Genesis of Agricultural Price Policy

India inherited a stagnant agriculture at the time of independence in 1947.

However, it has made rapid strides since then the pattern of growth in agriculture has
brought uneven development across regions and crops as also across different sectors of
the farming community and is characterized by low level of productivity and natural
resources in some area.

The planning framework initiated in 1950 governed the policy to boost the growth
in agriculture. The first 3 five year plans concentrated largely on agrarian reforms. In
1964, the Government of India introduced a very important scheme to assure guaranteed
minimum price as an incentive to the farmers. In 1965, a permanent full time Institute
called the APC (now CACP) was set up to advise the Government in appropriate price
and non-price policy for agricultural commodity from time to time.

Recognition to ICAR was accorded in 1965 to give boost to the development of

agriculture research system in the country. From 1966, greater emphasis was laid on
agricultural technologies is a major input for agricultural production. As a result of these
policies and programmes, agricultural production in the country registered a significant
growth during the later half of the last century.

With the emergence of WTO and subsequently signing of an Agreement on

Agriculture (AoA) by India in January 1995, Indian farmers are poised to face new
challenges where competitiveness is the key to international trade. Therefore, the
agriculture sector is also required to function on the basis of sound commercial
principles.

Recent performance of Indian Agriculture

National Agricultural Policy (NAP) envisages a growth of approximately 4% for

the agricultural sector. However, the observed growth rate during the decade of nineties
decelerated compared to that in the decade of eighties (Table below):

Gross Domestic Product from Agriculture and Allied Sectors at 1993-94 Prices

Year Gross Domestic Product

T.E. 1980-81 154144
T.E. 1989-90 202799
CGR (1980-81 to 1989-90) 3.10
T.E. 1990-91 216205
T.E. 1999-00 280820
CGR (1990-91 to 1999-2000) 2.95
T.E. 2000-01 286581
T.E. 2004-05 302640
CGR (2000-01 to 2004-05) 1.37
Source: National Accounts Statistics, CSO, New Delhi.
Note : CGR denotes Compound Growth Rate.
TE : Triennium Ending

It is noted that the rate of growth of the sector decelerated during nineties and this
trend continues during post 2000 period..

Low and volatile growth rates in Indian Agriculture and allied sectors was
reflected in the average annual growth rate of value added in the sector declining from
4.7% during the Eighth Plan (1992-97) to 2.1% during the Ninth Plan (1997-2000).
(Table below). As against the target of annual growth rate of 4% during the Tenth Plan
(2002-2007), agriculture growth rate in the first year (2002-03) was negative (-6.9%) due
to a severe drought of 2002.

Annual average growth rate (at constant prices)

Five Year Plan Overall GDP growth rate Agriculture & Allied
Sectors
Seventh Plan (1985-1990) 6.0 3.2
Annual Plan (1990-92) 3.4 1..3
Eighth Plan (1992-97) 6.7 4.7
Ninth Plan (1997-2000) 5.5 2.1
Tenth Plan (2002-07)
2002-03 3.8 -6.9
2003-04(P) 8.5 10.0
2004-05(Q) 7.5 0.7
2005-06(A) 8.1 2.3
P: Provisional, Q: Quick estimates, A: Advance estimates
Note : Growth rates prior to 2001 based on 1993-94 prices and from 2000-01 onwards
based on new series at 1999-2000 prices.
Source : Economic Survey 2005-06

Low productivity has afflicted growth in Indian Agriculture. For eg. though India
accounted for 21.8% of global paddy production, the yield level per hectare in 2002 was
less than that in neighbouring Bangladesh and Myanmar and only about one third that in
Egypt, which had the highest yield level in the reference year. India while accounting for
12% of global production of wheat had average yield levels higher than the global
average but only a third of the highest level achieved in UK in 2002.

International comparisons of yield selected commodities-2002

Kg/hectare
Rice/Paddy Wheat Maize
Bangladesh 3448 Bangladesh 2164 China 5022
Egypt 9135 China 3885 Egypt 7789
 India 2915 France 7449 France 8813
Japan 6582 India 2770 India 1705
Myanmar 3532 Iran 1905 Italy 9560
Pakistan 2882 Pakistan 2262 Pakistan 1769
Thailand 2597 U.K. 8043 Philippines 1803
U.S.A. 7372
World 3916 World 2720 World 4343
Sugarcane Groundnut (in shell)
Bangladesh 39890 Argentina 2329
China 66353 Brazil 2043
Colombia 94789 China 2986
Egypt 119893 India 794
Gautemala 94032 Sudan 630
India 68049 U.S.A. 2869
Pakistan 48042 Uganda 701
World 65802 World 1381
Source : Economic Survey 2005-06

All India Trends in Agricultural Yields

All India Trends in Yields

CGR Rice Jowar Bajra Maize Ragi Wheat Barl Gra Lentil Tur Moong Ura
ey m d
81-82 to 3.73 1.47 4.32 3.60 0.57 3.79 4.07 2.32 4.16 0.68 2.49 4.25
90-91

93-94 to 0.92 -1.10 1.94 1.86 0.46 1.46 1.79 0.65 -0.33 - -2.51 -0.73
2002-03 0.33
Fitted Rice Jowar Bajra Maize Ragi Wheat Barl Gra Lentil Tur Moong Ura
Growth ey m d
Rates

80-81 to 3.11 0.98 1.38 2.12 `1.24 3.25 3 0.94 3.29 - 0.47 2.19
91-92 0.90

91-92 to 0.87 -0.46 1.99 2.15 0.003.2 1.37 2 0.61 -0.04 -0.8 -2.27 0.33
2002-03 5
Saffl Groun Soyabe Sunflo Nigers Sesam Cott Sug Rapese
owe dnut en wer eed um on arca
r nr Musta
rd
Compou 0.78 1.82 3.25 -1.69 2.99 5.75 5.31 1.65 6.26
nd
Growth
Rates
Between
T.E.s
81-82 to
90-91
93-94 to - 0.18 -1.09 0.61 -1.39 1.91 0.21 0.09 1.19
2002- 0.80
034.81
Fitted - 1.10 1.80 -0.68 1.58 3.58 4.81 1.43 Rapese
0.23Gro 1.78
wth – Musta
0*Rates rd
80-81 to
91-92

91-92 to - -0.45 -0.04 -0.06 -1.42 1.69 0.23 0.10 2.93

2002-03 0.19
-0.49

The compound rate of growth of product studies of foodgrain, sugar and pulses,
product studies for the time of index numbers which was 3.71, 1.43, 3.26, 6.58, 4.54 and
4.05 for foodgrains, coarse cereals, pulses, oilseeds, other & sugarcare during eighties
decelerated to ….. 1.08, 1.22, -.36, -.79, -1.19, 1.53 and 2.42 in 1993-94 to 2001. The
decelerated in the growth of product occurred due to deceleration in the rowth of yield
from these ………………these crops is so o …….in