Agriculture in Indian Economy – Economics

Study Material & Notes

These trivia about role of agriculture in Indian Economy is from Economic Survey 2013-14,
so the data given below is latest from government sources and hence, relevant. We have
compiled it for benefit of fellow aspirants. This will especially prove useful for civil services
mains paper IV.

The share of agriculture in GDP has been constantly declining over the years. This was
highlighted yet again in this years Economic Survey 2013-14, In eight years from 2000 to
2008 it has declined 6.4 percent.

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Since agricultural market provides the backward linkage to Agro-based industries, it has to
be viewed holistically as a seamless farm-to-fork value chain, comprising farming,
wholesaling, warehousing, logistics, processing, and retailing including exports.

State of Agriculture in Economy

 About 60 per cent of the total foodgrains and oilseeds production occurs in the kharif
season.
 Just about 35 per cent of arable area being irrigated, Indian agriculture is still largely
dependent on rainfall.
 The south-west monsoon (from June to September) accounts for nearly 75 per cent of total
annual rainfall in India.
 Horticulture production is estimated at 265 million tonnes in 2013 and for the first time has
exceeded the production of foodgrains and oilseeds.
 An increase of 40 lakh ha in overall area coverage under foodgrains in 2013 as compared to
previous year.And record foodgrains production of 264.4 million tonnes is estimated in
2013-14. This increase is due to : A) expansion in area, B) increase in MSPs of select
foodcrops gave incentive to cultivation.
 Role of agriculture in GDP growth at Factor Cost at Constant (2004-05) Prices

Concerns regarding Agriculture:

 Productivity levels in Indian agriculture are still much lower than the global standards.
Productivity levels of rice and wheat have not risen significantly after the 1980s. Though
cotton yields have taken tremendous leap over the last decade, due to Bt cotton.
 Soil degradation because of declining efficiency of fertilizer use.
 Alarming reduction in the water table, especially in states of Punjab and Haryana due to
their inefficient cropping pattern.
 The nutrient based subsidy (NBS) policy, does not have “urea” under its purview which is
used more than the others, so subsidy benefit is not reaching right beneficiary.
 The predominance of marginal and fragmented farms in India’s agriculture, with
limited capital availability, hampers progress of farm mechanization.
 Domestic and international marketing of agricultural commodities needs immediate
attention but past interventions of government
for building marketing set up have in fact created more barriers to trade. So, there is a need
to reduce these market distortions.

Steps to be taken, as suggested by the Economic Survey

document:
 Recommendation of the Task Force for Direct Transfer of Subsidy (headed by Nandan
Nilekani) to shift to direct transfer of fertilizer subsidy to farmers in a phased manner needs
to be considered.
  The Crop Diversification Scheme has been introduced in the Punjab and Haryana region
to encourage farmers to choose crop alternatives and is also expected to promote
technological innovations.
 There is need to facilitate a National Common Market for agricultural
commodities with uniform taxes in the domestic market, and to foster a long-term stable
trade policy for agricultural products.
 Need to expand the decentralized system of procurement for the PDS from present 11
states and UTs to all the states. This would help in- A) saving transport costs, B) reduce
transit losses and other leakages, C) increase food availability, D) reduce food prices in the
open market and E) ultimately rein in food subsidy.

Food Inflation:
In 2013-14 it has been a result of structural and seasonal factors with different items causing
it at different times. Initially- cereals and proteins, then- vegetables esp. onions. Also,
inflation increased for Protein- based items due to rising income levels and subsequent
increase in consumption.

Three broad reasons for food inflation:

1. Wastage of food in the supply chain due to inefficiencies in distribution channels of
government.
2. APMC Acts of state governments hamper creation of competitive conditions in distribution
of commodities. No competition leads to ineffectiveness. This has prevented creation of a
national market for agricultural commodities.
3. Multiple layers of intermediaries in distribution of food articles have pushed up prices for
consumers.

Solutions suggested in survey:

1. Focus should be on reducing food wastage in the supply chain of distribution channels.
2. Increased investment in marketing infrastructure, including modern warehouses, cold
storages, reefer vans(refrigerated vans), scientific packaging and handling to strengthen
distribution channels.
3. State governments will have to remove restrictive provisions in the APMC Act and promote
alternative trading options for farmers.

These snippets will be useful for Essay paper also. We will keep updating the data as new
statistics release.
Effects of Liberalization on the
Economy
There have been revolutionary change in Indian Economy since the espousal of new economic
strategy in 1991. This had great impacts on all areas of life in India. When a nation becomes
liberalized, the economic effects can be intense for the country and for investors. Liberalization
is defined as laws or rules being liberalized, or relaxed, by a government. Economic
liberalization is generally described as the relaxing of government regulations in a country to
allow for private sector companies to operate business transactions with fewer restrictions.
With reference to developing countries, this term denotes to opening of their economic borders
to multinationals and foreign investment. Many economist explained that economic
liberalization is "opening up" to the rest of the world with regards to trade, regulations, taxation
and other areas that generally affect business in the country.

Investors face problems to enter in emerging market countries when there are lots of barriers.
These barriers can include tax laws, foreign investment restrictions, legal issues and
accounting regulations that can make it difficult or impossible to gain access to the nation. The
economic liberalization process begins by relaxing these obstacles and relinquishing some
control over the direction of the economy to the private sector. This often involves some form
of deregulation and a privatization of corporations.

