Transformation in Indian Agriculture, Allied Sectors, and Rural India: Is there less krishi in Bharat?

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The National Council of Applied Economic Research (NCAER) is an independent policy research institute.
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- Poverty, human development, household behaviour, and gender
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Transformation in Indian Agriculture, Allied Sectors, and Rural India: Is there less krishi in Bharat?

Traditional strength in agriculture has increased due to farmers' efforts and technology improvements.
Need to move from pure food security to a focus on returns for farmers.
Villages need full integration into the development process.
India has over 50 million small businesses, a major source of employment, especially for backward and disadvantaged sections.
Policymaking should support this sector with skill upgrades, knowledge, financial capital, and technology.

1. Backdrop

The agricultural sector has evolved from basic food gathering to an intensive production system.
Evolution driven by population growth, income increase, urbanization, technological revolution, and trade liberalization.
Initially, agriculture accounts for the bulk of economic output and labor force.
As countries develop, manufacturing and services sectors expand faster, increasing their GDP shares.
Labor force shifts from agriculture to these sectors, decreasing agriculture's GDP and labor force share.
Demand for agricultural products changes from basic cereals to high-value products like dairy, fruits, vegetables, meat, and processed goods, due to income growth, urbanization, and trade liberalization.
Consumption of high-value agricultural products rises, expanding the agriculture-food industry (processing, wholesale, and retail).

Objectives of the NCAER Paper for NABARD

Examine the evolution of Indian agriculture and allied sectors over six decades after independence.
Focus on the changing contribution of allied sectors.
Identify the main driving factors of this transformation.
Draw policy implications.
Examine whether the transformation of Indian agriculture has changed the relationship between rural India and agriculture.
Historically, agricultural development was seen as a necessary condition for rural development.
If this relationship has changed, promoting agriculture may no longer be synonymous with promoting rural development.
NABARD's strategic thinking and programming must adapt to this changing reality.
Explore new opportunities in the mix of agriculture and non-agricultural activities.
Address these questions using household data from the NSS 70th Round (January-December 2013).

Sections of the Paper

Section 2: Examines broad trends in Indian agriculture and allied sectors, segmented into three phases of development, and assesses the contribution of allied sectors (livestock, forestry, and fishery).
Section 3: Examines drivers of change in Indian agriculture and allied sectors across the three historical phases, considering both supply and demand side factors.
Section 4: Looks at the transformation of Indian agriculture and rural India from a household perspective using data from the 70th Round of the NSS.
Section 5: Concludes with a summary of key developments and their policy implications, including for NABARD's future strategy.

2. Broad Trends in Indian Agriculture and Allied Sectors

2.1 Agricultural and Allied Sector’s Share in GDP and Employment

Phase 1 (early 1950s): Agricultural and allied sectors constituted about 57% of India’s total GDP and employed 70% of the workers.
Phases 2 (1972-73 to 1992-93) and 3 (1992-93 to 2012-13): Acceleration in agricultural and allied sectors growth occurred, but there was a sharp fall in the share of these sectors in overall GDP due to slower growth compared to the overall economy.
Share of agriculture and allied sectors in GDP declined to:
- 44% during the early 1970s
- 29% in the early 1990s
- About 14% during the more recent period
The share of workers engaged in these sectors declined slowly:
- From 70% in the early 1950s to 55% during the more recent period.
The shift in workers engaged in agricultural and allied sectors to other sectors was slow from the early 1950s to the early 1990s.
Phase 3 (1992-93 to 2012-13), coinciding with economic reforms, witnessed a significant shift in workers out of agriculture and allied sectors.
Table 1: Agricultural and Allied Sectors GDP and Employment
- TE 1952-53: GDP = Rs. 162,112 crore, Workers = 97 million, GDP Share = 56.5%, Workers Share = 69.8%
- TE 1972-73: GDP = Rs. 258,070 crore, Workers = 126 million, GDP Share = 43.5%, Workers Share = 69.7%
- TE 1992-93: GDP = Rs. 406,404 crore, Workers = 185 million, GDP Share = 29.3%, Workers Share = 64.8%
- TE 2012-13: GDP = Rs. 745,385 crore, Workers = 263 million, GDP Share = 14.3%, Workers Share = 54.6%

