Agriculture is a very important sector for the sustained growth of the Indian economy. Agriculture engages nearly 70% of India’s population and is a principal contributor to India’s economic output, with an output of Rs 5,499 billion (US$ 122 billion) in 2004-05, accounting for nearly 23% of GDP (at constant prices basis 1999-2000). The sector is vast in its coverage, consisting of food grains/ cereals, fruits, vegetables and several commercial crops like oilseeds, cotton, rubber, spices, sugar cane, jute and tobacco. However, a large share of the production comes from small and marginal holdings, and goes for direct consumption. As a result, there is not a high commercial surplus from several segments of agriculture. However, with the introduction of private enterprise in food processing and with increased trade opportunities, this situation is beginning to change.

Agriculture has shown severe fluctuations in growth in the past few years: output fell by 3.1% in 2002-03, following the worst monsoons in over hundred years, and resurged with an increase of 15.6% in 2003-04, and remained staid with a marginal increase of 1.2% in 2004-05. India still depends heavily on rain-fed agriculture: only 53% of agriculture lands, concentrated in a few states, are irrigated. The dependence on monsoons has caused wide fluctuations in the agriculture growth in the past six years. However, India has a comfortable food buffer stock at present. 

The sector’s share of GDP is reducing, from 31% in 1995 to about 23% in 2004-05. Future growth requires India to generate commercial surpluses for international markets, which require interventions in productivity improvements. 

Food Grains
Food grains occupy the largest share (70%) of the agricultural area, and climatic conditions in India enable two cropping seasons in most places: the Rabi season for winter crop, and the Kharif season for summer crops. Some places with a hot post-monsoon climate, even have a late Kharif planting season.

Food grains Production

Rice, Wheat, Barley, Maize, Sugarcane, Oilseeds, Cotton and Jute constitute the chief food and commercial crops of India. Total food grain production declined from 213.5 million tonnes in 2003-04 to 204.6 million tonnes in 2004-05. India is the largest fruits producer (57.6 million tonnes) and the second largest vegetable producer in the world (99.4 million tonnes) - potato (23 million tonnes in 2005-06) being the principal vegetable.  India is among the top five producers in the world of rice, wheat, groundnuts, coffee, tobacco, spices, sugar, tea, jute, cotton, oilseeds, fruits and vegetables.

While India is a dominant producer of several agricultural commodities, Indian productivity in almost all crops is far behind the world averages, despite 40 years of concerted and regulated agricultural reforms. In this period, agriculture growth has averaged below 2.6%, barely coping with the population growth; and the growth has been largely due to increase in area under crop, not from higher yields. 

In the early nineties, floriculture was identified as a thrust area for exports from India, given its varied agro climatic profile, vast land resources, and the availability of abundant labour and agricultural scientists. More than 100 floriculture projects, with a total investment of nearly Rs 10 billion came up, for cultivation of roses, anthuriums, orchids, and other fashionable flowers and bulbs, for export to the auctions at Aalsmeer and other destination markets.

The government has assisted floriculture exports by setting up inspection and cold room infrastructure at selected international airports, and facilitating construction of a modern auction market near Bangalore. However, India is a marginal player in exports and lags way behind China and Kenya, which set up their floriculture sectors after India.

Seeds
India’s seed industry is governed by the Agriculture Ministry, through its Indian Seeds Act (initiated in 1966) and administered through its National Seeds Corporation and State Farms Corporation of India, which produce quality seeds for the mainstream Indian agri-system.  Besides the state-owned bodies, several private sector seed producers, including MNCs like Novartis, Cargill and Pioneer Seeds, have been active in India for several years.

The Indian seeds market is one of the biggest in the world, with a market size of around Rs 25 billion, excluding the free and subsidised products provided to marginal farmers. There are three market segments: open-pollinated varieties, public hybrids- developed by agencies and institutions under government, and proprietary hybrids- products of the private sector seed companies. In 2004-05, distribution of certified seeds was 1,131,000 MT, most of it from government-owned enterprises. Annual rate of growth of certified /quality seeds distribution is targeted to accelerate from 4.1% in 2004-05 to 22.5% in 2005-06.The public sector has a major role in the production and distribution of seeds- a large part being given free to marginal farmers or sold at highly subsidized prices through the state agriculture extension networks. 