Major goals of economic liberalization are the free flow of capital between countries and the
effectual allocation of resources and competitive advantages. This is generally done by
decreasing protectionist strategies such as tariffs, trade laws and other trade barriers. One of
the main effects of this improved flow of capital into the country is that it makes it inexpensive
for companies to access capital from investors. A lower cost of capital enables companies to
undertake lucrative projects that they may not have been able to with a higher cost of capital
pre-liberalization, leading to higher growth rates.
Stock Market Performance: Another factor is stock market performance. Generally, when a
country relaxes laws, taxes, the stock market values also rise. Stock Markets are platforms on
which Corporate Securities can be traded in real time. It offers mechanisms for continuous
price discovery, choices for investors to exit from or enter into investment any time. These are
strong base of free markets these days and there is vigorous trade going all over the world on
stock exchanges. Their Importance can be assessed from the fact that, behaviour of stock
markets of a country is strongest indicator of growth and future prospects of an economy. These
markets have thrown open range of associated services such as Investment Banking, Asset
Management, Underwriting services, Hedging advice etc. These collectively employ lakhs of
people all over India. Similarly there are commodities market which provides avenues for
investment and sale of various eligible commodities. Fund managers and investors are always
on the lookout for new prospects for profit, and so a whole country that becomes available to
be invested in will tend to cause a surge of capital to flow in. The situation is similar in nature
to the anticipation and flow of money into an initial public offering (IPO). A private company
that was formerly unavailable to an investor that suddenly becomes available typically causes
a similar valuation and cash flow pattern. However, like an initial public offering, the initial
eagerness also eventually dies down and returns become more normal and more in line with
basics.
Political Risks Reduced: Liberalization policies in country lessens the political risks to
investors. The government can attract more foreign investment through liberalization in
economic policies. These are areas that support and foster a readiness to do business in the
country such as a strong legal foundation to settle disputes, fair and enforceable contract laws,
property laws, and others that allow businesses and investors to operate with confidence. Also,
government administration is a common target area to be streamlined and improved in the
liberalization process. All these modifications can reduce the political risks for depositors.
Diversification for Investors: In liberalized economy, Investors gets benefit by being able to
invest a portion of their portfolio into a diversifying asset class. Commonly, the correlation
between developed countries such as the United States and undeveloped or emergent countries
is comparatively low. Although the general risk of the developing country by itself may be
higher than average, adding a low correlation asset to your portfolio can reduce your portfolio's
overall risk profile. However, a discrepancy should be made that although the correlation may
be low, when a country becomes liberalized, the relationship may actually rise over time. This
happens because the country becomes more incorporated with other parts of the world and has
become more sensitive to events that happen outside the country. A high level of integration
can also lead to increased contagion risk which is the risk that crunches that occur in different
countries cause crises in the domestic country.
With the advent of Information Technology in contemporary period, globalization process
increased and it made possible transfer of real time human labour across nations, without
transfer humans themselves. Additionally, it removed all boundaries which hinder free flow of
information. It has many benefits to investors such as sharing, nurturing and development of
knowledge in societies which earlier had access only to substandard or non-updated
information. As always package is coupled with some grim realities too. All over the world,
Governments has lost their capacity to control and ward of against malevolent, false, sensitive
information and content. Rise of Islamic State establishes that information technology
revolution has helped global Terrorism. Furthermore, explicit content is freely available on
web, to which immature children have unhampered access.
Industrial Growth Rate: Liberalization is imperative for the growth of Indian economy. Barring
few years, industrial growth rate has not been so much inspiring. Share of Industry still remains
stagnantly low at 25%. It is discouraging that India has transitioned to be a service led economy,
directly from an agrarian one. One compensation of this is end of policy of imports substitution
which derived industrial growth up to 1990. Foreign companies got free access to Indian
markets and made domestic products uncompetitive. They perceptibly had better access to
technology and superior economies of scale.
India's status also trailed in the arena of Research and innovation. Import substitution required
certain degree of investment and efforts in domestic production. It was done even when imports
were inexpensive. This resulted in good and better capacity building up to that time. This was
combined with constant technology denial by west, which further pushed government to spend
on R&D. Technology Denial ended with liberalization and globalization. Till that time Indian
Industry was better and modern than that of China. Currently, China has exceeded India by
huge margin in case of both Industry and novelty.
Impact on Small Scale in India: Impact of small scale is evaluated from the beginning of
colonization in 18th century. Colonization can be considered as 1st movement of globalization.
In pre colonization period, India’s textiles and handicraft was popular across the globe and was
mainstay of Indian economy. With the initiation of industrial revolution along with foreign rule
in India, Indian economy underwent major setback and much of its home-grown small scale
cottage Industry was ruined. After independence, Indian government made many efforts to
recuperate small scale sector by reserving items exclusively for it to manufacture. With
liberalization, list of reserved items was substantially curtailed and many new sectors were
thrown open to big companies.
Small scale industry exists and still remains strength of Indian Economy. It contributes to
major portion of exports and private sector employment. Results are mixed, many former
Small scale industries got bigger and better. But overall value addition, product innovation and
technology adoption remains miserable and they exist only on back of government support.
Their products are challenged by cheaper imports from China.
Impact on Agriculture: In the area of agriculture cropping patterns has undergone a huge
modification, but impact of liberalization cannot be properly measured. It is observed that there
are still all pervasive government controls and interventions starting from production to
distribution.
Global agricultural economy is highly biased. It is due to imbalance in economic and political
power in hands of farmers of developed and developing countries. In developed countries,
commercial and capitalistic agriculture is in place which is owned by influential Agri
corporations. They easily influence policies of WTO and extract a better deal for themselves
at cost of farmers of developing world. Farming in developing world is subsistence and
supports majority of poor people. With the process of globalization, there has been high
fluctuation in commodity prices which put them in massive risk. This is a fact for cash crops
like Cotton and Sugarcane. Recent crunches in both crops indicate towards this decisively.
Impact on Services Sector: In service sector, globalization has changed the scene of developing
countries and misery for developed ones. Due to historic economic inequality between two
groups, human resources have been much cheaper in developing economies. This was further
aided by information technology revolution and this all culminated in migration of numerous
jobs from developed countries to developing countries.
Information technology industry: Currently, Software, BPO, KPO, LPO industry are
prospering in India and it has helped India to absorb a big mass of demographic dividend,
which otherwise could have wasted. Best part is that export of services result in export of high
value. There is almost no material exported which consume some natural resource. Only thing
exported is labour of Professionals, which does not reduce, instead grows with time. Now India
is better positioned to become actually Knowledge Economy. Exports of these services
generate huge revenue for India’s foreign Exchange.
Banking: In banking sector, liberal policies have great impact in Indian economy. Since
improvements, there have been three rounds of License Grants for private banks. Private Banks
such as ICICI, HDFC, Yes Bank and also foreign banks, raised standards of Indian Banking
Industry. Now there is tough competition in the banking industry, and public sector banks are
more responsive to customers. It is well understood that information technology is bringing
banking revolution. New government schemes like Pradhan Mantri Jan dhanYojana aims to
achieve their targets by using Adhaar Card. Public Sector Banks still remain major lender in
the country. Similarly, Insurance Industry provides array of products such as Unit Linked
Insurance plans, Travel Insurance etc. But, in India life Insurance business is still decisively in
hands of Life Insurance Corporation of India.
Telecom Sector: Usually, Telecom sector was a government owned domination and therefore
service was not very efficient. But after reforming polices, private telecom sector reached
zenith of success. Indian telecom companies are progressing at global scale. However,
corruption and rent seeking disfigured growth and outlook of this sector. Entry of modern
Direct to Home services saw enhancements in quality of Television services on one hand and
loss of livelihood for numerous local cable operators. Education and Health Sector: It is a fact
that food (Agriculture), Health and education (and to lesser extent banking) are among basic
requirements, which every human being deserves and cannot do without. Unfortunately, in
developing countries, there is market failure in all these sectors and majority of people cannot
afford beyond a certain limit. Concept of free markets, globalization, and liberalization fails
despondently. Free markets provide goods and services to people who can afford paying for
them, not to those who deserve and need these.
If experts evaluates these sectors from the perspective of free markets, some progress is visible.
There has been high level education available in India and deregulation has resulted in growing
of private engineering and medical colleges. But in reality, this had far reaching upsetting effect
on society. These new colleges accommodate only small proportion of candidates at very high
costs. In recent times, an Independent organization ‘Transparency International’ came out with
report claiming that India’s medical system is most corrupt in the world. High fees of education
forces many aspirants to take educational loans from banks. After qualifying job market is
unable to absorb majority of them. Practice turns out to be option of last resort. Now to make
a decent living and to pay back the loans person is attracted by dishonesty. Subsequently, when
many similar cases are put together, corrupt system is developed.
It is observed that after deregulation and liberalization, government along with other sectors,
pulled its hand from social sectors too. In Public Sector less than mediocre to mediocre options
are available. This leaves huge proportion of hopeful students and expecting parents.
It is well recognized that liberalization has major impact on the Indian economy and made it a
huge consumer market. Currently, most of the economic changes in the country are based on
the demand supply cycle and other economic factors. Today, India has made good status in
economy in terms of market exchange rate and 4th largest in terms of the purchasing power
parity. Economic liberalization is generally thought of as a useful and necessary process for
developing nations. The fundamental goal is to have clear capital flowing into and out of the
country in order to increase growth and efficiencies within the domestic country. The effects
following liberalization are what should interest investors as it can provide new opportunities
for diversification and profit.

