(IGP) GS Paper 1 - Economic & Social Development - "Agriculture"

Integrated Guidance Programme of General Studies for IAS (Pre)

Subject - Economic and Social Development
Chapter - Agriculture


With about 14.5% contribution (2011) to the gross domestic product (GDP), agriculture provides livelihood support to about two-thirds of country’s population. The sector provides employment to 57% of country’s work force and is the single largest private sector occupation. Agriculture accounts for about 10% of the total export earnings and provides raw material to a large number of Industries (textiles, silk, sugar, rice, flour mills, milk products). Besides, the rural areas are the biggest markets for low-priced and middle-priced consumer goods, including consumer durables.

Accounting for Success in Agriculture

The main factors for the all-round success of agriculture have been

  • increase in net sown area
  • expansion of irrigation facilities
  • land reforms, especially consolidation of holdings
  • development and introduction of high yielding seeds
  • Fertilizers
  • improved implements and farm machines
  • technology for pest management
  • price policy based on MSP and procurement operations
  • infrastructure for storage/cold storage
  • improvements in trade system
  • increase in investments, etc.   

Crisis and Challenge in Agriculture

Low farm incomes due to inadequate productivity growth, high prices of inputs and lack of credit at reasonable rates pushed many farmers into crippling debt. Uncertainties have increased- prices, quality of inputs, weather and pests which, coupled with unavailability of proper extension and risk insurance have led farmers to despair. This has also led to widespread distress migration, a rise in the number of female headed households in rural areas and a general increase in women’s work burden and vulnerability.

Initiative taken by Government for Agricultural Growth

In recent years, several new initiatives have been taken which included:

  • Announcement of National Policy for Farmers (2007).
  • Kisan Credit Card (1998-1999).
  • Creation of a Watershed Development Fund
  • Bharat Nirman
  • National Horticulture Mission
  • Technology Mission on Cotton (1999-2000).
  • Implementation of the National Agriculture Insurance Scheme/Rashtriya Krishi Bima Yojana.
  • programmes for elimination of post-harvest losses
  • Lifting some of the restrictions and controls on the movement and storage and exports of foodgrains / agri produce.
  • De-reservation of the manufacture of some farm implements/machines from the small scale industries sector

Capital Formation in Indian Agriculture

Capital formation is one of the basic factors for increasing production. It means addition to the physical stock of dams, roads, power plants and other infrastructure. This is all the more important in agriculture where we are faced with the need of increasing production against vagaries of weather to keep pace with the increase in population.

Government stepped up public investment significantly for rural roads and rural employment programme Major measures taken for agriculture development through enhanced capital formation include the following:

  • A roadmap for agriculture diversification has been prepared with focus on horticulture floriculture, animal husbandry and fisheries.
  • Strengthening of agriculture marketing infrastructure
  • National scheme for the repair, renovation and restoration of water bodies.
  • Focus on micro irrigation, micro finance micro insurance and rural credits.
  • Setting up a Knowledge Centre in every village.
  • Setting up a National Fund for strategic agricultural research etc.

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Soil Health

  • Soil health is a critical factor for agriculture Productivity and human health. The following steps are being taken to improve it.
  • Government will issue Soil Health Cards to all farmers in the Country detailing the deficiencies in the soil and the amount of fertilizers needed, Soil Health Cards would give farmers information about the quality of the soil and what is the normal quantity of fertilizer to be used for a particular crop.

Extension services

  • The National Commission on Farmers (NCF) has drawn attention to the knowledge deficit that exists at present and explains much of the difference between yields realised in experiments and what farmers actually get. One reason for this is the virtual collapse of extension services in most States.
  • The Department of Agriculture and Cooperation, along with NABARD, has introduced a scheme for establishment of agri-clinics / agri-business centres / ventures by the agricultural graduates.
  • The ICAR is also associated in agriculture extension activities not only through KVKs but also Institute Village Linkage Programme (IVLP) and also its institutes / centres all over the country. The interaction of KVKs activities with the State / district extension machinery is being strengthened. It is planned to strengthen linkages between research and extension to improve quality and effectiveness of research and extension system.

Rainfed Agriculture

  • The ministry of agriculture classifies areas, which receive less than 750 mm rainfall annually, and have less than 30 per cent land under irrigation (both surface and ground water) as drylands.
  • Rainfed regions are those where crop production is exclusively dependent upon rainfall. In India rainfed regions Cover 177 districts and exists in all agro-climatic zones.
  • Rainfed agriculture plays an important role in India’s economy Rainfed crops account for 48 per cent of the total area under food crops and 68 per cent of the area under non-food crops in the country.
  • Nearly 50 per cent of the total rural workforce and 60 per cent of the livestock in the country are concentrated in the dry districts.


  • The National Bank for Agricultural and Rural Development (Nabard) was set up in 1982, as the apex development bank for agriculture and rural development under an Act of Parliament. The bank began by taking over the agriculture credit functions of the Reserve Bank of India and the refinance functions of the then Agricultural Refinance and Development Corporation (ARDC).
  • Nabard’s mission is to “promote sustainable and equitable prosperity in rural India through effective credit support, related services, institution development and other innovative initiatives.” Its prime function continues to be that of refinancing, supplementing the resources of co-operative banks, regional rural banks (RRBs) and commercial banks against the amounts lent at the grassroots level for agriculture and rural development.

Regional Rural Banks

Regional rural banks were set up in 1975 under an Act of Parliament to exclusively cater to the credit needs of the rural Population, especially small and marginal farmers. The ownership structure of RBs is, the Central Government (50 per cent), the State (15 per cent) and the Sponsor commercial bank (35 per cent). The Sponsor bank manages the RRB concerned.

