Monday, 24 April 2017

GST IN INDIA – AN OVER VIEW

-* Dr. S. Vijay Kumar
                                            
           The Goods and Service Tax (GST) is a Value Added Tax (VAT) to be implemented in India from July, 2017. It is a comprehensive tax mechanism where in all major indirect taxes are clubbed into one, whether they are levied on services (service tax) or goods (excise and vat). Amalgamating several Central and State taxes into a single tax would mitigate cascading or double taxation, facilitating a common national market. In simple terms, GST means the state will share the Central Sales Taxes that it is currently receiving fully with the Center. The Center in return will share the Service Tax with the States. Presently, there are around 160 countries in the world that have implemented GST/VAT in some form or other. In some countries, VAT is the substitute for GST, but conceptually it is a destination based tax levied on consumption of goods and services. France was the first in the world to introduce GST or Goods and Services tax in 1954. Presently, only Canada has a dual GST model (somewhat similar to the Dual GST Model that India is going to implement).

Brief Review of Literature of GST in India: In 2000, the Vajpayee Government started discussion on GST by setting up an empowered committee. An announcement was made by P. Chidambaram, the then Union Finance Minister, during the central budget of 2007–2008 that it would be introduced from April 1, 2010. After this announcement, the Empowered Committee of State Finance Ministers decided to set up a Joint Working Group on May 10, 2007, with the Adviser to the Union Finance Minister and the Member-Secretary of Empowered Committee as co-conveners and the concerned Joint Secretaries of the Department of Revenue of Union Finance Ministry and all Finance Secretaries of the states as its members. Centre Included Compensation in GST Constitutional Amendment Bill, accordingly compensation will be paid to the states for revenue loss on account of rolling out the new indirect tax regime. Liquor has been completely kept out of the GST. The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014 was introduced in the Lok Sabha by Finance Minister Arun Jaitley on 19 December 2014, and passed by the House on 6th  May 2015. In the Rajya Sabha, the bill was referred to a Select Committee on 14 May 2015. On 3rd, August 2016, the Constitution (122nd Amendment) Bill, 2014 was approved by the Rajya Sabha with 203 votes in favour and none against, after a seven-hour debate during which a rare bonhomie was witnessed among the ruling and the opposition parties. Finally, it was declared by Finance Minister, Mr. Arun Jaitley that GST will come in to force in our country from 1-07-2017.
*Head & Professor (Associate) of Economics (Retd.), Kakatiya Govt. (UG&PG) College (NAAC “A” Grade), Bharat Jyoti Awardee & Ex-Member of Board of Studies, Kakatiya University, Warangal (Telangana State).