Changes in Industrial Policies and their effect on

Industrial Growth:
Industrial policy is described as a statement which explains the role of government in industrial
development. The place of the public and private sectors in industrialisation of the country.
The relative role of large and small industries. The role of foreign capital etc. Concisely, it is a
statement of objectives to be realised in the area of industrial development and the measures to
be adopted towards achieving these objectives. The industrial policy formally designates the
spheres of activity of the public and the private sectors. It lays down rules and procedures that
would govern the growth and pattern of industrial activity.
The major objectives of industrial policy are as under:

1. Rapid Industrial Development: The objective of the industrial policy of the Government of
India is to augment industrial development. It seeks to create a positive investment climate
for the private sector as well as mobilise resources for the investment in public sector. In
its way the government seeks to promote rapid industrial development in the country.
2. Balanced industrial Structure: The industrial policy is intended to correct the predominant
lopsided industrial structure. The industrial policy had to be framed in such a manner that
these imbalances in the industrial structure are corrected. Thus by laying emphasis on
heavy industries and development of capital goods sector, industrial policy seeks to bring
a balance in industrial structure.
3. Prevention of Concentration of Economic Power: The industrial policy offers framework of
rules, regulations and reservation of spheres of activity for the public and the private
sectors. This is aimed at reducing the monopolistic tendencies and preventing
concentration of economic power in the hands of a few big industrial houses.
4. Balanced Regional Growth: Industrial policy has an objective to check regional imbalances
in industrial development. It is well recognized that some regions in the country are
industrially quite advanced such as Maharashtra and Gujarat while others are industrially
backward, like Bihar, Orissa. It is the duty of industrial policy to work out programmes and
policies which lead to industrial development or industrial growth.

Before independence, India was not industrially developed country. It was an agrarian country
where in handicrafts achieved sovereignty unmatched in the world. There are very few types
of economic activity which became traditional in nature and could be included under the
products produced under the factory system of 19th and 20th century. Strategies are modified
to achieve an end. Indian industrial polices developed to obtain speedy economic progress
through rapid industrialization and making economy self-reliant as an end. Industrial sector of
the nation was in stagnations at the time of independence as it was not encouraged but ignored
during the two centuries under British government. Their manipulative policies framed to serve
the interests of their homeland were the major cause of lack of industrialization in India. India
was the supplier of raw material and consumer of the British goods. The desire of Indians to
industrialize can be observed from the standpoint of the creation of Bombay Plan which was
initial effort by prominent industrialists of the country to form the industrial policy of the
country through importance on heavy businesses
Industrial policies and economic policies were formed by the British Government for their
interests. The tariff policy followed by British in India was based on the principal of one way
free trade while the Indian interest for industrialization in India remained deliberately
neglected. While British producers had unhampered access to Indian markets, Indian products
were kept at bay by British industrial strategy. Only access was allowed to raw materials.
Though the British Government established Department of Commerce and Industry in 1905
but the activities followed through this department favoured industrial activity in England.
Afterward, the dominant Government established board of Scientific and Industrial Research
in 1940 but not much could come out of it. By this time, there were several plans such as one
by congress working committee, Bombay plan, Visvesariya plan etc. Almost all of them
proliferated heavy industries with dominant role of state.
After India got independence, various resolutions were passed in Parliament from time to time,
landmark shift happened in 1991 when India was forced to open up its economy to global
competition and government had to liberalise sectors to leave space for private industry. There
are some revolutionary shifts in Industrial policy of India.
1. Industrial Policy Resolution, 1948: After independence, it was compulsory to have new
policy for industry of the country, to decide priority areas and clear doubts in the minds of
private entrepreneurs regarding nationalization of existing industries. In Industrial Policy
Resolution of 1948, both public and private sectors were involved towards industrial
development. Consequently, the industries were divided into four far-reaching categories:

I. Exclusive government Monopoly: This includes the manufacture of arms and ammunition,
production and control of atomic energy and the ownership and management of railway
transport. These industries were the exclusive monopoly of the Central Government.
II. Government Monopoly for New Units: This group included coal, iron and steel, aircraft
manufacture, ship building, manufacture of telephone, telegraphs and wireless apparatus
(excluding radio receiving sets) and mineral oils. New undertakings in this category could
henceforth be undertaken only by the State.
III. Regulation: This category encompassed industries of such basic importance like machine
tools, chemicals, fertilizers, non-ferrous metals, rubber manufactures, cement, paper,
newsprint, automobiles, electric engineering etc. which the Central Government would feel
necessary to plan and regulate.
IV. Unregulated private enterprise: In this category, industries were left open to the private
sector, individual as well as cooperative.

