Indian Agriculture today Agriculture forms the backbone of the Indian economy and despite concerted industrialization in the

last six decades, agriculture occupies a place of pride. Being the largest industry in the country, agriculture provides employment to around 60% the total workforce in the country. The significance of the agriculture in the national economy can be best explained by considering the role of agriculture under different heads. The Indian economy has grown at over seven percent per annum for the last decade and at more that nine percent for the three years. Ironically there is significant slowdown in agriculture sector. Agriculture growth slowed from 4.69 percent in 1991 to 2.6 percent in 1997 and to 1.1 percent in 2002-03 growth in the agriculture was only 0.7 percent in 2004-05 due to poor monsoon but increased to 2.3 percent in 2005-06. Year Agriculture Industry Service 1984-85 35.2 26.1 38.7 2002-03 26.5 22.1 51.4 2003-04 21.7 21.6 56.7 2004-05 20.5 21.9 57.6 2007-08 17.8 26.6 55.4 2008-09 18.00 22.00 60.00

Source : Economic Survey 2000 & 2009 (% of GDP)

Major causes this decline is poor and unplanned investment in agriculture sector. Though agriculture sector in major employment generator of this country but investment in this sector is very less compare to the industrial sector. This poor investment

in basic infrastructure and education in agriculture resulting in poor performance of this sector, poverty and less calorie consumption of citizen of this country compare to citizen of other countries.

Theoretical Background

i. Indian agriculture has, in the post-independence period remained mainly small farmer dominated subsistence, oriented and very little export led and technologically stagnant. ii. Indian economy practiced, at least upto 1991 a predominantly closed-door external trade policy clearly based on (a) Import substitution (b) Export Promotion (c) Regulated exchange market and (d) Certain direct controls. iii. The major concern for Indian agriculture was provision of adequate food supply to teeming millions of BPL families in the country. iv. There was no free trade.

Globalization : Conceptual Elaboration : Globalization as a definite economic term; acquired currency after 1980s, particularly with the evolving functional strategy of IMF and World Bank, whereby they insisted in an euphemistic manner that to eradicate poverty, we require faster growth, which is possible only in a systematic reform, based on Liberalization, privatization and globalization which became, in a concise way, known as Washington Consensus. In a more direct and explicit way it means unencumbered working of free market competitive system within, open trade without and no state intervention whatsoever.

The term globalization has, therefore four parameters : A) Reduction of trade barriers to permit free flow of goods has services among nation states. B) Creation of environment in which free flow of capital can take place among nation states.

C)

Creation of environment, permitting free flow of technology, and

D) Last, but not least, from the point of view developing countries, creation of environment in which free movement of labour can take place in different countries of the world.

Practical Implications In a globalized system it is believed that principle of comparative advantage will operate and each country will expert only those goods and services in which it has comparative cost advantage, and as Adam Smith and other Classical believed, world production, employment and welfare will be maximized. We should keep in mind that even in a so called global economy, even highly capitalist countries practice trade protection policies through controls on import and export subsidies as also convenient monetary policies. It is against this background that we should examine impact of globalization on Indian agriculture.

Review of Indias Trade Policy Before independence, India relied mainly on discriminatory protection policy. Even after independence we continued in a broad way to follow a policy of import substitution and export promotion by using conventional fiscal, monetary, and direct methods. Non-essential imports were kept minimum, developmental imports were encouraged to hard currency areas. Later diversification of exports was undertaken. After 1975 trade policy emphasized optimum utilization of recourses endowments in manpower and agriculture almost upto 1991- when India adopted NEP=LPG. We had a trade policy of selective type encouraging exports and discouraging imports. But in the evolution of Indias trade policy, consideration of its impact on agriculture was never a predominant factor. On the contrary, import of food grains was, for a fairly long period, inevitable.

