About the Project - NCAERagrioutlookindia.ncaer.org/events/second_semi_annual.pdf · (NCAP), New...

About the ProjectThe need for monitoring and analysis of emerging food scenarios is important for India both because ofsignificant dependence of output on the monsoon rains and the fact that globally India is one of the majorconsumers of food crops influencing markets. Management of agriculture from a public policy perspectiverequires organisation of this information and analysis as inputs to policy making.

Against this backdrop the National Food Security Mission (NFSM), Ministry of Agriculture, commissioned a3–Year study to National Council of Applied Economic Research (NCAER) in 2011–12 to bridge thisimportant gap in analytical inputs for understanding the emerging agricultural scenarios both in the short-termof one or two quarters and also in the medium to longer term.

Accordingly, the agricultural outlook and situation analysis undertaken in this study refers to the main cropbased food items: cereals (specifically rice, wheat, jowar, bajra, maize and overall coarse grains), pulses (gram,tur), selected fruits and vegetables (banana, potato, onion), sugarcane and edible oils (groundnut, rapeseed/mustard, soybean). In addition the analysis also covers milk, one livestock product.

The three main outputs of the proposed work are:

(1) A Quarterly Agricultural Outlook Report that integrates the assessment of key indicators relating toagriculture with a focus on food sectors. The reports will include assessment of the current situation oninputs, output and market conditions and also forecasts of key indicators for the full year based on modelsdeveloped for the purpose.

(2) A Semi-annual Agricultural Outlook Report which provides a longer term perspective for the food sector.These reports will present an analysis of alternative scenarios of output and consumption for the food cropstaking into account the available information and based on the suitable economic models that permitlonger term projections.

(3) Monthly briefings on the prevailing agricultural conditions.

ImplementationNCAER has set up a study team to carry out the study.

An advisory committee has been formed to provide broad guidance to the implementation of the study. TheCommittee comprises of Dr Shekhar Shah, DG, NCAER as Chair, Dr Ashok Gulati, Chairman, Commissionon Agricultural Costs and Prices, Prof. Ramesh Chand, Director, National Centre for Agricultural Policy(NCAP), New Delhi, Prof. Mahendra Dev, Director, Indira Gandhi Institute for Development Research(IGIDR), Mumbai, Mr Mukesh Khullar, Joint Secretary (Crops), Ministry of Agriculture and Mrs S. Bhavani,Principal Adviser, Ministry of Agriculture. Representative from FAO and DFID are Special Invitees to theCommittee meetings.

A Technical Support Group comprising of key officers from different departments of the government andexperts has also been formed to interact with the study team to improve the work under the study.

Agricultural Outlook and Situation Analysis Reports

Second Semi-annual Medium-term Agricultural Outlook Report(Update of February 2013 Report)

September, 2013

AGRICULTURAL OUTLOOK AND SITUATION ANALYSIS REPORTS

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Agricultural Outlook and Situation Analysis Reports

Second Semi-annual Medium-term Agricultural Outlook Report(Update of February 2013 Report)

Under the Project Sponsored by the National Food Security MissionMinistry of Agriculture

September, 2013

Prepared by

National Council of Applied Economic Research11, I.P. Estate, New Delhi 110 002


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The BackdropThe current projections of improved global economic growth performance for the currentyear and stronger growth in 2014 are positive signs for agricultural sector. TheInternational Monetary Fund (IMF), in its April 2013 World Economic Outlook,projected world GDP to expand by 3.3 per cent in 2013 as compared to 3.2 per cent in2012. The GDP growth has been projected to increase to 4.0 per cent in 2014 and furtherto 4.5 per cent in 2018. This recovery in global growth is expected to support growth indemand for food commodities in the medium-term of next 5-10 years.

India’s overall economic growth in the current year is expected to be again moderatefollowing a similar performance in 2012–13 when GDP increased by 5 per cent inconstant prices. The medium-term prospects of higher growth are consistent with theglobal growth recovery although it may fall short of the earlier expectations of annualaverage growth rate of 8 per cent.

The inflation pressures are also expected to moderate over the medium-term. In the caseof advanced economies, IMF projects annual consumer price inflation of 2.0 per cent overthe medium-term as compared to projected 1.7 per cent in 2013 and 2 per cent in 2014.In the emerging market and developing economies, consumer price inflation is projectedto decline from 5.9 per cent in 2013 to 4.8 per cent in 2018.

This higher economic growth and moderate rate of inflation provide a favourablemacroeconomic environment for agricultural sector’s own performance in the medium-term.

Recent trends in India’s agricultural sector withimplications to medium-term prospectsEven as foodgrain production registered significant increase during the period from2007–08 to 2012–13, reaching a peak production level of 259 million tonnes in 2011–12,an important feature of this period was also high rate of food inflation. The food prices alsorose sharply between 2006 and 2011 globally, stabilising thereafter. Maintaining stable levelof food prices is a policy challenge over the medium-term. India’s National Food SecurityAct, adopted by Parliament in September 2013 has expanded coverage of its PublicDistribution System to include a much larger proportion of population under its ambit.

Agricultural sector has seen several changes in the past decade. International trade inagricultural produce has increased significantly. Institutional credit and use of certified, andquality seeds have registered manifold increase. Among the input prices, wage rates ofagricultural labour increased by 19 per cent per year during 2008–09 to 2012–13. Thesechanges require adjustments in the sector so that the overall incentives to productionremain positive to the producers. The challenge of improving productivity is even morecritical as we consider the declining trend of average size of farm holdings.

Highlights

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Given the constraints on further expansion of aggregate land area under crops,improvement in crop yield per unit of land area is the main source for growth inproduction. In this context, differentials in crop yields across regions point to one potentialsource of productivity improvements.

Global scenario for food commodities in the medium-termThe emerging medium-term outlook for the food sector at the global level is characterisedby adequate stocks, moderate increase in prices and increased production contributedmainly by the developing countries.

The overall production growth is seen to be slower in the medium-term of 2014–22 in themedium-term Agricultural Outlook Report brought out by OECD and FAO in June 2013as compared to the recent growth. The projected output growth is slower than in the recentfive years in the case of rice, maize, oilseeds, vegetable oils, oil meal and milk. Theprojected growth rate in the medium-term is of the same order as in the recent past in thecase of wheat. Only in the case of soybean and sugar projected growth rates are higher thanexperienced in the recent period of 2008–12. With slower growth in production, tradevolumes are also projected grow at a slower pace in the medium-term.

While the uncertainties relating to crop yields affected by weather fluctuations and theimpact on commodity prices remain, the overall outlook is one of adequate supplies andstable price conditions.

Medium-term Outlook for India’s Food CommoditiesWith the increase in average income level and urbanisation, composition of demand isexpected to change in the developing economies. In India, the experience of high rate ofprice increase in the case of livestock products, fruits, vegetables and pulses has pointed tothe need for efforts to increase production of these commodities and also improvemarketing infrastructure including transport, storage and distribution.

Based on a review of recent trends in the factors affecting production, trade and prices offood commodities and an assessment of these variables over the medium-term, the presentreport has updated the medium-term projections of the sector first provided in February2013. The key findings are,

The projected growth rates of production are higher than the projected growth rates ofdemand in the case of rice and coarse grains among cereals, and in edible oils.

In the case of wheat, production growth rate lags behind demand and sustainedproductivity improvements would be important to maintain the balance betweensupply and demand over the medium-term.

In the case of pulses, projected increase in demand by 1.38 per cent per year over themedium-term is lower than the current trend growth in production. The projectedgrowth of production of 2 per cent per year over the medium-term, combined withcurrent levels of imports, meets growth in demand.

Projected growth rates of production either equal or exceed the projected levels ofdemand in the case of potato, onion, edible oils and milk. However, margin ofadditional production growth over demand growth is small emphasising the need for


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raising production performance and reducing wastage in handling and storage.

The prices of rice and wheat among the food commodities are projected to increase ata much lower rate of 5.3 per cent per year over the medium-term as compared to theexperience of 9–10 per cent increase per year in the recent five years. Prices of pulsesare also projected to increase at a lower rate of less than five per cent per year. The pricesof coarse grains and oilseeds are projected to increase at a rate higher than rice andwheat.

The projected export growth rates of rice, coarse grains and oilseeds in the medium-term are lower than the recent trends. The recent increases have come over relativelysmall base level quantities and achieving the projected export growth over the medium-term will require sustained production growth.

HIGHLIGHTS

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The study team wishes to place on record the guidance, support and assistance receivedfrom a number of organisations and individuals. Mr Ashsih Bahuguna, Secretary,Department of Agriculture and Cooperation has been very supportive of the work and hasencouraged us in the conduct of the study. He presides over the monthly briefings whichprovide new insights to our work on outlook assessment. Mr Mukesh Khullar, former JointSecretary (Crops) and Mission Director, NFSM was a source of constant encouragementin all stages of the study until he was handling these positions. A number of officials fromthe Ministry and DES have provided data, opportunities for interaction and guidance inthe course of the study. Dr B. Gangaiah, Economic and Statistical Adviser, Ministry ofAgriculture, has provided continued support and encouragement to the study from rightfrom its inception.

Dr Ashok Gulati (CACP), Prof. Ramesh Chand (NCAP), Mrs S. Bhavani (Ministry ofAgriculture), Prof. Mahendra Dev (IGIDR), Mr Mukesh Khullar (Ministry ofAgriculture) and Dr Shekhar Shah (NCAER) as members of the Advisory Committeeand Dr Peter Kenmore (FAO) as Special Invitee to the Advisory Committee meetingshave provided guidance to the study team. The Technical Support Group (TSG) set up forthe study has included a number of officials and also other experts.

Reports of USDA, FAO and Department of Agriculture and Cooperation have beenmajor sources of data and information for the report. We have used information and datafrom a number of other sources also. In this report we have extensively relied on theOECD-FAO Agricultural Outlook 2013–2022 for the medium-term scenario for foodcommodities globally and also for India in the global context.

A number of experts made presentations in the monthly briefings organised at theMinistry of Agriculture under the activities of this study. We acknowledge their support asthey shared their experience and knowledge on different aspects of assessment ofagricultural outlook.

Acknowledgements

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Study Team

Shashanka Bhide (Project Leader), A. Govindan, Laxmi Joshi, MondiraBhattacharya , V.P. Ahuja, S.K. Mondal, Amar Singh, Charu Jain, Himani Guptaand Praveen Sachdeva are the staff associated with the report at NCAER. Mr J.S.Punia has coordinated the printing of the report.

Dr Pramod Kumar, Professor and Head, Agricultural Development and RuralTransformation Centre at Institute for Social and Economic Change has providedthe medium-term projections based on the econometric model cited in the report.This work is part of the collaboration between NCAER and ISEC.


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Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .v

Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .vii

Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ix

Acknowledgements and Study Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xiii

List of Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xvii

List of Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xix

I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

II. Setting for India’s Medium-term Agricultural Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

III. Global Outlook and Implications to India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

IV. Medium-term Assessment of Selected Food Commodities in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41

V. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49

Contents

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II.1 Pattern of Changes in Production for the Major Food Crops: 2000–01 to 2012–13 . . . . . . . . . . . . . . . . . . .7

II.2 Pattern of Changes in Area and Yield for the Major Food Crops: 2000–01 to 2012–13 . . . . . . . . . . . . . . . .8

II.3 Trends in Food Commodity Prices: Average per cent change per year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

III.1 Annual Growth Rates of World Production and Trade in Food Commodities: per cent . . . . . . . . . . . . . . .20

III.2 Annual Growth Rates of World Prices of Food Commodities: per cent . . . . . . . . . . . . . . . . . . . . . . . . . . .21

III.3 Year-end Stocks of Food Commodities: million tonnes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

III.4 World Production Projections: million tonnes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

IV.1 Average Annual Growth Rate (per cent) of Production of Selected Food Commodities:Actual Production Trends in 2008–12 and Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42

IV.2 Trend in Minimum Support Prices of Major Food Commodities: per cent change per year . . . . . . . . . . . .43

IV.3 Gross and Net Returns on Actual Cost of Cultivation (Average of 2008–09 to 2010–11) – All India . . . .44

IV.4 Updated Projected Growth Rates of Area, Yield and Production of Selected Food Commodities in the Medium-term: per cent per year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45

IV.5 Growth Rates of Area, Yield and Production of Selected Food Commodities during 2008–12:per cent per year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46

IV.6 Projected Growth in Demand for Selected Food Commodities: per cent per year . . . . . . . . . . . . . . . . . . . .47

IV.7 Projected Growth Rates of Production and Demand for Selected Food Commodities Over the Medium-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47

IV.8 Rates of Change in Prices and Exports of Selected Food Commodities . . . . . . . . . . . . . . . . . . . . . . . . . . .48

List of Tables

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II.1 Trends in Yield of Rice, Wheat, Maize and Coarse Cereals: kg/ ha . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

II.2 Trends in Yield of Pulses and Oilseeds: kg/ ha . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

II.3 Trends in Yield of Sugarcane, Potato, Onion and Banana: tonnes/ ha . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

II.4 Yield (kg/ ha) and Area (million ha) under Rice Across Regions: Three years ending 2011–12 . . . . . . . . .11

II.5 Yield (kg/ ha) and Area (million ha) under Wheat Across Regions: Three years ending 2011–12 . . . . . . .12

