A PROJECT REPORT ON Agriculture Gujarat PRESENTED BY Krunal Patel (12MBA068) UNDER THE GUIDANCE OF Ms. Kinjal Mistri Ms.

. Komal Shukla IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE COURSE Inclusive Growth OF SEMESTER-III MBA PROGRAMME (2012-14) SUBMITTED TO

INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT (I2IM) CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY (CHARUSAT) AT & PO CHANGA 388 421 TA: PETLAD DIST. ANAND, GUJARAT

CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY (CHARUSAT) FACULTY OF MANAGEMENT STUDIES (FMS) INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT (I2IM) MBA/PGDM PROGRAMME (BATCH 2012-14) SEMESTER III

CERTIFICATE

I Mr. KRUNAL PATEL (ID NO. :12MBA068) student of MBA program (Batch 2012-2014) at Indikaka Ipcowala Institute Of Management (I2IM) hereby declare that this report as a part of the course Contemporary Issues In Management (MB 805.1)- Inclusive Growth is the result of my own work. I also acknowledge the other works/publications cited in the report.

Place:Changa Date:

(Signature) Krunal Patel

Introduction
Gujarat agriculture has recorded the fastest growth (above 9.6 percent) amongst all Indian states, since 2000. This is more than three times agricultural growth at all India level (2.9 percent per annum during 2000/01 to 2007/08) and even higher in relation to states like Uttar Pradesh (1.6 percent), Punjab (2.4 percent) and West Bengal (2.7 percent). The paper explores if Gujarats agricultural story is sustainable and can be a divadandi (lighthouse) for other states and developing regions. First the sources of growth are identified followed by the main drivers of growth i.e. which policies and institutions have accelerated agricultural growth after 2000. Cotton, the high value segment (livestock, fruits and vegetables) and wheat are identified as the main sources of growth as they have grown rapidly both in production and value terms. Private sector has driven the cotton boom; but public sector has also played an important role. Besides favorable monsoons in the past few years and past investment in rural roads, active role of public sector through [A] Mass based water harvesting and groundwater recharge [B] Reform of rural power system through Jyotigram Scheme [C] Reform of agricultural marketing institutions [D] Revitalized and reinvented agricultural extension system are among the factors that have contributed to Gujarats impressive performance in agriculture.

THE KEY ISSUE

An important question facing Indian policy makers at the center as well as states is how to promote faster and more inclusive agricultural growth. Due to significant regional disparity in agricultural growth across states, the Tenth (2002-07) and Eleventh Plans (2007-12) have worked out state-specific growth targets for Gross Domestic State Product from Agriculture and Allied Activities. Unfortunately, most states have grown below their target; but one state which stands out is Gujarat. From 2000/01 to 2006/07 GSDPA growth rate was 9.6 percent, albeit with high volatility (as against target of 4 and 5.5 percent per annum for the Tenth and Eleventh Plan respectively). During the same period Gross Domestic Product from Agriculture (GDPA) at an all India level grew at only 2.9 percent per annum. Thus Gujarat has grown more than 1.5 times above its Eleventh Plan growth target, and three times the all India figure. This stellar performance of Gujarat in agriculture raises the question: can Gujarat be a dividend (lighthouse) for other states to follow? Often called Indias growth engine, Gujarats rapid Gross State Product (GSDP) growth has been covered by various studies and the popular media already. The services and manufacturing sectors have grown steadily since the nineties and the infrastructure offered by the state from ports to roads have facilitated this growth. The latest testament to Gujarats economic development is a promise of investments worth US $ 243 billion via 8662 signed MOUs at the Vibrant Gujarats Global Investors Summit in January 2009. But li ttle attention has been given to Gujarats impressive agricultural story-no other state has achieved such high agricultural growth during this period. Other states like Uttar Pradesh, West Bengal and Maharashtra (three of the largest agricultural states) are lagging below the national average while even Rajasthan and Bihar have raced ahead (but with very high volatility). Is agriculture in Gujarat a success story for other states to emulate? What are the drivers of this high agricultural growth in Gujarat? Is this growth sustainable or a statistical aberration due to high volatility?