The main shove of the 1948 Industrial Policy was to develop mixed economy where both the
private and public enterprises were to be given prominence and work together to develop
economy to quicken the pace of industrial expansion.
Industrial Policy Resolution, 1956: Industrial Policy Resolution 1956 was formed by
Mahalanob model of growth which highlighted on role of heavy industries for long term
development of country. The resolutions broadened the scope of public sector with the
elementary objective of accelerating economic development and enhance the process of
industrialization. Policy also has major goal to decrease regional discrepancies through
development of low industrial base and by giving impetus to small scale industries and cottage
industries as they had a huge potential to provide mass employment. The policy stuck in line
with the prevalent beliefs of the times i.e. accomplishing self-sufficiency. But the policy faced
many implementation catastrophes and as a result in failure of its objectives such as regional
disparities and concentration of economic power.
The Industrial Policy Resolution of 1956 grouped the whole industrial sector in three
Schedules:
Schedule A: In the first category, those industries were included whose future development
was the exclusive responsibility of the State. Seventeen industries were included in this
category. This included heavy and strategic industries such as defence equipment; Atomic
energy; Iron and Steel; Heavy castings and forgoing of iron and steel; Heavy plant and
machinery required for iron and steel production for mining.
Schedule B: In this group those industries were included which were progressively State-
owned and in which the private enterprises would be expected only to supplement the efforts
of the State. In this category twelve industries were included.
Schedule C: Industries that are not listed in schedule A or B were included in the third category.
These industries were left open to the private sector. Hence, the responsibility with regard to
establishment, function and development was of private sector, though even here the state could
start any industry in which it was interested.
Small Scale Sector: Several proposals were made to boost small sector such as

I. Direct subsidy was provided to small scale sector.

II. Suitable taxation relief was given to this sector.

Main objective of the State was to protect small scale sector by advancing technical assistance.
Nonetheless, government was unsuccessful to incorporate these industries and their programs
with the production program of the large- scale sector.
Foreign Investment: Another area of industrial growth is foreign capital participation in
Indian economic development but the major share should belong to India. In case of already
existing foreign establishments, these will be replaced by Indian technicians progressively.
One of the major objectives of resolution was decrease in regional inequalities and imbalances.
But opposing to this, the actual operation of this policy resulted in increased regional
disparities. This becomes obvious from various reports which prominent that the four
industrially advanced States of Maharashtra, Gujrat, West Bengal and Tamil Nadu benefited
the most from the operation of this policy. Most important sectors were reserved for
government, but government failed to develop on these reserved sectors. Sometimes, private
sector was permissible to operate in these areas. This was due to system of rent seeking and
kickbacks which developed during this period.
Monopolies Inquiry commission (MIC) was formed in 1964 to appraise various aspects
pertaining to concentration of economic power and operation of industrial licensing under
Industrial (Development and Regulation) Act 1951. The report while emphasizing that planned
economy contributed to progress of industry accused the licensing system which permitted the
big business companies to obtain disproportionately large share of licenses which had led to
pre-emptive and foreclosure of capacity. Consequently, Dutt committee or Industrial licensing
inquiry committee 1956 recommended that big industrial houses must be given licenses only
for setting up industries in core and heavy investment sectors. Further, in order to control the
concentration of economic power, Monopolistic and Restrictive Trade Practices Act (MRTP)
was presented. Large industries were designated as MRTP companies and were qualified to
participate in industries that were not reserved for government or small scale industries.
The Monopolistic and Restrictive Trade Practices Act, 1969: This act was trademark of
infamous ‘license quota permit’ system. Companies having more than specified value of assets
required to take permission/license before any development and commencement of operations.
Major objectives were as under:

1. To prohibit monopolistic and restrictive trade practices (except by government).

2. To prevent concentration of economic power in few hands.
3. To control the monopolies.
4. To protect consumer interest.

The Monopolistic and Restrictive Trade Practices Act became operative in June 1970. There
were more emphasis on increasing efficiency of industry. There were major modifications in
1980’s and The Monopolistic and Restrictive Trade Practices commission was also setup. This
act was mismatched with new economic policy after 1991 and subsequently, it was repealed in
2009. Now Competition Act and Competition Commission of India are in place instead.
Industrial licensing policy as well as Industrial policy 1973 both highlighted on the necessity
for controlling the concentration of capital and gave importance to small and medium scale
industries. Continuing the favouritism to small scale industries the Industrial policy 1977 went
a step ahead by introducing District industrial centres to provide support to SSI. It also
introduces the new category called TINY SECTOR and considerably expanded the reserve list
of small scale industries. But due to exogenic shocks (wars) as well as internal disturbances
(emergency) and implementation problems the policy failed to have a substantial effect.
Industrial Policy Resolution 1977: This resolution was made due to change in government at
centre. Subsequently, this policy stressed more on small scale industry, cottage and village
industry. This was move away from Nehruvian- Mahalanobis ideology to Gandhian ideology
of economic development. This categorized the small sector into three categories:

1. Cottage and household industries which provide self-employment on a wide scale.

2. Tiny sector incorporating investment in industrial unit in machinery and equipment up to
Rs.1 lakh and situated in towns with a population of less than 50000.
3. Small-scale industries comprising industrial units with an investment of Rs.10 lakh and in
case of ancillaries with an investment in fixed capital up to Rs.15 lakh.