II.6 Yield (kg/ ha) and Area (million ha) under Maize Across Regions: Three years ending 2011–12 . . . . . . . .13

II.7 Yield (kg/ ha) and Area (million ha) under Gram Across Regions: Three years ending 2011–12 . . . . . . . .13

II.8 Yield (kg/ ha) and Area (million ha) under Tur (Arhar) Across Regions: Three years ending 2011–12 . . .14

II.9 Yield (kg/ ha) and Area (million ha) under Soybean Across Regions: Three years ending 2011–12 . . . . . .15

II.10 Yield (kg/ ha) and Area (million ha) under Rapeseed and Mustard Across Regions: Three years ending 2011–12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

II.11 Yield (kg/ ha) and Area (million ha) under Potato Across Regions: Three years ending 2011–12 . . . . . . .16

II.12 Yield (kg/ ha) and Area (million ha) under Onion Across Regions: Three years ending 2011–12 . . . . . . .17

III.1 Area Under Wheat: Selected Major Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

III.2 Wheat Production: Selected Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

III.3 Wheat Yields: Selected Major Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

III.4 Wheat Per Capita Consumption: Selected Major Regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

III.5 Area Under Rice: Selected Major Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

III.6 Rice Production: Selected Major Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

III.7 Rice Yields: Selected Major Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

III.8 Rice Per Capita Consumption: Selected Regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

III.9 Area Under Coarse Grains: Selected Major Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

III.10 Production of Coarse Grains: Selected Major Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

III.11 Coarse Grain Yield: Selected Major Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

III.12 Oilseeds Area: Selected Major Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30

III.13 Oilseeds Production: Selected Major Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31

III.14 Oilseeds Yield: Selected Major Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31

III.15 Production of Vegetable Oils: Selected Major Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

III.16 Vegetable Oils Consumption: Major Regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

III.17 Vegetable Oils Net Exports: India and Selected Major Exporters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

III.18 Per Capita Consumption of Vegetable Oils: Major Regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34

List of Figures

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III.19 Oil Meal Production: Selected Major Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34

III.20 Consumption of Oil Meal: Major Regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

III.21 Net Exports of Oil Meal: Selected Major Exporters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

III.22 Area Under Sugarcane: Selected Major Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37

III.23 Sugarcane Production: Selected Major Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37

III.24 Sugarcane Yield: Selected Major Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

III.25 Sugar Production: Selected Major Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

III.26 Consumption of Sugar: Major Regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39

III.27 Per Capita Consumption of Sugar: Major Regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39

III.28 Net Exports of Sugar: India and Selected Major Exporters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40

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An assessment of the medium-term scenarios of outlook for agricultural production,demand, prices and trade is a valuable input to policies for the sector. This report is anupdate of the Medium-term Agricultural Outlook Report (MTAOR) prepared inFebruary 2013 under the project commissioned by the National Food Security Mission,Ministry of Agriculture.

In the first semi-annual MTAOR, we had presented the supply demand scenarios for themajor food commodities based on alternative approaches. For instance, foodgrainproduction was projected at 277.8–284.3 million tonnes in 2016–17 based on the resultsof an econometric model of supply of food commodities. Foodgrain production wasprojected to increase by 1.82–2.15 per cent per year during 2012–2020. In the presentreport, we discuss alternative set of projections available from OECD-FAO Medium-termAgricultural Outlook Report of June 2013 and also update the projections provided inFebruary 2013 MTAOR.

The report provides an overview of the medium-term outlook at the global and domesticagriculture focusing on the major food commodities.The second chapter of the reportpresents an overview of the key determinants of emerging production, prices and tradeconditions for the medium-term based on the recent trends in these variables.

Given the constraints on expanding land area, productivity improvements will play acritical role in achieving growth in production in the coming years. In the second chapterof this report, we also highlight the yield differentials across four regions in the country.

In the third chapter of the report, we have summarised the emerging global outlook basedon the recent OECD-FAO Agricultural Outlook Report 2013–2022. In this chapter wehave also examined the perspectives on India’s medium-term outlook emerging in theglobal context.

The updated medium-term assessment for the food commodities is presented in Chapter4. The assessment provides projections of output, demand and prices of the major foodcommodities in the country over the medium-term. Chapter 5 provides concludingremarks.

CHAPTER I

Introduction

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II.1 Overall Economic EnvironmentIndia’s overall economic growth in the current year is expected to be moderate following asimilar performance in 2012–13 when GDP increased by 5 per cent in constant prices.This slowdown in growth, as compared to the experience of the recent years, has coincidedwith the global pattern.World GDPgrowth is expected to be marginally higher in 2013than 2012 with more significant improvement expected in 2014. The InternationalMonetary Fund (IMF), in its April 2013 World Economic Outlook, projected world GDPto expand by 3.3 per cent in 2013 as compared to 3.2 per cent in 2012. The GDP growthfor 2014 has been projected to increase to 4.0 per cent in 2014 and further to 4.5 per centin 2018. The improvement in global growth is expected to come from higher growth inboth Advanced and Emerging Market and Developing Economies. This recovery in globalgrowth is expected to support growth of demand for food commodities in the medium-term of next 5–10 years.

The inflationary pressures are also seen to be moderating. The WEO, April 2013 reportsees crude oil prices to be declining in 2013 and 2014. The OECD-FAO medium-termagricultural outlook report1, in developing its medium-term outlook, assumes the crude oilprices to rise by 2.8 per cent per year in dollar value during 2014–22. There are short termuncertainties affecting the global economic environment, particularly as internal turmoil incountries such as Syria and Egypt have potential for disruption of oil supplies in theinternational markets.

India’s own agricultural production, measured by GDP in constant prices from agricultureand allied sectors has increased by 3.7 per cent per year during 2007–08 to 2011–12. In thecurrent Twelfth Five Year Plan period of 2012–13 to 2016–17, the expectation is thatsimilar growth performance would be repeated. However, there will be a need to improveproductivity of the sector so that output growth can be sustained without inflationaryimpact and consumption growth can also be sustained.

II.2 Price ConditionsThe FAO Food Price Index rose by 80 per cent between 2006 and 2011. But since thenthe index has remained stable. Stable price environment for both inputs and output wouldbe necessary to sustain growth in demand and production.

In India, the wholesale price index for all commodities increased by 7.1 per cent per yearduring 2007–08 to 2012–13. One of the drivers of this increase was food prices. The WPIfor food articles (comprising of foodgrain, oilseeds, fruits, vegetables and other raw orunprocessed food commodities) rose by 11.4 per cent and the WPI for Food products(comprising of processed food products such as grain products, sugar, edible oils, dairyproducts) rose by 8.2 per cent year during the same period. The increase in input prices

CHAPTER II

Setting for India’s Medium-termAgricultural Outlook

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Recovery in globalgrowth isexpected tosupport growth ofdemand for foodcommodities inthe medium-termof next 5-10years.

In India, thewholesale priceindex for allcommoditiesincreased by 7.1per cent per yearduring 2007–08to 2012–13. One ofthe drivers of thisincrease was foodprices.

1. OECD-FAO Agricultural Outlook, 2013–2022, http://dx.doi.org/10.1787/agr_outlook-2013-en

such as fertilisers (6.2 per cent), and diesel (6.1 per cent) was significant but relatively lowerin the case of pesticides (1.9 per cent). The rise in agricultural wage rates has been sharperamong the input prices. Agricultural wage rates increased, by an average of 19.27 per centper year, during the period from 2008–09 to 2012–13.

Part of the explanation for the rising food prices during the recent period of 2007–08 to2012–13 has been the rising demand for protein foods such as livestock products, pulsesand diversification of diet to include fruits and vegetables as consumer income levelsincreased and supply response to meet the rising demand was slow to emerge. The supplybottlenecks included constraints in marketing channels and inadequate cold storagefacilities. The rising input costs, particularly labour and energy, were passed on to theconsumers leading to higher food prices.

II.3 Emerging Challenges2

During the recent decade, India’s exports and imports of agricultural commodities alsoincreased. In 2012–13, India exported 10.1 million tonnes of rice, 6.8 million tonnes ofwheat and wheat flour, 5.4 million tonnes of other cereals (mainly maize) and about 5million tonnes of oil meal. It imported 3.8 million tonnes of pulses, about 11 milliontonnes of edible oils and a million tonnes of sugar. In 2002–03, imports of pulses andedible oils were only about half the quantity as compared to the imports of 2012–13.Exports of rice, other cereals and oil meals were also considerably smaller in 2002–03compared to 2012–13: about 5 million tonnes of rice, less than 1 million tonnes of othercereals and 1.8 million tonnes of oil meal. India’s agricultural exports, including processeditems such as sugar were valued at $40.6 billion dollars in 2012–13, as compared to $6.7billion in 2002–03. In the case of imports, the value in 2012–13 was $15.9 billion ascompared to $2.7 billion in 2002–03.Accessing international markets both to providemarkets for India’s production and also to obtain supplies to meet domestic demand isincreasingly important in managing the supply-demand balances for food commodities.

The Food Security Bill, now passed by the Lok Sabha, seeks to provide 5 kg of grain permonth to all eligible persons in the country at highly subsidised price of Rs 3/ kg in thecase of rice, Rs 2/ kg in the case of wheat and Rs 1/ kg in the case of coarse grains. Theextent of subsidy is clear when we consider that the minimum support price of paddy for2013 kharif is Rs 13.5 per kg and the MSP for wheat for 2012–13 crop was Rs 13.5 perkg. The subsidy will also have to include cost of handling transport, storage and otherlogistics involved in the procurement and distribution of grain.The current economic costof grains handled by the government is estimated at Rs 26.44 per kg for rice and Rs 20.1per kg for wheat. Implementation of the legislation will require increased efforts to bringabout greater efficiency in handling grains and reduce wastage to make the operationssustainable.

The future increases in agricultural production have to come from increased productivityof land. The net sown area under crops has remained in the narrow range of 140-142million hectares since 2000–01 dropping sharply below 140 million hectares in 2002–03and just below 140 million hectares in 2006–07. In both the years, rainfall was inadequate:in 2002–03, the monsoon ( June–September) and post monsoon (October–December)period rainfall was well below normal and in 2006–07 while the monsoon season rainfallwas normal, it was below normal in the post monsoon and winter season underlying theimportance of well distributed rainfall in maintaining high levels of area under cultivation


Part of theexplanation forthe rising foodprices during therecent period of2007–08 to2012–13 has beenthe rising demandfor protein foodssuch as livestockproducts, pulsesanddiversification ofdiet to includefruits andvegetables asconsumer incomelevels increasedand supplyresponse to meetthe rising demandwas slow toemerge.

The Food SecurityBill, now passedby the Lok Sabha,seeks to provide 5kg of grain permonth to alleligible persons inthe country athighly subsidisedprice of Rs 3/ kg inthe case of rice, Rs2/ kg in the case ofwheat and Rs 1/kg in the case ofcoarse grains.

4

2. Data relating to Indian agriculture cited here are mainly from Official Statistics available from Directorate of Economics and Statistics, Ministry of Agriculture.

in any given year. In the last three decades increase in crop area has come essentially fromincreased cropping intensity, with about 53 million hectares of net sown area now beingcultivated more than once. Higher cropping intensity is possible as irrigation meets thewater requirement when rainfall is inadequate, suitable crop varieties become available andmechanisation of farm operations enabling more intensive use of land for crop production.

Transformation of agriculture over the longer term would be necessary as there are changesin the composition of demand, increased opportunities for international trade andtechnology of production, processing and storage improve. The challenge for Indianagriculture will be to achieve increased production from small farm holdings. Between2000–01 and 2010–11, the percentage of area under operational farm holdings of less thanone hectare rose from 18.7 to 22.2 indicating the current trend towards decreasing size ofland holdings. While faster growth of non-farm sector of the economy that requirestransfer of labour from farm to non-farm sector may lead to changes in this trend patternof declining size of holdings, the changes are likely to be gradual. Therefore, the medium-term focus on improving productivity in small holdings would be necessary to achievegrowth in food production. Encouraging contract farming and lease markets in transparentand enforceable contracts would help in achieving more viable holding size. The scale ofchallenge may be seen in the fact that growth rate of real value of output from agriculture(crops and livestock) sector per hectare of gross sown area has increased by just 2.4 per centyear during the period 2000–01 to 2009–10 latest period for which these data are available.In the context of declining size of land holdings, higher output per holding is possible onlyif there is higher yield of crops grown, increased cropping intensity or cultivation of highervalued crops or all of these measures. All these measures in turn require furtherinvestments in the sector.

Irrigation is a key driver of increase in crop yields and also in bringing more area undermultiple cropping systems. Area under irrigation has increased by about 1 million hectaresper year during the period 2000–01 to 2009–10 and has now reached 46 per cent of thegross cropped area. Further increase in irrigated area would depend on maintaining theirrigation infrastructure over the medium-term and investments by both public and privatesector. Private investments in irrigation would depend on the favourable price environmentand market support to the produce. It is expected that policy measures will create afavourable environment for investments in agricultural sector for both public sector andprivate sector.

There has been more intensive application of chemical fertilisers to increase production ofcrops per hectare of land area. Between 2001–02 and 2011–12, per hectare use of majornutrients (N+P+K) per hectare of land increased by 5 per cent per year. In this periodconsumption of phosphorous and potash increased more rapidly than application ofnitrogen. Application of nitrogen dropped from 65 per cent of total major nutrients to 58per cent. The peak level of share of nitrogen in total major nutrients was 72 per cent in1996–97. The rising share of phosphorous and potash is seen as desirable change implyinga shift towards more balanced application of chemical fertilisers.

