Friday, 3 March 2017

Banking Sector in India - A Review

             Today, the banking industry in our country is stronger and capable of withstanding the pressures of competition. It withstood Global Financial Crisis (2008). In the era of Globalization Banking Sector in India is rapidly changing since 1990s due to technological innovation, financial liberalization with entry of new private and foreign banks, and regulatory changes in the corporate sector. Indian banking industry is gradually moving towards adopting the best practices in accounting, internationally accepted prudential norms, with higher disclosures and transparency, corporate governance and risk management, interest rates have been deregulated, while the rigour of directed lending is being progressively reduced. In our country, currently we are having a fairly well developed banking system with different classes of banks – public sector banks, foreign banks, private sector banks – both old and new generation, regional rural banks and co-operative banks with the Reserve Bank of India as the leader of the system.  In the banking field, there has been an unprecedented growth and diversification of banking industry and our banks are now utilizing the latest technologies like internet and mobile devices to carry out transactions and communicate with the masses. In this circumstances, this Paper is an attempt to review the banking system in our country.

Objectives of the Study:
1) Brief History of Banking in India
2) Structure of Banking in India
3) Banking Reforms in India
4) Recent Trends in the Banking System
5) Implications & Challenges
6) Future Outlook & Conclusion

Methodology: The Study is based on information and secondary data accessed from reputed Journals, RBI & Various Official Committees Reports and authentic Websites.

Brief History of Banking in India: The history of Indian banking can be divided into three main phases.

Phase I (1786- 1969) - Initial phase of banking in India
Phase II (1969- 1991) - Nationalization, regularization and growth
Phase III (1991 on wards) - Liberalization and its aftermath 

Phase I (1786- 1969) Initial phase of banking in India: The first banks were The General Bank of India, which started in 1786, and Bank of Hindustan, both of which are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the “The Bank of
Bengal" in Calcutta in June 1806. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras. The presidency banks were established under charters from the British East India Company. The three banks merged in 1921 to form the Imperial Bank of India. For many years the Presidency banks acted as quasi-central banks, as did their successors. The first fully Indian owned bank was the Allahabad Bank, established in 1865. However, at the end of late 18th century, there were hardly any banks in India in the modern sense of the term. Banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. Foreign banks too started to arrive, particularly in Calcutta in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Pondicherry, then a French colony followed. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center. The Reserve Bank of India formally took on the responsibility of regulating the Indian banking sector from 1935. After India's independence the Reserve Bank was nationalized on 1st  January 1949 under the RBI Act 1948 and given broader powers. Before 1969, State Bank of India (SBI) was the only public sector bank in India. Under the first phase of nationalization of banks, it was nationalized in 1955 under the SBI Act of 1955.

Phase II (1969- 1991) Nationalization, Regularization and Growth: After India's independence, the Imperial Bank of India became the State Bank of India in 1955. The second phase of nationalization of  banks took place in 1969. Fourteen banks were nationalized in this year by the then Prime Minister of India Mrs. Indira Gandhi. In the year 1980, six more banks were nationalized with deposits over 200 crores. The major objective behind nationalization was to spread banking net work in the rural areas and make available cheap finance to Indian farmers. Until the 1990s, the nationalized banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy.

Phase III (1991 onwards) Liberalization and its Aftermath: Today, Indian banking sector is mature with banks having strong and transparent balance sheets. The major growth drivers are increase in retail credit demand, proliferation of ATMs and debit-cards, decreasing NPAs due to securitization, improved macroeconomic conditions, diversification, interest rates, regulatory and policy changes (e.g. amendments to the Banking Regulation Act). Certain trends like growing competition, product innovation and branding, focus on strengthening risk management systems, emphasis on technology have emerged in the recent past. Larger banks would have a relatively advantages, hence recently the  Union Cabinet on 15-02-2017 approved the merger of State Bank of India with five of its associate banks including State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, and State Bank of Travancore. The merger is likely to result in recurring savings, estimated at more than Rs 1,000 crore in the first year, through a combination of enhanced operational efficiency and reduced cost of funds. Existing customers of subsidiary banks will benefit from access to SBI’s global network. There are currently 27 public sector banks in India out of which 19 are nationalized banks and 6 are SBI and its associate banks, and rest two are IDBI Bank and Bharatiya Mahila Bank, which are categorised as other public sector banks, 23 private sector banks and 46 foreign banks with 325 branches (as on 31st Dec. 2015), 61 regional rural banks (RRBs) and more than 90,000 credit cooperatives. 

Structure of Banking in India: As per Section 5(b) of the Banking Regulation Act 1949, “Banking” means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise.”All banks which are included in the Second Schedule to the Reserve Bank of India Act, 1934 are scheduled banks. These banks comprise Scheduled Commercial Banks and Scheduled Cooperative Banks. Scheduled  Commercial Banks in India are categorized into five different groups according to their ownership or nature of operation. These bank groups are:
(i) State Bank of India and its Associates,
(ii) Nationalized Banks,
(iii) Regional Rural Banks,
(iv) Foreign Banks and
(v) Other Indian Scheduled Commercial Banks (in the private sector).

Banking Reforms in India: In August 1991, the Government appointed a committee under the chair of M. Narasimham, which worked for the liberalization of banking practices. The aim of this Committee was to bring about “operational flexibility” and “functional autonomy” to enhance efficiency, productivity and profitability of banks. The Committee submitted its report in November 1991 and the following recommendations were given: 

·        Establishment of a four-tier hierarchy for the banking structure consists of three to four large banks with SBI at the top. 

·        The private sector banks should be treated equally with the public sector banks and government should contemplate to nationalize any such banks. 

·        The ban on setting new banks in private sector should be lifted and the licensing policy in the branch expansion must be abolished. 

·        The government has to be more liberal in the expansion of foreign bank branches and foreign operations of Indian banks should be rationalized. 

·        The Statutory Liquidity Ratio and Cash Reserve Ratio should be progressively brought down from 1991-92. 

·        The directed credit program should be re-examined and the priority sector should be redefined to comprise small and marginal farmers, the tiny industrial sector, small business operators and weaker sections. 

·        Banking industry should follow BIS (Bank for International Settlement) / Basel norms for capital adequacy within three years. 

·        Interest rates should be deregulated to suit the market conditions.
·        The government should tighten the prudential norms for the commercial banks.
·        The competition in lending between DFIs (Development of Financial Institutions) and banks should be increased and a shift from consortium lending to syndicated lending should be made.

·        In respect of doubtful debts, provisions should be created to the extent of 100 percent of the security shortfall. 

·        The government share of public sector banks should be disinvested to a certain percentage like in case of any other PSU. 

·        Each public sector banks should setup at least one rural banking subsidiary and they should be treated at par with RRBs.

In order to initiate the second generation of financial sector reforms, a committee on Banking Sector Reforms (BIS), again under the Chairmanship of M. Narasimham submitted its report on 23rd April 1998 to the Finance Minister of Govt. of India. Narasimham committee II report had observed that RBI’s  role should be separated from being monetary authority to that of regulator of the banking sector. The major recommendations of the second Narasimham II report were as follows: 

·        The committee favored the merger of strong public sector banks and closure of some weaker banks if their rehabilitation was not possible. 

·        It recommended corrective measures like recapitalization is undertaken for weak banks and if required such banks should be closed down. 

·        The committee had also suggested an amicable golden handshake scheme surplus banking sector staff. 

·        Suggesting a possible short term solution to weak banks, the report observed the narrow banks could be allowed as a mean of facilitating their rehabilitation. 

·        Expressing concern over rising non-performing assets, the committee provides the idea of setting up an asset reconstruction fund to tackle the problem of huge non-performing assets (NPAs) of banks under public sector.

Government had also taken into account the establishment of the Board for Financial Supervision (BFS) as the apex supervisory authority for commercial banks, financial institutions and non-banking financial companies rating system, corporate governance, enhanced due diligence on important shareholders, fit and proper tests for directors; and setting up of Indian Financial Network (INFINET) as the communication backbone for the financial sector, introduction of Negotiated Dealing System (NDS) for screen-based trading in government securities and Real Time Gross Settlement (RTGS) System.  