Figure 1: Average Annual Growth Rates of Gross State Domestic Product (GSDP) and Gross State Domestic Product from Agriculture (GSDPA): Major States and All India (%): 2000/01 to 2007/08

This paper attempts to study the growth story of Gujarats agriculture sector during the period 2000/01 to 2006/07 (the last year for which data is available). The paper will explore the plausible sources and drivers of agricultural growth in the state using state-level secondary data and literature. Deeper research and a district-level analysis are required to understand the relative weights of each of these factors, but this is not attempted at present. The paper puts forth some preliminary observations, raises some questions and hopes to expand the debate around this topic. Gujarats recent growth experience provides a unique opportunity to study the drivers of agricultural growth and explore whether its experiences can be shared and implemented in other states and developing regions. The second section presents a brief literature review and overview on Gujarats economy and agricultural sector. The third section looks at the period 2000/01 to 2006/07 more closely and examines the sources of growth within the agricultural sector in Gujarat, based on the share and growth of value of output of major crops and their area and production. The fourth section considers some of the drivers of this recent growth and the policies, programs and institutions that have helped foster this growth.

BACKDROP
Gujarat has around 6 percent of Indias geographical area (19.6 million ha) and is home to around 56.4 million people (projected population as of 1st March 2008, based on Census 2001). Of this, 62.6 percent of the population is classified as rural (Census, 2001). The state has around 5 percent of the total Indian population, contributes around 6.5 percent of the all India GDP and 5.6 percent of all India GDPA (triennium ending (T.E.) 006/07). GSDPA constitutes around 16.8 percent of the GSDP (T.E. 2006/07). Gujarats economic performance, especially after the 1991 reforms has been a topic of much discussion in both academic and popular media. Ahluwalia (2000) notes that Gujarats rapid GSDP growth during the 1990s is commonly associated with miracle growth economies. State Product growth was dominated by the manufacturing and services sector during the eighties and the nineties, due to Gujarats strong industrial policy and state support to private sector initiative. But during the same period agricultural growth slowed down, showing little or no growth (see Dholakia, 2000; Hirway, 2000; Bagchi et al, 2000). This is attributed to many factors including saturation of earlier Green revolution strategies and diminishing land productivity, falling public expenditure on agriculture, irrigation and

electricity during the eighties, water scarcity and erratic rainfall (Hirway, Ibid.; Mathur and Kashyap, 2000; Shah, 2000) Table 1, shows that though growth rate during the eighties and nineties is quite high, it does not adequately represent the true picture due to even higher volatility (the Coefficient of Variation (CV) during these two periods is far above the all India figure; also see Dholakia, 2006). But based on the latest Gross State Domestic Product series released by Central Statistical Organization (in 1999/00 prices), agriculture in Gujarat after 2000 seems to have picked up dramatically recording average annual growth rate of 9.6 percent during 2000/01 to 2006/071. Though volatility is still high, it seems to have reduced (the CV value has almost been halved) This volatility is partly due to Gujarats high dependence on rainfall- 64 percent of the area is rain fed, which is marginally higher than the all India figure, i.e., 60 percent (Government of India, 2008a). Agriculture is largely dependent on the south-west monsoons from June/ July to

September/October, which is often erratic and unevenly distributed (Valsad district in south Gujarat received maximum rainfall of 2064 mm, while the Kutch district received minimum rainfall of 663 mm in the monsoon of year 2007). The correlation between annual percentage growth and departure of actual rainfall from normal rainfall is 0.5 (during the period 1992/93 to 2006/07)3. Agriculture suffered especially in the end of the nineties and early part of 2000, as Gujarat witnessed lower than normal rainfall for 4 years from 1999/00 to 2002/03. The worst hit year was 1999/00, where average percentage departure of actual from normal rainfall and GSDPA growth fell to around -28 percent and crop production declined by as much as 29-31 percent in Saurashtra, Kutch and North Gujarat districts (Prakash, 2008).