There have also been other changes on the input use front. Pesticide use per hectare of croparea has increased in the recent decade as compared to the decline in the previous decade.Pesticide use per hectare of gross cropped area increased by 2.9 per cent per year duringthe period from 2001–02 to 2010–11. In the previous 10 years the usage had declined by5.6 per cent. The change may be a result of changes in cropping pattern as well as theincreased awareness of the use of pesticides. Adoption of pest resistant crop varieties andimproved cultivation practices would help reduce dependence on harmful chemicals.

SETTING FOR INDIA’S MEDIUM-TERM AGRICULTURAL OUTLOOK

5

Transformation ofagriculture overthe longer termwould benecessary asthere are changesin the compositionof demand,increasedopportunities forinternationaltrade andtechnology ofproduction,processing andstorage improve.

In the context ofdeclining size ofland holdings,higher output perholding ispossible only ifthere is higheryield of cropsgrown, increasedcropping intensityor cultivation ofhigher valuedcrops or all ofthese measures.All thesemeasures in turnrequire furtherinvestments in thesector.

A major change on the input front is the increase in the distribution of certified and qualityseeds. The certified/quality seeds distribution increased from 8.63 million quintals in2000–01 to 28.39 million quintals in 2011–12. Cereals accounted for 65 per cent of totalcertified/quality seeds distributed in 2011–12. Pulses accounted for 6.8 per cent andoilseeds 20.6 per cent. Within the cereals and millets, rice and wheat account for most ofthe certified/quality seeds. Among the pulses, gram dominates use of certified/ qualityseeds and among oilseeds groundnut and soybean account for over 90 per cent of certified/quality seeds. At this rate of increase share of certified/ quality seeds in total seedrequirements will reach the desirable seed replacement rates more quickly in the case ofsome of the major crops. Nevertheless, use of hybrid seeds is still confined to mainly maizeand to some extent sunflower seed.

The use of machinery in farm operations including irrigation pumpsets has been risingover time. Although information from more recent agriculture census (2011) is not yetavailable, the sale of agricultural tractors, power tillers, irrigation pumpsets has increasedover the years. For instance, number of tractors sold in the country increased from 235, 602in 2000–01 to 578, 690 in 2012–13. The number of power tillers sold increased from16,018 in 2000–01 to 51,414 in 2010–11 but declined from this high to 39, 900 in2011–12. Not all the tractors and tillers sold may be used purely for agricultural operationsbut a majority of them are likely to be used for agricultural operations partially or fully.While there are still concerns over sustainability of subsidies in diesel, electricity andirrigation water supplied from public sector operated irrigation systems, the need forincreased mechanisation of farm operation will increase. The positive productivity effectsof mechanisation would be realised from increased cropping intensity and potential forincreased crop yields.

There has been a major policy thrust to increase institutional lending to the farm sector tominimise the risks from informal sources of finance. The short term lending (productioncredit) from institutional sources such as cooperatives and banks increased from Rs 33, 314crore in 2000–01 to an estimated Rs 396, 158 crore in 2011–12. The medium and longterm credit rose from 19,513 crore in 2000–01 to Rs 114, 871 crore in 2011–12. Atprojected 205 million hectares of gross cropped area in 2011–12 the production creditworks out to Rs 19,000 per hectare of gross cropped area in 2011–12. As a proportion ofvalue of output of agriculture and livestock, production credit works out to 25 per cent for2011–12. There appears to be greater intensity of use of credit by the smaller farmers asdata for 2006–07 shows that institutional credit per hectare of operational land is morethan double the average for all the holdings. However, the pattern of credit per hectare ofland for smaller and the larger holdings is similar when it comes to the long term credit.

Integrated approach to maintaining favourable input supply, technology and outputmarketing for food production would be needed to ensure rising productivity of smallfarms over the medium-term.

II.4 Trends in Area and Yield of Major Food CommoditiesThe prospects for the supply of food commodities over the medium-term are influencedby domestic production scenarios. The broad pattern of changes in the production of foodcrops in the recent decade shows that there have been changes in the composition ofoutput, driven by incentives to the producers and subject to constraints of input use andproductivity. During the period of 2000–01 and 2012–13, taking the three years’ averagesat the beginning and the ending periods, production of cereals increased by 50.1 milliontonnes, contributed by rice (17.9 million tonnes), wheat (20.5 million tonnes) and coarse


6

Integratedapproach tomaintainingfavourable inputsupply,technology andoutput marketingfor foodproduction wouldbe needed toensure risingproductivity ofsmall farms overthe medium-term.

cereals (11.7 million tonnes). Rice and wheat are the main contributors to the increase inthe output of cereals. Production of pulses increased by 6 million tonnes during this periodand major oilseeds rose by 13.1 million tonnes. Gram is the major contributor to theincrease in the production of pulses and soybean has kept up the production of oilseedsduring this period. Production of potato, onion and banana has increased sharply duringthe period following post 2000–01 period. The pattern of changes in production issummarised in Table II.1.

When we decompose production gains during the period 2000–01 to 2012–13 into areaand yield, we find that the overall area under the major food crops: cereals, pulses, oilseeds,sugarcane, potato, onion and banana- covered in the present analysis increased by about 10million hectares. During the same period gross sown area increased by an estimated 15million hectares. Bulk of the increase in crop area has, therefore, been assigned to foodcrops.

The food crops where there has been significant increase in area include wheat, maize,pulses, oilseeds and the horticultural crops of potato, onion and banana.

The crops which saw decline in area sown are coarse cereals other than maize.

Expansion in area has taken place in both kharif and rabi seasons. In kharif season, majorincrease has come in from maize and soybean. In rabi the area has increased in the case ofwheat, gram, and rapeseed and mustard.

There was practically no increase in area planted to rice during this period as the averagearea under rice for the three years of 2010–11 to 2012–13 was 43.8 million hectares, just0.2 million hectares more than during the period 2000–01 to 2002–03.

The decline of area under coarse cereals- other than maize is partly due to inadequate


7

When wedecomposeproduction gainsduring the period2000–01 to2012–13 into areaand yield, we findthat the overallarea under themajor food crops:cereals, pulses,oilseeds,sugarcane,potato, onion andbanana- coveredin the presentanalysisincreased byabout 10 millionhectares.

Table II.1: Pattern of Changes in Production for the Major Food Crops: 2000–01 to 2012–13

Crop Average for Average for Change from % change

TE 2000–01 TE2010–11 TE 2002–03

to 2002–03 to 2012–13 to TE 2012–13

(million tonnes)

Rice 83.4 101.3 17.9 21.4

Wheat 69.4 89.9 20.5 29.5

Maize 12.1 21.8 9.7 79.6

Coarse cereals 30.2 41.9 11.7 38.8

Gram 4.5 8.2 3.7 80.5

Arhar 2.2 2.9 0.7 29.0

Pulses 11.9 17.9 6.0 51.0

Groundnut 5.9 6.7 0.8 13.6

Soybean 5.3 13.0 7.7 146.2

Rapeseed and mustard 4.4 7.7 3.3 74.6

Nine oilseeds 18.0 31.1 13.1 72.9

Sugarcane 2.9 3.4 0.5 17.3

Potato 23.2 42.1 18.9 81.3

Onion 4.6 16.5 11.9 256.0

Banana 12.9 29.5 16.6 128.6

TE: Three years ending.

market support. Only in the case of maize, among coarse grains, increase in demand fromlivestock sector for feed and also exports have led to expansion of its area.

In percentage terms increase in area under potato, onion and banana has been sharp butthe absolute level of area under these crops is relatively small. Table II.2 below provides asummary of the changes in area and yield under the major food crops during the period of2000–01 to 2012–13.

In general, increase in yield growth has outpaced the growth rate of area in the recent yearsalthough in the following crops, area growth rate has exceeded growth rate of yield:

In the case of gram and tur (arhar) area sown increased at a higher rate than theincrease in yield during the period 2000–01 to 2012–13. However, for pulses as awhole, yield growth has exceeded area because of the increase in yield of other pulses.

Among the oilseeds, area under soybean and rapeseed and mustard increased at nearlythe same rate as yield growth or even faster.

In the case of potato, onion and banana also, crop area increased faster than yieldgrowth.

Sugarcane area also increased at a faster rate than increase in yield.

The incentives in terms of price signals or demand growth, favoured production of maize,pulses, oilseeds and the three horticulture crops. However, the growth of area in the caseof wheat and yield in the case of rice and wheat were possible due to availability of higheryielding seeds and market support. The average change in WPI for the major foodcommodities is summarised in Table II.3.


8

The incentives interms of pricesignals ordemand growth,favouredproduction ofmaize, pulses,oilseeds and thethree horticulturecrops. However,the growth of areain the case ofwheat and yield inthe case of riceand wheat werepossible due toavailability ofhigher yieldingseeds and marketsupport.

Table II.2: Pattern of Changes in Area and Yield for the Major Food Crops: 2000–01 to 2012–13Crop Crop area average % Change Units Crop yield average % Change

for 3 years ending for 3 yearsin (mill ha) ending in

2002–03 2012–13 2002–03 2012–13

Rice 43.6 43.8 0.42 Kg/ ha 1907.9 2312.2 21.19

Wheat 25.8 29.0 12.48 Kg/ ha 2693.2 3102.0 15.18

Maize 6.6 8.7 31.92 Kg/ ha 1834.3 2495.6 36.05

Coarse cereals 28.9 27.4 -5.39 Kg/ ha 1041.3 1530.5 46.97

Gram 5.8 8.6 47.83 Kg/ ha 771.2 955.6 23.90

Arhar 3.4 4.1 18.02 Kg/ ha 649.3 712.5 9.73

Pulses 21.0 25.2 20.36 Kg/ ha 564.8 711.5 25.97

Groundnut 6.2 5.5 -12.75 Kg/ ha 932.7 1214.8 30.25

Soybean 6.3 9.9 56.60 Kg/ ha 841.3 1325.6 57.56

Rapeseed & mustard 4.7 6.7 41.94 Kg/ ha 930.4 1148.7 23.46

Nine oilseeds 22.3 27.2 22.00 Kg/ ha 804.7 1134.5 40.99

Sugarcane 4.4 5.0 13.02 Tonnes/ ha 66.5 68.8 3.46

Potato 1.3 1.9 50.87 Tonnes/ ha 18.5 22.2 19.72

Onion 0.4 1.1 141.73 Tonnes/ ha 10.6 15.6 47.39

Banana 0.5 0.8 78.64 Tonnes/ ha 28.4 36.3 27.89

Total 150.2 159.8 NA NA NA NA

Given the constraints on further increase in crop area, improvement in crop yields wouldbe necessary to meet growing demand. While there has been increase in yields, the needfor sustained efforts to improve productivity is emphasised by the variability in yields andstagnation in yield levels in some of the crops. In the case of cereals, although there havebeen improvements in yields in the case of rice and wheat, maize yield has remainedstagnant in the recent three years (Figure II.1). In the case of coarse cereals as a whole,yields are stagnant or declining in the recent three years.


9

In the case ofcereals, althoughthere have beenimprovements inyields in the caseof rice and wheat,maize yield hasremainedstagnant in therecent threeyears.

Table II.3: Trends in Food Commodity Prices: Averageper cent change per yearCommodity 2005–06 to 2008–09 to Item 2005–06 to 2008–09 to

2007–08 2012–13 2007–08 2012–13

Rice 5.2 9.7 Commodity groups

Wheat 8.2 7.9 Cereals 6.6 9.4

Jowar 12.2 10.4 Pulses 10.1 11.0

Bajra 7.1 13.0 Vegetables 7.2 9.2

Maize 7.9 12.6 Fruits 4.9 10.7

Gram 10.7 13.5 Edible oils 3.5 5.2

Arhar 7.2 11.4

Potato 23.4 16.9

Onion 12.4 8.0

Banana 6.5 11.9

Milk 4.6 12.8

Groundnut Seed 9.7 12.3

Rape & Mustard Seed 3.0 12.4

Soyabean 6.0 17.8

Grain mill products 6.1 4.6

Sugar 3.5 17.1

Groundnut Oil 7.0 7.9

Palm Oil 8.3 2.7

Mustard & Rapeseed Oil 0.3 7.5

Data Source: Office of the Economic Adviser to the Government of India, Ministry of Commerce and Industry, http://www.eaindustry.nic.in/

Figure II.1: Trends in Yield of Rice, Wheat, Maize and Coarse Cereals: kg/ ha

The pattern in the case of oilseeds shows greater year-to-year variability and decline inyield in the recent years. The yield of pulses has shown improved growth rate in the recentthree years (Figure II.2). In both the cases, India is a major importer and improvedproductivity of these commodities is necessary to ensure adequate supplies to meetdomestic demand.

The trends in the yield of sugarcane, potato, onion and banana show that in more recentyears, there has been slackening of yield growth (Figure II.3). Sugarcane yields showcyclical dips and highs but the yield levels have not shown significant increase from peakto peak over time. In the case of potato and onion, yields have not shown rising trends inthe recent three years. After three years of lack of improvement from 2009–10 to 2011–12,the yield in the case of banana appears to be higher in 2012–13 than in the previous years.