2.2 The Contribution of Allied Sectors in Agriculture and Allied Sector GDP

Components of agriculture and allied sectors: agriculture including livestock, forestry, and fishery.
Agriculture including livestock accounts for a major share of the total GDP, and has consolidated its position.
The combined share of forestry and fisheries has shrunk considerably.
The share of agriculture including livestock increased:
- From 74% in the early 1950s to 83% in the early 1990s to 85% in the more recent period.
Forestry sector's share decreased:
- From 24% in the early 1950s to 13% in the early 1990s to 10% in the more recent period.
Fisheries sector's share doubled:
- From 2% in the early 1950s to 4% in the early 1990s and 5% during the more recent period.
Reduction in the contribution of forestry and fisheries is due to uneven growth compared to agriculture and fisheries.
Fisheries sector's growth is healthier compared to agriculture during all three phases.
The loss in the share of forestry has been made up by the expansion of livestock sector’s GDP.
Livestock sector now accounts for 23% share of the total GDP of the agricultural and allied sectors.
In the early 1980s the livestock sector accounted for only about 12%.
Table 2: Agricultural and Allied Sectors GDP (Percentage Shares)
- TE 1952-53: Agriculture and Livestock = 74.0%, Forestry = 24.3%, Fisheries = 1.8%
- TE 1972-73: Agriculture and Livestock = 75.3%, Forestry = 22.1%, Fisheries = 2.7%
- TE 1992-93: Agriculture and Livestock = 83.3%, Forestry = 12.8%, Fisheries = 3.9%
- TE 2012-13: Agriculture and Livestock = 85.1%, Forestry = 9.7%, Fisheries = 5.2%
Table 3: Agricultural and Allied Sectors GDP (Percentage Shares at Current Prices)
- TE 1982-83: Agriculture and Livestock = 68.9%, Livestock = 12.9%, Forestry = 16.4%, Fisheries = 1.8%
- TE 1992-93: Agriculture and Livestock = 63.9%, Livestock = 20.5%, Forestry = 12.6%, Fisheries = 3.0%
- TE 2002-03: Agriculture and Livestock = 61.3%, Livestock = 22.8%, Forestry = 11.2%, Fisheries = 4.8%
- TE 2012-13: Agriculture and Livestock = 63.8%, Livestock = 22.7%, Forestry = 9.0%, Fisheries = 4.5%

2.3 The Contribution of Agriculture, Livestock, Forestry and Fishery in Total Value of Output of Agriculture and Allied Sectors

Lack of disaggregated GDP data necessitates examining changes in the value of output for a comprehensive view of sector transformation.
In the early 1950s, the crop sector constituted about 58% share of the country’s total value of output.
- Food grains (cereals and pulses) accounted for 23%.
- Fruits and vegetables and oilseeds had small shares (8% and 5%, respectively).
The livestock sector’s share was about 19%.
- Milk contributed the bulk (10%).
- Meat and eggs accounted for about 4%.
Forestry had a much larger share (22%), higher than livestock and close to food grains.
The fisheries sector had a very low share (about 2%).

2.3.1 Phase 1: From TE 1952-53 to TE 1972-73

The Green Revolution drove transformation, leading to significant growth in cereals (mainly wheat, then rice).
The value of output of cereals at constant prices nearly doubled, rising by 96%.
Cereals contributed nearly 30% growth in the value of output of the entire agricultural sector.
Apart from cereals, forestry (18%) and fruits and vegetables (17%) made significant contributions.
The value of output of forestry and fruits and vegetables grew by 45% and 111%, respectively.
Forestry maintained its share, and fruits and vegetables increased their share.
Livestock sector’s output increased by just 24%, its contribution was about 8%, explaining the fall in its share.

