Economics Project

Agricultural Economy of India(Kerala)

Submitted by:
Hemant Verma

Semester 2, BA.LLB
Section A, Roll Number 58

Submitted to:
Prof. Hanumant Yadav
Faculty (Economics),
Hidayatullah National Law University, Raipur
 ACKNOWLEDGMENTS

I, Hemant Verma, would like to humbly present this project to Prof. Hanumant Yadav
I would first of all like to express my most sincere gratitude to Prof. Hanumant Yadav for his
encouragement and guidance regarding several aspects of this project. I am thankful for being
given the opportunity of doing a project on ‘Agricultural economy on india(kerala)’.
I am thankful to the library staff as well as the IT lab staff for all the conveniences
they have provided me with, which have played a major role in the completion of this paper.
I would like to thank God for keeping me in good health and senses to complete this
project.
Last but definitely not the least, I am thankful to my seniors for all their support, tips
and valuable advice whenever needed. I present this project with a humble heart.

-HEMANT VERMA
SEMESTER II
SECTION A
ROLL NUMBER 58
BA LLB (HONS.)
 RESEARCH METHODOLOGY
The objective of this project is to study the different types and methods of collecting
statistical data. This research is descriptive and analytical in nature. Secondary and Electronic
resources have been largely used to gather information and data about the topic.

Books and other reference as guided by Faculty of Economics have been primarily helpful in
giving this project a firm structure. Websites, dictionaries and articles have also been
referred.

Footnotes have been provided wherever needed, to acknowledge the source.

Table of contents
Acknowledgement...............................................................................................3

Research methodology.........................................................................................4

Introduction .........................................................................................................5

Agricultural economy of india..............................................................................7

Importance of economy.........................................................................................9

Overview of india’s agricultural economy.........................................................10

Agricultural performance of kerala...................................................................12

Cropping pattern.................................................................................................13

Agricultural income of kerala.............................................................................14

Land use..................................................................................................................15

Conclusion..............................................................................................................16
INTRODUCTION
Economy?
An economy or economic system consists of the production, distribution or trade, and

consumption of limited goods and services by different agents in a given geographical

location. The economic agents can be individuals, businesses, organizations, or governments.

Transactions occur when two parties agree to the value or price of the transacted good or

service, commonly expressed in a certain currency.

In the past, economic activity was theorized to be bounded by natural resources, labor, and

capital. This view ignores the value of technology (automation, accelerator of process,

reduction of cost functions), and innovation (new products, services, processes, new markets,

expands markets, diversification of markets, niche markets, increases revenue functions),

especially that which produces intellectual property.

A given economy is the result of a set of processes that involves its culture, values, education,

technological evolution, history, social organization, political structure and legal systems, as

well as its geography, natural resource endowment, and ecology, as main factors. These

factors give context, content, and set the conditions and parameters in which an economy

functions. The largest national economy in the Americas is the United States,[1] Germany in

Europe,[2] Nigeria in Africa[3] and China in Asia.

A market-based economy is where goods and services are produced without obstruction or

interference, and exchanged according to demand and supply between participants (economic

agents) by barter or a medium of exchange with a credit or debit value accepted within the

network, such as a unit of currency and at some free market or market clearing price. Capital

and labor can move freely to any area of emerging shortage, signaled by rising price, and thus
dynamically and automatically relieve any such threat. Market based economies require

transparency on information, such as true prices, to work, and may include various kinds of

immaterial production, such as affective labor that describes work carried out that is intended

to produce or modify emotional experiences in people, but does not have a tangible, physical

product as a result.1

Indian Economy
The Economy of India is the tenth-largest in the world by nominal GDP and the third-largest

by purchasing power parity (PPP). The country is one of the G-20 major economies, a

member of BRICS and a developing economy that is among the top 20 global traders

according to the WTO.India was the 19th-largest merchandise and the 6th largest services

exporter in the world in 2013; it imported a total of $616.7 billion worth of merchandise and

services in 2013, as the 12th-largest merchandise and 7th largest services importer India's

economic growth slowed to 4.7% for the 2013–14 fiscal year, in contrast to higher economic

growth rates in 2000s. The Indian Finance Ministry projects the GDP growth for fiscal 2014

will be 5.5%.IMF projects India's GDP to grow at 5.6% over 2014-15. Agriculture sector is

the largest employer in India's economy but contributes a declining share of its GDP (13.7%

in 2012-13). Its manufacturing industry has held a constant share of its economic

contribution, while the fastest-growing part of the economy has been its services sector –

which includes construction, telecom, software and information technologies, infrastructure,

tourism, education, health care, travel, trade, banking and other components of its economy.