WTO and NEP The genesis of NEP, which goes back to 1980s with coming back to power of congress, liberal policies of Rajeev Gandhi, World Bank conditionalities, Dunkel

draft and finally formation of WTO in 1995. World Bank conditionlities in a way imposed capitalist. Functioning on aid / loan receiving countries for all practical purpose WTO and NEP essentially boil down to free open market economy for mainly developed countries. For the first time, under WTO, which became operative since January, 1995. Agriculture become a part of WTO, insisting more liberal agricultural produce by reducers subsides to agriculture by greater percent in developed countries and less percent in developed countries. However, developed countries have successfully circumvented this approach by providing Green box and Blue box subsidies and directing export subsidies in developing countries.

Agreement on Agriculture The agreement on agricultural (A.o.A.) provides framework for the long-term reform of agricultural trade and domestic policies over the year the years to come, with the objective of introducing increased market orientation in agriculture trade AoA deals specifically with providing market access, regulating domestic support and containing export subsidies. As for as providing market access in concerned, AoA required that the prevailing non-tariff barriers in agriculture, which were considered trade distorting, were to be abolished and converted into tariffs so as to provide that some level of protection and subsequently the tariffs were to be progressively reduced by a simple average of 36 percent by the development countries over a six years (year ending 2000) and by 24% by the developing countries over ten years (year ending 2004). [ Reduction commitments under AoA Developed Countries 1 (1995-2000) 2 Developing Countries (1995-2004) 3

Tariffs (Base 1986-88) Average out for all agricultural Products Domestic support, total AMS (Base 198688) Export Subsidies (Base 1986-90) (Budgetary outleys for export subsidies) Volume of Subsidized exports

36% 20% 36% 21%

24% 13% 24% 14%

But as facts stand today, developed countries tried to circumvent this agreement by providing Green Box and Blue Box subsidies to support agriculture.

Green Box subsidies include amounts spent on Government service such as research, disease control, infrastructure and food security. They also include payments made directly to farmers that do not stimulate production, such as certain forms of direct income support assistance to help farmers restructure agriculture and direct payment under environmental are regular assistance programmes. This definition is very wide and includes all type so Government Subsidies. Blue Box subsidies are certain direct payments made to framers where the farmers are to limit production, certain Govt. assistance programmes to encourage agriculture and rural development in developing countries, and other support on a small scale when compared with the total value of the products supported 15 percent or less in the case of developed countries and 10 percent or less or developing countries. Similar to domestic support subsidies, developing countries are not allowed to increase their negligible level of export subsidies while developed countries are allowed to maintain 64 percent of their subsidy outlays on the base level. Consequently, agriculture, imports form developed countries are available at much below the market price in the domestic economy. Earlier, Indian agricultural prices were lower than international price mostly. But as a result of the heavy subsidization of agricultural exports by developed countries, the situation undertook a dramatic about turn. The Indian farmers have been put to serious disadvantage. The phenomenon of farmers suicide and the

growing unrest in several states because of the distress of farmers specializing in agricultural commodities and their export is a very serious human problem.

WHAT SHOULD HAVE HAPPENED? In the preceding paragraphs, we have made a reference to a manner in which globalization could have affected Indian Agriculture in respect of aspects like i) ii) iii) iv) Conditions of comparative advantages, Change in agriculture output, Change in structure of agricultural output, Prices of agricultural produce

v) Technological changes in agriculture with implication for agricultural employment. It is well-known that despite very cheap labour, Indian yields in different crops are low resulting into relatively higher cost of production because of higher capital cost due to their scarcity. With globalization the prices of Indian labor will go up whereas prices of capital may come down either due to market competition or government of Indias policy oriented supply of subsidized credit to agriculture. It is, therefore, expected that exports of agriculture should increase at a faster rate alongwith increased agriculture output in general. It is also expected that cropping pattern of Indian agriculture should change in accordance with international demand pattern where exports of foodgrains, fruits, vegetables, sugar and similar goods should increase. In this process, it is expected that domestic prices of agricultural produce should also increase. Most importantly, it is believed that due to globalization adoption of modern technology will lead to grater need for capital, substitution of machinery for labour greater incidence of unemployment in agriculture as also enhanced scale of forming unit. In a broad way, what it means is-greater size of cultivation, application of modern technology, reduced demand for labour and higher prices for agricultural produce, grater productivity and better agricultural process giving farming better terms of trade against remaining sectors of the economy. We will now examine some empirical data in following paragraphs.