The past few years have seen fluctuating but normal/surplus rainfall in most districts. This could have had some positive impact, but only explains a part of the story. As Table 1 shows, the period of the nineties records a continuous declining trend in GSDPA growth, reaching the lowest point in 1999/00. But there seems to be a structural shift after 2000, as growth rates seem to exhibit a stable and slowly increasing upward trend, at a higher level than before. This indicates that factors other than just rainfall have caused this shift in the growth trajectory. The following section explores the changes within the agricultural sector and possible sources of growth.

SOURCES OF AGRICULTURE GROWTH Gujarat shows much diversification in the agricultural sector and is predominantly a non- food crop economy. Oilseed especially groundnut, tobacco and cotton are the principal non-food crops. The share of different segments is computed as a percentage of the total value of output from Agriculture and Livestock only, which constitutes 94 percent of the total value of output from Agriculture and Allied Activities (T.E. 2005/06)4. The share of cash crops, other than cotton (value from oilseeds, fibers, condiments, sugars and drugs and narcotics) has fallen from around 27.4 percent (T.E. 1995/96) to 25.8 percent of the total value of agriculture and livestock (T.E. 2005/06). But the share of cotton has grown

Percent of the total value of output for agriculture and livestock (T.E. 2005/06) Rather than oilseeds (usually seen as the primary cash crop in Gujarat), kapas value showed unprecedented growth after 2000 with relatively lower volatility, emerging as the first source of growth. In 2003/04 cotton output value rose by 114 percent from the previous year, probably due to the impact of Bt Cotton which was officially introduced in 2002. Average annual growth rate

during 2002/03 to 2005/06 of value of kapas output was 46.4 percent per annum, Growth in

value of output of cash crops (minus kapas) shows high growth but with very high volatility due to fluctuating performance of oilseeds. The second important source of growth is the high value sector. Livestock has witnessed steady growth with again relatively lower volatility at 6-7 percent per annum. It contributes around 5 percent to overall GSDP of Gujarat state on an average (Government of Gujarat, 2008a). Milk is the largest product, forming 89 percent of the total value of livestock and almost 20 percent of the total output of agriculture and allied activities (T.E. 2005/06). The dairy industry received a boost after the Operation Flood program launched by the National Dairy Dev elopment Board in the 1970s. The stable performance of the livestock sector seems to be a key growth component within the agriculture Figure 3: Production and Procurement of Milk in Gujarat (Million Liters per day): 1996/97 to 2007/08

And allied services sector Of this total procurement a significant and simultaneously rising portion is procured by District Milk Producers cooperative Unions and consequently re-sold or processed, The next source of growth within the high value segment is the fruits and vegetables sector whose value of output grew steadily at 14.4 percent per annum during 2000/01 to 2005/06. From 1992/93 to 1999/00 production of fruits and vegetables grew by

5.5 percent per annum, but from 2000/01 to 2007/08 average annual growth rate has increased to 12.8 percent. Of total area under fruits and vegetables, area is highest under mango (14.5 percent), banana (7.5 percent) and chikku (3.6 percent) and potato (7.3 percent), onion (10.4 percent) and brinjal (8.3 percent) (T.E. 2007/08). There seems to be significant diversification into other fruits like pomegranate, guava, ber and other vegetables like cucurbits, cow pea, cluster beam and tomato. The last few years have also seen some land brought under

floriculture, but this still remains a small portion. Lastly, though Gujarat has diversified away from total food grains, this sector has also recorded rapid growth after 2000. In terms of value, both cereals and pulses are growing at 11 percent per annum, but with high annual fluctuations.