Local Area Banks

LABs were started in 1996 with a view to providing institutional mechanisms for promoting rural savings as well as for the provision of credit for viable economic activities in the local areas. They are in the private sector. This is expected to bridge the gaps in credit availability and enhance the institutional credit framework in the rural and semi urban area.


RIDF was introduced by Government of India during the year 1995-96 for implementation and timely completion of various rural oriented schemes / projects in the States which were languishing for shortage of funds. The fund is placed with NABARD for providing loan assistance to the State.

M.V. Nair Committee August 2011

  • The Reserve Bank of India has set up a 10-member committee to re-examine priority sector lending classification norms under the chairmanship of Mr. M.V. Nair, CMD, Union Bank of India, and is expected to submit its report in four months time.
  • The committee will also look into the issue of whether bank lending via financial intermediaries such as MFIs, non-banking finance companies, housing finance companies etc., for eligible categories of borrowers and activities could be classified under the priority sector and if so, to lay down suitable conditions.


  • Microfinance is defined as provision of credit and other financial services like insurance of very small amount to the poor in rural, semi-urban and urban areas for enabling them to raise their income levels and improve living standards. Micro finance Institutions are those which provide these facilities.
  • Microfinance covers not only consumption and production loans for various farm and non- farm activities of the poor but also include their other credit needs such as housing and shelter improvements.
  • A Self-Help Group (SHG) is a registered or unregistered group of micro entrepreneurs having homogenous social and economic background voluntarily coming together to save small amounts regularly, to mutually agree to contribute to a common fund and to meet their emergency needs on mutual help basis.

Types of micro credit providers in India

  • Domestic Commercial Banks: public Sector Banks; Private Sector Banks & Local Area Banks
  • Regional Rural Banks
  • Co-operative Banks
  • Co-operative Societies
  • Registered NBFCS
  • Unregistered NBFCS
  • Other providers like Societies, Trusts, etc.

In the area of microfinance, there are many areas of concern in India. They are:

  • unjustified high rates of interest
  • lack of transparency in interest rates and other charges.
  • multiple lending
  • upfront collection of security deposits
  • over-borrowing
  • ghost borrowers
  • coercive methods of recovery

Malegam Committee’s recommendation

  • The committee, headed by Reserve Bank’s Central Board Director Y. H. Malegam, also recommended creation of a separate category of non-banking financial companies (NBFC-MFI) for the micro finance sector.
  • The panel also said small loans of up to Rs. 25,000 could be given to families having an income up to Rs.50,000 per annum.
  • It further said at least 75 per cent of loans extended by MFIs Should be for income generation purposes It further recommended that a borrower cannot take loans from more than two MFIs.
  • These recommendations the committee said, Should be implemented from April 1, 2011.

Kisan Credit Cards

  • The scheme of Kisan Credit Card (KCC) was introduced in 1998-99 for timely, easy and flexible availability of production credit to farmers Commercial banks, cooperative banks and RRBs are implementing this scheme. Each farmer is provided with a Kisan Credit Card and a passbook for providing revolving cash credit facilities. The farmer is permitted any number of drawals and repayment within a stipulated date, which is fixed on the basis of land-holdings.
  • All categories of farmers including tenant farmers, share croppers, oral lessees are eligible for a Kisan Credit Card.

National Food Security Mission

  • The Department of Agriculture & Cooperation, Ministry of Agriculture, has launched a Centrally-sponsored scheme on National Food Security Mission (NFSM) in pursuance of the resolution of the National Development Council (NDC) to increase the production of rice, wheat and pulses by 10, 8 and 2 million tonnes, respectively, over the benchmark levels of production, by the end of the Eleventh Five Year Plan period.
  • The Mission aims at increasing foodgrains production of the above crops through area expansion and productivity enhancement; restoring soil fertility and productivity; creating employment opportunities; and enhancing farm level economy to restore confidence of farmers of targeted districts.

Rashtriya Krishi Vikas Yojana (RKVY)

  • The NDC in its 53rd meeting (2007) decided to launch a programme to incentivise the States to increase the share of investment in agriculture in their State plans. Accordingly, the Government approved the Rashtriya Krishi Vikas Yojana (RKVY) with an allocation of Rs. 25,000 crore for the Eleventh Five Year Plan.
  • The RKVY aims at achieving the 4 per cent annual growth in the agriculture sector during the Eleventh Five Year Plan period by ensuring a holistic development of agriculture and allied sectors. The RKVY will be a State Plan Scheme and the eligibility for assistance under the scheme would depend upon the amount provided in the -State budgets for agriculture and allied sectors, over and above the baseline percentage expenditure incurred on agri-culture and allied sectors. The funds under the RKVY would be provided to the States as 100 per cent grant by the Central Government.

Kisan Call Centres

Kisan Call Centres function form 6.00 AM to 10.00 PM on all days throughout the year. They receive calls through the toll-free number 1800-180-1551. Call Centre agents reply farmers’ queries instantaneously by using their own expertise as well as by referring to reference material available with them.

Nutrient Based Fertilizer Subsidy

  • Government has shifted to a nutrient-based fertilizer pricing system to help farmers get fertilizers such as di-ammonium phosphate (DAP), muriate of potash (MOP) and complexes at cheaper rates.
  • The new pricing would help farmers get complexes at cheaper rate as these fertilizers were not covered under the previous subsidy regime that covered fertilizers which mainly contained primary nutrients — nitrogen, phosphorous and potassium.
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