Small Scale sector specific policies were formulated. Number of items reserved for this sector
was increased (105 to 807). ‘District Industries Centres’ were established in every district,
which are instrumental for support to small scale industry. This agency would provide under
many services at one place and support required by small and rural entrepreneurs. Khadi and
Village Industries Commission was revamped.
This resolution considered large industries on the lines of Basic/core industry, Capital Goods
industry, High Technology industry and other Industries. It was also visualised that government
made extreme efforts in the development of indigenous technology, which should guarantee
efficient production, continued inflow of technology in sophisticated and high priority areas
where Indian skills and technology are yet not sufficiently developed.
Additional, foreign investment would be exhilarated only for some industries in the national
interest as decided by the Government. This indicated that in areas where the foreign
collaboration was not required, such case would not be reviewed. For this there was draconian
Foreign Exchange Regulation Act in place.
Industrial Policy resolution, 1980: In this period, Congress made government and soon restored
its own industrial policy. Major Changes were as under:

1. Some of the items reserved for small scale industry were de-reserved.
 2. Many units/companies were operating on excess capacities, than allowed by law. These
excess capacities were regularized.
3. Foreign Investment was allowed with technology transfer.
4. Regulations, Licensing, restrictions were eased a bit signalling inclination towards private
sector.
5. The mounting economic situation led to formulation of Industrial Policy 1980 which sowed
the seeds of liberalization.

The Industrial Policy 1980 put more emphasis on competitiveness in the domestic market,
technical advancement and modernization of industries along with the focus on optimum
utilization of installed capacity for ensuring higher productivity, higher employment levels,
and removal of regional disparities. Policy measures were proclaimed to recuperate the
efficiency of public sector undertakings along with provisions of automatic development. The
public sector undertakings were freed from a number of restrictions and was provided with
greater sovereignty. Government took major initiatives to deregulate all industries except for
those specified in the negative list. The limited liberalization initiated in 1980s reached its
summit with a landmark policy change in 1991.
Industrial Policy 1991
This policy slated a paradigm shift in the appraisal of industrial policy and development.
Increase in Fiscal shortfall and monetized deficit along with the global financial crises (Gulf
war, oil crises) played a major role in beginning of the new episode in the history of industrial
policy and economic progress. The objective of the policy was to maintain sustained growth in
productivity, enhance gainful employment and realise optimal utilization of human resources,
to accomplish international competitiveness and change India into a global player. Main
emphasis of the policy was to liberate the industry from bureaucratic control. Important
modifications brought about by the policy were as under:

1. Abolition of industrial licensing for most industries barring few which were important
because of strategic and security concerns and social environmental issues.
2. Significant role accorded to FDI. 51% FDI allowed in heavy industries and technologically
important industries.
3. Automatic approval to technological agreements for promotion of technology and hiring
foreign technology expertise.
4. Restructuring of PSUs to increase productivity, prevent over staffing, technology up
gradation and to increase rate of return.
5. Disinvestment of PSUs to increase resources and increase private participation.
6. The policy realized that governmental intervention in investment decision of large
companies through MRTP act has proved to be deterring for industrial growth. Hence thrust
of the policy was more on controlling unfair and restrictive trade practices. Provisions
restricting mergers, amalgamations and takeovers were replaced. Since then the LPG
reforms initiated in 1991 has been considerably expanded. Some of the measures are
mentioned below.
7. Competition commission of India was established in 2003 so as to prevent practices having
adverse impact on competition in markets.
8. A new North East Industrial Policy was introduced in 1997 for mitigating regional
imbalances due to economic growth.
9. Focus on disinvestment of PSUs shifted from sale of minority stake to strategic stakes.
10. Focus on PP with government playing a facilitative role rather than regulatory role.
11. FDI limits increased in almost all the sectors including defence and telecommunications.
New Industrial Policy 1991
The year 1991 observed a radical change in the industrial policy governing industrial
development in the country since independence. This major transformation opened new era
which was to implement completely open economic system as compared to the previous mixed
system. The country decided to follow the lines of capitalism. It is also believed that there was
change from ‘imperative’ to ‘indicative’ planning under new system. Features of New
Industrial Policy.

Industrial Licensing Policy

New industrial policy eradicated all industrial licensing, regardless of the level of investment,
except for a short list of 18 industries related to the security and strategic concerns, social
reasons, hazardous chemicals and overriding environmental reasons and items of elitist
consumption. Nevertheless, of these 18 industries, 13 categories have been removed from the
list gradually and currently only 5 category of health, strategic and security considerations
industries needs license viz. Alcohol, cigarettes, hazardous chemicals, electronic, aerospace
and all types of defence equipment.

Policy on Public Sector

The 1956 Resolution had reserved 17 industries for the public sector. The 1991 industrial policy
reduced this number to 8. Currently, only 3 industries are reserved for government which
include

