Agriculture in India

Agriculture in India has a long history, dating back to ten thousand years.

Today, India ranks second worldwide in farm output. Agriculture and allied sectors like forestry and logging accounted for 16.6% of the GDP in 2007, employed 52% of the total workforce and despite a steady decline of its share in the GDP, is still the largest economic sector and plays a significant role in the overall socio-economic development of India.

India is the largest producer in the world of fresh fruit, anise, fennel, badian, coriander, tropical fresh fruit, jute, pigeon peas, pulses, spices, millets, castor oil seed, sesame seeds, safflower seeds, lemons, limes, cow's milk, dry chillies and peppers, chick peas, cashew nuts, okra, ginger, turmeric guavas, mangoes, goat milk and buffalo milk and meat. Coffee. It also has the world's largest cattle population (281 million).It is the second largest producer of cashews, cabbages, cotton seed and lint, fresh vegetables, garlic, egg plant, goat meat, silk, nutmeg. mace, cardamom, onions, wheat, rice, sugarcane, lentil, dry beans, groundnut, tea, green peas, cauliflowers, potatoes, pumpkins, squashes, gourds and inland fish.It is the third largest producer of tobacco, sorghum, rapeseed, coconuts, hen's eggs and tomatoes. India accounts for 10% of the world fruit production with first rank in the production of mangoes, papaya, banana and sapota.

Agriculture in India

Later reforms

• Atal Bihari Vajpayee's administration surprised many by continuing reforms, when it was at the helm of affairs of India for five years.
• The Vajpayee administration continued with privatization, reduction of taxes, a sound fiscal policy aimed at reducing deficits and debts and increased initiatives for public works.
• The UF government attempted a progressive budget that encouraged reforms, but the 1997 Asian financial crisis and political instability created economic stagnation.

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Later reforms

Narasimha Rao government (1991–1996)

Crisis

The assassination of prime minister Indira Gandhi in 1984, and later of her son Rajiv Gandhi in 1991, crushed international investor confidence on the economy that was eventually pushed to the brink by the early 1990s.

As of 1991, India still had a fixed exchange rate system, where the rupee was pegged to the value of a basket of currencies of major trading partners. India started having balance of payments problems since 1985, and by the end of 1990, it was in a serious economic crisis. The government was close to default,its central bank had refused new credit and foreign exchange reserves had reduced to the point that India could barely finance three weeks’ worth of imports.

Narasimha Rao government (1991–1996)

Pre-liberalisation policies

Indian economic policy after independence was influenced by the colonial experience (which was seen by Indian leaders as exploitative in nature) and by those leaders' exposure to Fabian socialism. Policy tended towards protectionism, with a strong emphasis on import substitution, industrialization, state intervention in labour and financial markets, a large public sector, business regulation, and central planning. Five-Year Plans of India resembled central planning in the Soviet Union. Steel, mining, machine tools, water, telecommunications, insurance, and electrical plants, among other industries, were effectively nationalized in the mid-1950s. Elaborate licences, regulations and the accompanying red tape, commonly referred to as Licence Raj, were required to set up business in India between 1947 and 1990.

In the 80s, the government led by Rajiv Gandhi started light reforms. The government slightly reduced License Raj and also promoted the growth of the telecommunications and software industries.

The Vishwanath Pratap Singh government (1989–1990) and Chandra Shekhar Singh government (1990–1991) did not add any significant reforms.

Impact

• The low annual growth rate of the economy of India before 1980, which stagnated around 3.5% from 1950s to 1980s, while per capita income averaged 1.3%. At the same time, Pakistan grew by 5%, Indonesia by 9%, Thailand by 9%, South Korea by 10% and in Taiwan by 12%.
• Only four or five licences would be given for steel, power and communications. License owners built up huge powerful empires.
• A huge public sector emerged. State-owned enterprises made large losses.
• Infrastructure investment was poor because of the public sector monopoly.
• License Raj established the "irresponsible, self-perpetuating bureaucracy that still exists throughout much of the country" and corruption flourished under this system.