10

The trends in theyield ofsugarcane,potato, onion andbanana show thatin more recentyears, there hasbeen slackeningof yield growth

Figure II.2: Trends in Yield of Pulses and Oilseeds: kg/ ha

Figure II.3: Trends in Yield of Sugarcane, Potato, Onion and Banana: tonnes/ ha

II.5 Potential Gains in Production by Bridging the YieldDifferences Across RegionsThe yield gaps between India and other major producers, between experimental plots andfarmers’ fields, between irrigated and unirigated production conditions, between ‘ best’farm level yields and ‘average yields’ have been seen as indicators of potential yields orproductivity improvement. A similar indicator is the yield differential across regions withinthe country. A potential strategy to raise production is to bridge the yield gaps acrossregions, subject to the constraints posed by agro climatic conditions. We have provided anoverview of the yield differences across states grouped into four regions.

The composition of regions in terms of states’ coverage is as follows:

North: Punjab, Haryana, HP, JK, UP, Uttaranchal, Rajasthan

West Central: Madhya Pradesh, Chhattisgarh, Maharashtra, Gujarat

East: Assam, Bihar, Jharkhand, West Bengal, Orissa

South: Andhra Pradesh, Karnataka, Tamilnadu and Kerala

The yield and crop area across regions have been presented as averages for the three yearperiod of 2009–10 to 2011–12. The major patterns that emerge from an assessment ofthese yield differentials are highlighted below.

RRiicceeWhile west central and southern regions cover nearly equal area the yield differencebetween them is wide. The southern region has nearly double the yield levels as thewestern region. Eastern region has the largest area under rice but the yield levels are lowerthan in North and South (Figure II.4).


11

A potentialstrategy to raiseproduction is tobridge the yieldgaps acrossregions, subject tothe constraintsposed by agroclimaticconditions.

Figure II.4: Yield (kg/ ha) and Area (million ha) under Rice Across Regions: Three years ending 2011–12

WheatThe northern region dominates crop area and also has the highest yield per hectare. Thereis, however, significant difference in yields between north and west central regions, withthe latter accounting for next highest share of wheat area in the country (Figure II.5).There are differences in yields within the region as well. For instance wheat yields inPunjab and Haryana are well above 4 tonnes/ ha as compared to about 3.1 tonnes/ ha inUP. In the west central region, Madhya Pradesh is the main wheat producing state withabout 5 million hectares of crop area with average yield of about 2 tonnes/ ha. The yieldgap of 2 tonnes per hectare points to potential for increasing production in the longer termwith investments in irrigation, and research and development to achieve potential yields.

MaizeSouthern region accounts for over 2 million hectares of crop area, about 28 per cent ofoverall area under maize across all regions. The yield per hectare is also the highest in thesouthern region among the four regions. Northern region has even larger area planted tomaize accounting for 30 per cent of the area across the four regions but has the lowest yieldper hectare. West central region also has nearly the same acreage under maize as south buthas half the yield levels (Figure II.6). The higher maize yields in south India is attributedto increased use of hybrid seeds. Maize, therefore, has large variation in yield and has thepotential to achieve higher production levels in the longer term with improved yields innorthern and west central regions.


12

In the westcentral region,Madhya Pradeshis the main wheatproducing statewith about 5million hectaresof crop area withaverage yield ofabout 2 tonnes/ha. The yield gapof 2 tonnes perhectare points topotential forincreasingproduction in thelonger term withinvestments inirrigation, andresearch anddevelopment toachieve potentialyields.

Maize, therefore,has largevariation in yieldand has thepotential toachieve higherproduction levelsin the longer termwith improvedyields in northernand west centralregions.

Figure II.5: Yield (kg/ ha) and Area (million ha) under Wheat Across Regions: Three years ending 2011–12

GramIn terms of area, largest area is in the west central region accounting for 55 per cent of areaunder gram across the four regions. Northern region accounts for another 25 per cent ofarea planted under gram and the yield difference between north and west central regionsare relatively small (Figure II.7). However, yield in southern region is about 60 kg perhectare lower than in west central and may reflect scope for increased production in thelonger term. The eastern region has the highest yield but also lowest area under gram.


13

In terms of area,largest area is inthe west centralregion accountingfor 55 per cent ofarea under gramacross the fourregions.

Figure II.6: Yield (kg/ ha) and Area (million ha) under Maize Across Regions: Three years ending 2011–12

Figure II.7: Yield (kg/ ha) and Area (million ha) under Gram Across Regions: Three years ending 2011–12

Tur (Arhar)West central region has about 2 million hectares of land under tur and produces 742 kg ofthis pulse crop per hectare. The next largest area under tur is planted in southern regionwith a yield of only 491 kg per hectare (Figure II.8). Bridging this large yield differentialwith improvements in productivity in the southern region could provide significantproduction gains in the longer term. The yield levels in the north and east are even greaterthan in the west central region although area under this crop is less than half a millionhectare each. Tur is typically a long duration crop taking up 6–8 months from sowing toharvest and introduction of short duration varieties would help raise production.

SoybeanThe west central region dominates production of this oilseed crop among all four regions.The yield in west central region is lower than in the north and the lower yield may be aresult of expansion of crop area to relatively less productive land within the region (FigureII.9). Within the west central region, yield is higher in Maharashtra than MP, the twostates accounting for most of production in the region. Thus, yield gaps across regions maynot imply significant production gains.Yield differentials within the region may providescope for significant production gains. Indian soybean yields are only half the average USyield.


14

Tur is typically along duration croptaking up 6-8months fromsowing to harvestand introductionof short durationvarieties wouldhelp raiseproduction.

Figure II.8: Yield (kg/ ha) and Area (million ha) under Tur (Arhar) Across Regions: Three years ending2011–12

Rapeseed and MustardNorthern region accounts for over 4 million hectares of land planted to rapeseed &mustard. Crop yield in the north is also the highest among the four regions. The westcentral region, with about a million hectares under the crop has yield of 1144 kg perhectare as compared to 1264 kg per hectare in the north. The eastern region also bringsabout one million hectares under the crop with much lower yield of 846 kg per hectare(Figure II.10). Improvement in the yields in the eastern region is, therefore, likely toprovide significant production gains.


15

Improvement inthe yields in theeastern region is,therefore, likelyto providesignificantproduction gains.

Figure II.9: Yield (kg/ ha) and Area (million ha) under Soybean Across Regions: Three years ending 2011–12

Figure II.10: Yield (kg/ ha) and Area (million ha) under Rapeseed and Mustard Across Regions: Threeyears ending 2011–12

PotatoThe northern and eastern regions account for 85 per cent of total area under potato. Theper hectare yield in eastern region is about 3 tonnes lower than in the north. The yieldlevels are much lower in the west central and south although crop areas are also low inthese two regions (Figure II.11). Improved yields and expansion of area in the southernregion are likely to provide significant increase in overall production of potato.

OnionThe west central region accounts for 50 per cent of crop area across the four regions. Thesouthern region accounts for another 26 per cent of crop area (Figure II.12). The yielddifference between the two regions is about one tonne per hectare representing potentialgains from bridging the yield gap.


16

Improved yieldsand expansion ofarea in thesouthern regionare likely toprovidesignificantincrease inoverallproduction ofpotato.

Figure II.11: Yield (kg/ ha) and Area (million ha) under Potato Across Regions: Three years ending 2011–12

II.6 ConclusionsThe setting for the medium-term outlook for agriculture is one of continuing increase indemand for food commodities as population grows and income levels also increase.Identifying and implementing strategies to raise production in a sustainable and globallycompetitive manner will remain the challenge for policy making in the medium to longerterm. In this chapter we have presented a review of the trends in a number of indicatorsrelating to both supply and demand for food crops and highlighted the yield differentialsfor the major food crops across regions within the country. While the differentials mayarise due to differences in agro climatic conditions they may also be due to differences ininput use, irrigation and marketing infrastructure such as storage and transportation.Continued improvements in productivity will be needed to maintain growth in productionover the medium to long term as scope for further expansion of overall crop area is limited.


17

The setting for themedium-termoutlook foragriculture is oneof continuingincrease indemand for foodcommodities aspopulation growsand income levelsalso increase.Identifying andimplementingstrategies to raiseproduction in asustainable andgloballycompetitivemanner willremain thechallenge forpolicy making inthe medium tolonger term.

Figure II.12: Yield (kg/ ha) and Area (million ha) under Onion Across Regions: Three years ending 2011–12


18

CHAPTER III

Global Outlook and Implications to India

19

III.1 Global OutlookWorld population is projected to increase by an average of 75 million per year in the nextdecade. As the pace of overall economic growth has become less certain, at least in theshort term it remains well above the population growth, indicating rising demand for foodcommodities on account of rising population and per capita income growth.

The OECD-FAO Agricultural Outlook 2013–2022 released in June this year notes thatpolicy reforms and economic growth across the world have turned agriculture into a moremarket driven sector providing investment opportunities in the developing countrieswhich are also expected to capture most of the export growth in the medium-term.

The overall production growth is projected to be slower in the medium-term of nextdecade as compared to the recent experience. The projections are subject to uncertaintiesof economic growth, energy prices and exchange rates that affect market prices. Food priceinflation is projected to be lower although food prices are expected to rise at the same rateas overall rate of inflation.

The overall price scenario for the medium-term is sensitive to variations in crop yieldswhich may arise due to weather fluctuations.

A summary of annual average growth rates derived from the projected world productionand trade for the major food commodities in the OECD-FAO report is presented in TableIII.1. The projections are compared with the experience in the recent five years forreference and also in two sub-periods of 20014 to 2017 and 2018 to 2022.

Among the cereals the main patterns are: (1) in the case of rice there is a decline inproduction growth over the medium-term as compared to the experience in the recentperiod of 2008 to 2012. There is also a corresponding decline in trade volumes in themedium-term. Increased production may be more widely spread across countriesleading to lower trade volumes and (2) in the case of coarse grains, dominated by maize,projected production growth is slightly higher in the second sub-period of next decade,although the growth rate is lower initially. The changing patterns of production andtrade are also influenced by the changes in consumption demand. Livestock demand isprojected to increase faster than direct food demand and the coarse grains productionresponds to this increased demand for feed from the livestock sector.

Wheat production is projected to increase at nearly the same pace as the recentexperience although the pace of production is slightly greater in the second sub-periodof the next decade. Again, some of the increased production may be stimulated by therising demand from livestock sector.

Vegetable oil production is projected to increase at a slightly lower rate in the nextdecade as compared to the growth rate seen in the recent five years. Projected growthin soybean and soy oil production remains relatively higher than the overall vegetable

The overallproductiongrowth isprojected to beslower in themedium-term ofnext decade ascompared to therecentexperience.

Food priceinflation isprojected to belower althoughfood prices areexpected to rise atthe same rate asoverall rate ofinflation.

oils. The oil meal production is expected to grow at a lower rate than in the recent fiveyears.

Milk production is projected to increase at a slightly lower rate of 1.7-1.9 per centduring 2014–22 as compared to 2.5 per cent during 2008–12.

Sugar production is projected to increase at a higher rate in the next decade ascompared to the experience of the recent five years. However, growth rate of productionof sugarcane is projected to slow down indicating greater share of other sugar crops insugar production.

The slower pace of production growth is seen to be meeting the market demand as thereare no significant price pressures emerging in the medium-term. The sharp rise in the foodprices seen in the recent five years is expected to moderate. The medium-term projectionsby OECD-FAO indicate declining prices in the case of cereals in the initial five years withmodest increase in the subsequent five year period. The sharp increase in the recent fiveyears is, therefore, to be seen as an adjustment to the supply-demand imbalances as theagricultural sector became increasingly market driven. Table III.2 provides a summary ofthe projected global price scenario in the medium-term.

The moderate increases in production are expected to meet emerging demandrequirements as indicated by stable stocks of food commodities. In the case of cereals,projected year-end stocks in 2017 and 2022 are higher than the average for the three yearsof 2010–12. In the case of rice, the stocks in 2017 and 2022 are projected to be lower thanestimated stocks at the end of 2013 but the current stock levels may be higher thanequilibrium levels because of favourable production conditions in 2012 and 2013.However, rice stocks are projected to decline during the medium-term, because of theslower growth in consumption demand as consumers diversify their food demand awayfrom cereals to proteins and fats and producers respond with slower output growth as well.Table III.3 provides a summary of global year-end stocks for the major food commoditiesin the medium-term.


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The slower paceof productiongrowth is seen tobe meeting themarket demandas there are nosignificant pricepressuresemerging in themedium-term.The sharp rise inthe food pricesseen in the recentfive years isexpected tomoderate.