Recent Trends in the Banking System:

·        Electronic Payment Services – e – Cheques: In the recent days we are aware of e-governance, e-mail, e-commerce, e-tail etc. In the same manner, a new technology is being developed in US for introduction of e-cheque, which will eventually replace the conventional paper cheque. India, as harbinger to the introduction of e-cheque, the Negotiable Instruments Act has already been amended to include; Truncated cheque (a substitute electronic form for paper cheque) and E-cheque instruments. 

·        Real Time Gross Settlement (RTGS): Real Time Gross Settlement system, introduced in India since March 2004, is a system through which with the help of internet instructions can be given by banks to transfer of funds from one bank account to the another bank account . The RTGS system is maintained and operated by the RBI and provides a means of efficient and faster funds transfer among banks facilitating their financial operations. As the name suggests, funds transfer between banks takes place on a ‘Real Time' basis. Therefore, money can reach the beneficiary instantly and the beneficiary's bank has the responsibility to credit the beneficiary's account within two hours. 

·        Electronic Funds Transfer (EFT): It is a system whereby anyone who wants to make payment to another person/company etc. can approach his bank and make cash payment or give instructions/authorization to transfer funds directly from his own account to the bank account of the receiver/beneficiary. Complete details such as the receiver's name, bank account number, account type (savings or current account), bank name, city, branch name etc. should be furnished to the bank at the time of requesting for such transfers so that the amount reaches the beneficiaries' account correctly and faster. RBI is the service provider of EFT. 

·        Electronic Clearing Service (ECS): It is a retail payment system that can be used to make bulk payments/receipts of a similar nature especially where each individual payment is of a repetitive nature and of relatively smaller amount. This facility is meant for companies and government departments to make/receive large volumes of payments rather than for funds transfers by individuals.
·        Automatic Teller Machine (ATM): It is the most popular devise in India, which enables the customers to withdraw their money 24 hours a day 7 days a week. It is a devise that allows customer who has an ATM card to perform routine banking transactions without interacting with a human teller. In addition to cash withdrawal, ATMs can be used for payment of utility bills, funds transfer between accounts, deposit of cheques and cash into accounts, balance enquiry etc. 

·        Point of Sale Terminal: It is a computer terminal that is linked online to the computerized customer information files in a bank and magnetically encoded plastic transaction card that identifies the customer to the computer. During a transaction, the customer's account is debited and the retailer's account is credited by the computer for the amount of purchase.

·        Tele - Banking: It facilitates the customer to do entire non-cash related banking on telephone. Under this devise Automatic Voice Recorder is used for simpler queries and transactions. For complicated queries and transactions, manned phone terminals are used.

·        Electronic Data Interchange (EDI): It is the electronic exchange of business documents like purchase order, invoices, shipping notices, receiving advices etc. in a standard, computer processed, universally accepted format between trading partners. EDI can also be used to transmit financial information and payments in electronic form. 

·        Net Banking: It is done through internet by individuals and firms for transfer of funds, booking rail tickets, shopping, purchasing cinema tickets, purchasing shares etc.

·        Mobile Banking: Mobile banking is a service provided by a bank or other financial institution that allows its customers to conduct a range of financial transactions remotely using a mobile device such as a mobile phone or tablet, and using software, usually called an app, provided by the financial institution for the purpose.

·        Amalgamation of Banks: The consolidation of banks is known as amalgamation of  banks. Recently the  Union Cabinet on 15-02-2017 approved the merger of State Bank of India with five of its associate banks for efficient enhanced operational efficiency and reduced cost of funds.

·        The banks were quickly responded to the changes in the industry; especially the new generation banks.
·        The continuance of the trend has re-defined and re-engineered the banking operations as whole with more customization through leveraging technology.
·        As technology makes banking convenient, customers can access banking services and do banking transactions any time and from any ware.
·        The importance of physical branches is going down.  
·        The importance of physical branches is going down.  

 Challenges: The major challenges faced by banks today are:

·        Non – Performing Assets (NPAs): Today, in the era of globalization banks have cope with the competitive forces and strengthen their balance sheet. Now a days, banks are groaning with burden of NPAs. If NPAs are not recovered, they will destroy the very vitals of the banks. Another major concern before the banking industry is the high transaction cost of carrying Non Performing Assets in their books. The resolution of the NPA problem requires greater accountability on the part of the corporate, greater disclosure in the case of defaults, an efficient credit information sharing system and an appropriate legal framework pertaining to the banking system so that court procedures can be streamlined and actual recoveries made within an acceptable time frame. The banking industry cannot afford to sustain itself with such high levels of NPA’s thus, “lend, but lent for a purpose and with a purpose ought to be the slogan for salvation”.

·        Information technology (IT) in Banking: Indian banking industry, today is in the midst of an IT revolution. A combination of regulatory and competitive reasons has led to increasing importance of total banking automation in the Indian Banking Industry. Information Technology has basically been used under two different avenues in Banking. One is Communication and Connectivity and other is Business Process Reengineering. Information technology enables sophisticated product development, better market infrastructure, implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographically distant and diversified markets. The Indian banks today are subject to tremendous pressures to perform or perish as otherwise their very survival would be at stake. Information technology (IT) plays an important role in the banking sector as it would not only ensure smooth passage of interrelated transactions over the electric medium but will also facilitate complex financial product innovation and product development. The application of IT and e-banking is becoming the order of the day with the banking system heading towards virtual banking. Training the banking staff with the latest soft ware skills is also a challenge.

·        World Wide Banking (WWB): As an extreme case of e-banking World Wide Banking (WWB) on the pattern of World Wide Web (WWW) can be visualized. That means all banks would be interlinked and individual bank identity, as far as the customer is concerned, does not exist. There is no need to have large number of physical bank branches, extension counters. There is no need of person-to-person physical interaction or dealings. Customers would be able to do all their banking operations sitting in their offices or homes and operating through internet. This would be the case of banking reaching the customers. This is also another challenge for our banking system.

·        Cyber Crimes: Today, the major cybercrimes which plague the banking sector are ATM frauds, hacking of bank accounts, Denial of Service, Credit Card frauds, phishing etc.  are challenges to the banking industry. The rapid growth to global electronic crime and the complexity of its investigation requires a global presence.

Future Outlook: Banking landscape is changing very fast. The Reserve Bank in its bid to move towards the best international banking practices will further sharpen the prudential norms and strengthen its supervisor mechanism. There will be more transparency and disclosures. In the days to come, banks are expected to play a very useful role in the economic development and the emerging market will provide ample business opportunities to harness. Although, the adoption of technology in banks continues at a rapid pace, the concentration is perceptibly more in the metros and urban areas. The benefit of Information Technology is yet to percolate sufficiently to the common man living in his rural hamlet. More and more programs and software in regional languages could be introduced to attract more and more people from the rural segments also. Standards based messaging systems should be increasingly deployed in order to address cross platform transactions. The surplus manpower generated by the use of IT should be used for marketing new schemes and banks should form a ‘brains trust' comprising domain experts and technology specialists. 

Conclusion: Indian banking system will further grow in size and complexity while acting as an important agent of economic growth and intermingling different segments of the financial sector. It automatically follows that the future of Indian banking depends not only in internal dynamics unleashed by ongoing returns but also on global trends in the financial sectors.


The Hindu, dated: 15-02-2017.
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Dr Goyal, A. K., Joshi, Vijay- “Indian Banking Industry: Challenges and opportunities”, IJBRM, Volume 3:Issue1:2012 pp23-38
Govt.  of India (1998) Report of the Committee on Financial System, Ministry of Finance, (Narasimham Committee-II), April.
Report on Trend and Progress of Banking in India for the year ended June 30, 2011 submitted to the Central Government in terms of Section 36(2) of the Banking Regulation Act, 1949
Obtaining New Banking Licenses in India: Challenges and Opportunities, cognizant 20-20 insights, November 2013
Jalan, B (2001): ‘Banking and finance in the New millennium’, Lecture delivered at the bank economists conference’, New Delhi, January.
Jalan, B (2002):’Strengthening Indian Banking and Finance: Progress and Prospects, Bank Economists conference, Bangalore 27th Dec. 2002.
Patel, U. R. (2000): Outlook for the Indian Financial Sector’, Economic and Political Weekly, November 4, 2000 p 3933-38.
Rakesh, M (2002), Transforming Indian Banking: In search of a Better Tomorrow’, Bank economists Conference 2002, Bengalore, 29th December 29.
RBI (1999): ‘ Some aspects and issues relating to NPAs in Commercial Banks’ RBI Bulletin, July, p 913-93.