Pre-liberalisation policies

Economic liberalisation in India

The economic liberalisation in India refers to ongoing economic reforms in India that started in 1991. After Independence in 1947, India adhered to socialist policies. In the 1980s, Prime Minister Rajiv Gandhi initiated some reforms. In 1991, after India sold 67 tons of gold to the International Monetary Fund (IMF), the government of P. V. Narasimha Rao and his finance minister Manmohan Singh started breakthrough reforms. The new neo-liberal policies included opening for international trade and investment, deregulation, initiation of privatization, tax reforms, and inflation-controlling measures. The overall direction of liberalisation has since remained the same, irrespective of the ruling party, although no party has yet tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labour laws and reducing agricultural subsidies. The main objective of the government was to transform the economic system from socialism to capitalism so as to achieve high economic growth and industrialize the nation for the well-being of Indian citizens. Today India is mainly characterized as a market economy.

As of 2009, about 300 million people—equivalent to the entire population of the United States—have escaped extreme poverty. The fruits of liberalisation reached their peak in 2007, when India recorded its highest GDP growth rate of 9%. With this, India became the second fastest growing major economy in the world, next only to China. An Organisation for Economic Co-operation and Development (OECD) report states that the average growth rate 7.5% will double the average income in a decade, and more reforms would speed up the pace.

Indian government coalitions have been advised to continue liberalisation. India grows at slower pace than China, which has been liberalising its economy since 1978.McKinsey states that removing main obstacles "would free India’s economy to grow as fast as China’s, at 10 percent a year".

For 2010, India was ranked 124^th among 179^th countries in Index of Economic Freedom World Rankings, which is an improvement from the preceding year.

Economic liberalisation in India

Economic disparities

A critical problem facing India's economy is the sharp and growing regional variations among India's different states and territories in terms of poverty, availability of infrastructure and socio-economic development. Six low-income states – Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa and Uttar Pradesh – are home to more than one third of India's population. Severe disparities exist among states in terms of income, literacy rates, life expectancy and living conditions.

The five-year plans, especially in the pre-liberalisation era, attempted to reduce regional disparities by encouraging industrial development in the interior regions and distributing industries across states, but the results have not been very encouraging since these measures in fact increased inefficiency and hampered effective industrial growth. After liberalisation, the more advanced states have been better placed to benefit from them, with well developed infrastructure and an educated and skilled workforce, which attract the manufacturing and service sectors. The union and state governments of backward regions are trying to reduce disparities by offering tax holidays, cheap land, etc., and focusing more on sectors like tourism which, although being geographically and historically determined, can become a source of growth and develops faster than other sectors.

Economic trends and issues

Infrastructure

In the past, development of infrastructure was completely in the hands of the public sector and was plagued by slow progress, poor quality and inefficiency. India's low spending on power, construction, transportation, telecommunications and real estate, at $31 billion or 6% of GDP in 2002 had prevented India from sustaining higher growth rates. This has prompted the government to partially open up infrastructure to the private sector allowing foreign investment, and most public infrastructure, barring railways, is today constructed and maintained by private contractors, in exchange for tax and other concessions from the government.

Some 600 million Indians have no electricity at all. While 80% of Indian villages have at least an electricity line, just 44% of rural households have access to electricity. Some half of the electricity is stolen, compared with 3% in China. The stolen electricity amounts to 1.5% of GDP. Transmission and distribution losses amount to around 20%, as a result of an inefficient distribution system, handled mostly by cash-strapped state-run enterprises. Almost all of the electricity in India is produced by the public sector. Power outages are common, and many buy their own power generators to ensure electricity supply. As of 2006–07 the electricity production was at 652.2 billion kWh, with an installed capacity of 128400 MW. In 2007, electricity demand exceeded supply by 15%. However, reforms brought about by the Electricity Act of 2003 caused far-reaching policy changes, including mandating the separation of generation, transmission and distribution aspects of electricity, abolishing licencing requirements in generation and opening up the sector to private players, thereby paving the way for creating a competitive market-based electricity sector. Substantial improvements in water supply infrastructure, both in urban and rural areas, have taken place over the past decade, with the proportion of the population having access to safe drinking water rising from 66% in 1991 to 92% in 2001 in rural areas, and from 82% to 98% in urban areas. however, quality and availability of water supply remains a major problem even in urban India, with most cities getting water for only a few hours during the day.

India has the world's third largest road network, covering about 3.3 million kilometers and carrying 65% of freight and 80% of passenger traffic. Container traffic is growing at 15% a year. Internet use is rare; there were only 7.57 million broadband lines in India in November 2009, however it is still growing at slower rate and is expected to boom after the launch of 3G and wimax services.

Economic trends and issues