Table III.1: Annual Growth Rates of World Production and Trade in Food Commodities: per centItem Average growth in Production % per year Average growth in Trade % per year

2008–12 2014–17F 2018–22F 2008–12 2014–17F 2018–22F

Wheat 1.2 1.2 1.4 5.2 1.5 1.0

Rice 1.4 1.2 1.2 5.3 3.6 1.4

Maize 2.0 1.0 1.8 0.0 2.3 2.3

Soybean 0.9 2.1 2.3 6.1 2.7 2.3

Soy oil 3.5 3.1 2.7 4.3 2.7 1.7

Vegetable oils 3.9 2.1 2.0 4.7 1.6 2.0

Sugar 1.1 1.5 1.7 2.6 1.8 1.3

Oil meal 3.3 2.2 2.0 3.0 2.9 2.7

Oilseeds 3.5 2.1 2.0 5.5 1.8 1.9

Coarse grains 1.4 1.0 1.8 0.0 2.3 2.3

Sugarcane 1.5 2.6 0.7 – – –

Milk 2.5 1.9 1.7 – – –

In summary, the overall supply-demand balances in the food sector, particularly cereals andoilseeds are projected to be consistent with a relatively stable price environment. Some ofrisks mentioned in this regard are the macroeconomic vulnerabilities leading to exchangerate volatility, energy price shocks and short term fluctuations in output.

The gains in world production of the major food commodities projected by OECD-FAOare in line with the two other alternative projections, one by the United States Departmentof Agriculture (USDA) and Food and Agricultural Policy Research Institute (FAPRI).Although OECD-FAO projections are higher in absolute value as compared to the othertwo projections, all three projections indicate higher output levels in the medium-term. Acomparison of the three projections is presented in Table III.4.

GLOBAL OUTLOOK AND IMPLICATIONS TO INDIA

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In summary, theoverall supply-demand balancesin the food sector,particularlycereals andoilseeds areprojected to beconsistent with arelatively stablepriceenvironment.

Table III.2: Annual Growth Rates of World Prices of Food Commodities: per centCommodity Average Change in Prices: % per year

2008–12 2014–17F 2018–22F

Wheat 6.5 -3.52 1.13

Rice 12.9 -3.40 2.39

Maize 16.5 -1.43 1.07

Soybean 13.0 -1.84 0.69

Soybean oil 11.0 1.10 -0.04

Vegetable oils 9.4 -0.84 1.12

Sugar 18.1 0.26 1.23

Milk (dairy prices) 12.2 1.30 0.97

Oilmeal 10.4 -4.10 0.80

Oilseeds 10.0 -1.84 0.69

Coarse grains 16.6 -1.43 1.07

Table III.3: Year-end Stocks of Food Commodities: million tonnes

Commodity Average 2010–12 2013F 2017F 2022F

Wheat 190.4 188.1 203.2 206.2

Rice 150.4 179.6 188 179.5

Maize 132.1 237.7 233.8 227.2

Soybean 31.0 38.5 39.2 43.8

Vegetable oils 21.2 22.1 23.6 25.0

Sugar 64.2 70.7 71.3 73.9

Oil meal 15.4 14.9 16.2 17.6

Table III.4: World Production Projections: million tonnesCommodity 2013 2017 2022

FAO USDA FAPRI FAO USDA FAPRI FAO USDA FAPRI

Wheat 697 687 696 732 712 722 784 747 758

Rice 494 473 * 518 495 * 549 517 *

Maize * 959 899 * 991 960 * 1083 1024

Soybean * 245 267 * 266 284 * 298 307

Soy oil * 45 44 * 51 48 * 58 52

Sugar 181 * 176 195 * 192 212 * 213

Note: * Projections are not available for maize, soybean and soybean oil in OECD-FAO publication; USDA assessment does not provide information forsugar (http://www.ers.usda.gov/data-products/international-baseline-date.aspx#37269) and FAPRI does not provide information for rice(http://www.fapri.istate.edu/outlook/2012).

III.2 Medium-term Assessment of India’s Prospects in aGlobal Context: India, Other Major Players and World The major trends seen in the medium-term outlook by OECD-FAO projections aresummarised below for the key food commodities for India and other main producers.

Wheat Global wheat area is forecast to increase by around 9 million hectares during the

forecast period to 231.8 million hectares by 2022 with most of the increase taking placein India, Russia and Ukraine. Almost one-third of the wheat area increase is projectedto be in India reaching around 31 million hectares. Area expansion in most other majorproducing/exporting countries such as the United States, China, Canada, Australia andEU is expected to be marginal or negative.

Global wheat production is forecast to increase by around 87 million tonnes (12.5 percent) to 784.5 million tonnes during 2013 to 2022, with India’s contribution at 23.4million tonnes, followed by Russia (12 million tonnes), China (6.5 million tonnes),Ukraine (4 million tonnes),and Australia (2 million tonnes). While, production isforecast to remain more or less unchanged in Canada, US production is projected todecline by 3 million tonnes.

Although India’s wheat yield is forecast to increase from the current 3.1 tonnes perhectare to 3.5 tonnes per hectare, matching the global wheat yield, and yields in mostmajor exporting countries, it will continue to remain significantly below the Chinesewheat yield which is forecast to reach 5.3 tonnes per hectare from the current 5 tonnesper hectare.

Russia is likely to emerge as the leading wheat exporter with exports forecast at 21million tonnes, closely followed by the United States and Canada with somewhat lowerexports. Other major exporters will be Australia, European Union, and Ukraine. Indiais forecast to remain a net exporter of wheat of around 4 million tonnes, whereas Chinawill remain a net importer.

India’s per capita annual wheat consumption is expected to grow to 69.6 kilogramsclose to the world average but significantly below per capita consumption in majorwheat exporting countries such as the United States, Canada, Europe, Australia, andRussia, where wheat is the major staple unlike in most Asian countries where rice is themajor staple.

While a 3 million hectare increase in wheat area seems difficult to achieve considering theagro climatic constraints, India could increase production significantly by increasing yield.Area under wheat was about 28 million hectares in 2006–07 and it increased to about 30million hectares in 2011–12. However, considering the yield differentials between Indiaand China, there is greater scope to achieve production increase by improving yields.Chinese wheat yield is over 5 tonnes per hectare and even within India, Punjab andHaryana’s yield is around 4.7 tonnes per hectare, there is a scope to increase average wheatyield in the other producing regions, which needs to be explored.

Although wheat consumption per capita is low compared with other major wheatconsuming countries, the recently adopted National Food Security Act and the increasingurbanization could result in higher per capita consumption. Wheat-based food productssuch as bread being a convenience food, could lead to higher per capita wheat consumption


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Almost one-thirdof the wheat areaincrease isprojected to be inIndia reachingaround 31 millionhectares.

Russia is likely toemerge as theleading wheatexporter withexports forecastat 21 milliontonnes, closelyfollowed by theUnited States andCanada withsomewhat lowerexports.

in coming years, especially with increased female work participation rates.

India’s position as an exporter of wheat in the medium-term will depend on howcompetitive Indian wheat will be in the global market. Increasing cost of production,higher minimum support price could make Indian wheat less competitive, as productionin Russia and Ukraine, major sources for low priced wheat, will increase at a fast pace.There is also a need to develop a proper grain standard for Indian wheat so that Indianwheat could fetch a higher price in the world market.


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India’s position asan exporter ofwheat in themedium-termwill depend onhow competitiveIndian wheat willbe in the globalmarket.

Figure III.1: Area Under Wheat: Selected Major Producers

Figure III.2: Wheat Production: Selected Producers


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Figure III.3: Wheat Yields: Selected Major Producers

Figure III.4: Wheat Per Capita Consumption: Selected Major Regions

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022India 3.1 3.2 3.2 3.3 3.3 3.4 3.5 3.5 3.5 3.6China 5 5 5.1 5.1 5.1 5.1 5.2 5.2 5.2 5.3USA 3 3.1 3.1 3.1 3.1 3.2 3.2 3.2 3.2 3.3Russia 2.2 2.3 2.3 2.4 2.4 2.4 2.5 2.5 2.5 2.6Ukraine 2.9 3 3 3 3.1 3.1 3.1 3.2 3.2 3.3Australia 1.7 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8Canada 2.8 2.8 2.8 2.8 2.9 2.9 2.9 2.9 2.9 2.9World 3.1 3.2 3.2 3.2 3.2 3.3 3.3 3.3 3.4 3.4

Rice Global rice area is projected to increase marginally to around 165 million hectares from

the current 162 million hectares, with the growth mostly confined to smaller producingcounties. Rice area in all major producing states such as India, China, Thailand, andVietnam is forecast to decline marginally.

Global rice production is projected to increase by around 55 million tonnes to 549million tonnes with India forecast to contribute 10 million tonnes to the growth withits own production reaching 113 million tonnes. Rice production in Thailand andVietnam is forecast to increase by 3 million tonnes to 28 million tonnes and 32 milliontonnes, respectively, whereas China’s production is forecast to decline by 3 milliontonnes to 137 million tonnes. Significant increase in production is forecast inIndonesia (6 million tonnes), Bangladesh (6 million tonnes), Philippines (3 milliontonnes), and African countries (10 million tonnes).

India’s rice yield is forecast to increase to 2.7 tonnes per hectare from the current 2.4tonnes per hectare, although getting close to Thai yield, it is significantly below theworld average yield of 3.3 tonnes/ha and Chinese and Vietnamese yield of 4.8 and 4.4tonnes/ha, respectively.

Global rice trade is forecast to increase by around 8 million tonnes to 45 million tonneswith most of the increased exports originating from Thailand and Vietnam. Indian riceexports are forecast to decline somewhat to 5.3 million tonnes, largely confined tobasmati rice.

India’s per capita rice consumption is forecast to increase marginally to 73.6 kgcompared with the global average of 59.4 kg, but significantly below that of thepredominantly rice consuming countries such as Vietnam (171 kg) and Thailand(133.5 kg).

Although India has the largest rice area in the world, its ranks only second in productionto China due to lower yield. The scope to expand area planted to rice is limited, there isscope to increase cropping intensity by binging lager area under summer rice cultivation insouthern and eastern India.

As in the case of wheat, there is a significant yield gap in rice compared to global rice yieldand rice yield in some major rice producing countries such as Vietnam and China. Evenwithin the country, the yield gap between states such as Punjab and Haryana vs. easternStates of Bihar, Orissa and Chhattisgarh is significant. Government programmes such asBringing Green Revolution to Eastern India and the National Food Security Mission aimto bridge the yield gap.

The main constraining factor however is assured sources of water, with rice in most statesgrown predominantly as a rainfed crop. One of the factors contributing to higher rice yieldin Punjab and Haryana is that it is grown almost entirely under irrigated conditions.Hence there is an urgent need to expand irrigation coverage and develop rice varietieswhich can withstand abiotic stress, especially there is increasing realisation to diversifyagricultural production in Punjab and Haryana because of declining ground water reserves.

Spectacular gains in productivity have been achieved in China over the last two decadesmainly through the adoption of hybrid rice technology, For example, from an area of 18million hectares (54 per cent of total rice area) under hybrid rice, China is producing about118 million tonnes of paddy rice, which is equivalent to almost 75 per cent of what Indiaproduces from almost 42 million hectares. There is clearly a need to intensify efforts to


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Global riceproduction isprojected toincrease byaround 55 milliontonnes to 549million tonneswith Indiaforecast tocontribute 10million tonnes tothe growth withits own productionreaching 113million tonnes.

improve rice yields in India to increase production capacity.

India’s rice exports will face increasing competition from Thailand and Vietnam, whererice production is forecast to grow at a faster rate than in India. India has a comparativeadvantage in basmati rice trade, which needs to be further exploited by binging additionalarea under basmati rice cultivation. Also there is a need to improve the quality of rice bymodernizing the milling technology, which will help in meeting competition.

India’s per capita rice consumption is forecast to remain somewhat below the Chinese leveland significantly below that of Thailand and Vietnam, where rice is basically the onlystaple.


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India’s riceexports will faceincreasingcompetition fromThailand andVietnam, whererice production isforecast to growat a faster ratethan in India.

Figure III.5: Area Under Rice: Selected Major Producers

Figure III.6: Rice Production: Selected Major Producers

Coarse grains World coarse grain area is projected to reach 352 million hectares by 2022 from the

2013 level of 334 million hectares. India’s coarse grain area is projected to increase by3 million hectares to 31.5 million hectares by 2022, the third largest after China (38.7million hectares) and the United States (36.4 million hectares).


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World coarsegrain area isprojected to reach352 millionhectares by 2022from the 2013level of 334million hectares.

Figure III.7: Rice Yields: Selected Major Producers

Figure III.8: Rice Per Capita Consumption: Selected Regions

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022India 2.4 2.5 2.5 2.5 2.5 2.6 2.6 2.6 2.7 2.7China 4.6 4.7 4.7 4.7 4.7 4.7 4.7 4.7 4.7 4.8Thailand 2.1 2.2 2.2 2.2 2.3 2.3 2.4 2.4 2.5 2.5Vietnam 3.8 3.9 3.9 4 4.1 4.1 4.2 4.3 4.3 4.4World 3.0 3.1 3.1 3.1 3.2 3.2 3.2 3.3 3.3 3.3

India’s coarse grain production is forecast to increase to around 53 million tonnes fromthe current 42 million tonnes as compared to the United States (371 million tonnes),China (257 million tonnes), and Brazil (80 million tonnes). Most of the increase inproduction is expected to be in maize.

Per hectare yield of coarse gains in India is forecast to remain one of the lowest amongall major coarse grain producing countries at 1.7 tonnes/hectare as compared with theUnited States (10.2 tonnes), China (6.6 tonnes), Argentina (5.9) and Brazil (4.6tonnes) and the world average of 4 tonnes per hectare.

