds, fertilizers, or pesticides, limiting advancements in productivity. In addition, in
2008, 57 percent <strong>of</strong> <strong>India</strong>n crop production was nonirrigated, <strong>and</strong> because <strong>India</strong> receives
on average 80 percent <strong>of</strong> its total rainfall between June <strong>and</strong> September from the
southwest monsoon, farmers on nonirrigated l<strong>and</strong> face considerable weather-related
risk. 40
29 Ibid., 5.
30 Industry sources expect area for cotton production to peak at 10 million hectares. Aradhey, <strong>India</strong>:
Cotton, May 21, 2008, 5.
31 Shunmugam, <strong>India</strong>: Dairy <strong>and</strong> Products, October 20, 2003, 3.
32 Dhankhar, <strong>India</strong>: Dairy <strong>and</strong> Products, November 5, 2008, 3.
33 Singh, <strong>India</strong>: Poultry <strong>and</strong> Products, September 14, 2006, 3.
34 See chapter 8 for a discussion <strong>of</strong> the Tyson-Godrej joint venture in poultry production.
35 Government <strong>of</strong> <strong>India</strong>, Ministry <strong>of</strong> Agriculture, Agricultural Statistics at a Glance, 2008.
36 Government <strong>of</strong> <strong>India</strong>, Agriculture Division Planning Commission, “Report <strong>of</strong> the Working Group on
Agriculture Marketing Infrastructure <strong>and</strong> Policy Required for Internal <strong>and</strong> External Trade for the Eleventh
Five Year Plan 2007–12,” January 2007, 20.
37 OECD, Agricultural Policies in Emerging Economies, 2009, 107-108; U.S. Dairy Export Council,
<strong>India</strong>: Dairy Industry, March 2006, 13.
38 See chapter 7 for further discussion <strong>of</strong> farm-level marketing <strong>and</strong> its impact on grower returns.
39 Government <strong>of</strong> <strong>India</strong>, Planning Commission, Eleventh Five Year Plan: 2007–12, vol. 3, 2008, 38.
40 Ibid., 46.
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