2.3.2 Phase 2: From TE 1972-73 to TE 1992-93

The livestock sector contributed a dominant share (31%) of growth due to a 129% increase in the value of livestock sector’s output.
A significant increase in milk output drove the livestock sector.
- The value of milk output increased by 166%.
- Meat and eggs also increased significantly.
The share of the livestock sector in the total agricultural GDP increased from 15% to 21%.
Cereals continued their high growth, with the value of output increasing by 75% and a contribution of 25%.
Fruits and vegetables and oilseeds also contributed, with 14% and 9%, respectively.
- The value of output of oilseeds increased significantly by 103%.
The value of output of the forestry sector fell by 9%, dropping its share by almost half.

2.3.3 Phase 3: From TE 1992-93 to TE 2012-13

The livestock sector again led bulk of the change, more than doubling the value of its output.
A little over 31% of growth came from the livestock sector.
Fruits and vegetables followed with 23% contribution due to 154% growth.
Nearly 54% of growth in the agricultural sector came from dairy and fruits and vegetables.
The biggest change was an enormous fall in the contribution of cereals.
The value of output of cereals increased by just 40% compared to 96% and 75% in Phases 1 and 2, respectively.
The contribution of cereals was just 11%, less than half of the contributions in Phase 2.
Enormous growth in the value of output of fibres due to a significant growth in cotton output after the introduction of Bt cotton in 2002.
A 173% increase in the value of output of fibres, doubling its contribution to 4%.
A reversal in trends for forestry sector, with increased output, but growth was less than fisheries.
Fisheries continued to maintain high growth, and its share increased to 5%.
The fisheries sector's contribution improved to 6% from 5% in Phase 2.
Table 4: Shares in value of Output of Agricultural and Allied Sectors
- Detailed breakdown of crop sector, livestock, forestry, and fishery shares for TE 1952-53, TE 1972-73, TE 1992-93, and TE 2012-13.

3. Drivers of the Transformation of Agriculture and Allied Sectors in the Three Growth Phases

Driven by several factors, including supply side factors and demand side factors.
Supply Side Factors:
- Policies to push growth
- Efficient use of resources (land, labor)
- Introduction of new technology
- Increased use of modern inputs (chemical fertilizers)
- Expansion of irrigation infrastructure
- Investments in general infrastructure (roads, power)
Demand Side Factors:
- Population
- Income growth
- Urbanisation
- Demand from the rest of the world (trade liberalization)
The specific roles of these factors varied during the three phases.

3.1 Phase 1: From TE 1952-53 to TE 1972-73

Mainly driven by the need to achieve self-sufficiency in food grains due to large cereal imports.
Low area under irrigation and frequent droughts.
Objective: adequate food supplies for increasing population and raw materials for the industrial sector.
Achieved through imports, reorganization of the agricultural sector, and development measures (irrigation expansion and farming).
Strengthening agricultural administration and special area programs boosted initiatives.
The advent of new high-yielding varieties ushered in Green Revolution.
Significant investments, and government support led to a significant increase in production of cereals.
The gross cropped area expanded by 22%, and gross irrigated area increased by 50%.
Massive increase in the usage of fertilizers.
Significant increase in the road network and electricity generation.
Large increase in investment in the agricultural and allied sectors, mainly in the public sector.
On the demand side, mainly population growth.
Marginal shift in urbanization.
Slower per capita income expansion.
Little foreign demand due to marginal role in international trade.
Per capita consumption expenditure increased for cereals, fruits, vegetables, edible oils, and sugar.
Expenditure declined for milk and milk products, and eggs, meat, and fish.
Bulk of expansion in food basket due to cereals and fruits and vegetables.
Table 5: Drivers of Agricultural Transformation: Supply side
- Data on gross cropped area, gross irrigated area, gross fixed capital formation, consumption of fertilizers, total roads, surfaced roads, electricity generated for TE 1952-53, TE 1972-73, TE 1992-93, and TE 2012-13.
Table 6: Drivers of Transformation: Demand side
- Data on population, share of rural population, per capita income, exports of agricultural and allied sector, imports of agricultural and allied sector, and net trade balance for TE 1952-53, TE 1972-73, TE 1992-93, and TE 2012-13.