Private Sector: Currently there are over 200 private seed companies, including a few MNCs, which focus on high value products, the principal emphasis being hybrids for oilseeds, maize, cotton, and horticultural crops.  The turnover of the private sector is estimated to be Rs 16 billion, more than 60% of the market turnover, but a lower share of volume sales than the public sector. The proprietary hybrids segment, estimated at 51,400 tonnes in 2002, has a market turnover of Rs 4.8 billion, representing nearly 6% of volume market share and 22% by value.

The market is expected to grow to 2.7 million tonnes and Rs 235 billion by 2010, representing a compounded growth of 6% in volume terms but more than 14% in value terms due to the increasing market share of proprietary hybrids and biotechnologically engineered seeds. The preference for hybrid seeds over conventional seeds cuts across farmers with holdings of all sizes.

Import of seeds, planting materials of fruits and vegetables, etc. is allowed for consumption, sowing or planting, against an import permit issued by the Ministry of Agriculture, conditional on fulfilment of phyto-sanitary certification by the country of origin, and post entry quarantine inspections. Special conditions apply to all species of alliums - onion, garlic and leeks, citrus, potato and solanum species, seeds and plant material of fruits and cutting of ornamental plants and flowers.

The earlier Indian Patent Act did not accord patents to life forms, and India did not have a sui generis system of plant varietal protection in place as required under the WTO.  India’s laws on researchers’ privilege provide for free exchange of germplasm and farmer’s privilege to conserve, replant and even trade farm grown seeds commercially. These provisions are contradictory to the plant breeder rights provided by the UPOV.  Thus private companies, especially Multinational Companies (MNCs), are reluctant to offer their varieties in India for certification as it exposes inbred parental lines and potentially causes pilferage from seed producers’ fields. The other apprehension for international players in attempting certification was the mandatory accession of all parent lines to the National Gene Bank which risks exposure of purebred lines to copying, given that the certification process for new varieties can take up to three years. A new Seeds Bill, compliant to the TRIPS agreement and based on the UPOV 1978 model for varietal protection has been introduced in 2006, and is presently under consultation.

However, foreign direct investment is allowed in production of hybrid and high yielding varieties. Several MNC seed companies have entered India through joint ventures or 100% owned subsidiaries, with adequate control over the intellectual property: these include Dutch companies Nun hems, and Bejo Seeds.

Cold Storage and Post Harvest Refrigeration Equipment
India’s geographical complexity and agro-climatic diversity poses enormous challenges in preserving and delivering agriculture produce from the farm to the consumer with minimum spoilage. Post harvest management holds the key to avoid a large part of the Rs 280 billion annual losses (30% of farm produce) from spoilage. At present, there are close to 3500 cold storage units with a storage capacity of over 10 million tonnes; nearly 3000 operated by the private sector, the rest under government or cooperative bodies. Very few cold stores have multiple product capabilities, multi-temperature facilities or controlled atmosphere provisions. Potato accounts for more than 90% of the tonnage, which reflects the low usage levels of cold storage in the agriculture sector.

The storage capacity in fruit and vegetables is only 0.11 million tonnes, less than 0.1% of the annual production. Until 1999, the cold storage business was subject to licensing, storage quantitative controls as well as ceilings on rent rates. As a result, there has been consistent decline in capacity.

In recent years, export opportunities in the fresh produce sector, opening up of imports of food products, as well as the entry of large international companies in industrial food processing, have resulted in fresh opportunities for cold storage activities. This has resulted in a new opportunity for cold chain logistics to handle inland distribution of imported fruits and vegetables (like Australian apple), dairy and meat products (US ice cream, New Zealand lamb and French poultry) as well as farm produce from various parts of India to processing factories (KFC, Domino’s and McDonald’s kitchens), besides export consignments. The national export promotion body (APEDA) has established storage and certification facilities at the major international airports to handle fruit, vegetables, and other perishable cargoes like flowers.

The Agricultural and Processed Food Products Export Development Authority (APEDA) is promoting Agri Export Zones (AEZs), aimed at integrated development of the entire value chain at one location, right from development of seeds and planting material, production, post harvest handling and storage, processing and packaging of value added products.  Till date, 44 AEZs have been approved, and several proposals are under consideration. Recently, the government has allowed private sector operators to develop AEZs, and has allowed foreign participation as well in line with other infrastructure projects.

The involvement of multi-lateral institutions, such as The World Bank and Asian Development Bank, in the agriculture sector, is mainly in the field of irrigation development, agricultural extension and research projects in the economically weak states.