Wikipedia Public and Private Sector Banks in India.

Friday, 17 February 2017


(This Paper was submitted to the National Seminar on “Agrarian Crisis in Rural India: Issues and Challenges” held on 14-15, Feb.2017, Ujjain, Madya Pradesh, India)

-*Dr. S. Vijay Kumar      
          India is considered as one of the fastest growing economies in the world. Agriculture is the mother of any economy, whether it is rich or poor. Much of its influence is on the other sectors of economy - industry and service. India is the second largest in farm output. Hence, India’s economic security continues to be predicated upon the agriculture sector, and the situation is not likely to change in the near future. Even today, the share of agriculture in employment is about 49% of the population, as against around 75% at the time of independence.  In the same period, the contribution of agriculture and allied sector to the Gross Domestic Product (GDP) has fallen from 61% to 17% in 2015-16. Around 51% of India’s geographical area is already under cultivation as compared to 11% of the world average. China with lesser cultivable land produces double the food grains, i.e. 607 million tons in 2015 -16 as compared with India’s 252 million tons  in 2015-16. The present cropping intensity of 136% has registered an increase of only 25% since independence. Further,  rain fed dry lands constitute 65% of the total net sown area. There is also an unprecedented degradation of land (107 million ha) and groundwater resource, and also fall in the rate of growth of total factor productivity. This deceleration needs to be arrested and agricultural productivity has to be doubled to meet growing demands of the population by 2050. Natural resource base of agriculture, which provides for sustainable production, is shrinking and degrading, and is adversely affecting production capacity of the ecosystem. However, demand for agriculture is rising rapidly with increase in population and per capita income and growing demand from industry sector. There is, thus, an urgent need to identify severity of problem confronting agriculture sector to restore its vitality and put it back on higher growth trajectory. The problems, however, are surmountable, particularly when new tools of science and technology have started offering tremendous opportunities for application in agriculture. However, the country recorded impressive achievements in agriculture during three decades since the onset of green revolution in late sixties. This enabled the country to overcome widespread hunger and starvation; achieve self-sufficiency in food; reduce poverty and bring economic transformation in millions of rural families. The situation, however, started turning adverse for the sector around mid-nineties, with slowdown in growth rate of output, which then resulted in stagnation or even decline in farmers’ income leading to agrarian distress, which is spreading and turning more and more serious. This Paper attempts to focus attention on Issues, Challenges and Government policies of Indian Agriculture in the context of Globalization.
Objectives of the Paper:
·         Indian Agriculture in the Pre & Post – Globalization Period – Average GDP Growth Rates—Overall & Agriculture.
·         Indian Agricultural Trade in the Post – Globalization.
·         Impact of Globalization on Indian Agriculture - Cost of Cultivation, Farmers’ Suicides.
·         Issues & Challenges of Indian Agriculture.
·         Remedial Measures, Challenges, Government Policies, Future of  Agriculture in India.
*Professor (Associate) & Head (Retd.), Department of Economics, Kakatiya Government (UG&PG) College (NAAC “A” Grade), Ex - Member of Board of Studies, Kakatiya University, Warangal – 506 009 ( Telangana State).
Methodology: The Study is on the basis of empirical data accessed from different source like Central Statistical Organization (CSO), Economic Surveys, Planning Commission of India, GOI Websites and other relevant Websites. Research Journals, National and International Reports.
Table – 1: Indian Agriculture in the Pre – Globalization Period (1951-1991) Compared With Other Sectors
Share of GDP (%)

Distribution of working population (%)
Share of GDP (%)

Distribution of working population (%)
Agriculture & Allied Activities
Agriculture  &
Allied Activities
Services (including construction)
    Source: Economic Survey 2013-14
Analysis: In the early days of independence (1950-51), it is clear that the share of Agricultural Sector in GDP is higher (53.1%) when compared to other sectors – Industrial Sector (16.6%) and Service Sector (30.3). So all so, the share of distribution of working population in Agriculture Sector (72.1) is higher when compared to other sectors – Industrial Sector (10.6%) and Service Sector (17.3). This means, in the early years of independence, both the share of Agriculture as well as working population are higher when compared with other sectors – Industry and Services. But later (1990-91), the share of Agriculture in GDP declined (29.6) when compared to
Service Sector (42.7), but moderately higher than Industrial Sector (27.6). But, the the share of distribution of working population is still higher in Agriculture Sector (66.9) when compared to other sectors – Industrial Sector (12.7%) and Service Sector (20.4). It is clearly evident from this, even after 44 years of independence (1947-1991), agriculture is the prime sector when compared to Industry and Service Sectors.

Table – 2: Indian Agriculture in the Post – Globalization (1991 Onwards) Compared With Other Sectors:

Share of GDP (%)
(2004-05 Prices)
Distribution of working population (%)
Share of GDP (%)
(2004-05 Prices)
Distribution of working population (%)
Agriculture & Allied
Agriculture & Allied
54.4 (2015 est.)
31.0 (2012 est.)
Source: Statistical Outline of India 2009-10.(Tata Services Ltd.) and India Economy Profile 2016    (index mundi)
Analysis: In the Post – Globalization period 1991 onwards, gradually both the share of agriculture in GDP and the share of distribution of working population are declining. The share of agriculture in GDP is 28.54% in 1991 and 16.1% in 2016, while that of distribution of working population in agriculture is 67.5%  in 1991 and 49% in 2016. One important thing to be noted in the post reforms period is, though the share of agriculture in GDP is declining when compared to industry and service sectors, but it still bears the higher share of distribution of working population than that of industry and service sectors. This is not a welcome sign, because when GDP from a sector (Agriculture) declines the working population also should decrease in proportionate with other sectors.
Table - 3 - Average GDP Growth Rates—Overall and in Agriculture in India:
(% per period (Years) at 1999–2000 Price and 2004-05 prices for 11th plan &  12th Plan)

Average GDP Growth Rates—Overall and in Agriculture in India (% per period (Years) at 1999–2000 Price and 2004-05 prices for eleventh plan) Period
Total Economy
  Allied Sectors
Pre - Green Revolution:   1951-52 to 1967-68
Green Revolution Period:1968-69 to 1980-81
Technology Dissemination Period:1981-82 to1990-91
Early Reform Period:  1991-92 to 1996-97
Ninth Plan Period:       1997-98 to 2001-02

Tenth Plan Period :      2002-03 to 2006-07

Eleventh Plan Period : 2007-08 to 2011-12

Twelfth Plan Period:    2012-13 to 2012-17 (Expected)
 (As on 6/01/2017) CSO Forecast: 2016-17

Source: Economic Survey, 2014 – 15 and Planning Commission of India

Note: The average annual growth rate of agriculture and allied sector during the first four years of the current Five Year Plan period (2012-17) has been 1.6 per cent as against the 12th plan target of 4 per cent per annum.