3.2 Phase 2: From TE 1972-73 to TE 1992-93

Combination of expansion of the Green Revolution into new crops/areas and introduction of the White Revolution.
Consolidation of Green Revolution gains and enormous growth of milk production.
Efforts to spread new technology into regions outside of technological revolution with special programs.
Gross cropped area expanded by just about 12%, but gross irrigated area continued growth momentum.
Other factors such as use of fertilizers, road network, and electricity generation also expanded significantly (but slower).
Investment in agricultural and allied sectors maintained its pace.
The launching of the White Revolution was made possible through a rare way to develop India’s dairy development.
Operation Flood programme utilized food-aid (milk powder and butter oil) to stabilize domestic prices and develop dairy cooperatives.
Financial aid from the World Bank to integrate efforts into a national-level program.
Attempt to increase oilseed supplies and reduce edible oil imports through a Technology Mission on Oilseeds (TMO).
Approach similar to dairy development model, with location-specific technologies to boost supplies, marketing facilities, and processing technology.
The mission was successful in boosting supplies, mainly through area expansion.
Production of cereals increased by 75%; milk increased considerably (153%); oilseeds output also shot up significantly (122%).
Population increased; acceleration in urbanization; per capita income also increased at a higher rate; external demand also went up considerably.
Consumption expenditure increased on food items such as milk and milk products and meat products, and fruits and vegetables.

3.3 Phase 3: From TE 1992-93 to TE 2012-13

Significant shift in the drivers of transformation from supply-side factors to demand-side factors with economic reforms.
Respectable growth in gross irrigated area, but growth in the gross cropped area slowed down.
Deceleration in immense increase in use of fertilizers.
Increase in the road network and electricity generation, and investments also expanded.
Supplies of cereals, oilseeds, and sugarcane did not show much increase.
Exceptions: fruits and vegetables and cotton, the supplies of which increased significantly.
Supplies of livestock products maintained their growth momentum.
Per capita income grew at a much higher rate; consumption expenditure on food items increased significantly.
Decline in per capita consumption expenditure on cereals.
Bulk of growth in food consumption from fruits and vegetables, dairy products, and meat products.
Emergence of external demand with a significant increase in exports.
Country emerged as a net exporter of a range of agricultural and allied products.

4. Is there less krishi in Bharat now? Evidence from Recent Household Surveys

Agriculture will always be rural, but is rural always agriculture?
India’s policy framework for rural development has been built around agriculture and allied sectors and farmer households.
India’s rural areas are changing.
Changes in the Indian economy and rural areas are reducing the role of agriculture as a principal source of income.
This has profound implications for government policy and agencies like NABARD.
The National Sample Survey Organisation (NSSO) conducts a Situation Assessment Survey of Agricultural Households (SAS).
SAS assesses levels of living, income, consumer expenditure, productive assets, indebtedness, and farming practices.
The 59th NSS Round was the first SAS (SAS 2003).
Repeated after 10 years with the 70th NSS Round (SAS 2013).
The two surveys are not directly comparable due to changes in the definition of a farmer household.
SAS 2003: possession of land was essential.
SAS 2013: a household receiving more than Rs 3,000 from farming activities and with at least one member self-employed in agriculture.
Information for SAS 2013 is available for a limited set of variables.
Analysis focuses on the proportion of agricultural households, their income and expenditures, and indebtedness.
Diversity among states is captured by combining states into three groups.
Groups based on shares of rural households that have agriculture and allied sectors as their principal source of income.