Salient Features of GST:
·         GST is the India's biggest tax reform. There would be a single tax policy across the country that will allow free movement of goods and services to each and every state of India. The cost of the product throughout the country would be almost the same and customers will have more money in their pocket to spend. This will likely boost India’s GDP by 1 to 1.5 percent, according to experts.
·         Exports will be zero-rated and imports will be levied the same taxes as domestic goods and services adhering to the destination principle.
·         Since GST will cut down a large number of taxes imposed by the central government, this will lead to the creation of a unified market, which would facilitate seamless movement of goods across states and reduce the transaction cost of businesses.
·         The commodities that are exempted from GST are potable alcohol, aviation turbine fuel etc.
  • The GST shall have two mechanisms: one levied by the Centre (hereinafter referred to as Central GST), and the other levied by the States (hereinafter denoted to as State GST). Rates for Central GST and State GST would be set appropriately, reflecting revenue considerations and acceptability. This twofold GST model would be implemented through manifold statutes (one for CGST and SGST statute for every State).
  • Though, the basic structures of law such as chargeability, definition of taxable event and taxable person, measure of levy including valuation provisions, basis of classification would be uniform across these statutes as far as practicable.
  • The Central GST and the State GST would be applicable to all transactions of goods and services made for a consideration except the exempted goods and services, goods which are outside the purview of GST and the dealings which are below the prescribed threshold limits.
  • The Central GST and State GST are to be paid to the accounts of the Centre and the States independently. It must be ensured that account-heads for all services and goods would have indication whether it relates to Central GST or State GST.
  • Since the Central GST and State GST are to be treated distinctly, taxes paid against the Central GST shall be permitted to be taken as input tax credit (ITC) for the Central GST and could be utilized only against the payment of Central GST.
  • Cross utilization of ITC (Input Tax Credit) between the Central GST and the State GST would not be permitted except in the case of inter-State supply of goods and services under the IGST model.
  • Preferably, the problem related to credit accumulation on account of refund of GST should be evaded by both the Centre and the States except in the cases such as exports, purchase of capital goods, input tax at higher rate than output tax where, again refund/adjustment should be completed in a time bound manner.
  • In order to make it practical, uniform procedure for collection of both Central GST and State GST is recommended in the respective legislation for Central GST and State GST.
  • The supervision of the Central GST to the Centre and for State GST to the States would be given. This would infer that the Centre and the States would have parallel jurisdiction for the entire value chain and for all taxpayers on the basis of thresholds for goods and services prescribed for the States and the Centre.
  • The present threshold prescribed in different State VAT Acts below which VAT is not applicable varies from State to State. A uniform State GST threshold across States is required. It is considered that a threshold of gross annual turnover of Rs.10 lakh both for goods and services for all the States and Union Territories may be approved with satisfactory compensation for the States (particularly, the States in North-Eastern Region and Special Category States) where lower threshold had prevailed in the VAT regime. To respect the interest of small traders and small scale industries and to avoid dual control, the States also considered that the threshold for Central GST for goods may be kept at Rs.1.5 crore and the threshold for Central GST for services may also be appropriately high. It may be stated that even now there is a separate threshold of services (Rs. 10 lakh) and goods (Rs. 1.5 crore) in the Service Tax and CENVAT.
  • The States has opinion that Composition/Compounding Scheme for the purpose of GST should have an upper ceiling on gross annual turnover and a floor tax rate with respect to gross annual turnover. Particularly, there would be a compounding cut-off at Rs. 50 lakh of gross annual turnover and a floor rate of 0.5% across the States. The scheme would also permit option for GST registration for merchants with turnover below the compounding cut-off.
  • The taxpayer would need to submit periodical returns, in common format as far as possible, to both the Central GST authority and to the concerned State GST authorities.
  • Each taxpayer would be allotted a PAN-linked taxpayer identification number with a total of 13/15 digits. This would bring the GST PAN-linked system in line with the predominant PAN-based system for Income tax, facilitating data exchange and taxpayer compliance.
  • For the convenience of tax payer, functions such as assessment, enforcement, scrutiny and audit would be undertaken by the authority which is collecting the tax, with information sharing between the Centre and the States.
Why are we getting 3 taxes -SGST, CGST, IGST?
India is a federal country where both the Centre and the States have been assigned the powers to levy and collect taxes. Both the levels of Government have distinct responsibilities to perform, as per the Constitution, for which they need to raise resources. A dual GST will, therefore, be keeping with the Constitutional requirement of fiscal federalism. The Centre and States will be simultaneously levying GST. 3 taxes will be implemented to help tax-payers to take credit against each other thus ensuring “One nation one tax”. 
Advantages of GST:
  • The tax structure will be lean and simple.
  • The whole Indian market will be an incorporated market which may transform into lower business costs. It can simplify seamless movement of goods across states and reduce the transaction costs of businesses.
  • It is beneficial for export businesses. Because it is not applied for goods/services which are exported out of India.
  • It's implementation has long term benefit. The lower tax burden could translate into lower prices on goods for customers.
  • The Suppliers, manufacturers, wholesalers and retailers are able to recover GST suffered on input costs as tax credits. This decreases the cost of doing business, thus enabling reasonable prices for customers.
  • It can bring more transparency and better compliance.
  • GST implementation can control corruption. Number of departments (tax departments) will reduce which in turn may lead to less corruption.
  • More business persons will come under the tax system thus broadening the tax base. This may lead to better and more tax revenue collections.
  • Companies which are under unorganized sector will come under tax area.
·         The procedure of GST registration would also be made simple, thereby improving the ease of starting a business in India.
  • GST will lead to the elimination of multiple taxes like excise, CST, VAT, service tax calculations.
  • For both goods and services and less confusion in determining what constitutes a good or what is a service.

  • Avoiding double taxation means the consumer pays tax on an item, on which already government has collected tax from the manufacturer under some other head.

·         Reduces number of hidden Taxes. Currently hidden taxes actually push up the    taxes on a majority of goods to anywhere in the 27% to 32% range. But with GST coming in, the % tax number is much lesser.

  • GST is a transparent tax and also reduce number of indirect taxes. With GST implemented a business premises can show the tax applied in the sales invoice.

  • GST will not be a cost to registered retailers therefore there will be no hidden taxes and the cost of doing business will be lower.

  • Benefit people as prices will come down which in turn will help companies as consumption will increase.

  • In the GST system, when all the taxes are integrated, it would make possible the taxation burden to be split equitably between manufacturing and services.

  • GST will be levied only at the final destination of consumption based on VAT principle and not at various points (from manufacturing to retail outlets). This will help in removing economic distortions and bring about development of a common national market.