1. Atomic Energy
2. Mining of Atomic Minerals
3. Railway Transport.

The policy also advocated that those public enterprises which are constantly sick and which
are suspect to be turned around will, for the formation of revival/ rehabilitation schemes, be
referred to the Board for Industrial and Financial Reconstruction (BIFR), or other similar high
level institutions created for the purpose, in order to protect the interests of workers likely to
be affected by such rehabilitation package, a social security mechanism will be created.
Privatization/disinvestment: Government declared its plan to offer a part of government
shareholding in the public sector enterprises to mutual funds, financial institutions, the general
public and the personnel. A beginning in this direction was made in 1991-92 themselves by
diverting part of the equities of selected public sector enterprises.
Monopolistic and Restrictive Trade Practice limit: Under the Monopolistic and Restrictive
Trade Practice Act, all companies with assets above a certain size (Rs.100 crore since 1985)
were grouped as MRTP firms. Such firms were allowed to enter selected industries only and
this also on a case by case approval basis. In addition to control through industrial licensing,
separate approvals were required by such huge firms for any investment applications. The New
Industrial Policy removed the threshold limit in assets in respect of MRTP companies.
Policy on Foreign investment and Technology agreements: In transforming industrial policies
in India, The New Industrial Policy developed a specified list of high technology and high
investment priority industries, wherein automatic permission was to be made available for
direct foreign investment up to 51 percent foreign equity. The industries in which automatic
approval was approved included array of industrial activities in the capital goods and
metallurgical industries, entertainment electronic, food processing and the services sectors
having significant export potential. List of such industries is being expanded since then.
Abolition of Phased Manufacturing Programs for New Projects: The main objective of these
programs was indigenization of technology. These were in force in a number of engineering
and electronic industries. The new policy abolished such program for future.
Removal of Mandatory Convertible Clause: In pre liberalization period, there was a mandatory
convertible clause in loan agreement with borrower. According to this clause, banks had
authority to convert their loan amount into equity whenever they feel so. This used to make
them "owner' from 'lender' in that enterprise. This clause was used by government as a tool to
nationalize private firms. This was removed under new economic policy.
New economic policy was result of long period of incompetent supremacy of public sector.
However, public sector by this time had built strong industrial base on which other industries
can succeed in future. This was one of the objectives of Nehruvian model. Naturally, Industrial
and economic growth remained gloomy during this period. Process of liberalization begun in
1980’s which demonstrated better performance of economy. Recent high growth cannot be
attributed to initiatives of New industrial and economic policy as statistical evidence propose
better performance from early 1980's.
In post liberalization era, government has effective role of facilitator and controller. Some
decisive indications toward this are replacing Foreign Exchange – Regulation Act with
Management Act, latter one being more liberal and less harsh. Correspondingly, MRTP act
was swapped by competition Act. Presently, foreign direct investment is allowed in many
sectors, in many of them through automatic route. However, post 1991 growth is accused of
uneven growth with upsetting social impact as government had taken back expenditure from
social sectors too.
To summarize, economic liberalization started in 1991 in India of reviving economic policies,
with the goal of creating the economy more market-oriented and increasing the role of private
and foreign investment. Regarding industrial policies, it is apparent from the development of
industrial policy that the governmental role in development has been widespread. The path to
be followed towards industrial development has evolved over time. In early stages, the
government adopted an inward looking development policy which enforced the Indian industry
to have low and inferior technology and throttled the growth of private sector. It disallowed the
domestic industries from severe competition and therefore resulted in low productivity and
limited its ability to expand employment prospects.
The focus on self-reliance and lack of investment in R&D acted as obstacles to technological
development and hence led to the production of inferior quality of goods. There is strong belief
that foreign merchandises are superior to Indian goods is still predominant in Indian society. It
is well established that the condition of the nation after two centuries of exploitation and a
shocking separation must be kept in mind before evaluating the progress of the continual
industrial policy. Many factors like lack of tactical skills, low literacy levels, unskilled labour,
and absence of technology were significant aspects of Indian economy before independence. It
is said that, Industrial plans and policies and their revival has vital role for the economic growth
of any country.
Land Reforms in India
Land is precious for any country and used by people for productivity and as a source of food,
for place to live, for wood, for place to work. In India, before colonial rule the land used to be
in the hands of the community as a whole. However during the British Raj, this was changed.
Lord Carnwallies had introduced Permanent Land Settlement for Bengal, Bihar and Orissa in
1793. According to this the tax farmers appointed by the British rulers was converted as various
Land Lords. Under this rule they had to pay fixed commission to East India Company. Thus
these intermediaries were formed and called as Jagirdar / Jamindar.
Emergence of Tenants: Following the Land Settlement Act, 1793, the farmers purchase lands
from the Land Lords and hire it for their agricultural use. These people who hired the land were
called tenants.
Variations in Tenency:
Cash Tenents: They pay a fixed tax for the use and occupy of the land.
Share - cash Tenants: They pay part of their rent in cash and other part as share of the crop.
Crop - share Tenants: They pay a share of crops only.
Croppers: They pay crop of the share. But they were not independent and work under the
landlord.
Other unspecified tenants:
Land Lord – Tenant Relationships
Land lord – Tenant
Landlord – Agricultural Labour

Land reforms & Land Distribution:

In India, there was a practice of land holdings from historic times and it was distributed in a highly
unequal manner and have always been used as a source of social power. To get secure access
to land for the poor and landless, policies of land reform were implemented to benefit poorer
section of society since independence. After that a number of land reforms have been done by
the government such as abolition of 'Zamindari' or middlemen as revenue collectors, imposing
ceiling on landholdings and awarding of the surplus land's rights to landless, and tenancy
reforms (Mearns, 1998). Land reform is described as redistribution of land from the rich to the
poor. More broadly, it comprises of regulation of ownership, operation, leasing, sales, and
inheritance of land (indeed, the redistribution of land itself requires legal changes). In an
agricultural economy such as India with great dearth, and an unequal distribution, of land,
coupled with a large mass of the rural population below the poverty line, there are enthralling
financial and political opinions for land reform. Purpose of land reforms is efficient use of scarce
land resource, redistributing agricultural land in favour of the less privileged class in general &
cultivating class in particular.

Historical review of Land Reforms in India:

Land program in post-Independence India has evolved through different phases. During the
Mughal period, before the arrival of the British there were numerous changes in the system of
land taxation or revenue. Peasants continued to enjoy customary rights over land they occupied
and generally could not be evicted unless they failed to pay the required land revenue (land tax)
to the state. The task of collecting land revenue was assigned to a class of agents called
zamindars (Bhaumik, 1993).