Analysis: It is interesting to note that the growth rates of agriculture in India’s GDP had been growing during early periods, but in the last few years, it is constantly declining. This is evident from the table- 3, which presents the long-term growth rates of agriculture in comparison with the whole economy. The growth performance of agriculture has been always lower than that of the total economy, since the early independence period say pre-green revolution era (1951-52 to1967-68). The difference is the highest during the Tenth Plan Period where the total economy was growing at 7.77 per cent, the agriculture and allied sector was witnessing a growth of 2.47 during the tenth Plan Period. As evident from the table above, this sector has shown a remarkable average growth rate, i.e., 4.1 per cent during the eleventh plan period, may be due to a better monsoon in some of the years. In the 12th Plan, GDP of the total economy is growing at 7.9, but that of agriculture is only 1.6 during the first four years of the current Five Year Plan (2012-17) less than the expected target of 4% per annum. But, recently, CSO revised over all GDP growth rate to 7.1% from 7.6% (actual forecast was 6.5% only for Q4 of FY 2016-17) due to demonetization. But, however due to good monsoon the agricultural growth rate increased to 4.1% in Q4 of FY 2016-17 from 1.2% of FY 2015-16.
India’s Agricultural Trade in the Post – Globalization (Post Reforms Period: 1990-91 to 2008-09) - Share of Agriculture in India’s Exports &Imports:
Table- 4: Share of Agriculture in India’s Exports
(1990-91 to 2008-09):
Year        Agriculture Exports         National Exports    % of national Exports
---------------------------------------------------------------------------------------------------- -----
1990-91         6012.76                            32527.28                     18.49                
1991-92         7838.04                            44041.81                     17.80  
1992-93         9040.30                            53688.26                     16.84  
1993-94       12586.55                            69748.85                     18.05  
1994-95       13222.76                            82673.40                     15.99  
1995-96       20397.74                          106353.35                     19.18  
1996-97       24161.29                            18817.32                     20.33    
1997-98       24832.45                          130100.64                     19.09  
1998-99       25510.64                          139751.77                     18.25  
1999-00       25313.66                           159095.20                    15.91  
2000-01       28657.37                           201356.45                    14.23  
2001-02       29728.61                           209017.97                    14.22  
2002-03       34653.94                           255137.28                    13.58  
2003-04       37266.52                           293366.75                    12.70  
2004-05       41602.65                           375339.53                    11.08  
2005-06       49216.96                           456417.86                    10.78                         
2006-07       62411.42                           571779.28                    10.92  
2007-08       79039.72                           655863.52                    12.05
2008-09(P)   85961.82                          839977.96                    10.23
Average                                                                                    15.24%
Source: Directorate General of Commercial Intelligence and Statistics (DGCI&S), Ministry of Commerce, Kolkata
Table- 5: Share of Agriculture in India’s Imports (1990-91 to 2008-09):
Year          Agricultural Imports             Total National Imports   % of National Imports
1990-91            1205.86                                        43170.82                                2.79  
1991-92            1478.27                                        47850.84                                3.09  
1992-93            2876.25                                        63374.52                                4.54  
1993-94            2327.33                                        73101.01                                3.18  
1994-95            5937.21                                        89970.70                                6.60  
1995-96            5890.10                                      122678.14                                4.80  
1996-97            6612.60                                      138919.88                                4.76
1997-98            8784.19                                      154176.29                                5.70  
1998-99          14566.48                                      178331.69                                8.17  
1999-00          16066.73                                      215528.53                                7.45  
2000-01          12086.23                                      228306.64                                5.29  
2001-02          16256.61                                      245199.72                                6.63  
2002-03          17608.83                                      297205.87                                5.92  
2003-04          21972.68                                      359107.66                                6.12  
2004-05          22811.84                                      501064.54                                4.55  
2005-06          21499.22                                      660408.90                                3.26  
2006-07          29637.86                                        40506.31                                3.53  
2007-08          29906.24                                    1012311.70                                2.95  
2008-09(P)      36736.52                                   1340587.78                                2.74
Average                                                                                                               4.85
Source: Directorate General of Commercial Intelligence and Statistics (DGCI&S), Ministry of Commerce, Kolkata

Analysis: The share of agriculture in India’s total exports has been decreased from 18.49% in 1990-91 to 10.23% in 2008-09. The average share of agriculture exports in the same period was 15.24%. The share of agriculture in India’s total imports has been slightly decreased from 2.79% in 1990-91 to 2.74% in 2008-09. The average share of agriculture imports in the same period was 4.85%. Thus, the average share of India’s agriculture exports(15.24%) was more than the average share of agriculture imports (4.85%) from 1990-91 to 2008-09. This is a good sign, but the decrease of agriculture exports is not good for the economy.

India’s Agricultural Trade (2009-10 to 2016-17): According to Economic Survey 2015-16, agricultural exports as a percentage of agricultural GDP increased from 7.95 per cent in 2009-10 to 12.08 per cent in 2014-15. Food grain production for 2015-16 is estimated at 253.16 million tonnes (MT); higher by 1.14 MT over the production of 252.02 MT during 2014-15.  India has emerged as a significant agricultural exporter of commodities such as cotton, rice, meat, oil meals, spice, guar gum meal and sugar. As per the World Trade Organization’s (WTO’s) Trade Statistics, the share of India’s agricultural exports and imports in the world trade in 2014 were 2.46 per cent and 1.46 per cent respectively. Agricultural Sector in India contributes 16% of GDP & 10% of export earnings. GDP of agriculture and allied sectors in India was recorded at US$ 244.74 billion in FY2016-17. According to the advanced estimates of Ministry of Statistics and Programme Implementation (MOSPI), agriculture and allied sector recorded a Compound Annual Growth Rate (CAGR) rise of 6.64 per cent during FY2007-2016. As per estimates by the Central Statistics Office (CSO), the share of agriculture and allied sectors (including agriculture, livestock, forestry and fishery) was 15.35 per cent of the Gross Value Added (GVA) during 2015-16 at 2011-12 prices. India is the largest producer, consumer and exporter of spices and spice products. India's fruit production has grown faster than vegetables, making it the second largest fruit producer in the world. India's horticulture output, comprising fruits, vegetables and spices, is estimated to be 283.4 million tonnes (MT) in 2015-16 after the third advanced estimate. It ranks third in farm and agriculture outputs. Agricultural export constitutes 10 per cent of the country’s exports and is the fourth-largest exported principal commodity. The agro industry in India is divided into several sub segments such as canned, dairy, processed, frozen food to fisheries, meat, poultry, and food grains. As per the 3rd Advance Estimates, India's food grain production has increased marginally to 252.23 million tonnes (MT) in the 2015-16 crop year. Production of pulses is estimated at 17.06 million tonnes. With an annual output of 146.31 MT, India is the largest producer of milk, accounting for 18.5 per cent of the total world production. It also has the largest bovine population. India, the second-largest producer of sugar, accounts for 14 per cent of the global output. It is the sixth-largest exporter of sugar, accounting for 2.76 per cent of the global exports. India is a leading country in coconut production and productivity in the world, with annual production of 2,044 crore coconuts and the productivity of 10,345 coconuts per hectare as on 2015-16. Spice exports from India are expected to reach US$ 3 billion by 2016–17 due to creative marketing strategies, innovative packaging, strength in quality and strong distribution networks. The spices market in India is valued at Rs 40,000 crore (US$ 5.87 billion) annually, of which the branded segment accounts for 15 per cent.

Impact of Globalization on Indian Agriculture: Globalization integrated Indian economy with global economy in 1991. In India, economic growth improved significantly in the post-reform period. It is considered as one of the fastest growing economies in the world. However, the problems of globalization have not been seriously addressed by the government policies and strategies, especially with regard to agriculture sector. The experience of the economic reforms in the last 25 years indicate while there have been improvements in economic growth ,foreign exchange, IT revolution, export growth etc, the income distribution has been unequal and only some sections of the population benefited more from higher growth and prosperity. We have problems of poverty, unemployment, inequalities in access to health, education and poor performance in agriculture sector. One of the excluded sectors during reform period was agriculture which showed low growth and experienced more farmers’ suicides due to fake and terminal seeds, low prices and inadequate agricultural policies. The post- reform growth was led by services. Commodity sector growth (agriculture and industry) has not been higher in the post reform period as compared to that of 1980s. Particular worry is agriculture sector which showed lower than 4% per annum target in the last Plans, including 12th Plan. There is disconnection between employment growth and GDP growth. In other words, employment is not generated in industry services where growth is high. On the other hand, GDP growth is low in agriculture where majority are employed.  Today, even after 69 years of independence agriculture sector bears about 50% of population with low earnings, while industry and services together bears 50% with high incomes. Thus, there has been lopsided approach to development in India in the last two and half decades.
            Macro level study on agricultural growth after reforms gives very different look despite increase in cropping intensity and area expansion which are considered as major sources of growth. In the Post reform period, agricultural growth is recording a fall mainly is in food grains in the first phase of reform but growth during this period sustained due to rise growth rate of commercial crops such as horticulture and oilseeds, cotton and allied sectors like livestock. But after globalization agriculture as a whole declined drastically while non agriculture sector is growing fast, this poor performance of agriculture particularly food grains has become a serious concern for the policy makers as there is a chance of facing the problem of food security. Having witnessed various facets of transformation, the globalization of business in the last decade of the 20th century with the inception World Trade Organization (WTO) in 1995, General Agreement on Trade in Services (GATS), Trade Related Intellectual Rights (TRIPS) etc put an end to restrictive trade, even in agriculture. Liberalization created an unprecedented demand in all sectors of trade including agriculture. This demanded pragmatism on the part of Indian Government. With globalization making headway everywhere, Government had to introduce reforms in agricultural sector too. Reforms in agricultural policies were felt necessary for achieving trade liberalization in the agricultural sector (Kumar et. al., 2008).

