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India's yield paralysis-Indicus Analytics

With regional disparities, the target of four per cent agricultural growth remains elusive

The importance of agriculture in the Indian economy becomes quite clear just before the monsoons. Though other sectors contribute a greater share to the national income, more than three quarters of India’s rural population is still dependent on agriculture as the primary driver of income.

India has come a long way from an era of vulnerability to food shortages in the sixties when two severe drought years led to extremely low growth of agricultural GDP of just one per cent a year. Agricultural growth moved up only in the eighties and for the past three decades, growth has averaged three per cent a year despite drought years. However, more than half the cropped area remains dependent on rains, investment in agriculture lagged in the nineties and there is a severe problem of productivity in many crops — the target of four per cent set in the Ninth Plan has remained elusive.
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As with all regional-level analyses, there is wide disparity in growth of agricultural gross state domestic product (GSDP). For the latest five years for which data are available for all states, 2004-05 to 2009-10, only Mizoram and Puducherry have averaged double digit-growth. Agriculture in the past five years had been the major driver of growth in Mizoram. Though overall GDP growth in the state had been 10 per cent a year, agriculture grew at the rate of 15 per cent a year. Puducherry also experienced higher growth in the agricultural sector compared to its overall GDP growth. However, despite being the two top growth performers, being small states, their share to the agricultural GDP of the country is almost negligible.

The important contributors to the country’s agricultural GDP are Uttar Pradesh, Andhra Pradesh, Maharashtra and West Bengal, accounting for 40 per cent of India’s agricultural income. Other important states include Madhya Pradesh, Gujarat and Punjab, each contributing more than six per cent to India’s agricultural GDP. Among these states, Andhra Pradesh, Maharashtra and Madhya Pradesh had a fairly high growth of five to six per cent a year, while West Bengal, Uttar Pradesh and Punjab managed a growth of only two to three per cent a year. Kerala stands out as the only large state where agriculture has recorded a decline by about one per cent a year.

In terms of dominance of the agricultural sector in the state domestic product, Punjab tops the list with about 29 per cent of the GSDP coming from agriculture. Besides Punjab, states where more than 20 per cent of the GDP comes from the agricultural sector include Uttar Pradesh, Assam, Madhya Pradesh, Nagaland, Andhra Pradesh and Bihar. On the other hand, there is Maharashtra, the second-highest contributor to India’s agricultural GDP, where the sector accounts for only eight per cent of its state domestic product.

States not only have diverse economic structures, but within agriculture, too, the crop pattern and productivity differs widely. The fact that state-level performances vary dramatically shows that action by state governments is crucial for improving the sector. Given the need for inclusive growth, overall deceleration in agricultural growth in recent years and unevenness across states calls for urgent attention at the regional level.