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Agricultural Economics

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What is agro-economics?

Agricultural economics combines the technical aspects of agriculture with the business aspects of management, marketing and finance.

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Agronomics

• originally applied the principles of economics to the production of crops and livestock - a discipline known as agronomics.

• Agronomics was a branch of economics that specifically dealt with land usage. It focused on maximizing the yield of crops while maintaining a good soil ecosystem.

• Throughout the 20th century the discipline expanded and the current scope of the discipline is much broader. Agricultural economics today includes a variety of applied areas, having considerable overlap with conventional economics.

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What Is Agro Economics?

• Economics is often defined as the study of resource allocation under scarcity.

• Agronomics, or the application of economic methods to optimizing the decisions made by agricultural producers, grew to prominence around the turn of the 20th century.

• The field of agricultural economics can be traced out to works on land economics.

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What Is Agro Economics?

• Henry C. Taylor was the greatest contributor with the establishment of the department of Agricultural Economics at Wisconsin.

• Another contributor, Schultz was among the first to examine development economics as a problem related directly to agriculture. Schultz was also instrumental in establishing econometrics as a tool for use in analyzing agricultural economics empirically; He noted in his landmark 1956 article that agricultural supply analysis is rooted in "shifting sand", implying that it was and is simply not being done correctly.

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The Agro Sector in India

• Mainstream agriculture• Allied sectors – horticulture, animal

husbandry and pisciculture and fisheries• Rural development and special area

programmes – irrigation, flood control, rain water harvesting and other sustainable methods, research and education

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• Agricultural growth is pegged at 2.7 per cent.

• Total food grains production in 2006-07 estimated at 209.2 metric tonnes (MT).

• Total water availability in reservoirs up 10 per cent to 120.2 billion cubic meters (BCM) at the end of monsoon 2006.

The Economic Survey of India (2006-07) says:

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• Fishing, aquaculture and allied activities made for 5.3 per cent of the agricultural gross domestic product (GDP).

• Production of wheat and other rabi crops increased with the rains in February 2007 -- sugarcane, cotton, and jute to set new records.

The Economic Survey of India (2006-07) says:

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More facts and figures

• One of the most important sectors of its economy (obviously because of the resources)

• The means of livelihood of almost two thirds of the work force in the country

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More facts and figures

• According to the economic data for the financial year 2006-07, agriculture accounts for 18% of GDP. About 43 % of India's geographical area is used for agricultural activity. It accounts for 8.56 % of India’s exports.

• Though the share of Indian agriculture in the GDP has steadily declined, it is still the single largest contributor to the GDP and plays a vital role in the overall socio-economic development of India.

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The role of Agriculture in the Indian economy

• The national income (GDP)

• Employment

• Industrial development

• International trade

• Economic planning, growth and development

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Agriculture and the Five Year Plans

Objectives

• Increase in production

• Employment opportunities

• Manage population pressure on land

• Equitable redistribution of rural income

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Pattern of InvestmentPlans Periods

Total Outlay (Cr)

Agro and Allied (Cr)

% of the Total

I 51-56 2380 350 14.9

II 56-61 4500 500 11.3

III 61-66 8580 1090 12.7

IV 69-74 15800 2320 14.7

V 74-79 39430 4870 12.3

VI 80-85 97500 5700 5.8

VII 85-90 180000 10530 5.9

VIII 92-97 434100 22470 5.2

IX 97-02 859200 42460 4.9

X 02-07 1525640 79810 5.2

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Progress under the Five Year Plans (Economic Survey: 2005-06)

50-51 64-65 2003-04 % increase between 51-04

foodgrains 51 89 212 314

rice 21 39 87 338

wheat 6 12 72 1100

oilseeds 5 9 25 400

sugarcane 57 122 238 412

cotton 3 6 14 366

jute 3 4 11 268

potato 2 23 1050

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India vis-à-vis Other NationsPotential Of High Actual Yield Actual Yield Of Country World's Highest Yield Country

Food Crops Yielding Indian Varieties In India The World's Largest Producer

Rice 40-58 29.3 63.2 China 88.8 EgyptWheat 60-68 25.8 39.7 China 80.5 UKMaize 60-80 16.7 83.9 USA 96.9 Italy

Non-food cropsSugarcane 680 686 Brazil 1190 EgyptGroundnuts 20-30 9.1 27.9 China 30.4 USA

Cotton 15-20 2.3 10.2 China 12.7 AustraliaJute 25-30 20 20 India 25.2 China

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Present Status

• 55 years of planning

• The much applauded Green Revolution

• Sufficient food and surplus only since 2002

• HYV and MSP, marketing, storage, distribution

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Present Status

• Monsoon dependent• Technology?• Decline in agro-investment• Failure of land reforms• Tenancy exploitations• Rural population outburst• Unbalanced agro development

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The Actual Crisis

Allocation for agriculture in the budget (2007-08).

• Farm credit raised to Rs 1,75,000 crore, providing relief to additional 50 lakh farmers.

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The Actual Crisis

• At 7 percent interest rate farmers receive short-term credit from NABARD, with Rs 3,00,000 upper limit on principal amount.

• The outlay for accelerated irrigation benefit Programme (AIBP) has been raised by 58.22 per cent to Rs 7,120 crore for 2006-07 from Rs 4,500 crore during 2005-06.

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The Actual Crisis

• Banking sector to credit-link an additional 3,85,000 self-help groups (SHGs) in 2006-07.

• NABARD to open a separate line of credit for financing farm production and investment activities.

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The Actual Crisis

• The corpus of rural infrastructure development fund (RIDF) in 12 tranches to be increased to Rs 10,000 crore.

• The programme for repair, renovation and restoration of water bodies to be implemented through pilot projects in 23 districts in 13 states. The estimated cost of the programme stands at Rs 4,481 crore.

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Reasons for the Crisis

• Pressure on land

• Structural deficiencies

• Inflation affects loans

• Storage and distribution network

• Globalisation: liberalised but unfair in many cases

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Saving Grace

• Agriculture research and development and rural infrastructure????

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Future Prospects

• The Second Green Revolution?

• Food Security?

• Sustainable Development?