4.1 Household Income from Agriculture & Allied Sector Incomes & Indebtedness

Group 1 states: more than 50 percent of rural households reporting agriculture and allied sectors as their principal source of income
Group 2 states: 25 percent to 50 percent
Group 3 states: less than 25 percent
Four states have a majority of their rural households dependent on farming as a major source of income
Despite such a high proportion of agricultural households engagement in farming, only 53 per cent of all rural households are dependent on agriculture and allied activity as their principal source of income.
Thirteen states, the largest number, belong to Group 2, where 25 to 50 percent of rural households are dependent on agriculture.
Group 3 has two states, which are the most urbanised major states. As a result of a smaller percentage of rural households, only 19 percent of all rural households depend on farming as the principal source of income.
58 per cent of the households in rural areas are now engaged in agricultural and allied activities, only 40 per cent of all households living in rural areas depend on agriculture and allied sectors as their principal source of income.
Agricultural households in the Group 3 states earned more than the agricultural households living in Group 1 or Group 2 states.
Agricultural households is states with majority of the rural households are dependent on farming earn 19 per cent less, and 71 per cent less compared to Group 2 and Group 3 respectively.
Consumption expenditure follows income, with Group 3 spending more than Group 1 and 2.
SAS 2013 suggests that about 52 percent of agricultural households in India are indebted, with the average size of loan outstanding at Rs 47,000.
At the national level, about 60 percent of outstanding loans were from institutional sources.
The table 7 is provided bellow.
Table 7: Agricultural Households and their Dependence on Agriculture and Allied Sectors as the Principal Source of Income in Major Indian States: 2012-13

4.2 Household employment and wages

Changes in rural employment can also show the transformation that is underway in rural India
Evidence from IHDS-II shows that employment in agriculture has fallen sharply over the last seven years and a combination of farm oriented and nonfarm work is now the most common form of rural employment.
Fall in agricultural employment is much larger than was previously believed.
Nonfarm work is now a bigger employer for rural men.
Exclusive farm-oriented work is still the most prevalent form of employment among rural women.
Evidence confirms a disturbing trend of a fall in the participation of women of age 15-59 in the workforce
Participation rate for men also fell marginally.
Wages have grown exponentially over the last decade.
The daily agricultural labor wage for men nearly tripled in the last seven years
Women’s wages, though much less than male wages, also grew similarly

4.3 Is there's less krishi in Bharat now?

SAS 2013 suggests that 57.8 percent of rural households are engaged in farming activity.
Net receipts from cultivation, rearing animals and other agricultural activity accounted for just 59.8 percent of the average farming family's monthly income.
Consistent with this finding, of these agricultural households only 68.3 percent reported farming as their principal source of income.
Combining these figures suggests that only 39.5 per cent of all rural households are now dependent on agriculture as the principal source of income.
These findings challenge the popular perception that India’s rural areas are stagnating.
They are rapidly shifting to non-farm and non-agricultural pursuits in rural areas, so indeed, there is definitely less krishi in India’s rural areas.
The NSS data suggest that the most obvious examples of the weakening association of rural with agriculture are in Kerala, Tamil Nadu, Andhra Pradesh and, perhaps surprisingly, West Bengal and Bihar.
One reason for the growing chasm between "rural" and "agricultural" has to do with the definition of rural, which is residual.
What is agriculture's share within India's rural GDP? Is it already as low as 25 per cent as some analysts claim? What per cent of new factories and new manufacturing jobs were created in the last decade in rural areas? Is it as high as 75 per cent of all factories and 70 percent of all manufacturing jobs? These are the type of questions that are thrown up by the new NCAER and NSSO data, and require further work to be done to understand the transformation of rural India and agriculture in order to provide policy and strategic guidance to agencies such as NABARD for adapting its 10-15 year future strategy.
Overall, what this implies is that rural development is now less and less synonymous with the agricultural sector.
Hence, the approach to promoting rural development should also begin to change from an exclusive focus on boosting agricultural production to promoting more inclusive rural development, which has other economic and social dimensions of the non-farm sector.

5. Outcomes and Policy Implications

This paper highlights the transformation of Indian agricultural and allied sectors and of rural India over the six decades from the early 1950s.

