Agricultural Outlook and Situation Analysis Report
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A recently released report by the National Council of Applied Economic Research (NCAER) provides an overview of India’s agricultural outlook. This report is part of a series of reports that monitors and provides analysis of food scenarios in India in the short (one to two quarters) and medium term (up to 10 years).  The agricultural outlook and situation analysis undertaken in this study analyses and compares medium-term projections for major Indian crops made by three international institutions (OECD/FAO, USDA, FAPRI) on the supply and demand conditions for the world and India. The goal of this comparison is to highlight trends across the projections. The report also provides an overview of the main changes in India’s horticultural sector over the past decade as well as policy recommendations for India’s agricultural sector as a whole.

The report provides a short overview of a number of trends in Indian agriculture over the past few decades. In particular it highlights that agricultural production has grown steadily since independence but has generally grown less rapidly than the rest of the Indian economy. The total area under major crop cultivation in India increased by about 7 percent to 176 million hectares in 2013-2014. Most of the increase in cropped area during this time period was in wheat, maize, soybeans, pulses and cotton, the area under cultivation for rice and sugarcane stayed about the same at 44 million hectares and 5 million hectares respectively. The largest declines were in the cultivation of other cereals from 23.7 to 16.3 million hectares. Overall, due to rapid population growth farm size has shrunk consistently from around 2.2 hectares in 1970 to 1.3 in 2015, the report predicts that average farm size will shrink to 1 hectare by 2020. Other main challenges identified are climate change as well as low agricultural productivity.

The report compares global agricultural projections from the OECD/FAO, USDA and FAPRI. The main messages from this comparison are that globally, the potential for area expansion in the next decade is weak for most crops and that production growth will mostly be driven by yield increases. Simultaneously, demand for agricultural products is expected to remain strong, although at slower rates when compared to the past decade. This section highlights that growing incomes, urbanization and changing eating habits are likely to contribute to the transition to higher protein, fat and sugar diets in India and across the world.  Due to sustained global increases in agricultural production crop prices are expected to drop during the next couple of years and eventually stabilize at levels that remain above the pre-2008 period. India is predicted to experience higher price increases than the rest of the world due to significant increases in demand and shifting diets.

The projections made by the three institutions also provide an overview of productivity changes for major crops in India as compared to other countries. Generally, this comparison predicts slow but steady increases in Indian agricultural productivity across all major crops over the next decade but highlights that Indian output per hectare remains significantly below that of other major countries. For instance, wheat productivity in India is predicted to increase from around 1.5 tons per hectare currently to around 2 tons per hectare by 2020, this however remains significantly below the world average of 4 tons per hectare.

Variations between projections do exist, for instance, the OECD/FAO projects Indian wheat production to increase by 1.5 percent per year until 2023 while the USDA only predicts a 0.77 percent increase over the same time period. Similarly, regarding increases in wheat consumption the OECD/FAO predicts a 1.68 percent increase in annual consumption while the USDA only predicts a 0.63 percent increase. The methodologies used to compile these predictions are similar and based around macroeconomic projections; the main variations occur as a result of the estimates of different national experts evaluating the macroeconomic projections of the OECD/FAO and FAPRI. All the predictions for grain production in India are predicted to grow well above the global rate, which is mostly driven by increases in maize production. Of the production increases covered in the report, oil seeds and vegetable/soybean oil are predicted to grow the most at over 2 percent per year. Rice production and consumption is expected to increase moderately, on average around 1.46 percent and 1.43 percent respectively according to the OECD/FAO. Generally the report suggests that the increases in productivity will match consumption increases, however, highlights that this is difficult to predict due to population growth and diets. 

The report provides an overview of the changing nature of horticulture production in India. The Indian horticulture sector has experienced significant growth in production (3 fold) and processing over the past two decades making India the second largest producer of horticulture products in the world. Highlighting that increases in horticultural production have been driven by substantial increases in the area under cultivation and productivity. These increases have been supported by increased Government investment and extension support for the horticulture sector as well as higher returns for farmers from horticultural crops as compared to staples.

The report concludes with a number of general policy recommendations for India’s agricultural sector as a whole identifying increasing productivity as the major challenge to Indian agriculture.  In this regard the report recommends increased investment in research and development, particularly in the development of seeds, coupled with increased farmer extension services.  Additionally, the report argues that productivity can be further enhanced by expanding investment in irrigation as well as the development of novel irrigation schemes. The increased promotion and adoption of new and digital technologies can also support productivity growth. Furthermore, the report states that Indian domestic commodity markets should be further integrated with global markets arguing that government involvement in market support pricing, export restrictions, and tariffs prevents agricultural productivity growth. Similarly, the report recommends policies that further attract private financing including reforms in food retailing and the legalization of contract farming. 

The full report can be accessed here

The NCAER reports are available on the NCAER website

By Bas Paris, IFPRI

Photo credit:Flickr, ICRISAT