Cost of Cultivation: A study by Sen and Bhatia (2004) based on cost of cultivation data indicates in the growth of farm business income (FBI) over time. This study shows that the all India rate of growth of real (deflated by Consumer Price Index for Agricultural Laborers) FBI per hectare declined sharply from 3.21% per annum during the 1980s to only 1.02% per annum during 1990s. However, farmer is interested in farm income rather than price-cost or FBI per hectare. Estimates of FBI per cultivator using growth of cultivators and cropped area revealed that the growth rate was 1.78% per annum in the 1980s but decelerated to 0.03% per annum in the 1990s- indicating almost stagnant FBI per cultivator in the later period.
Farmers’ Suicides: In India, according to National Crime Records Bureau (NCRB) on farmer’s suicides in 1997, 14000 farmers committed suicides. From 2002 onwards every year not less than 17000 farmers committed suicides. In 2006, over 17000 farmers’ suicides confirms this trend In our country per every half-an-hour one farmer is committing suicide. From 1997-2005 in four big states- Andhra Pradesh, Maharashtra, Karnataka and MadyaPradesh 89362 farmers committed suicides(A.P-16770,M.S-28911,K.S-20093,M.P-23588). The official estimates show that the number of suicides is more than 9000 in these four states .The unofficial estimates would be much higher than this. The reasons are growing indebtedness, increasing risk, sharper decline in absolute productivity, price uncertainty due to trade liberalization and rise in cost due to domestic liberalization, decline in credit, and non-farm work intensified the crisis. Long term factors like decline in farm size, ground water depletion, deterioration in soil quality etc. have also been responsible for the agrarian crisis and farmers’ suicides.  As per the latest data, by 2016, April 116 farmers have committed suicide due to agrarian reasons, with maximum cases reported in Maharashtra, followed by Punjab and Telangana. More than 2,000 farmers’ suicide cases were reported due to agrarian reasons in 2015 with highest number of 1,841 cases in Maharashtra alone. Most of the suicides in India are attributed to debt trap, crops failures, failure of continuous monsoons and drought. Telangana is mostly dependent on dry land farming. Most of the agriculture in Telangana is dependent on monsoon, tanks, dug wells and bore wells. Due to scarcity of water, farmers are going for bore wells by taking loans. But, due to ground water depletion, most of the bore wells failed. There are many farmers dug up to 12 bore wells for search of water. In the the event of failure of all bore wells, they committed suicides for non-payment of loans.
Issues/Causes for Indian Agricultural Crisis: There is a need for analyzing the reasons for the crisis to know what measures could be adopted to face this challenge. However, there are two reasons to be concerned that Indian agriculture may indeed be facing a wider, deeper crisis: (1) The long term growth trend in production and productivity of agriculture, considerably less than required to sustain the high overall growth rates in the coming decade and (2) the growing economic and social disparities between agriculture and the rest of the economy and between rural and urban sectors. Apart from these other important issues/causes observed are as follows:
Shifting in Cropping Pattern, Increasing Landlessness and Inequality in Landholdings: India shifted its cropping pattern from less-remunerative food grains to high-value and export-oriented cash crops. Such a change in the cropping pattern required an endorsement of economies of scale in agriculture. Thus, the policy prescribed concentration of land through purchase or leasing in by big landowners in the name of private firms (Ramachandran and Ramakumar 2000; Athreya 2003). That is why during the post reform period there has been an increase in the inequality of distribution of land owned.
Declining Productivity in Agriculture and Increasing Marginalization of Peasantry: Productivity Levels are very low- The productivity levels primarily determine the income of the farmers. However, the per unit area productivity of Indian agriculture is much lower than other major crop producing countries. During the post-reform phase the sectoral distribution of Gross Domestic Product (GDP) in India has seen a consistent declining share of agriculture. (Table-2). However, the shifting of associated labour force from agriculture has been much less than proportionate compared to other sectors.

Diminishing Profitability of Agriculture: The post-reform phase has generally witnessed a fall in profitability of agriculture, notwithstanding a variation across crops and regions (Sen 2004; Sen and Bhatia 2004; Surjit 2008). Sen points out this trend has been significantly caused by a general slowdown in the diffusion of yield-increasing technologies and inputs and a slow rise in the prices of crops (Sen 2004). Surjit, V (2008) in his study of farm business incomes from paddy cultivation in seven most important paddy-growing states shows that in four out of seven states, the growth rate of farm business incomes, which was positive in the 1980s, became negative in the 1990s. In other three states except Andhra Pradesh, the growth rate slowed down significantly in 1990s.
Declining Growth Rates of Agriculture: Declining growth rate of agriculture in the early reform period (1991-92 to 1996-97) from 3.66% to 1.2% per annum in 2015-16 (Table-3).
Slowdown of Exports and Increased Uncertainty vis-à-vis Cultivation: Contrary to the promise of economic reforms, India has witnessed a major rise in imports, rather than exports, of agricultural commodities after the mid-1990s. (Tables: (5&6). This has significantly narrowed down the  difference between the rupee value of farm exports and imports. According to the Planning Commission estimates, the ratio of dollar value of agricultural exports and imports fell from about 5 in 1996-97 to 2.2 in 2003-04. The share of agricultural exports in total merchandise exports declined from 21 per cent in 1996-97 to 12 per cent in 2003-04. The ratio of agricultural exports to the GDP from agriculture also fell from 7.6 per cent in 1995-96 to 6.9 per cent in 2003-4 (GoI 2005).
The Reduction of Input Subsidies: The provision for state subsidies on inputs is meant to enable farmers to modernize agriculture by adopting new technologies and inputs including seeds and to bear the associated risks. That is why the provision of state subsidies on these inputs contributed considerably to the success of Green Revolution (Sen 1992). This provision proved to be quite inclusive leading to significant benefit to marginal and small farmers (Acharya and Jogi 2004). However, with the fiscal reforms that followed liberalization, there has been decline of state subsidies on inputs. The reduction of state subsidies on inputs is considered to be one of the most important reasons for the erosion of profitability of agriculture and the consequent agrarian crisis during the phase of economic reforms. The government used roughly 1.6 to 1.9 per cent of the GDP for subsidies on inputs in the early 1990s, which it reduced to about 1.3 to 1.4 per cent between 2003 and 2006. So far as the share of state subsidies on inputs in the agricultural GDP is concerned, there has been an increase in the share of subsidy on electricity whereas the share of subsidies on fertilizer and irrigation in agricultural GDP has fallen after the late 1990s, and particularly in the 2000s (Sen 1992; Acharya 2000; Acharya and Jogi 2004). Since state subsidies on inputs rationalizes the ratio between the output price and the input price in favour of farmers, any reduction in the subsidies adversely affect farmers because they have to pay more for inputs. India offers less subsidies to farmers when compared with other countries (Table – 6).
Table – 6: Comparison of Country Regarding Subsidies to Agriculture
Subsidy per Hectare
Percentage of population depending on Agriculture
Source: WTO Reports
Decline in Public Investment in Agricultural Research and Extension and Irrigation: Historically, public investment in Agricultural research and extension in India has been seen as creation of 'public goods'. Vaidyanathan (2000) opines that the widespread specialized state funded agricultural research centres under the India Council for Agricultural Research and the Agricultural Universities, working with and through the National Extension Service, have contributed historically to the growth of agricultural productivity by specifically developing and diffusing knowledge, skills, better varieties of seeds and practices. This trend reversed during the phase of economic reforms. Liberalization led to a drastic decline in the growth rate of public spending on agricultural research and extension. The growth rate of public spending on agricultural research and extension during 1980s to 1990-2005 has fallen from 6.3 and 7 per cent to 4.8 and 2 per cent respectively.