5.1 Outcomes in Agriculture, Allied Sectors, and Rural India

Even though agricultural and allied sectors have grown at a slower rate than the rest of the economy, yet there has been an acceleration of growth from Phase 1 to Phase 2 and from Phase 2 to Phase 3.
Agricultural and allied sectors have witnessed a significant transformation: on the one hand an allied sector like forestry has lost a significant share in the total value of agricultural and allied sectors output due to highly uneven growth, but on the other hand, allied sectors like livestock and fishery have gained a significant share due to consistent higher growth, particularly during Phase 2 and Phase 3. On balance, though, the share of the allied sectors (livestock, forestry, and fishery) in the total value of agricultural output has remained more or less the same, with livestock taking over the share lost by forestry.
Within agriculture, cereals, after gaining a significant share of the value of output during Phase 1 and Phase 2, have lost considerable momentum in Phase 3. The loss in the share of cereals in the total value of agricultural output has been made up mainly by fruits and vegetables. The fruits and vegetable sector now accounts for more than double the share in the total value of agricultural output that it accounted for in the early 1950s. The tremendous growth in fruits and vegetables output during the three phases has brought their share in the value of agricultural production on par with cereals.
Other non-food grains like oilseeds, sugarcane, cotton, and other crops have also gained marginally during this transformation—oilseeds in Phase 2 and cotton and other remaining crops in Phase 3.
Much like elsewhere in the world, the transformation of Indian agriculture has been driven by both supply side interventions and policies to push growth, technological developments, and investments, as well as demand side pulls such as population growth, urbanisation, income growth, and the gradual liberalisation of international trade in agricultural and allied products. Phase 1 of the transformation was essentially driven by supply side pushes, but demand side pulls have started dominating this process in Phases 2 and 3 as urbanisation and income growth took place at a much faster rate compared to the Phase 1.
The other consequences of this transformation have been that the country has not only been able to achieve self-sufficiency in food, but has also emerged as a net exporter of food and other allied agricultural products such as cereals, fish and fish products, meat and meat products, cotton, oilcakes, vegetable extracts, and many others. And, with increased irrigation capacity and diversification of the sector, the adverse impact of droughts on the agricultural and allied sectors output has lessened. This is reflected in comparatively lower dips in agricultural output experienced during the recent droughts in 2002-03 and 2009-10, compared to the slumps witnessed during earlier drought years during the fifties, sixties, and even seventies.
The consequence of comparatively slower growth in agricultural and allied sectors compared to the rest of the economy has been that the share of agricultural and allied sectors in the overall GDP has fallen at a much faster rate compared to the fall in share of workers engaged in these sectors. On the face of it, it would appear that the agricultural and allied sectors are therefore bearing the burden of a disproportionately large number of rural workers, resulting in low productivity employment. Recent household survey data however shows that India’s rural areas are becoming less and less agricultural with the rise of non-farm and SME enterprises. This has major consequences for poverty reduction and for policy. Countries such as China that have done well in terms of growth and created more rural jobs in non-agricultural rural areas have experienced faster poverty reduction.
Of course, the increased pressure of population more generally is leading to continued fragmentation of land holdings and the average land holding size has come down to about 1.2 hectares. The share of marginal and small holdings (less than 2 hectares) has increased, and now stands at 85 per cent of all holdings in the country. On top of it, further growth in land under cultivation has virtually come to a standstill and the intensive use of both land as well as water, have led to increased environmental concerns.
Labour productivity growth in agriculture and allied sectors, which was the main driver of technological progress in the agricultural sector in Phase 1 and Phase 2, has unfortunately plateaued. Average productivity growth in Phase 3 has slowed down considerably and even fallen in some cases (Figure 6). Low rates of yield growth seem to have become a norm in recent years. The only bright spot during Phase 3 has been cotton, which has witnessed an exceptionally high rate of productivity growth after the introduction of Bt technology. Apart from this, the overall outlook does not look very promising for most of the crops despite significant gaps in productivity between India and some of the other comparable large emerging economies of the world.
Despite large investments in the agricultural sector the development of rural infrastructure in general has not kept pace with increasing requirements. Poor infrastructure in rural areas (roads, power, storage, transport systems, and communication) is continuing to lead to a large wastage of agricultural and allied products, which in some cases like perishable products (fruits and vegetables in particular) continues to remain very high, close to 25 per cent or so.