The post independence-era Indian economy (from 1947 to 1991) was a mixed economy with

1
http://en.wikipedia.org/wiki/Economy#cite_note-4
an inward-looking, centrally planned, interventionist policies and import-substituting

economic model that failed to take advantage of the post-war expansion of trade and that

nationalized many sectors of its economy. India's share of global trade fell from 1.3% in 1953

to 0.5% in 1983. This model contributed to widespread inefficiencies and corruption, and it

was poorly implemented.

After a fiscal crisis in 1991, India has increasingly adopted free-market principles and

liberalised its economy to international trade. These reforms were started by former Finance

minister Manmohan Singh under the guidance of Prime Minister P.V.Narasimha Rao. They

eliminated much of Licence Raj, a pre- and post-British era mechanism of strict government

controls on setting up new industry. Following these economic reforms, and a strong focus on

developing national infrastructure such as the Golden Quadrilateral project by former Prime

Minister Atal Bihari Vajpayee, the country's economic growth progressed at a rapid pace,

with relatively large increases in per-capita incomes. The south western state of Maharashtra

contributes the highest towards India's GDP among all states, while Bihar is among its

poorest states in terms of GNI per capita. Mumbai,Maharashtra is known as the trade and

financial capital of India.2

AGRICULUTRAL ECONOMY OF INDIA

Agriculture is an important sector of Indian economy as it contributes about 17% to the

total GDP and provides employment to over 60% of the population. Indian agriculture has

registered impressive growth over last few decades. The foodgrain production has increased

from 51 million tonnes (MT) in 1950-51 to 250 MT during 2011-12 highest ever since

independence. The production of oilseeds (nine-major oilseed) has also increased from 5 MT

2
http://en.wikipedia.org/wiki/Economy_of_India
to 28 MT during the same period. The rapid growth has helped Indian agriculture mark its

presence at global level. India stands among top three in terms of production of various

agricultural commodities like paddy, wheat, pulses, groundnut, rapeseeds, fruits, vegetables,

sugarcane, tea,jute, cotton, tobacco leaves, etc (GOI, 2008-09). However, on marketing front,

Indian agriculture is still facing the problems such as low degree of market integration and

connectivity,accessibility of reliable and timely information required by farmers on various

issues in agriculture. Also, the agricultural marketing sector is characterized by fragmented

supply chain.Huge postharvest losses, multiple market intermediaries; higher transaction cost,

lack of awareness and several other socio-economic factors are some of the acute problems

being faced by the Indian agriculture.Agricultural commodities produced have to undergo a

series of operations such as harvesting, threshing, winnowing, bagging, transportation,

storage, processing and exchange before they reach the market, and as evident from several

studies across the country, there are considerable losses in crop output at all these stages. A

recent estimate by the Ministry of Food and Civil Supplies, Government of India, puts the

total preventable post-harvest losses of food grains at 10 per cent of the total production or

about 20 million Mt, which is equivalent to the total food grains produced in Australia

annually. In a country where 20 per cent of the population is undernourished, post-harvest

losses of 20 million Mt annually is a substantial avoidable waste.

According to a World Bank study (1999), post-harvest losses of food grains in India are 7-10

percent of the total production from farm to market level and 4-5 per cent at market and

distribution levels. For the system as a whole, such losses have been worked out to be 11-15

million Mt of food grains annually, which included 3-4 million Mt of wheat and 5-7 million
MT of rice. With an average per capita consumption of about 15 kg of food grains per month,

these losses would be enough to feed about 70-100 million people, i.e. about 1/3rd of India’s

poor or the entire2 population of the states of the Bihar and Haryana together for about one

year. Thus, it is evident that the post-harvest losses have impact at both the micro and macro

levels of the economy.3

IMPORTANCE OF AGRICULTURAL ECONOMY

The direct contribution of the agriculture sector to national economy is reflected by its share

in total GDP, its foreign exchange earnings, and its role in supplying savings and labor to

other sectors. Agriculture and allied sectors like forestry and fishing accounted for 18.5

percent of total Indian Gross Domestic Product (GDP) in 2005-06 (at 1999-2000

constant prices) and employed about 58 percent of the country's workforce (CSO, 2007).