Low level of Income of Small Farmers: Overall, there is not much diversification and the income of an average farmer household from cultivation would hardly suffice to meet some basic day-to-day requirements. The Situation Assessment Survey of Farmers, 2013 (SAS), NSSO 70th round indicates that the monthly per capita income to a farmer household within 1 hectares land is much lower than the monthly per capita consumption expenditure. At all-India level, average monthly income per agricultural household during the year 2012-2013 was estimated as Rs.6426.
Price is income for any producer. Industrialists can the fix the prices of their products. But, unfortunately in our country, it is pitiable that the farmers cannot fix the prices of their crops. Another concern is widening economic disparities between agricultural and non-agricultural sectors and between rural and urban areas. Rural-urban disparities in basic social amenities have also increased in quality though not in quantity. All these have led to resentment among the rural population that the benefits of development have gone to the urban areas. India's economic liberalization in the early 1990s resulted in high rates of growth, whether it reduced the numbers of poor or benefit only increasingly wealthy urban elite is a question.
Lack of Easy and Cheap Loan to Agriculture: Though, the money lenders are losing ground, but is still they single largest contributors of agricultural credit. Rural credit scenario has undergone a significant change and institutional agencies such as Central Cooperative Banks, State Cooperative Banks, Commercial Banks, Cooperative Credit Agencies and some Government Agencies are extending loans to farmers on easy terms, yet this is not sufficient government must extended largely credit facilities to the farmers on war footing basis to avoid agriculture losses and their suicides. After 1991 the lending pattern of commercial banks, including nationalized banks, to agriculture considerably changed with the result that loan was not easily available and the interest was not affordable. This has forced the farmers to rely on moneylenders and thus pushed up the spending on agriculture. The National Commission for Agriculture, headed by Dr M.S. Swaminathan, also pointed out that removal of the lending facilities and concessions of banks during the post-reform period have accelerated the crisis in agriculture. When the farmers were not able to pay back loan with high interest, they fell into the debt trap. Studies show that most of the farmers’ suicides were due to the debt trap. It is part of the policy of privatization that banks, even nationalized banks, look for profit over their societal responsibilities to the people. Credit is often considered to be the key element in increasing the productivity in agriculture through modernization.
Small and Fragmented Land-Holdings: The Indian agriculture is characterized by millions of marginal and small farmers. The most vulnerable groups at the bottom of the pyramid of the farming population in our country are marginal (less than one hectare of operational holding) and small (greater than one and less than two hectares of operational holding) farmers. Sub-division and fragmentation of the holdings is one of the main causes of our low agricultural productivity and backward state of our agriculture. A lot of time and labour is wasted in moving seeds, manure, implements and cattle from one piece of land to another. Irrigation becomes difficult on such small and fragmented fields. Further, a lot of fertile agricultural land is wasted in providing boundaries. Under such circumstances, the farmer cannot concentrate on improvement.

Shortage of Quality Seeds: Seed is a critical and basic input for attaining higher crop yields and sustained growth in agricultural production. Distribution of assured quality seed is as critical as the production of such seeds. Unfortunately, good quality seeds are out of reach of the majority of farmers, especially small and marginal farmers mainly because of exorbitant prices of better seeds. Some of the multi- national and other companies selling fake and terminal seeds causing farmers’ suicides. In the olden days farmers used to prepare their own seeds for future crops. But, today most of the farmers are dependent on seed companies. Due to this, MNCs and other seed companies are exploiting our farmers.

Manures, Fertilizers and Biocides: Indian soils have been used for growing crops over thousands of years without caring much for replenishing. This has led to depletion and exhaustion of soils resulting in their low productivity. The average yields of almost all the crops are among t e lowest in the world.

Pests, Germs and Weeds: Pests, germs and weeds cause heavy loss to crops which amounted to about one third of the total field produce at the time of Independence. Biocides (pesticides, herbicides and weedicides) are used to save the crops and to avoid losses. The increased use of these inputs has saved a lot of crops, especially the food crops from unnecessary wastage. But indiscriminate use of biocides has resulted in wide spread environmental pollution which takes its own toll.
Inadequate Irrigation Facilities: Out of the gross sown area of 192 million ha, rain fed agriculture contributes to 60 per cent of the gross cropped area and 45 per cent of the total agricultural output. Although India is the second largest irrigated country of the world after China, only one-third of the cropped area is under irrigation. Irrigation is the most important agricultural input in a tropical monsoon country like India where rainfall is uncertain, unreliable and erratic India cannot achieve sustained progress in agriculture unless and until more than half of the cropped area is brought under assured irrigation. This is testified by the success story of agricultural progress in Punjab Haryana and western part of Uttar Pradesh where over half of the cropped area is under irrigation! Large tracts still await irrigation to boost the agricultural output.

Competitiveness of Farmers- It is imperative to raise the agricultural competitiveness of farmers with small land holdings. Productivity improvement to increase the marketable surplus must be linked to assured and remunerative marketing opportunities.

Lack of Mechanization: In spite of the large scale mechanization of agriculture in some parts of the country, most of the agricultural operations in larger parts are carried on by human hand using simple and conventional tools and implements like wooden plough, sickle, etc. Little or no use of machines is made in ploughing, sowing, irrigating, thinning and pruning, weeding, harvesting threshing and transporting the crops. This is specially the case with small and marginal farmers. It results in huge wastage of human labour and in low yields per capita labour force.
Agricultural Marketing: Agricultural marketing still continues to be in a bad shape in rural India. In the absence of sound marketing facilities, the farmers have to depend upon local traders and middlemen for the disposal of their farm produce which is sold at throw-away price. In most cases, these farmers are forced, under socio-economic conditions, to carry on distress sale of their produce locally only. In most of small villages, the farmers sell their produce to the money lender from whom they usually borrow money. According to an estimate 85 per cent of wheat and 75 per cent of oil seeds in Uttar Pradesh, 90 per cent of Jute in West Bengal, 70 per cent of oilseeds and 35 per cent of cotton in Punjab is sold by farmers in the village itself. Such a situation arises due to the inability of the poor farmers to wait for long after harvesting their crops.
Inadequate storage facilities: Storage facilities in the rural areas are either totally absent or grossly inadequate. Under such conditions the farmers are compelled to sell their produce immediately after the harvest at the prevailing market prices which are bound to be low. Such distress sale deprives the farmers of their legitimate income. The Parse Committee estimated the post-harvest losses at 9.3 per cent of which nearly 6.6 per cent occurred due to poor storage conditions alone.
Inadequate transport: One of the main handicaps with Indian agriculture is the lack of cheap and efficient means of transportation. Even at present there are lakhs of villages which are not well connected with main roads or with market centers. Most roads in the rural areas are Kutcha (bullock- cart roads) and become useless in the rainy season. Under these circumstances the farmers cannot carry their produce to the main market and are forced to sell it in the local market at low price. Linking each village by metalled road is a gigantic task and it needs huge sums of money to complete this task. 
Scarcity of Capital: Agriculture is an important industry and like all other industries it also requires capital. The role of capital input is becoming more and more important with the advancement of farm technology. Since the agriculturists’ capital is locked up in his lands and stocks, he is obliged to borrow money for stimulating the tempo of agricultural production. The main suppliers of money to the farmer are the money-lenders, traders and commission agents who charge high rate of interest and purchase the agricultural produce at very low price. All India Rural Credit Survey Committee showed that in 1950-51 the share of money lenders stood at as high as 68.6 per cent of the total rural credit and in 1975-76 their share declined to 43 per cent of the credit needs of the farmers.
Reduction in Food Crops: China produces more than 600 million tonnes of food grain, compared to India’s 251 million tonnes in FY2015, from a cropped area that is less than India’s and with a holding size that is almost half of India’s 1.15 hectares. China also liberated controls on agriculture pricing to a large extent. As a result, its agriculture grew by 7.1 per cent per annum. During 10th plan the growth rate of agriculture was only 2.4 per cent and further declined to 1.6 in the first 4 years of 12th Plan period. As a result, per capita availability of food grains decreased; the growth rate of population became higher than that of food grains, and India started to import food grains at a much higher price than that in the domestic market.

Unemployment in the Agricultural Sector: Unemployment in the agricultural sector increased as agriculture was not considered as a profitable venture due to the fall in the price of farm products. As a result, the number of people who are employed in the primary sector and the area under cultivation decreased, which in turn caused a decline in rural employment. According to the National Sample Survey, the annual rate of growth of the employment in the rural areas was 2.07 per cent in 1984-1987, while it declined to a mere 0.67 per cent in 1993-94 to-2004-05, which corresponds to the period of liberalization. Again during the period1999-00 to 2009-10 employment in primary sector is negative (-0.13 per cent). Hence, it is not only the farmers but also the Dalits and tribals, who heavily depend on agriculture, became unemployed.

