Towards a Viksit Bharat: The farm sector must play a bigger role in our economy
- Prioritizing infrastructure and logistics capacity in the agriculture sector may help revive primary sector growth. For an inclusive journey towards developed country status, agriculture mustn’t get left behind.
India’s ambition to become a developed nation by 2047 depends on the strategic implementation of enabling reforms. While innovative ideas have been proposed for a Viksit Bharat, the primary sector has largely been left out. Despite being home to 18% of the world population with a median age of 28.2 years, we tend to overlook our core strength—i.e., domestic private consumption, which constitutes nearly 61% of GDP—while focusing on export-led growth.
While the idea of accelerating to a new growth orbit by raising the industrial sector’s share of national output is widely accepted, and also expected to make India a self-reliant economy, it may not be sufficient to feed our masses, let alone livestock. It may also mean inadequate support for our small-scale industries, including sunrise sectors like food processing, which alone contributes 11.6% of gross value added (GVA) in the agriculture sector and 10.5% of GVA in manufacturing, apart from contributing significantly to employment and investment.
In its July 2023 bulletin, the Reserve Bank of India argued for raising the contribution of the industrial sector to 35% of GDP in the next 24 years from its present level of 25.6%. Historically, farm-sector growth has been slow, with industry and services relied upon for fast expansion. Like many other economies, India leapfrogged from the primary to the services sector, which now accounts for over 60% of GDP. At which sector’s cost can industry get another 10% share? With rising aspirations and fast urbanization, demand for services is only going to rise and its share is likely to expand. This means the primary sector is expected to have a shrinking slice of the economic pie.
Since our post-liberalization experience has been one of a worsening skew in income distribution, it needs a rebalance, as promised by the government’s commitment to the idea of “Sabka saath, Sabka vikaas, Sabka vishwaas, Sabka prayaas" (everyone’s accompaniment, development, trust and endeavour) in building an Atmanirbhar Bharat (self-reliant India) through inclusive economic growth.
While devising a national strategy, we must ascertain the sources of inequality. Decomposing Gini coefficients calculated from income data from 1951 to 2023, we see that rising primary-sector income has a far better equalizing effect on the distribution of total income than the two other sectors, as the Gini coefficient in the farm sector is 0.32, against 0.56 for industry and 0.60 for services. Also, a 1% rise in primary-sector income is seen to reduce income inequality, while the same in the industrial and service sectors add to inequality (more so in the latter). Reducing overall income inequality requires agriculture to perform well, and to that end, we need suitable reforms to boost the sector’s output through capital formation and inclusive policies.
Capital formation in agriculture has crucial implications for its future growth and sustainability. Gross capital formation (GCF) in the agriculture-and-allied sector hovers at around 14% of the sector’s GVA and is dominated by private investments (with a share of 84%). This needs a boost with an eye on long-term asset creation. Increasing public investment in irrigation and R&D while building market infrastructure can help improve the productivity and profitability of farming and create conducive conditions for larger sums of private investment.
As Indian agriculture is prone to the vagaries of climate change, we need technological, institutional and policy interventions to increase investments in developing a better understanding of climate-smart farming. The goal is to increase production while adapting to climate constraints. Also, subsistence farming must become sustainable. Widely dispersed benefits of digital and genetic technologies, improved early warning systems for weather and a redesigned agricultural insurance programme could help the sector acquire resilience. Let us not forget that apart from feeding the country, agriculture remains the main source of inputs for high-potential industries like food processing.
In the absence of sustainable growth in the primary sector, it may not be in a position to benefit from production-linked incentives. Hence, output and productivity of the sector must rise. Food and beverages account for 45.9% in the Consumer Price Index basket, and stubborn food inflation has been a major policy concern, although other factors also play a role. Inflation control, however, means farmers sometimes face policy inconsistencies, such as selective price restrictions and export bans; although these measures aim to increase the local availability of some commodities and limit price fluctuations, they also push up uncertainty in an already-fragile agricultural sector.
High priority must be given to schemes aimed at strengthening infrastructure and logistical capacity in agriculture. There are plans for a critical role to be played by the PM Kisan Sampada Yojana in setting up additional food parks, cold-chain projects and agro-processing clusters, even as food processing, preservation and lab-testing capacities are expanded.
The strong link between the primary sector’s performance and people’s well-being necessitates lasting solutions, instead of ad hoc interventions. If the farm sector joins India’s growth story, we would be assured of a successful launch into a new growth orbit towards an inclusive Viksit Bharat.
These are the authors’ personal views.