Global coarse grain trade is forecast to increase to 160 million tonnes by 2022 from thecurrent 130 million tonnes. Most of the increase in exports is in the United Statesreaching 61 million tonnes, followed by Argentina (26 million tonnes) and Brazil (10million tonnes). Indian exports are forecast at around 4 million tonnes. China, despitehigh production, will remain a net importer of coarse grains importing 13 milliontonnes.

Indian coarse grain yield is less than one half of the world average, one sixth of the U.S.and one-fourth of the Chinese yield. There is a large scope to increase production althoughsignificant area expansion is unlikely due to competition from other cereal and commercialcrops. The low productivity in most coarse grains in India barring maize crop in southernstates of Karnataka and Andhra Pradesh is attributed to poor irrigation availability. In thesouthern maize growing states, where hybrid seed coverage is more, yields are comparableto world average. The coarse grains also do not receive the same kind of marketing supportas rice and wheat prompting farmers to shift from coarse grains such as jowar to cottonand soybeans.

Although India is currently exporting around 4 million tonnes of coarse grains, mainlymaize to neighbouring countries, growth in the poultry sector could lead to increaseddomestic maize utilization. As the poultry sector shifts from traditional feeding methodsto more scientific feeding technology, the demand for maize will continue to rise. Also thegrowing domestic starch industry would also generate increased demand for maize. ThusIndia would need to increase the productivity of coarse grain crops to meet increasingdemand in domestic and export markets.


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Indian coarsegrain yield is lessthan one half ofthe worldaverage, one sixthof the U.S. andone-fourth of theChinese yield.There is a largescope to increaseproductionalthoughsignificant areaexpansion isunlikely due tocompetition fromother cereal andcommercialcrops.

Figure III.9: Area Under Coarse Grains: Selected Major Producers

Oilseeds Global oilseed area is forecast to increase by around 15 million hectares to 204 million

hectares with most of the increase in Brazil, Argentina and India. India’s total oilseedarea is forecast to increase by around 2 million hectares to 26 million hectares. Oilseed(mostly soybeans) area in Brazil is forecast to increase by 4 million hectares and in


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Figure III.10: Production of Coarse Grains: Selected Major Producers

Figure III.11: Coarse Grain Yield: Selected Major Producers

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022India 1.5 1.5 1.5 1.5 1.6 1.6 1.6 1.6 1.7 1.7China 5.9 5.9 6 6.1 6.2 6.3 6.4 6.5 6.6 6.6United States 9.2 9.3 9.4 9.5 9.6 9.7 9.9 10 10.1 10.2Brazil 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.6 4.6Argentina 5.6 5.5 5.5 5.6 5.7 5.7 5.8 5.8 5.8 5.9World 3.7 3.7 3.7 3.8 3.8 3.9 3.9 3.9 4 4

Argentina by 2 million hectares, whereas no appreciable expansion in oilseed area isforecast in United States, China, and Canada.

Although India ranks third in the world in oilseed planted area after United States andBrazil, in oilseed production the country ranks fifth after the U.S., Brazil, Argentinaand China at 24 million tonnes because of low yields. While most major oilseedproducing countries have yields ranging from 2 to 3 tonnes per hectare, Indian oilseedyield is at 1 tonne per hectare, with no increase forecast in the medium-term.

Nevertheless, India is projected to remain a modest exporter of oilseeds, mostly HPSpeanut. The U.S., Brazil, Argentina, and Canada will continue as major exporter ofoilseeds, with China remaining as the largest importer, importing annually around 64million tonnes gradually increasing to 82 million tonnes by 2022, more than three timesIndia’s annul oilseed production, despite producing almost twice India’s production.

Because of pressure on cultivated area from competing crops such as cotton, maize andwheat, potential to increase area under oilseeds in limited. Most of the rain fed fallow landin Madhya Pradesh, Maharashtra and Rajasthan has come under soybean cultivation overthe past two decades.

The largest potential in increasing oilseed production will again have to come from higheryields as in the case of other food crops. Major constraining factors are lack of assuredsources of adequate irrigation and poor seed replacement rate. Even a modest 20%increase in oilseed yield from the current 1 tonne/hectare could increase production by 5million tonnes per year, reducing import demand for vegetable oils to some extent.Oilseeds with higher oil content such as rapeseed and mustard should be encouraged innon-traditional growing regions of eastern India.

An important point that emerges from comparisons across the major producers andconsumers of oilseeds is that China, which is also a major producer of oilseeds like Indiaimports annually over 40 million tonnes of oilseeds, twice its annual production, to meetits vegetable oil requirement and to support the domestic feed industry. India’s approach,on the other hand has been to import oils. Constraints on general manufacturing sector’sgrowth may also be affecting the rise of India’s oil processing sector.


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The largestpotential inincreasing oilseedproduction willagain have tocome from higheryields as in thecase of other foodcrops.

Figure III.12: Oilseeds Area: Selected Major Producers

Vegetable Oils and Oilseed Meal Global vegetable oil production is projected to increase from 163 million tonnes to 196

million tonnes. Most of the increase in world vegetable oil production is forecast to bepalm oil in Indonesia and Malaysia and soybean oil in Argentina and Malaysia. India’svegetable oil production at around 7.5 million tonnes now is forecast to increasemodestly to 8.5 million tonnes by 2022.

India’s vegetable oil imports are forecast to reach over 14 million tonnes by 2022 fromthe current 11 million tonnes, thus emerging as the topmost importer of vegetable oilsreplacing China. Palm oil from Indonesia and Malaysia, soybean oil from Argentina,Brazil, and rapeseed oil from Canada are India’s major source of vegetable oils.

Even with such large imports, India’s per capita vegetable oil consumption is likely to


31

Global vegetableoil production isprojected toincrease from 163million tonnes to196 milliontonnes. Most ofthe increase inworld vegetableoil production isforecast to bepalm oil inIndonesia andMalaysia andsoybean oil inArgentina andMalaysia.

Figure III.13: Oilseeds Production: Selected Major Producers

Figure III.14: Oilseeds Yield: Selected Major Producers

remain low at around 16 kilograms per year, compared with world average of 20 kgs,China’s 26 kilograms and 33 kilograms in the United States. Import requirements willtherefore depend on India’s economic growth.

In comparison to the major producing counties such as China (80 million tonnes),United States (46 million tonnes), Argentina (43 million tonnes) and Brazil (39 milliontonnes) Indian oil meal production is forecast at 23 million tonnes by 2022 from thepresent 20 million tonnes.

Despite lower production, India is expected to remain an exporter of oil meals reaching6 million tonnes by 2022, whereas China with record oil meal production will continueto remain a net importer of 6 million tonnes of oil meal.

India’s oil meal consumption is among the lowest compared with most other majorcountries such as China, Unites States and Brazil.

The vegetable oil sector in India presents complex challenges. Although India has largearea planted to oilseeds, because of lower productivity, the country is also the largestimporter of vegetable oils. However, despite such large imports, per capita vegetable oilconsumption will be well below the world average even in the medium-term of nextdecade. There is urgent need to increase domestic vegetable oil production throughtechnological innovations.

Another dimension of the Indian oilseed industry is that despite having largest cattlepopulation in the world and a growing poultry sector, the country is a net exporter of oilmeals. With increased focus on increasing milk and meat production, the exportablesurplus of oil meals may diminish unless either production of oilseeds increases faster orthere are imports of oilseeds.


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Although Indiahas large areaplanted tooilseeds, becauseof lowerproductivity, thecountry is also thelargest importerof vegetable oils.

Figure III.15: Production of Vegetable Oils: Selected Major Producers


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Figure III.16: Vegetable Oils Consumption: Major Regions

Figure III.17: Vegetable Oils Net Exports: India and Selected Major Exporters


34

Figure III.18: Per Capita Consumption of Vegetable Oils: Major Regions

Figure III.19: Oil Meal Production: Selected Major Producers

Sugarcane and sugar Global sugar cane production is projected at 2 billion tonnes in 2022, an increase of

around 15 per cent over the 2013 production, with India’s production forecast at 295million tonnes (15 per cent of global production) making it the second largest producer.Brazil will continue to remain the largest producer of sugarcane with productionforecast at 900 million tonnes, three times India’s production, with China ranking thirdwith 145 million tonnes.

While sugarcane production in India fluctuates cyclically, production in most othercountries shows a steady upward trend.

In the next decade, the largest increase in sugarcane area is forecast in Brazil, reaching


35

Brazil willcontinue toremain thelargest producerof sugarcane withproductionforecast at 900million tonnes,three timesIndia’sproduction, withChina rankingthird with 145million tonnes.

Figure III.20: Consumption of Oil Meal: Major Regions

Figure III.21: Net Exports of Oil Meal: Selected Major Exporters

11.8 million hectares from the current 9.4 million hectares. Indian sugar cane area,varying cyclically, is forecast to reach 4.4 million hectares by 2022, 16 per cent of globalsugarcane area.

Like most other commodities, sugarcane yield in India at 68 tonnes per hectare isbelow the world average yield of 73 tonnes per hectare and yields in other majorproducing counties such as Brazil (76 tonnes), China (73 tonnes), Thailand (82tonnes), and Australia (89 tonnes).

India’s share in global sugar production in 2022 is projected at 15 per cent at around 32million tonnes. Brazil with a production of 48 million tonnes in 2022 will continue tobe the largest sugar producing country.

Unlike in Brazil where almost 50 per cent of sugarcane production goes in theproduction of ethanol, no sugarcane is used in India directly for ethanol production,which is mostly based on molasses.

India will remain the largest consumer of sugar in the world at around 33 milliontonnes. Nonetheless, per capita sugar consumption at 23 kilograms will be below theworld average of 26 kilograms and significantly below the per capita consumption inBrazil (76 kilograms) and Thailand (50 kilograms) but above the Chinese per capitaconsumption of around 14 kilograms.

Global sugar trade is projected at 63 million tonnes by 2022 with India remaining animporter of around 1 million tonnes of sugar. Brazil with net exports of 32 milliontonnes and Thailand with net exports of 10 million tonnes will remain the largest sugarexporting countries.

Although grown largely as a irrigated crop, sugarcane production is still dependent onmonsoon rains as the irrigation sources are dependent on rainfall in the monsoon season.Sugar yield in India is below the global average as the sugar recovery in the cane is low dueto varietal characteristics, differences in input use and also level of mechanisation. Widecyclical fluctuations in production unlike in most other counties make India an erraticexporter or importer of sugar. One major reason for the fluctuating production is thehighly regulated nature domestic sugar sector. Spanning across the sugar value chain, theseregulations cover activities ranging from reservation of specific areas for sugarcaneproduction, a minimum distance criterion for setting up of new mills and specifying theproducer price of sugarcane in the form of a Fair and Remunerative (FRP) / State AdvisedPrice (SAP). The recent government efforts to deregulate the sugar industry should helpin reducing cyclical fluctuations in production.

India’s per capita sugar consumption is expected to increase over time as average incomeof households increase. The dependence on imports will emerge, unless domesticproduction catches up with increasing consumption.


36

India’s per capitasugarconsumption isexpected toincrease overtime as averageincome ofhouseholdsincrease. Thedependence onimports willemerge, unlessdomesticproductioncatches up withincreasingconsumption.


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Figure III.22: Area Under Sugarcane: Selected Major Producers

Figure III.23: Sugarcane Production: Selected Major Producers


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Figure III.24: Sugarcane Yield: Selected Major Producers

Figure III.25: Sugar Production: Selected Major Producers

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022India 62.8 66.4 68.5 68.2 64.4 65.4 69.8 67.4 68.6 67.6China 67.1 67.6 68.2 68.9 69.7 70.4 71.2 71.9 72.7 73.5Brazil 76.8 78.2 77.4 77.3 77.2 75.3 75.1 75.4 76 76.3Thailand 74 75 76.1 77.1 77.8 78.6 79.6 80.5 81.2 82.2Mexico 72.7 72.7 72.5 72.4 72.8 73.3 73.6 73.7 73.6 73.3Australia 82.9 83.3 83.8 84.6 85.4 86.1 87 87.7 88.5 89.3World 70 71.7 72.1 72.3 71.6 71.5 72.4 72.4 73 73.1


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Figure III.26: Consumption of Sugar: Major Regions

Figure III.27: Per Capita Consumption of Sugar: Major Regions


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Figure III.28: Net Exports of Sugar: India and Selected Major Exporters

The projections of production of major food commodities for the period 2014 to 2022provided by OECD-FAO report on the medium-term global agricultural outlook indicatethat output growth in India would also be subdued relative to the experience of the recentfive years in the case of wheat, rice, oilseeds and vegetable oils similar to the projectedtrends in world output. In the case of sugarcane and sugar the projected growth rates arehigher during 2014–22 as compared to the recent five year period. Table IV.1 presents thecomparison of recent trends in production and the projected growth rates over themedium-term.

The changes in growth rates of production over the medium-term are as much a result ofpattern of productivity growth as they are a result of changes in area under the crop.Productivity in turn is determined by levels of input use, investment and technology. Anadditional factor to be considered in the assessment of emerging production scenario isalso the demand for food commodities, both domestic and exports.