Farmers’ Suicides: When agriculture was not yielding remunerative income, the life of the farmers became very desperate. Many of them committed suicide as a last resort. In the last few years, a large number of farmers have committed suicide. Cases of suicides have been reported from states such as Andhra Pradesh, Karnataka, Maharashtra, Kerala, Punjab, Rajasthan, Orissa and Madhya Pradesh. As per the latest data, by 2016, April 116 farmers have committed suicide due to agrarian reasons, with maximum cases reported in Maharashtra, followed by Punjab and Telangana. More than 2,000 farmers’ suicide cases were reported due to agrarian reasons in 2015 with highest number of 1,841 cases in Maharashtra alone.
Remedial Measures:
Pro-active and Prompt Responses: Agriculture in India is largely rain fed and therefore, heavily relies on nature. Factors like excessive monsoon or deficient rainfall, extremely hot and dry weather. Droughts have direct effect on the performance of the agriculture. While these risks can never be entirely eliminated, they can be reasonably addressed through pro-active and prompt responses.

Encouragement to Rural People: Rural people must be encouraged to stay back in their rural areas and to start their enterprises to get the same degree of satisfaction, an urbanite gets while leading his day to day life. The dichotomy between urban and rural societies must diminish leading to total elimination. Modern industries could be split into various components which require simple industrial skills can be manufactured in rural areas by giving them training in addition to their own traditional skills. Planning for rural, urban growth should be such that dichotomy vanishes automatically.
Consolidation of Holdings: The only answer to this ticklish problem is the consolidation of holdings which means the reallocation of holdings which are fragmented, the creation of farms which comprise only one or a few parcels in place of multitude of patches formerly in the possession of each peasant. But unfortunately, this plan has not succeeded much. Although legislation for consolidation of holdings has been enacted by almost all the states, it has been implemented only in Punjab, Haryana and in some parts of Uttar Pradesh. Consolidation of about 45 million holdings has been done till 1990-91 in Punjab, Haryana and western Uttar Pradesh. The other solution to this problem is cooperative farming in which the farmers pool their resources and share the profit.

Use of Manures and Fertilizers: This is a serious problem which can be solved by using more manures and fertilizers. It has been estimated that about 70 per cent of growth in agricultural production can be attributed to increased fertilizer application. Thus increase in the consumption of fertilizers is a barometer of agricultural prosperity. However, there are practical difficulties in providing sufficient manures and fertilizers in all parts of a country of India’s dimensions inhabited by poor peasants. Cow dung provides the best manure to the soils. But its use as such is limited because much of cow dung is used as kitchen fuel in the shape of dung cakes. Chemical fertilizers are costly and are often beyond the reach of the poor farmers. The fertilizer problem is, therefore, both acute and complex. It has been felt that organic manures are essential for keeping the soil in good health. The country has a potential of 650 million tonnes of rural and 160 lakh tonnes of urban compost which is not fully utilized at present. The utilization of this potential will solve the twin problem of disposal of waste and providing manure to the soil. The government has given high incentive especially in the form of heavy subsidy for using chemical fertilizers.  As a result of initiative by the government and due to change in the attitude of some progressive farmers, the consumption of fertilizers increased tremendously.

Extending Irrigation Facilities: Irrigation facilities should be extended by by linking all the rivers in India, while doing so, care must be taken to safeguard against ill effects of over irrigation especially in areas irrigated by canals. Large tracts in Punjab and Haryana have been rendered useless (areas affected by salinity, alkalinity and water-logging), due to faulty irrigation. In the Indira Gandhi Canal command area also intensive irrigation has led to sharp rise in sub-soil water level, leading to water-logging, soil salinity and alkalinity.

Mechanization of Agriculture: There is urgent need to mechanize the agricultural operations so that wastage of labour force is avoided and farming is made convenient and efficient. Agricultural implements and machinery are a crucial input for efficient and timely agricultural operations, facilitating multiple cropping and thereby increasing production. Some progress has been made for mechanizing agriculture in India after Independence. Need for mechanization was specially felt with the advent of Green Revolution in 1960s. Strategies and programmes have been directed towards replacement of traditional and inefficient implements by improved ones, enabling the farmer to own tractors, power tillers, harvesters and other machines. Strenuous efforts are to be made to encourage the farmers to adopt technically advanced agricultural equipments in order to carry farm operations timely and precisely and to economize the agricultural production process.

Measures for Soil Erosion: Large tracts of fertile land suffer from soil erosion by wind and water. This area must be properly treated and restored to its original fertility.

Need for Regulated Markets: In order to save the farmer from the clutches of the money lenders and the middle men, the government has come out with regulated markets. These markets generally introduce a system of competitive buying, help in eradicating malpractices, ensure the use of standardized weights and measures and evolve suitable machinery for settlement of disputes thereby ensuring that the pro­ducers are not subjected to exploitation and receive remunerative prices.

Scientific Storage Facilities: Scientific storage facilities are very essential to avoid losses and to benefit the farmers and the consumers alike. In Telangana, farmers are encouraged to use solar cold storage facilities.

Approach Roads: There is a need for well connected approach roads for farmers to sell their produce in the regulated markets.
Credit facilities: Credit facilities should be easily made available to the farmers, especially since the input cost of agriculture has gone up. The government should seriously think of providing loans to farmers at low rate of interest by banks and other financial institutions. In fact, the M.S. Swaminathan Commission for Agriculture has recommended a low rate of four per cent interest for the farmers.

Increase in investment & Expenditure in Agriculture Sector by Government: The government should increase its investment and expenditure in the agriculture sector. One reason for the agricultural stagnation is low government expenditure. Investment in agriculture and its allied sectors, including irrigation, transport, communication and farm research, should be significantly increased, and the government should aim at integrated development of the rural areas. Effective implementation of National Rural Employment Guarantee Scheme can also become a means of revival of the rural economy as agriculture is already overcrowded.

Support Price: According to the Swaminathan Commission, unless agriculture is made a profitable enterprise, its present crisis cannot be solved. The Commission has suggested 50 per cent more of the total production cost as supportive price for food grains. So, there is a need for periodic revision of the procurement prices for farm produce. This will help the farmers to meet the increasing expenses for farm inputs and ensure at least remunerative income.

Revise SEZ Policy: Governments are more interested in pleasing the corporate sector (e.g., SEZ policy) rather than helping agriculture sector which bears 50% of the burden, while the European Union is considering the release of additional land for agriculture-set aside under 1992 regulation to control excess capacity. The government should not acquire fertile agricultural land for SEZs and revise the policy on Special Economic Zones as it goes against the interest of farmers and the agricultural sector. The recommendations of the Swaminathan Commission not to acquire land suitable for agriculture for non-agricultural purposes, to give adequate compensation for the acquired land and to distribute surplus land to the landless farmers should be seriously taken into account when the policy of SEZs is reframed.

Implementation of Land Reforms: According to Amartya Sen, the Nobel Laureate, though the economic growth rate of India is impressive, India cannot play a significant role in the global economic scenario unless it completes land reforms. Steps should be taken to implement land reforms which were not implemented in most States.

Lack of crop insurance mechanism to Farmers – Despite having approximately 60 per cent of the gross cropped area rain fed, agricultural insurance mechanism in India is very weak. In India, the net sown area is around 140 million hectare and the gross cropped area hovers between 190-200 million hectare, but insured area is only 15 million hectare. However, the US and China are the world’s biggest crop insurers. In the US, the state supports almost 70 per cent of premiums paid by farmers. In China, the state used to support 50-65 per cent of premiums, which was raised to almost 80 per cent in 2013.

Revival of agriculture: (a) To achieve 4% growth and equity in agriculture, the supply and demand side constraints have to be removed. The support systems have to be tuned to improve productivity and incomes of farmers with emphasis on small and marginal farmers and dry land areas. (b) Agriculture policies have to keep in mind increasing risk and uncertainty due to liberalization, gender sensitive as the share of women is increasing and on cost of production. (c) Infrastructure including irrigation, natural resource management, research and extension, inputs including credit, diversification by maintaining food security,  marketing, regional planning have to be focused for higher agriculture growth.
Subsidies: Developed countries, while they offer subsidies to their farmers and reluctant to cut them. At the same, they argue to cut subsidies to farmers in developing countries like us. Hence, India should stress on the implementation of Uruguay round agreements to reduce subsidies and other distortions caused by policies pursued by developed counties. 
Demand Side Issues: (a) Adequate insurance is needed for those carrying out diversification with in agriculture or from agriculture to non- agriculture. (b) Social security should be provided for the unorganized workers also.
Rural Non-Farm Sector: The ultimate solution for reduction on land is to improve rural non-farm sector and planned urbanization. Chinese experience shows that Globalization with better initial conditions has increased employment and incomes for workers which in turn was due to rural diversification.   
Special Economic Zones (SEZs): The Government of India is allotting agricultural lands as SEZs to industrialists. The examples of Nandigram in West Bengal and Rajasthan (“Arre arre chor aaya re…SEZ layare!”. So goes rallying cry) may be cited, where farmers resisted against governments. This should not happen in future.
Political Economy of Agriculture: There is a feeling that governments (Central and State) promise a lot for agriculture without much allocations and implementation. Hence, the governments should come up to the expectations of farmers.
Compensation should be given to all those farmers’ who have suffered even one-third loss,  by relaxing the existing criterion of minimum damage of at least 50 per cent.