When the East India Company (EIC) established in the Seventeenth Century, the agricultural
structure underwent fundamental change. The EIC first purchased the right to receive the
collected land revenue and later, under the Permanent Settlement introduced in 1793, declared
the Zamindars to be proprietors of land in exchange for the payment of land revenue fixed in
perpetuity. Zamindars, or those to whom they sold their proprietary rights, typically delegated
revenue collection to a series of middlemen. The increasing layers of intermediaries meant that
there was considerable increase in rent extracted from the tillers and failure to pay this
increased amount resulted in large-scale evictions, widespread disturbance, and declining
agricultural production (Bhaumik, 1993). The British sought to stabilize the situation through
legislated tenancy reform.
The Bengal Rent Act of 1859 placed restrictions on the power of landlords' to increase rent or
evict tenants. However, the Act only protected fixed-rent tenants and did not protect bargadars
or agricultural labourers. But it only protected those fixed-rent tenants who could prove they
had cultivated the land for 12 consecutive years. Constant cultivation was difficult to prove due
to poor records and the Act resulted in an increase in evictions by Zamindars to prevent tenants
from possessing land for the required time period (Bhaumik, 1993). The 1885 Bengal Tenancy
Act also sought to protect long-standing tenants, and was similarly ineffective. During this
period, another form of landholder emerged in Bengal. The Jotedars were a rich class of
peasants who reclaimed and gained control of large quantities of uncultivated forests and
wetlands outside the territory governed by the Permanent Settlement (Bhaumik, 1993). The
Jotedars refined some of this land through the direct supervision of hired labour or servants.
Nevertheless, the bulk of the Jotedars' land, like much of the land in Bengal, was cultivated by
Bargadars.
Rural tensions over the dilemma of Bargadars were common in the decades prior to and after
Independence. In the 1940s, the Tebhaga movement called for a smaller crop share payment
and also created the slogan, "He who tills the land, owns the land." The movement is given
credit for shaping post-Independence land reform legislation in West Bengal (Datta, 1988). At
the time of Independence, this matter was of great significance. In the decades following
independence India passed a significant body of land reform legislation. The 1949 Constitution
left the adoption and implementation of land and tenancy reforms to state governments. This
led to a lot of dissimilarity in the implementation of these reforms across states and over time.
After India Independence, the government took major step to eradicate the systems of
Jamindaris and Jagirdari, to remove intermediaries between state and peasant. This was the
first legislature taken by almost all the states called as Abolition of Jamindari / Jagirdari
systems Act.

The main objectives of the Land Reforms:

These are as follows:

1. To make redistribution of Land to make a socialistic pattern of society. Such an effort will
reduce the inequalities in ownership of land.
2. To ensure land ceiling and take away the surplus land to be distributed among the small
and marginal farmers.
3. To legitimize tenancy with the ceiling limit.
4. To register all the tenancy with the village Panchayats.
 5. To establish relation between tenancy and ceiling.
6. To remove rural poverty.
7. Proliferating socialist development to lessen social inequality
8. Empowerment of women in the traditionally male driven society.
9. To increase productivity of agriculture.
10. To see that everyone can have a right on a piece of land.
11. Protection of tribal by not allowing outsiders to take their land.

Land reform legislation in India is categorized in to four main sections that include abolition
of intermediaries who were rent collectors under the pre-Independence land revenue system,
tenancy regulation that attempts to improve the contractual terms faced by tenants, including
crop shares and security of tenure, a ceiling on landholdings with a view to redistributing
surplus land to the landless and lastly, attempts to consolidate disparate landholdings.
Abolition of intermediaries is generally established to be effective land reforms that has been
relatively successful. The record in terms of the other components is mixed and varies across
states and over time. Landowners naturally resisted the implementation of these reforms by
directly using their political influence and also by using various methods of evasion and
coercion, which included registering their own land under names of different relatives to bypass
the ceiling, and shuffling tenants around different plots of land, so that they would not acquire
incumbency rights as stipulated in the tenancy law. The success of land reform was driven by
the political will of particular state administrations, the prominent achievers being the left-wing
administrations in Kerala and West Bengal.
Table: Land policy formulation through planning period
Tenancy Systems of Land:
At the time of independence, there existed many types of proprietary land tenures in the country.

1. Ryotwari: It was started in Madras since 1772 and was later extended to other states. Under
this system, the responsibility of paying land revenue to the Government was of the cultivator
himself and there was no intermediary between him and the state. The Ryot had full right
regarding sale, transfer and leasing of land and could not be evicted from the land as long as
he pays the land revenue. But the settlement of land revenue under Ryotwari system was done
on temporary basis and was periodic after 20, 30 or 40 years. It was extended to Bombay
Presidency.
Mahalwari: This system was initiated by William Bentinck in Agra and Oudh and was later
extended to Madhya Pradesh and Punjab. Under this system, the village communities held the
village lands commonly and it was joint responsibility of these communities to make payments
of the land revenue. The land ownership is held as joint ownership with the village body. The
land can be cultivated by tenants who can pay cash / kind / share.
Jamindari: Lord Cornwallis gave birth to Zamindari system in India. He introduced this
system for the first time in 1793 in West Bengal and was later adopted in other states as well.
Under this system, the land was held by a person who was responsible for the payment of land
revenue. They could obtain the land mostly free of charge from the government during the
British rule and it is called estate. Landlords never cultivated the land they owned and rented
them out to the cultivators. The amount of land revenue may either be fixed once one for all
when it was called permanent settlement or settlement with regard to land revenue may only
be temporary and may, therefore, be revised after every 30-40 years, as the practice may be.
The Zamindari system is known as absentee landlordism. Under this system the whole village
was under one landlord. The persons interested can work in the Jamindar's land as tenant /
labourer based on the agreement with the jamindar. The jamindari system was known to be
more exploitive, as the jaminder used to fix / hike the prices of land according to his desire.
Jagirdari: It is similar to Jamindari system. The jagirdar is powered to control the
unproductive masses of village by engaging them in agricultural activities. Because land is
controlled by state in India and the relationship between production and land tenure varies from
state to state, the national policy recommendations resulted in differing tenancy reform laws in
each state.
Tenancy is completely banned in some states but completely free in others. Punjab and Haryana
have not forbidden tenancy whereas Karnataka has a near complete ban on tenancy. Some
states have discussed ownership rights on tenant cultivators except for sharecroppers, whereas
West Bengal chose to provide owner-like rights only to the sharecroppers. Tenancy reforms
may have indirect effects in the form of reduced tenancy shares if poorly implemented. Most
tenancy reform laws also contained provisions concerning the ability of tenants to surrender
the land back to the landlord voluntarily. These provisions were used by landlords to wane the
impact of the laws. In most states the surrender of land falls under the jurisdiction of the revenue
authorities.

Impact of Land Reform in India:

Following are the outcomes of Land Reforms in India.

