Reforms needed to make agriculture more viable

Source: The post “Reforms needed to make agriculture more viable” has been created, based on “Reforms needed to make agriculture more viable” published in “Business Line” on 23rd January 2026.

UPSC Syllabus: GS Paper-3- Economy

Context: Agriculture continues to remain a vital sector of the Indian economy despite its declining share in Gross Value Added. In 2023–24, the sector contributed nearly 18 per cent to GVA and employed about 46 per cent of the workforce. The average growth rate of agriculture during 2011–2025 was around 4 per cent, which was lower than the overall GVA growth. There exist wide inter-State disparities in agricultural productivity, income, and access to resources. The Agriculture Development Index has been developed to analyse these regional variations.

Agriculture Development Index: Framework

1. The Agriculture Development Index is based on six major parameters that reflect income, productivity, and input use.
   1. It includes the average annual income of agricultural households as per the Situation Assessment Survey 2019.
   2. It considers the value of crop output per hectare reported by the Ministry of Statistics and Programme Implementation.
   3. It incorporates cropping intensity as an indicator of land use efficiency.
   4. It measures fertiliser consumption per hectare to assess input usage.
   5. It includes institutional credit advanced per hectare to reflect financial access.
   6. It takes into account gross value added per agricultural worker to measure labour productivity.
2. All indicators are normalised and given near-equal weights to ensure comparability across States.

Key Findings from the ADI

Overall Performance

1. Punjab and Haryana rank highest on the Agriculture Development Index.
2. Tamil Nadu and Andhra Pradesh occupy middle positions.
3. Nagaland, Odisha, Chhattisgarh, and Manipur rank at the bottom.
4. These rankings indicate serious structural and institutional weaknesses in low-performing States.

Farm Household Income

1. The average annual income of agricultural households varies widely across States.
2. It ranges from about ₹58,470 to more than ₹3 lakh in Punjab and Meghalaya.
3. Haryana, Kerala, Mizoram, and Arunachal Pradesh also report high farm incomes.
4. Bihar, West Bengal, Jharkhand, Odisha, and Uttarakhand record comparatively low incomes.
5. Farm income growth between 2012 and 2019 was only around 8 per cent.
6. This low growth rate is insufficient to achieve the target of doubling farmers’ income.

Value of Crop Output per Hectare

1. The national average value of crop output is about ₹1.39 lakh per hectare.
2. Tripura records the highest value, exceeding ₹3 lakh per hectare.
3. Andhra Pradesh, Tamil Nadu, West Bengal, and Sikkim also show strong performance.
4. Rajasthan, Punjab, Haryana, Madhya Pradesh, and Maharashtra show relatively low output values. This indicates inefficient utilisation of land and agricultural inputs in several States.

Cropping Intensity

1. The national average cropping intensity is about 155.
2. Punjab, West Bengal, Tripura, Madhya Pradesh, and Haryana record higher cropping intensity.
3. Cropping intensity does not show a strong relationship with household income.
4. It also does not have a strong correlation with fertiliser use. Therefore, increasing cropping intensity alone is not sufficient to improve farmers’ income.

Fertiliser Use

1. The average fertiliser consumption in India is about 137 kilograms per hectare.
2. Punjab, Haryana, and Telangana record the highest fertiliser usage.
3. Sikkim and several North-Eastern States show negligible fertiliser use due to organic farming practices.
4. The weak correlation between fertiliser use and crop output indicates excessive and imbalanced application. This results in declining soil health and lower input efficiency.

Credit per Hectare

1. The average outstanding agricultural credit per hectare is around ₹0.88 lakh.
2. Credit availability varies widely from ₹0.07 lakh in Nagaland to ₹4.5 lakh in Tamil Nadu.
3. States with better access to institutional credit generally show superior agricultural performance.
4. This highlights the importance of financial inclusion in rural areas.

Labour Productivity

1. Haryana records the highest gross value added per agricultural worker at about ₹5.69 lakh.
2. Punjab, Tamil Nadu, Andhra Pradesh, Tripura, and Mizoram also demonstrate high labour productivity.
3. Several eastern and central Indian States continue to exhibit low labour productivity.
4. Low productivity reflects disguised unemployment and limited mechanisation.

Major Issues

1. There is widespread inefficiency in fertiliser use across many States.
2. High fertiliser consumption does not always translate into higher agricultural output.
3. Farm household income does not always correspond with crop productivity.
4. Non-crop activities such as dairying, fisheries, and poultry play a significant role in income generation.
5. Access to institutional credit remains highly uneven across regions.
6. Small and fragmented landholdings restrict mechanisation and economies of scale.
7. Inadequate marketing infrastructure reduces farmers’ share in consumer prices.
8. Structural and policy constraints continue to hinder balanced agricultural development.

Way Forward

1. Fertiliser subsidies should be rationalised by promoting soil health cards and balanced nutrient application.
2. Direct benefit transfer and income support through PM-KISAN should be strengthened.
3. Agricultural market reforms should be accelerated to create a unified national market.
4. Inter-State trade barriers should be removed and logistics infrastructure should be improved.
5. Institutional credit systems should be reformed to reduce regional disparities.
6. Cooperative banks and regional rural banks should be strengthened.
7. Precision farming, mechanisation, and digital agriculture should be promoted for small farmers.
8. Farmer Producer Organisations should be strengthened for collective input purchase and marketing.
9. Land consolidation and collective farming models should be encouraged through legal support.
10. Farm reforms should be promoted through fiscal incentives and cooperative federalism.

Conclusion

Agriculture continues to play a crucial role in employment generation and social stability. The Agriculture Development Index highlights deep inter-State disparities in income, productivity, and institutions. These disparities can be addressed through efficient input use, market integration, and credit expansion. Technological adoption and institutional reforms are essential for sustainable agricultural growth. Coordinated efforts by the Centre and the States are necessary to ensure higher and stable farm incomes.

Question: “Regional disparities in agricultural development continue to hinder inclusive growth in India.” In this context, analyse the factors responsible for inter-State differences in farm productivity and income. Suggest suitable policy measures to promote balanced and sustainable agricultural development.