5.2 Policy Implications

Indian agriculture and India’s rural areas are undergoing considerable change, evident from the sector and output data as well as the household surveys analyzed in this report. Rural India is becoming less and less agricultural, even as there is a serious need to improve the productivity of crop and non- crop agriculture. To reduce the burden of the still large number of workers dependent on the agricultural sector for employment, the overall development of rural areas and creating productive jobs in the non-agricultural sector is becoming more and more critical for India. The linkages between agricultural and allied production and the rest of the economy can only be enhanced through the development of rural non-agricultural enterprises, particularly manufacturing that includes processing industries and SMEs in peri-urban areas. This has to be on top of the reform agenda for the future and has implications for agencies like NABARD mandated to help develop both agriculture and rural India.
As the most recent household survey results suggest, to some extent this is happening already as India’s rural areas are becoming less agricultural and as employment increases in a number of nonfarm activities. Government programs and policies need to support this transformation of India’s rural areas while at the same time assisting productivity growth in agriculture and allied sectors.
Maintaining productivity growth to sustain the growth of food crops and allied products that form the main staples of the population is essential for a more balanced growth of these sectors. Policies should focus on measures that provide incentives for efficient utilisation of both capital investments as well as natural resources. Increasing productivity calls for investments in technology, extension, research and logistics. The need of the hour is to make intelligent investments and design incentive programs that raise output through efficient use of natural resources and minimise wastage.
Shifts in consumer preferences and growing incomes have altered the domestic demand for agricultural and allied products and the liberalisation of trade has connected these Indian sectors to international markets. As a result, the demand for dairy products, meat and meat products, fruits and vegetables and their processed products is growing fast and will continue to do so in the future. To meet this growing demand and maintain competitiveness, more investments in the entire chain that involves collection, grading, storage, packaging, and transport to help take produce from farms to markets and factories is the key to the future growth of the agricultural and allied sectors. While attempts have certainly been made in this direction, a more focussed and integrated strategy is needed to meet this challenge. NABARD would be strategically well placed to take leadership in this area.
In some cases, policies to protect the poor are relying on assumptions about who the poor are and what they need, for example, to tackle the serious problem of persistent malnutrition in India. India adopted a rights based approach to food security, and while the goal itself is laudable, it is not clear how the thinking on the Right to Food and the Ordinance that supports it is likely to deliver that goal (See Box 1). Any schemes for protecting the poor and vulnerable and for addressing India’s malnutrition problem need to be designed and implemented so that they deliver needed benefits to those who should be targeted, do not distort food and labour markets, do not over- deplete natural resources, and create opportunities for those who can enter the labour force in productive jobs. This is extremely critical in view of the climatic and economic challenges that are likely to emerge in the medium to long-term in the future.
To smoothen this transition, investments in ancillary infrastructure and rural industries are required and the magnitude of the investments that are necessary to bring the required infrastructure to an adequate level of development is large. Even though governments and development institutions such as NABARD are trying their best to promote rural infrastructure, more needs to be done.
The fragmentation of land holdings means that to achieve economies of scale, bulk-buying and sale of produce have become extremely important to generate more income. Therefore, large-scale retail and supermarket operations can lead to the development of necessary infrastructure that improves supply logistics and also help in dealing with price volatility through risk pooling.
Set against these developments in agriculture and allied sectors and the transformation of India’s rural areas that is underway, the role of NABARD has become even more important. Since its inception in the 1980s NABARD has been providing financial and technical assistance to the agricultural sector–both directly and indirectly through refinance to institutions providing rural investment and production credit and building institutions for improving the absorptive capacity of rural credit and its delivery. In addition to infrastructure like roads and small irrigation projects that is being built through RID