WHAT HAS HAPPENED? In the EXIM policy, 2002-2007, Government of India removed all quantitative restrictions on agricultural products except items like jute and onion. It provided transport subsidy to agriculture for diversification mainly for export of fruits, vegetables, floriculture, poultry and dairy products. If we take into consideration unit value index for 1980-81 and 2000-01, the index number for imports of food items increased from 115 to 277 with 1978-79 as base year. Fortunately, in the same period unit value index for food items increased form 103 to 524. However, it is to be noted that compared with unit value index for both imports and exports with manufactured goods the change is relatively small. So far export of agriculture produce are concerned we get following pictureTable No.1 Agricultural imports (Quantity: Thousand Tones) 1990-91 Rs Quantity (Cr.) 86.5 252 199.1 1070 2447.8 609 87.1 263 55.5 447 103.3 239 191 38 374.4 846 505 462 158.9 960 140 216 213 2007-08 Quantity Rs.(Cr.) 178 197 6909 173 126 615 5582 1558 6469 1872 2034 8141 1932 2235 4315 5663 8865 11775 6927 3749 4053 2135

Sr.No. 01. 02. 03. 04. 05. 06. 07. 08. 09. 10. 11. 12

Item Coffee Tea and Mate Oil Cakes Tobacco Cashew Kernels Spices Sugar & Molasses Raw Cotton Rice Fish & Fish Preparations Meat & Meat preparations Fruit, vegetables & Pulses (incl. Cashew, kernels, processed fruits & juices) Miscellaneous processed foods (incl. processed fruits & juices)

13.

14.

Agricultural and allied products

6317

65230

(source : Govt. of India, Economic survey, 2009-10) So far as change in agriculture imports is concerned data in the following table in indicated. Table No.2 Agricultural Imports (Quantity: Thousand Tones) Sr. Item 1990-91 2007-08

Rs Quantity Quantity Rs.(Cr.) No. (Cr.) I. Food and live animals chiefly for food (Excl. cashew raw) of which 1.1 Cereals & cereal 308.3 182 1848 2839 preparation II. Raw material & intermediate manufactures II.1 Cashew nuts (unprocessed) 82.6 134 592 1715 II.2 Crude rubber (including 105.1 26 339 3163 synthetic and reclaimed) II.3 Fibers of which II.3.1 Synthetic and regenerated fibers 21.2 56 44 446 (man-made fibers) II.3.2 Raw Wool 29.4 182 93 1090 II.3.3 Raw Cotton 0.2 1 137 912 II.3.4 Raw Jute 32.1 20 136 148 II.4 Petroleum. Oil & 29359 10816 320654 Lubricants II.5 Animal & Vegetables oils and facts of which II.5.1 Edible oils 525.8 326 4903 10301 II.6 Fertilizers and chemical Product

Total

11942

341268

(source: Govt. of India, Economic survey, 2009-10) It is clearly seen that both in terms of quantity and value, agricultural exports from India have shown substantial increase during post globalization period. Similarly in the post globalization period our imports of cereals and cereals preparations have also increased substantially. Raw material imports have not been recorded. Rubber imports have substantially increased, synthetic and edible oils show substantial increases in quantity as well as in value terms. A broad conclusion that emergence is that in the post globalization period both agricultural exports and imports of India show significance increases. However, in both years imports greatly exceed exports. It is therefore, clear that although, given level playing field, Indian agriculture would have fared better domestically and globally, but the policies of developed OECD countries of subsidising their farm sector in palpable manner have compelled Indian agriculture to be in the same relative position as before. Conclusion Since 1991, India adopted the Liberalization, Globalization due to this policy Indian agriculture sector faced more problems, because in india more farmers are small scale farmers with low land sector. So that they could not get advantages of globalization. Hence some Economist says that, in an age of market liberalization, globalization and expanding agri business, there is danger that small-scale farmers will find difficulty in fully participating in the market. A survey of globalization policies followed in India reveales that the promised benefits of globalization in the form of sharp increase in GDP, exports, foreign direct investment, reduction of poverty, deceleration of unemployment could not be realized by India during the 1990. Globalization has adversely affected Indian economy.