Direct Cash Transfer- We should reorient food and fertilizer subsidies by moving to cash transfers to identified beneficiaries. This will help in reducing leakages and will also help in curbing corruption and will make process more transparent.

Open Markets - Farmers must have the freedom to sell their produce to anyone, anywhere. Taxes, levies and commissions on agricultural commodities across states need to be rationalized to less than 4 per cent, currently it is ranging from less than 2 per cent in Gujarat to about 14.5 per cent in Punjab. It is advised  to encourage the farmers to sell their produce in the similar way like “Rythu Bazars” i.e. directly selling to the consumers or all the medium and small farmers should sell their produce by establishing cooperative markets themselves in order to eliminate “middle men”.

Special Agriculture Zones (SAZs) - SAZs should be designed to conserve prime farm land so that we do not revert to a ship-to-mouth existence.

Mandatory Rainwater Harvesting in all farms for crop-life-saving irrigation if there is a prolonged dry spell. Wherever farms are small, community rainwater harvesting can be promoted. Equity in water-sharing is essential for cooperation in water-saving. Some method of community management, like a pani panchayat (Pani Panchayat is a voluntary activity of a group of farmers engaged in the collective management (harvesting and distribution) of surface water and groundwater (wells and percolation tanks), will be useful.
Seed Banks: In case there is a prolonged dry spell between rains, seedlings may wither. Therefore, seed banks with alternative short-duration crops should be built up and the choice of alternative crops could be according to both home needs and market demand.
Contingency plans to adapt to different weather probabilities should be prepared jointly by agriculture universities and farmers’ associations. Women farmers in particular should be consulted. Unless such joint work is promoted, the technical advice may remain on paper.

Our grain reserve is dwindling and climate change is posing unforeseen threats. Thus, codes of coping with weather probabilities like drought, flood and good weather should be prepared jointly by scientists and farmers. Eternal vigilance is the price of stable agriculture and sustainable food security. This will call for an inter-disciplinary monsoon management strategy.

To Tackle the Problem of Farmer’s Suicides:
·         Provide affordable health insurance and revitalize primary healthcare centres. The National Rural Health Mission should be extended to suicide hotspot locations on priority basis.
·         Set up State level Farmers' Commission with representation of farmers for ensuring dynamic government response to farmers' problems.

·         Restructure microfinance policies to serve as Livelihood Finance, i.e. credit coupled with support services in the areas of technology, management and markets.

·         Cover all crops by crop insurance with the village and not block as the unit for assessment. Private Sector insurance agencies can be invited to bid for the share of insurance at the lowest premium and fastest settlement of claims at the block level, without any plot-to-plot assessment. Farmers’ accounts can be linked to pixel-based mapping of their fields and satellites can be used, with agronomic experts to gauge the extent of damages.
·         Provide for a Social Security net with provision for old age support and health insurance.

·         Promote aquifer recharge and rain water conservation. Decentralise water use planning and every village should aim at Jal Swaraj with Gram Sabhas serving as Pani Panchayats.

·         Ensure availability of quality seed and other inputs at affordable costs and at the right time and place.

·         Recommend low risk and low cost technologies which can help to provide maximum income to farmers because they cannot cope with the shock of crop failure, particularly those associated with high cost technologies like Bt cotton.

·         Need for focused Market Intervention Schemes (MIS) in the case of life-saving crops such as cumin in arid areas. Have a Price Stabilisation Fund in place to protect the farmers from price fluctuations.
·         Need swift action on import duties to protect farmers from international price.

·         Set up Village Knowledge Centres (VKCs) or Gyan Chaupals in the farmers' distress hotspots. These can provide dynamic and demand driven information on all aspects of agricultural and non-farm livelihoods and also serve as guidance centres.

·         Public awareness campaigns to make people identify early signs of suicidal behavior.

To Improve Competitiveness of Farmers:
·         Promotion of commodity-based farmers' organisations such as Small Cotton Farmers' Estates to combine decentralised production with centralised services such as post-harvest management, value addition and marketing, for leveraging institutional support and facilitating direct farmer-consumer linkage.

·         Improvement in implementation of Minimum Support Price (MSP). Arrangements for MSP need to be put in place for crops other than paddy and wheat. Also, millets and other nutritious cereals should be permanently included in the PDS.

·         Central/State/Local Governments should give advice to farmers regarding various crops suited to their relevant areas and provide information about agricultural marketing, storage and processing of agriculture produce need to shift to one that promotes grading, branding, packaging and development of domestic and international markets for local produce, and move towards a Single Indian Market.

·         MSP should be at least 50% more than the weighted average cost of production.


·         To achieve 4% growth in agriculture and raise incomes of the farmers.
·         Ensuring that agricultural growth responds to food security needs
·         sustainability of agriculture by focusing on environmental concerns.  
·         Raising agricultural productivity per unit of land
·         Reducing rural poverty through a socially inclusive strategy that comprises both agriculture as well as non-farm employment
To fulfill these challenges/Goals, the following actions are required:
(1). Price Policy; (2). Investment in infrastructure & Subsidies; (3) Land and Water Management including land issues; (4) Inputs including agricultural credit and technology; (5) Domestic and International trade Reforms; (6) Diversification, marketing and rural non-farm sector; (7). Sharing growth is also important. Ere one has to concentrate on small and marginal farmers, lagging regions and women. Institutions are needed in all these aspects.
Government Policies:

·         Last year budget 2016–17, planned several steps for the sustainable development of agriculture.  It proposed a slew of measures to improve agriculture and increase farmers’ welfare such as 2.85 million hectares to be brought under irrigation, Rs 287,000 crore grant in aid to be given to Gram Panchayats and municipalities and 100 per cent village electrification targeted by May 01, 2018.
·         The Government of India recognizes the importance of micro irrigation, watershed development and Pradhan Mantri Krishi Sinchai Yojana’; thus, it allocated a sum of Rs 5,300 crore for it. It urged the states to focus on this key sector.
·         The state governments are compelled to allocate adequate funds to develop the agriculture sector, take measures to achieve the targeted agricultural growth rate and address the problems of farmers.
·         To improve soil fertility on a sustainable basis through the soil health card scheme.
·         Other steps include improved access to irrigation through ‘Pradhanmantri Gram Sinchai Yojana’, enhanced water efficiency through `Per Drop More Crop’.
·         Continued support to MGNREGA
·         The creation of a unified national agriculture market to boost the incomes of farmers.
·         To raise the existing norms of compensation by a 50 per cent. Existing compensation amount is Rs 9,000 per hectare for irrigated crop, Rs 4,500 per ha for un-irrigated crop and Rs 12,000 per ha for perennial crop.
Future of  Agriculture in India: The prospects for Indian agriculture are good. The agriculture sector in India is expected to generate better momentum in the next few years due to increased investments in agricultural infrastructure such as irrigation facilities, warehousing and cold storage. Factors such as reduced transaction costs and time, improved port gate management and better fiscal incentives would contribute to the sector’s growth. And also, the growing use of genetically modified crops will likely improve the yield for Indian farmers. Demand will grow fast and if we create the correct incentive and organization systems the Indian farmer will not fail us as he has responded well in the past when our policies were supportive.

Conclusion: The next of stage of reforms in agriculture has to focus on developing institutions for better delivery systems. Agriculture can be ignored at our own peril. If we want inclusive growth, both Central and State Governments have to focus on agriculture sector. Let us hope that Government has the political will to implement the policies effectively and help the farmers without testing their patience. The words of Dr M.S. Swaminathan are relevant here: “In a country where 60 per cent of people depend on agriculture for their livelihood, it is better to become an agricultural force based on food security rather than a nuclear force.”

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