It accounted for 10.95 percent of India’s exports in 2005-06 (GoI, 2007) and about 46

percent of India's geographical area is used for agricultural activity. There has been a

structural transformation in the Indian economy during the past few decades. The

composition of Gross Domestic Product at 1993-94 constant prices reveals that the share of

agriculture including forestry and fishing has declined as growth in industrial and services

sectors far outpaced agricultural sector (Figure 1). The share of mining, manufacturing,

electricity and construction sector has increased from 21.6 percent in 1970-71 to 27 percent

in 2004-05 and services sector has increased significantly from 32 percent to 52.4 percent

during the same period. Despite a steady decline of its share in the GDP, agriculture is still an

important sector and plays a significant role in the overall socio-economic development of

the country. Therefore, fostering rapid, sustained and broad-based growth in agriculture

3
http://www.ccsniam.gov.in/research/KCG%20Final%20report.pdf
remains key priority for the government.4

OVERVIEW OF INDIA’S AGRICULTURAL

ECONOMY
In the early 1950s, half of India’s GDP came from the agricultural sector. By 1995, that

contribution was halved again to about 25 per cent. As would be expected of virtually all

countries in the process of development, India’s agricultural sector’s share has declined

consistently over time as seen in the table below .In the last five decades, the Government’s

objectives in agricultural policy and the instruments used to realize the objectives have

changed from time to time,depending on both internal and external factors. Agricultural

policies at the sectoral level can be further divided into supply side and demand side policies.

The former include those relating to land reform and land use, development and diffusion of

New technologies, public investment in irrigation and rural infrastructure and agricultural

price supports. The demand side policies on the other hand, include state interventions

in agricultural markets as well as operation of public distribution systems. Such

policies also have macro effects in terms of their impact on government budgets.

Macro level policies include policies to strengthen agricultural and non-agricultural

sector linkages and industrial policies that affect input supplies to agriculture and the

supply of agricultural materials. During the pre-green revolution period, from independence

to 1964-1965, the agricultural sector grew at annual average of 2.7 per cent. This period saw

a major policy thrust towards land reform and the development of irrigation. With the green

revolution period from the mid-1960s to 1991, the agricultural sector grew at 3.2 per

cent during 1965-1966 to 1975-1976, and at 3.1 per cent during 1976-1977 to 1991-1992.

4
http://iimahd.ernet.in/publications/data/2007-08-01Sharma.pdf
Acharya (1998) explains that the policy package for this period was substantial and consisted

of:

a) introduction of high-yielding varieties of wheat and rice by strengthening agricultural

research and extension services,
b) measures to increase the supply of agricultural inputs such as chemical fertilizers and
pesticides,
c) expansion of major and minor irrigation facilities,

d) announcement of minimum support prices for major crops, government procurement of

cereals for building buffer

stocks and to meet public distribution needs, and e) the provision of agricultural

credit on a priority basis. This period also witnessed a number of market intervention

measures by the central and state Governments. The promotional measures relate toAsia

Pacific the development and regulation of primary markets in the nature of physical and

institutional infrastructure at the first contact point for farmers to sell their surplus products.

Acharya (1998) also notes that the rate of growth of productivity per hectare of all crops

taken together increased from 2.07 per cent in the decade ending 1985-1986 to 2.51 per cent

per annum during the decade ending 1994-1995. Similar evidence of an increase in yields, a

partial measure of productivity gains given by output per unit of land area is seen below for

various crops.Although productivity gains were sustained in the 1990s after the liberalization

process began, the yield rates for most of the agricultural products in India are far

below comparable rates in a number of other countries. This is seen in table 3.

Except for sugarcane, tea, coffee and jute, India’s yields are lower than the world

average. It should be noted that India is ranked second both in area and output for

sugarcane production and is the largest producer of tea and jute in the world. Although
India is doing quite well in wheat production, the average yields in the Netherlands

and Ireland are more than three times India’s yield rates. In all other major crops,

India’s productivity performance seems to lag behind others.5

AGRICULTURAL PERFORMANCE OF KERALA

A country without sound agricultural system may not be capable of producing adequate food

materials and other crops.Agriculture is the backbone for the survival of any community. As

in the case elsewhere, the people of Kerala also had been depending on agriculture for their

livelihood and Kerala continues, to be a predominantly agricultural State. Kerala was known

in the past for her agricultural produces like pepper, cardamom and other spices.These

produces had enticed many foreigners to this land and this led to many historical events

culminating in the colonization of the country and thereafter decades long struggle for

freedom. Having yoked the country under colonialism, the foreign forces plundered the

natural resources including the much-wanted agricultural produces, The post

independence period witnessed the end of the exploitation by foreign countries and beginning

of a new phase of planning and development in India. The fifty years witnessed several

developments in domestic, national and international scenario.6

CROPPING PATTERN
Both topographical and economic factors in terms of a favorable export market encouraged