In the case of rice and wheat, there are already signs of stagnant or declining levels ofconsumption in the recent years. For example, the average per capita householdconsumption of rice in rural India has declined from 82.61 kg in 1993–94 to 77.62 kg in2004–05 and further to 74.70 kg in 2009–10. In urban India estimated per capitaconsumption of rice has declined from 62.42 kg in 1993–94 to 56.64 kg in 2009–10 (Stateof India Agriculture, 2012–13, Ministry of Agriculture). The trends are similar for wheatand also all cereals together. One may also note that these trends are not due to loweravailability of rice and wheat as per capita production of rice and wheat together was nearlythe same for the three years’ average of 1991–92 to 1993–94 and 2007–08 to 2009–10. Theper capita production of rice had declined during this period but per capita production ofwheat had increased. There are also indications that as income levels increase, food basketof consumers is changing from just grains to include fruits, vegetables and livestockproducts. In this context, if production of rice and wheat which are main staple foodcommodities increases by a rate above 2 per cent per year, which exceeds populationgrowth rate, export demand would be necessary to sustain such an increase. Availability ofcheaper cereals as a result of the National Food Security Act may raise consumption levelof these commodities to some extent. But the lower expenditure on cereals may alsoincrease demand for other food items.

Sustaining current rates of growth in production would, therefore, require expansion ofexport demand which in turn requires that production is globally competitive.

Projected growth rates of production are higher or close to the recent five years only in thecase of coarse grains and the sugar sector. In the case of coarse grains, the higher growthrates in the medium-term are likely due to the likely expansion of demand for maize forlivestock feed. In the case of sugar, rising demand is expected to provide market supportfor higher production.

The projections provided in our previous MTAOR (February 2013), indicate higher ratesof growth in the case of rice, coarse grains and oilseeds as compared to the OECD-FAO

CHAPTER IV

Medium-term Assessment ofSelected Food Commodities in India

41

If production ofrice and wheatwhich are mainstaple foodcommoditiesincreases by arate above 2 percent per year,which exceedspopulation growthrate, exportdemand would benecessary tosustain such anincrease.


42

Limitations onincreasingirrigated areabecause of limitedsupplies of waterfor irrigationrequirealternativestrategies tonarrow yield gapsbetween irrigatedand rainfedproductionconditions.

projections. The NCAER projections also show lower growth rates for 2012–2020 thanthe experience of the recent five years in the case of wheat but higher in the case of rice,coarse grains and oilseeds. The NCAER projections do not explicitly take into accountdemand unlike the analytical framework underlying projections by OECD-FAO reportand therefore, may indicate higher production growth.

The review of recent trends in crop area and yield presented in Chapter 2 of this reportpoints to the need for increasing crop yields to achieve sustained growth in output in themedium-term. Given the constraints on increasing overall area under cultivation aspointed out in Chapter 2, unless there are significant changes in land use across crops, theyield improvements are the only source of increased production. Significant changes inland use or cropping pattern are possible when international trade in food commodities canmeet the import demand for these commodities in a stable manner, especially during theperiod when there are large production shocks. China has increased over time its relianceon imports for selected food commodities. Higher yields have been achieved in the pastby more intensive use of inputs such as irrigation and fertilisers and by use of higheryielding varieties of crops. Limitations on increasing irrigated area because of limitedsupplies of water for irrigation require alternative strategies to narrow yield gaps betweenirrigated and rainfed production conditions.

We have updated our projections of production and prices for the period 2013–2020.Actual data on exogenous variables was updated upto 2012–13 and then these variableswere projected upto the year 2020–21.

Some of the recent trends with implications to the medium-term outlook are summarisedbelow:

At the macroeconomic level, the overall projections of economic growth have now beenlowered in the backdrop of slowdown in growth in 2012–13 and 2013–14. The baselineprojections of annual GDP growth for the twelfth five year plan period of 2012–13 to2016–17 have now been revised to 8 per cent, rather than the initial expectations of 9per cent. Even this growth rate is not likely to be met and the average growth for theperiod of 2012–13 to 2016–17 may be close to 6.5 per cent if the growth in the finalthree years’ average 8 per cent per year. In the subsequent five years, the acceleration ingrowth may raise the average growth rate to 8 per cent giving the overall rate of

Table IV.1: Average Annual Growth Rate per cent of Production of Selected Food Commodities: ActualProduction Trends in 2008–12 and ProjectionsCommodities Average OECD/ FAO Projections (June 2013) February 2013

% YOY Medium-termOutlook Projections

by NCAER2008–12 Actual 2014–17 2018–22 2014–22 2012–2020

Wheat 3.34 2.68 2.61 2.64 1.31-1.69

Rice 1.77 1.22 0.91 1.05 2.47-2.62

Coarse grains 0.76 1.64 3.70 2.78 1.27-2.96

Oilseeds 1.85 0.80 1.98 1.45 4.47-4.75

Vegetable oils 3.00 1.56 1.98 1.79 NA

Sugarcane 0.13 3.52 -0.70 1.18 3.0

Sugar 2.70 4.66 1.04 2.65 NA

Note: Actual growth rates are obtained from official statistics; projected growth rates are from OECD-FAO Global Agricultural Outlook (June 2013) andNCAER’s Medium-term Agricultural Outlook Report (February, 2013). In the case of sugarcane, the NCAER projections were for the period 2012–2017. Noprojections were made in the NCAER report for vegetable oils and sugar.

economic growth to 7.5 per cent per year for the period 2014–15 to 2021–22. Theaccelerated growth would require policy reforms that would enable productiveinvestments and improvements in productivity.

The global market environment is expected to improve in the medium-term. Theassumptions in the OECD-FAO Agricultural Outlook 2013–22 include GDP growthin the advanced economies to improve from the recent experience of 2010–12 over themedium-term. In the case of US and EU, the GDP growth rate during 2014–22 isprojected at 2.5 and 1.8 per cent per year as compared to the growth rate in 2010–2012at 2.1 and 1.1 per cent, respectively. For India, the projections are for an average growthrate of 6.7 per cent as compared to an average 7.3 per cent for the period 2010–12. Thegrowth projections for China also indicate slower growth of 7.6 per cent per year ascompared to the current 8-9 per cent growth rate.

The petroleum crude oil price is projected to increase by 2.8 per cent per year during2014–22 and the rupee/ US$ exchange rate is assumed to depreciate by 3.79 per centper year during the same period. This would imply a domestic nominal increase inpetroleum prices by 6-7 per cent per year over the medium-term.

The overall growth environment, therefore, remains positive with respect to demandconditions for agricultural commodities although energy price scenario affecting cost ofagricultural production would be of concern.

The minimum support prices for 2013 kharif season indicate lower increase in supportprices as compared to the recent years for most of the crops, except sugarcane. Theoverall price increase may, however, be higher than the increase in the overall price(WPI) given the need to provide adequate returns to the producers. The input pricessuch as fertilisers would be anchored by the energy prices. The inter- crop variation insupport prices may be needed to signal the need for crop diversification and moreefficient use of resources.

MEDIUM-TERM ASSESSMENT OF SELECTED FOOD COMMODITIES IN INDIA

43

The overallgrowthenvironment,therefore,remains positivewith respect todemandconditions foragriculturalcommoditiesalthough energyprice scenarioaffecting cost ofagriculturalproduction wouldbe of concern.

Table IV.2: Trend in Minimum Support Prices of Major Food Commodities: per cent change per year Commodity 2008–12 2012–13 2013–14

Cereals

Paddy Common 11.1 15.7 4.8

Wheat 7.2 10.0 *

Jowar 21.8 53.1 0.0

Bajra 15.2 19.9 6.4

Maize 14.3 19.9 11.5

Ragi 21.9 42.9 0.0

Pulses

Arhar 23.2 17.6 -1.1

Moong 21.3 10.0 2.3

Urad 20.9 13.2 *

Gram 13.9 7.1 *

Oilseeds

Soy black 20.6 33.3 13.6

Soy yellow 17.2 32.5 14.3

Rapeseed/ mustard 11.6 20.0 *

Groundnut in shell 19.9 37.0 8.1

Sugarcane 17.7 17.2 23.5

Note: * MSP for these commodities for 2013–14 would be announced towards the end of 2013.


44

The wage rateswill therefore bean importantdeterminant ofthe cost ofagriculturalproduction overthe medium-term, besidesenergy.

The averagelevels of costs andrevenue do pointrelatively lowlevels of return toa large proportionof farm producersparticularly in thecase of smallholdings.

Labour, including family labour, is a major component of the cost in crop production3.Taking into account all items of cost, including land and capital, labour accounts for 30per cent of the total cost of cultivation across all crops for which MSP is announced.Excluding land and capital cost, labour cost accounts for 40–60 per cent of the cost ofcultivation. The wage rates will therefore be an important determinant of the cost ofagricultural production over the medium-term, besides energy. Need for maintainingattractive wage rates to agricultural labour will become increasingly important as highergrowth in non-farm sectors will increase demand for labour in those sectors as well.Given the small size of holdings return to labour would be an important indicator ofviability of farming as family labour would account for significant share of total labourused. The average net return to the producers is the highest in the case of Tur or Arharamong the kharif season crops in the recent years but even that is less than Rs 8,000per hectare (Table IV.3). If we consider that 30 per cent of total cost is labour and 50per cent of labour used in cultivation is own family labour, the return to farm family,inclusive of value of own labour, from one hectare of cultivation of tur would be aboutRs 12,500 per hectare. In the case of paddy, the return calculated in the same mannerwould be of the same order. In the case of wheat, the per hectare returns includingimputed value of family labour may go upto Rs 16,000. With double cropping, thereturns may also double. The returns may also be higher when there is irrigation andyields are greater. Nevertheless, the average levels of costs and revenue do pointrelatively low levels of return to a large proportion of farm producers particularly in thecase of small holdings.

An analysis of the state level data upto 2008–09 indicates that taking into account themajor crops grown for which cost of cultivation data are available, higher net returns of Rs

Table IV.3: Gross and Net Returns on Actual Cost of Cultivation (average of 2008–09 to 2010–11) – All IndiaCrop C2 cost (Rs/ha.) Gross value of output Net returns over C2

(GVO) (Rs/ha.) (Rs/ha.)1 2 3 4

Kharif crops

Paddy 33697 38741 5044

Maize 23607 27051 3445

Jowar 18800 19162 362

Bajra 15049 16360 1312

Tur 26288 34194 7906

Moong 12841 15632 2791

Groundnut 32661 35062 2401

Soyabean 21480 25500 4020

Rabi crops

Wheat 31889 43424 11534

Barley 26347 36511 10163

Gram 18146 22386 4240

Rapeseed/Mustard 21840 33214 11374

Lentil 18212 26763 8551

Data Source: CACP website http://cacp.dacnet.nic.inNote: 1. Actual estimates by States have been averaged by using their area as weights.2. C2 cost includes all paid out cost + imputed value of family labour (A2+FL), rental value of owned land, interest on fixed capital, etc.

3. Estimates of cost of cultivation, revenue and components of cost are taken from the data available at the website of Commission for Agricultural Costs & Prices http://cacp.cacp.dacnet.nic.in


45

As compared tothe experience ofthe recent fiveyears (2008–12),projected growthrates are lower inthe case of wheatand higher in thecase of rice,coarse grains andoilseeds.

50,000- 60,000 per farm of average holding size after netting out family labour as a costitem- are realised only in high productivity states of Haryana and Punjab. The croppingintensity is also among the highest in the two states.

The international market prices are projected to be stable in the medium-term in theOECD-FAO outlook, with the rice prices projected to decline by 0.18 per cent peryear during the period 2014–22 and wheat price by 0.94 per cent per year. Even if food(crop) commodity prices would rise by 1 per cent per year in the medium-term, thecomparable rupee price increase for the commodities would be 5-6 per cent with adepreciation of the rupee by 3-4 per cent per year. These limits point to the need formuch greater efforts to improve productivity of small farms so that income levels canimprove not by higher prices but by productivity including reduced post- harvest losses.

The updated projections for 2014–20 provided in Table IV.4 are within the range ofgrowth rates provided in the previous medium-term outlook assessment for the period2012–20. As compared to the experience of the recent five years (2008–12), projectedgrowth rates are lower in the case of wheat and higher in the case of rice, coarse grains andoilseeds. The coarse grain projections reflect the trends in the case of maize whereproduction has increased sharply because of improvement in yields and also expansion ofarea. For reference, we have presented the average annual growth rates of area, yield andproduction for selected commodities for the period 2008–12 in Table IV.5.

In the case of rice, improvement in production growth is due to increased area and alsocontinued growth in yield per hectare. The oilseed production is projected to increasesharply at 4.5 per cent per year in the medium-term on account of the rising acreage underoilseeds and also improvement in yield per hectare. Growth of area under soybean andrapeseed and mustard, and significant increase in yield of these two crops result in thisimprovement in production of oilseed sector in the medium-term.