·      Benefit of GST for the Centre and the States. According to experts, by implementing the GST, India will gain $15 billion a year. This is because, it will promote more exports, create more employment opportunities and boost growth. It will divide the burden of tax between manufacturing and services.

·         Benefit of GST for Individuals and Companies. In the GST system, taxes for both Centre and State will be collected at the point of sale. Both will be charged on the manufacturing cost. Individuals will be benefited by this as prices are likely to come down and lower prices mean more consumption, and more consumption means more production, thereby helping in the growth of the companies.

·         Easier Tax Compliance - instead of having to deal with many different taxation laws and spending a lot of time in legal advice and compliance, businesses will now need to pay GST only. This is a big relief and it creates simplicity and predictability in business. The GST is being introduced to create a common market across states, not only to avoid enfeebled effect of indirect tax but also to improve tax compliance.

·         Price reduction as credit of input tax is available against output tax.

·         Simplified and Cost Saving system as procedural cost reduces due to uniform accounting for all types of taxes. Only three accounts; CGST, SGST, IGST have to be maintained.GST is structured to simplify the current indirect system. It is a long term strategy leading to a higher output, more employment opportunities, and economic boom.

·         GST is beneficial for both economy and corporations. The reduced tax burden on companies will reduce production cost making exporters more competitive.

·         Reduced Tax Evasion - the difference between present system and GST is that the present system gave an incentive to evade taxes (because excise duty was a cost for traders, thereby making it attractive for them to purchase without invoice). With GST, this incentive will vanish. Therefore, tax evasion will fall.

·         More Money to Poor States - present taxation system was origin based, so tax collection used to go to manufacturing heavy states (Tamil Nadu, Gujarat etc.) Now, the tax collection of poor states (Bihar, Madhya Pradesh etc) will also rise. This gives an opportunity for all the poor states to develop.

·         Tax Bias for Location will go - many businesses create depots and godowns in different states simply because there is a difference in tax rates. Now that GST will come, this difference between states will vanish. It would help to remove the tax difference as a bias, thereby helping businesses.
·         The current indirect system is so burdensome that the trucks have to stop at check posts and toll plazas for weeks to get the clearance to enter the state which considerably lessen their average distance travelled per day. With the application of the GST, the trucks need not to stop on check posts. Therefore, it will reduce the buffer stock. In this way, it will increase the operating proficiency of the companies. Single tax will also reduce managerial costs of companies.
·         Some economic evaluators inferred that GST will eliminate flowing effect of taxes rooted in cost of production of goods and services and will provide seamless credit throughout value chain. This will considerably decrease cost of home-grown goods and will encourage ‘Make in India’. The sectors which have long value chain from basic goods to final consumption stage with operation spread in multiple states such as FMCG, pharma, consumer durables, automobiles and engineering goods will be the major recipients of GST system.
Disadvantages of GST:
·         Some Economist say that GST in India would impact negatively on the real estate market. It would add up to 8 percent to the cost of new homes and reduce demand by about 12 percent.
·         Some Economist says that CGST (Central GST), SGST (State GST) are nothing but new names for Central Excise/Service Tax, VAT and CST.

·         GST is a form of Value Added Tax that would include all the indirect taxes into one throughout all the regions of India. That means every state will have the same GST rate unlike now where the states can fix their own rates.

Impact of GST:
On 3rd November,2016 a four tier GST rate structure has been passed, the final slab rates being agreed upon are 5%,12%,18% and 28%.

·         Zero rated items : Food grains used by common people.

·         5% Rate : Items of mass consumption including essential commodities will have low tax incidence.

·         12% and 18 % Rate :  Two standard rates have been finalized as 12% and 18%.

·         28% Rate : White goods like Air conditioners, washing machines, refrigerators, soaps and shampoos etc. that were taxed at 30-31% shall be now taxed at 28%.

·         Services that are now taxed at 15% shall be taxed at a higher rate of GST @ 18%. The tax rate on Gold is yet to be decided.