5
http://www.unescap.org/sites/default/files/apdj10-2-4-mahadevan.pdf
6
http://shodhganga.inflibnet.ac.in/bitstream/10603/334/11/11_chapter3.pdf
the growth of commercial crops in Kerala some of which were processed further, even when

the State was deficit in food. Demand for food was met through imports. A study of the

Travancore region showed that the area under commercial crops among which coconut and

rubber were the more important ones, increased continually since at least the 1920's.'~ There

was a rapid expansion of the external trade of the region that increased nearly ten fold

between the latter half of the lgih century and 1938-39. While the trend of a relative decline

in paddy acreage continued in the post-Independence period; and absolute shift in its acreage

had been halted between 1952-53 to 1974-75, a period which witnessed a sharp increase in

paddy prices and state policy emphasized the need for some degree of self-sufficiency in

food.I6 However since 1975-76 there was again a sharp shift away from paddy, the latter

losing acreage even in absolute terms. While area under paddy grew at an annual rate of

0.8 per cent during 1962-63 to 1974-75, in the subsequent decade. the rate of growth, 2.1 per

cent per annum, was negative." Paddy acreage continued to decline and by early nineties,

almost 70 percent of the gross cropped area was under non-food crops in Kerala compared to

about 30 per cent for all India. The significance of cash crops for Kerala gained momentum

from the 1980's. However, the fact that commercialisation is extensive in Kerala, and the

pace of it has accelerated since the mid-seventies cannot be denied. What is rather unique in

the spread of cash crops is that historically such crops are grown even in very smallholdings

in Kerala; both poor and middle peasants are engaged to a large extent in their cultivation. In

fact over 80 percent of the rubber is grown on small holdings.''7

AGRICULTURAL INCOME OF KERALA

The ten years from mid-seventies is considered as a period. when the Kerala agricultural front

7
http://shodhganga.inflibnet.ac.in/bitstream/10603/334/11/11_chapter3.pdf
was in stagnation. The nineties in general showed positive signs of recovery. The trends in

agricultural income in Kerala are given in Table 111.2. The growth rate during 2000-01 was
3.73 per cent.

Growth of agriculture incone in kerala(1993-1994)

S.no. Year Agricultural income Rate of change Percentage

(Rs. In crore) over previous contribution to
year(%) state income
1 2 3 4 5
1 1999-94 6256 - 26.23
2 1994-95 6897 10.25 26.62
3 1995-96 6947 0.72 25.76
4 1996-97 7115 2.42 25.39
5 1997-98 6777 -4.75 23.67
6 1998-99 6900 1.81 22.70
7 1999-2000 7158 3.74 22.03
8 2000-01 7425 3.73 21.38

LAND USE
Data on land use pattern for the year 1999-2000 is given in Table Out of a total geographical

area of 38.85 lakh ha, forest occupies around 28 per cent. In view of the high density of
population, the pressure for non-agricultural uses is increasing.Land under non-agricultural

uses was 8.6 per cent in 1998-99 and has increased to 9.1 per cent in 1999-00. The net

cropped area has marginally declined from 22.59 lakh to 22.39 lakh ha and the cropping

intensity has increased from 129 to 134. There was an increase in the area under current

fallow (4144ha) and fallow other than current fallow (601 ha). But there was a decrease in the

area under cultivable wastes (-4431 ha).

CONCLUSION
Agriculture is an important sector of Indian economy as it contributes about 17% to the

total GDP and provides employment to over 60% of the population. Indian agriculture has

registered impressive growth over last few decades. The foodgrain production has increased

from 51 million tonnes (MT) in 1950-51 to 250 MT during 2011-12 highest ever since

independence. The production of oilseeds (nine-major oilseed) has also increased from 5 MT

to 28 MT during the same period. During the mid 1990s the factor, which has had the biggest

~mpact on the state's economy, was migration to the Gulf and the inflow of remittance^.^^ In

several districts of Kerala, Gulf remittances are the basic factor determining all economic

activities. But the return of a large number of migrants from the Gulf during 1996 and 1997

created a severe economic crisis in those areas having large concentrations of migrant

households. Due to restrictions imposed on foreign workers, more than 40,000 migrant

workers were forced to return from the U.A.E. since October 1996.Another 37,000 returned

from Saudi Arabia since October 1997. The return of migrants created an acute recession in

seven districts with large concentration of migrant households. There has been a big fall in

the price of land and real estate, construction activities and trade and commerce.