In the case of potato, onion, banana and milk, projection of production growth rates hasnot been made based on any detailed model based analysis. We have retained theprojections of growth rates of production made in the previous MTAOR (February, 2013)for the medium-term projections upto 2020, which was based on an assessment of pastgrowth trends. However, lower growth rates are more likely over the longer period asconstraints on land and water are likely to be more binding. In the case of sugar, the

Table IV.4: Updated Projected Growth Rates of Area, Yield and Production of Selected Food Commoditiesin the Medium-term: per cent per yearCommodity 2014–17 2017–20 2014–20

Area Yield Production Area Yield Production Area Yield Production

Rice 1.3 1.5 2.8 0.9 1.5 2.4 1.1 1.5 2.6 (2.47-2.62)

Wheat 0.6 1.1 1.7 0.4 1.1 1.5 0.5 1.1 1.6 (1.31-1.69)

Coarse grains 0.4 2.1 2.5 -0.2 2.2 2.0 0.1 2.1 2.3 (1.27-2.96)

Oilseeds 2.4 2.3 4.8 1.7 2.4 4.2 2.1 2.4 4.5 (4.47-4.75)

Potato 7.0 (7.0)

Onion 5.0 (5.0)

Banana 5.0 (5.0)

Edible oils 4.5

Sugar 3.0

Milk 3.8 (3.8)

Note: Figures in parentheses for 2014–20 are the projected growth rates for the period 2012–20 in the February MTAOR.

production is projected to grow at 3 per cent per year, higher than the recent growth rateof sugarcane. In the past, growth rate of sugar has been higher than the growth rate ofsugarcane because of increase in sugar recovery rate and higher share of sugarcane outputthat may be processed into sugar. Therefore, although recent trends in sugarcaneproduction are lower than 3 per cent per year, we have retained the higher rate of growthfor production for sugar.

Edible oil production is projected to increase at 4.5 per cent per year over the medium-term, at the same rate as oilseed production. We note that rate of increase in oil productionhas been higher than oilseed production in the past because of increased rate of oilrecovery. To this extent, we may be under-estimating rate of growth of edible oilproduction.

The projected increase in area in the case of rice and oilseeds is greater than the actualtrends for the recent five years. The projections are not based on specific limits on overallcultivated area or cropping intensity and to this extent the results of the analysis underscorethe need for ensuring productivity improvements.

We now provide an assessment of the projected growth in demand over the medium-termbased on an assumption of growth of Net National Product (NNP) in constant prices at 6per cent and population growth of 1.37 per cent per year and holding constant all pricesduring the projection period. Table IV. 6 provides the estimated growth rates of demandfor all domestic uses. For a comparison we have also indicated the projected growth rate ofproduction in the entire projection period.


46

Edible oilproduction isprojected toincrease at 4.5per cent per yearover the medium-term, at the samerate as oilseedproduction. Wenote that rate ofincrease in oilproduction hasbeen higher thanoilseedproduction in thepast because ofincreased rate ofoil recovery.

Table IV.5: Growth Rates of Area, Yield and Production of Selected Food Commodities during 2008–12:per cent per yearCommodity 2008–12

Area Yield Production

Rice 0.2 1.5 1.5

Wheat 0.7 2.7 2.7

Maize 1.9 2.1 4.2

Coarse grains (including maize) -1.1 1.8 0.8

Foodgrain 0.0 2.2 2.2

Nine Oilseeds 0.6 0.7 1.3

Groundnut -3.1 -6.2 -8.3

Rapeseed and mustard 2.6 4.6 7.3

Soybean 2.0 4.7 6.1

Sugarcane 0.5 -0.4 0.1

Potato 4.7 3.9 8.7

Onion 9.0 5.8 14.9

Banana 9.5 2.5 12.8

Sugar 5.6

Edible oils 3.0

Milk 4.3

The projected growth rates of production are higher than the projected growth rates ofdemand in the case of rice and coarse grains among cereals and edible oils (derived fromproduction of oilseeds). However, in the case of edible oils it must be noted that domesticproduction currently accounts for about half of the total requirement and the projectionspoint to the possibility of reducing the gap between domestic supplies and imports if theprojected gains in productivity and area allocation to oilseeds is achieved. The higher rateof production in the case of rice relative to its demand points to the need for developingexport demand in this commodity. In the case of wheat, the production growth lags behinddemand and the need to sustain productivity improvements would be important tomaintain the balance between supply and demand over the medium-term of next 7–8 years.

In the case of pulses, we have projected the rate of increase in demand at the rate of 1.38per cent per year over the medium-term. The production growth rate based on currenttrend is about 5 per cent per year (for the period 2008–2012). However, this increase is onaccount of the sharp increase in estimated production of 3.5 million tonnes or from 14.7million tonnes in 2009–10 to 18.2 million tonnes in 2010–11 which has not been repeatedin the next two years. The production of pulses has remained at 18 million tonnes during2011–12 and 2012–13. We have retained growth in production at the rate of 2 per cent peryear over the medium-term as in the previous MTAOR (February 2013). At this rate ofincrease in production, growth in demand could be met at current levels of imports overthe medium-term. However, achieving the growth rate of 2 per cent per year in pulsesproduction would depend on the success in achieving increase in yields.

The projections in the case of sugar and selected horticultural crops are provided based ontrend growth rates in the case of production and increase in NNP by 6 per cent per yearover the medium-term in the case of demand. The projected growth rates of productionand demand are summarised in Table IV.7.


47

The projectedgrowth rates ofproduction arehigher than theprojected growthrates of demandin the case of riceand coarse grainsamong cerealsand edible oils(derived fromproduction ofoilseeds)

Achieving thegrowth rate of 2per cent per yearin pulsesproduction woulddepend on thesuccess inachievingincrease in yields.

Table IV.6: Projected Growth in Demand for Selected Food Commodities: per cent per yearPeriod Average Rice Wheat Coarse grains Total cereals Pulses Foodgrain Edible oil

2012–14 0.90 1.80 3.01 1.62 1.24 1.60 3.20

2014–17 0.91 1.88 3.12 1.69 1.34 1.67 3.30

2018–20 0.96 2.01 3.29 1.82 1.43 1.79 3.35

2014–20 0.94 (2.6) 1.94 (1.6) 3.19 (2.3) 1.75 1.38 (2.0) 1.72 3.32 (4.5)

Notes: The figures in parentheses are projected growth rates of production presented in Table 4 for the period 2014–20. In the case of pulses,production growth rate is projected based a review of recent trends in production.

Table IV.7: Projected Growth Rates of Production and Demand for Selected Food Commodities Over theMedium-termCommodity Expenditure elasticity Growth rate % per year

Actual Production Projected Production Domestic during 2008–12 for 2014–20 consumption

demand

Sugar 0.80 5.60 3.0 4.1

Potato 0.97 8.66 7.0 5.0

Onion 0.97 14.86 5.0 5.0

Banana 1.77 12.80 5.0 9.1

Milk 0.66 3.8 3.4

Edible oils 0.78 4.5 4.0

Note: Growth rates of production are based on actual average growth rates for the period 2008–09 to 2012–13 (4th Advance estimates) and growthrates of demand are based on expenditure elasticities at the commodity or commodity group level taken from a review of past studies and increase inNNP (constant prices) by 6 per cent per year. Higher growth rate of NNP would imply even higher increase in demand as compared to the projectionsabove.

Projection of consumption demand presented above is based on relatively lower rate ofgrowth of aggregate income (NNP) than may be expected as indicated at the beginning ofthis chapter. If the income growth accelerates during the projection period, demand forfood commodities would also increase at a rate higher than projected above. However, aselasticities indicated above are expenditure elasticities rather than income elasticities andincome growth tends to be higher than expenditure growth we have retained the demandprojections at the levels obtained using NNP growth of 6 per cent per year.

The growth rates of production estimated from the econometric model are based onprojected pattern of prices of crops and other exogenous variables. The model also providesestimates of (1) post-harvest prices of foodgrains and oilseeds commodities which thenaffect production and (2) exports of rice, coarse grains and oilseeds for the projectionperiod which are presented in Table IV.8.

The prices of rice and wheat are projected to increase by about 5.3 per cent per year, wellbelow the actual increase of 9–10 per cent per year during the recent period of 2008–12.The sharp reduction in the projected prices is a reflection of the assumption relating tominimum support prices in the projection period and the international prices. Theprojected increase in the prices of coarse grains is greater than in the case of rice and wheatat 8 per cent per year reflecting higher trend growth in prices. The oilseed prices areprojected to increase at higher rate than rice and wheat again, reflecting the higher rate ofincrease in the recent years.

The estimated levels of exports of wheat are negligible. In the case of rice, coarse grainsand oilseeds, exports are projected to increase at 5.9, 11.1 and 8.8 per cent per year duringthe medium-term. The results point to the potential for increased exports given the currentpattern, trends in world income growth and export prices.


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The prices of riceand wheat areprojected toincrease by about5.3 per cent peryear, well belowthe actualincrease of 9-10per cent per yearduring the recentperiod of2008–12. Thesharp reduction inthe projectedprices is areflection of theassumptionrelating tominimum supportprices in theprojection periodand theinternationalprices.

Table IV.8: Rates of Change in Prices and Exports of Selected Food Commodities Commodity Actual 2008–12 Projected 2014–20Prices (post-hharvest)Rice 9.0 5.2Wheat 10.4 5.3Coarse grains 11.0 8.0Pulses 7.2 4.8Foodgrain 9.7 5.6Oilseeds 11.7 6.5Exports Rice 8.6 5.9Coarse grains 49.8 11.1Oilseeds 23.9 8.8

The emerging medium-term global outlook for the food sector is characterised byadequate stocks, moderate increase in prices and increased production contributed mainlyby the developing countries. The overall production growth is seen to be slower in themedium-term of 2014–22 in comparison to the recent experience as per the Medium-termAgricultural Outlook Report brought out by OECD and FAO in June this year. Theprojected output growth is slower than in the recent five yearsin the case of rice, maize,oilseeds, vegetable oils, oil meal and milk. The projected growth rate in the medium-termis of the same order as in the recent past in the case of wheat. Only in the case of soybeanand sugar projected growth rates are higher than experienced in the recent period of2008–12. With slower growth in production trade volumes are also projected grow at aslower pace in the medium-term.

Uncertainties relating to crop yields affected by weather fluctuations and the impact oncommodity prices remain but the overall outlook is one of balance between supply anddemand growth and consequently stable price conditions.

In India, the experience of high rate of price increase in the case of livestock products,fruits, vegetables and pulses has pointed to the need for efforts to increase production ofthese commodities and also improve marketing infrastructure including transport, storageand distribution.

With the passing of legislation on food security in the current session of the Parliament,food grain prices will be significantly lower than market prices for the population coveredby the programme. This is expected to induce increased demand for food grain and alsofor other food commodities. Implementation of the programme will require considerableimprovement in the efficiency of operations to keep the additional subsidy expenditures aslow as possible.

Indian agriculture has been transforming itself adopting new technologies and moreintensive cultivation of land to meet the food and other needs of growing population. Onekey constraint that needs to be kept in view is the availability of land for cultivation. Thenet sown area has remained between 140 and 142 million hectares since 2000–01 barringtwo years of weak monsoon when the area dropped below 140 million hectares. The grosscropped area has increased due to increase in irrigated area, introduction of short durationcrop varieties and mechanisation of farm operations. This has enabled relaxing of the landconstraint to some extent. However, future increases in agricultural production will have torely on productivity improvements. The increased use of quality seeds and spread ofinstitutional credit to support timely use of inputs have helped improve productivity.Productivity improvement would also be critical to achieve financial viability of smallholdings of farmers.

This report has highlighted the yield differentials across regions in the country pointing tothe potential gains in food production from bridging these gaps. Raising productivity oflow yield regions to the levels of high yield regions is subject to agro-climatic factors whichmay limit achieving best yields uniformly across regions.

CHAPTER V

Conclusions

49

With the passingof legislation onfood security inthe currentsession of theParliament, foodgrain prices willbe significantlylower thanmarket prices forthe populationcovered by theprogramme.

Indian agriculturehas beentransformingitself adoptingnew technologiesand moreintensivecultivation of landto meet the foodand other needsof growingpopulation. Onekey constraintthat needs to bekept in view is theavailability of landfor cultivation.

The updated medium-term projections of demand and production for the major foodcommodities in this report show that,

The projected growth rates of production are higher than the projected growth rates ofdemand in the case of rice and coarse grains among cereals, and in the case of edible oils.

In the case of wheat, production growth rate lags behind demand and sustainedproductivity improvements would be important to maintain the balance between supplyand demand over the medium-term.

In the case of pulses, projected increase in demand by 1.38 per cent per year over themedium-term is lower than the current trend growth in production. However, theprojected growth of production at 2 per cent per year over the medium-term meets growthin demand if the imports are maintained in proportion to their prevailing share in meetingthe demand. Achieving the projected growth rate in pulses production would depend onthe success in achieving increase in yields.

Projected growth rates of production either equal or exceed the projected levels of demandin the case of potato, onion, edible oils and milk. However, the projected additionalproduction growth is small emphasising the need for raising production and reducingwastage in handling and storage of these commodities.

The producer prices of rice and wheat among the food commodities are projected toincrease at a much lower rate of 5.3 per cent per year over the medium-term as comparedto the experience of 9–10 per cent increase per year in the recent five years. Prices of pulsesare also projected to increase at a lower rate of less than five per cent per year. The pricesof coarse grains and oilseeds are projected to increase at a rate higher than rice and wheat.

The projected export growth rates of rice, coarse grains and oilseeds in the medium-termare lower than the recent trends. The recent increases have come over relatively small baselevel quantities and sustaining of the export growth over the medium-term will be possibleif agriculture achieves sustained growth of production.


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Projected growthrates ofproduction eitherequal or exceedthe projectedlevels of demandin the case ofpotato, onion,edible oils andmilk. However,the projectedadditionalproductiongrowth is smallemphasising theneed for raisingproduction andreducing wastagein handling andstorage of thesecommodities.

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