·         Demerit goods like tobacco, tobacco products, pan masala,aerated drinks and luxury cars shall be charged at the highest rate of 28%. An additional cess on some luxury goods shall also be imposed.
·         Taxes on service would increase from present 14% to 20%
·         Taxes on retail sale would go up from present 12.5% to 20%
Local Taxes (Counter Vailing Duty) on imported items would go up by around from present 16% to 20%
·         The manufacturers and service providers have to register separately in each State.
·         There will be a dual control on the GST where State and Central Authorities will monitor all supply of goods and services
·         All invoices has to be captured online by GSTN 
Positive Impact of GST on the Common man :
·         A unified tax system removing a bundle of indirect taxes.
·         Less tax compliance.
·         Removes cascading effect of taxes.
·         Manufacturing costs will be reduced, hence prices of consumer goods likely to come down.
·         Due to reduced costs some products like cars, FMCG (Fast Moving Consumer Goods) etc. will become cheaper.
·         Lower prices will increase demand/consumption. Increased demand will lead to increase supply. Hence, rise in production of goods. The increased production will lead to more job opportunities in the long run. But, this can happen only if consumers actually get cheaper goods.
·         A unified tax regime will lead to less corruption which will indirectly affect the common man.
Hence, this is possible only if the benefit is actually passed on to the consumers. There are other factors also like the sellers profit margin that determine the final price of goods.GST alone does not determine the final price of goods.
Negative Impact of GST on the Common man :
·         Services will become expensive. e.g. Telecom, banking, airline etc.
·         Being a new tax, it will take some time for the people to understand its implications.
·         It is easy to say, but there are always some complications attached. It is a consumption based tax, so in case of services the place where service is provided needs to be determined.
·         If actual benefit is not passed to consumer and seller increases his profit margin, the prices of goods can also see a rising trend.

Impact of GST on Small Businesses (Start up):
1. Simple Taxation: Currently, a startup spends a lot of time and energy to manage the various taxes at various points. Adhering to different regulations at different States make the process very complex. GST will simplify the process by integrating all taxes, making the process of paying tax simpler
2. Ease of Registration: Any new business needs to have a VAT registration from sales tax department. A business operating in many States has to face a lot of issues regarding the different procedures and fees in each state. GST will bring about a uniformity in process and centralised registration that will make starting business and expanding in different States much simpler.
3.Higher Exemption : As per the current indirect tax structure, any business with a turnover of more than Rs five lakh has to get VAT registration and pay VAT. GST will make this limit higher, to up to Rs 10 lakh and, further to it, businesses with turnover between Rs 10 and 50 lakh will be taxed at a lower rates. This will bring rejoice to newly established start up and small businesses.
4. Businesses in Both Sales and Services: Businesses like restaurants, which fall under both sales and service taxation, have to calculate the VAT and service tax on both items separately. This makes the calculations process very complex. GST will not distinguish between sales and services, and thus the tax calculation will be done on total.
5. Saving in Logistics Cost and Time : Many transport vehicles get delayed during movement across States due to small border tax and check post issues. Interstate movement will become cheaper and less time consuming, as these taxes will be eliminated. The whole Indian market opens up for manufacturers as interstate supply becomes tax-neutral. This will also bring down costs associated with maintaining high stocks, as there will be undisrupted movement of goods. As per a CRISIL analysis, GST can reduce logistics costs of companies producing non-bulk goods (comprising all goods besides the primary bulk commodities transported by railways – coal, iron ore, cement, steel, food grains, fertilizers) by as much as 20 percent.
Major Challenges of GST system:

 

·         To implement the bill, there has to be lot changes at administration level. 
·         GST, being a consumption-based tax, states with higher consumption of goods and services will have better revenues. So, the co-operation from state governments would be major factors for the effective implementation of GST.
·         It is assessed that since GST substitutes many flowing taxes, the common man may get benefit after implementation. But it depends on rates fixed on the GST.
·         It is assumed by experts that the most substantial opposing impact for consumers may arose because petroleum is excluded of the GST domain. Subsequently, the tax costs (taxes other than GST will continue) could have a flowing impact on the whole economy. According to news reports, economic adviser has mentioned that "bringing electricity and petroleum within the scope of GST could make Indian manufacturing more competitive". Additionally, certain challenges in-built in the GST structure, such as a GST levy on maximum retail price (MRP) for packaged goods and GST on barter exchanges, will trouble to the common man.
How GST Will Operate?
Sale in one State, Resale in the Same state:
Let us suppose, goods are moving from Hyderabad to Warangal. Since it is a sale within a State, CGST and SGST will be levied. The collection goes to the Central Government and the State Government. Then the goods are resold from Warangal to Khammam. This is again a sale within a State, so CGST and SGST will be levied. Sale price is increased so tax liability will also increase. In the case of resale, the credit of input CGST and input SGST is claimed and the remaining taxes go to the respective governments.
Sale in One State, Resale in Another State:
In this case, goods are moving from Adilabad to Warangal. Since it is a sale within a State, CGST and SGST will be levied. The collection goes to the Central Government and the State Government. Later the goods are resold from Warangal to Vijayawada (outside the State). Therefore, IGST will be levied. Whole IGST goes to the Central Government.
Against IGST, both the input taxes are taken as credit. But, the SGST never go to the Central Government, still the credit is claimed. This is the crux of GST. Since this amounts to a loss to the Central Government, the State Government compensates the Central Government by transferring the credit to the Central Government.
Sale Outside the State, Resale in that State:
In this case, goods are moving from Delhi to Agra. Since it is an interstate sale, IGST will be levied. The collection goes to the Central Government. Later the goods are resold from Agra to Lucknow (within the State). Therefore, CGST and SGST will be levied.
However, GST is a long term strategy and the positive impact shall be seen in the long run only. This can happen if GST is introduced at a nominal rates to reduce the overall tax burden of the final consumers. The rate of GST also plays a crucial role in deciding the actual impact of GST on the common man.
To conclude, we can say that GST is a major breakthrough in the Indian taxation system. GST is an indirect tax which entails that the tax is approved till the last stage where it is the purchaser of the goods and services who bears the tax. The GST will substitute most other indirect taxes and synchronize the differential tax rates on mass-produced goods and services. The government of India claims that GST will enhance Indian GDP by 2%. With the enactment of GST, customers will have funds to spend because of lower tax rates. It can be seen that it will completely change the indirect tax system in India. Let us hope this One nation, One tax proves to be a game changer in a positive way and proves to be beneficial to the common man.






Tuesday, 4 April 2017

REVISED PAPER ON INDIAN AGRICULTURE IN THE CONTEXT OF GLOBALIZATION: ISSUES, CHALLENGES AND GOVERNMENT POLICIES

                                                                                                                            
-*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).
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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
                                            1950-51
                                            1990-91
Sector
Share of GDP (%)

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

Distribution of working population (%)
Agriculture & Allied Activities
53.1
72.1
Agriculture  &
Allied Activities
29.6
66.9
Industry
16.6
10.6
Industry
27.7
12.7
Services (including construction)
30.3
17.3
Services
42.7
20.4
    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:

                                               1991
                                             2016
Sector
Share of GDP (%)
(2004-05 Prices)
Distribution of working population (%)
Sector
Share of GDP (%)
(2004-05 Prices)
Distribution of working population (%)
Agriculture & Allied
28.54
67.5
Agriculture & Allied
16.1
49.0
Industry
27.33
11.7
Industry
29.5
20.0
Services
43.91
20.4
Services
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
    Agriculture
          &
  Allied Sectors
Pre - Green Revolution:   1951-52 to 1967-68
3.69
        2.54
Green Revolution Period:1968-69 to 1980-81
3.52
        2.44
Technology Dissemination Period:1981-82 to1990-91
5.40
        3.52
Early Reform Period:  1991-92 to 1996-97
5.69
        3.66
Ninth Plan Period:       1997-98 to 2001-02

5.52
        2.50
Tenth Plan Period :      2002-03 to 2006-07

7.77
        2.47
Eleventh Plan Period : 2007-08 to 2011-12

8.40
        4.10
Twelfth Plan Period:    2012-13 to 2012-17 (Expected)
                                                        2015-16
 (As on 6/01/2017) CSO Forecast: 2016-17
7.90
7.60
7.10
        1.60
        1.2
        4.1

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
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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):
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Year          Agricultural Imports             Total National Imports   % of National Imports
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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. It is the fault of Union Government for reduction in subsidies without preparing the farmers to face the challenges of “Globalization”. 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
Country
Subsidy per Hectare
Percentage of population depending on Agriculture
USA
$32
5
Japan
$35
4
China
$30
24
India
$14
59
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. There is a failure on the part of Agricultural Research and Extension Services in informing and instructing the farmers for the improvement of agriculture.

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. 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 extend 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 and fake pesticides 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. This is also one of the reasons of farmers’ suicides in India.

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 the lowest in the world. Post - green revolution has led to increase in utilization artificial fertilizers and pesticides in place of natural manures and methods for increase in yield/acre. Which resulted  increase in cost of production of agriculture.

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. Government must support our farmers in every aspect to increase their productivity, marketing their produce and eliminate middle men in this era of globalization to withstand in the global competition.

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.
Increasing Afforestation, reforestation and stopping deforestation to increase ground water level and rain fall for irrigation.
Encouraging the farmers to use natural manures instead of chemical fertilizers.
There should be State level Agricultural Commissions in addition to a National Agricultural Commission and Governments must include social scientists also in these committees to research and evaluate the social impact on our farmers so that solutions may be found for many agricultural problems including farmers suicides.
It is the “need of the hour” Center and Governments MUST assurance to our farmers that Government is behind them in all times and especially in difficult times.
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.

Challenges/Goals:

·         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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