1. Abolition of Jamindars and Jagirdars:

The powerful Jamindars and Jagirdars have become inexistent.
The abolition of intermediaries has stopped exploitation.
Transfer of land to peasants from intermediaries has reduced disparities.
The new proprietorship has given scope for innovation in Land Reforms.
The ex-jagirdars and ex-Jamindars have engaged themselves actively in other work thus
contributing for National Growth.
The abolishment of these systems has increased to the new land owners thus adding
revenue to the state governments.
2. Land Ceiling:
Land is a source of Income in rural India land and it provides employment opportunities.
Therefore it is important for the marginal farmers, agricultural labourers, and small
farmers. The concept 'ceiling on land holdings' denotes to the legally stipulated maximum
 size beyond which no individual farmer or farm household can hold any land. The
objective of such ceiling is to promote economic growth with social justice.
Land Ceiling should be imposed on all kinds of lands such as Fallow, Uncultivable,
irrigated and Cultivable land. All the mentioned are inclusive of ceiling Act. The ceiling act
varies from state to state on ceiling on two crops a year land. However in most of the
places the ceiling is 18 Acres.
3. Land possession and social power: It is observed that the land is not only the source of
production but also for generating power in the community. In the Indian system, the land
is often transferred from one generation to another generation. However all this lack the
documentation of possession of land. In this framework, the government had made it
mandatory to register all tenancy arrangements.

To summarize, Land reform is the major step of government to assist people living under
adverse conditions. It is basically redistribution of land from those who have excess of land
to those who do not possess with the objective of increasing the income and bargaining
power of the rural poor. The purpose of land reform is to help weaker section of society
and do justice in land distribution. Government land policies are implemented to make
more rational use of the scarce land resources by affecting conditions of holdings, imposing
ceilings and grounds on holdings so that cultivation can be done in the most economical
manner.

Major crops cropping patterns in

various parts of the country
Variation in cropping systems has been one of the main characteristics of Indian agriculture
and it is credited to rain fed agriculture and existing socio-economic condition of crop growing
community. Fundamentally, cropping pattern entails the proportion of area under various crops
at a point of time. The crop statistics published by the governments are used to signify the
cropping patterns. Cropping pattern is, however, a dynamic notion as it changes over space and
time. The cropping patterns of a region are directly influenced by the geo-climatic, socio-
cultural, economic, historical and political factors. The physical environment (physiographic,
climate, soils and water) imposes limits on the growth and dis¬tribution of plants and animals
(Singh and Sharma, 1985).

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In the period of Green Revolution, there are signs of inequity in cropping pattern. During
sixties, there were technological advancements that caused considerable shifts, in land
utilisation, in favour of crops such as wheat and rice at the cost of area under coarse cereals,
pulses and oil seeds. This move was the collective effect of differential rates of technological
change among crops, irrigation bias of new technology causing shift, of land away from dry
crops in favour of irrigated crops and the related policy of price support system as well as
market intervention by the Government for certain crops. Changes in cropping pattern are
determined by many factors such as agro-climatic conditions, technological, infrastructural and
institutional environment and profitability signals. Major element in crop production scheme
in the post-green revolution period is enhanced agricultural technology. This technology is in
the form of high yielding plant varieties, intensive cultivation, and greater use of fertilizers,
increased irrigation and better method for cultivating, harvesting and plant protection
(Velayuthum and Planniappan, 2003).
Cropping systems of an area are decided by several soil and climatic parameters which
determine overall agro-ecological setting for nourishment and appropriateness of a crop or set
of crops for cultivation. However, at farmers’ level, potential productivity and financial
benefits act as guiding principles while opting for a particular crop/cropping system. These
decisions with respect to choice of crops and cropping systems are further narrowed down
under influence of several other forces related to infrastructure facilities, socio-economic
factors and technological developments, all operating interactively at micro-level.
These factors are:

1. Infrastructure facilities: Irrigation, transport, storage, trade and marketing, post-harvest

handling and processing etc.
2. Socio-economic factors: Financial resource base, land ownership, size and type of land
holding, household needs of food, fodder, fuel, fibre and finance, and labour availability
etc.
3. Technological factors: Enhanced varieties, cultural requirements, mechanization, plant
protection, access to information, etc.

It can be established that the cropping pattern and the level of crop production of a region is
influenced by capital, marketing, labour, transport, economic condition of the farmer,
institutional facilities etc. Agriculture is an economic activity from which farmers earn their
livelihood. Therefore, they first look for the economic viability of a crop within their socio-
physical and political environment.
There are different ways of growing crops. Growing of two or more crops concurrently and
blend together on the same piece of land without row arrangements is called Mixed Cropping.
This lessens risk and gives some insurance against failure of one of the crops. Another way is
intercropping. It is growing two or more crops simultaneously on the same field in a definite
pattern. A few rows of one crop alternate with a few rows. The growing of different crops on
a piece of land in a pre-planned succession is called crop rotation.
The role of man in the farming of certain crops in a region is also significant. Person by his
techno¬logical advancement can improve the physical limits. In the regions of Punjab, Haryana
and Rajasthan (Ganganagar), the farming of rice, confirm this fact. Nonetheless, around the
globe, the physical environment reduces the choice of crops, either by barring the growth of
certain plants or by reducing their yield per unit area.
The cropping patterns differ from region to region. It depends on the land, topography, slope,
temperature, amount and reliability of rainfall, soils and availability of water for irrigation. The
perception and evaluation of environment is also important for guiding which crop should grow
in certain region. Those areas of the world where physical diversities are less, the cropping
patterns are less diversified. For instance, in the rainfall scarce areas of Rajasthan (India), the
farmers grow bajra (bulrush millet), while in the Brahmaputra valley of Assam rice is the
dominant crop. Likewise, cotton is grown in the regur (black earth) soil of Maharashtra and
Gujarat, while the loamy soils of western Uttar Pradesh, Haryana and Punjab are ideally suited
for wheat, rice and sugarcane crops.
Furthermore, the land occupancy, ownership of land, size of holdings and size of fields also
enforce restrictions on the cropping patterns of a province. In the areas of small holdings, the
farmers tend to be subsistent despite innovation diffusion. Dissimilar to this, the farmers with
large holdings have more risk bearing capacity and they have relatively high degree of
commercialisation.
The cropping patterns of a region unit may be determined on the basis of aerial strength of
individual crops. The first, second and third ranking crops of an aerial unit may be called as
the dominant crops of that unit. These crops, if occupying more or less the same percentage of
the total cropped area, shall be competing for area with each other and the farmer will decide
which crop may fetch him more profit in a given year under the prevailing rainfall and demand,
supply and commodity price situation. Generally, for the determination of cropping patterns of
an area, the minor crops (crops occupying insignificant proportion of the total cropped area)
are eliminated. Apart from the proportion of area under a particular crop, its relative yield also
guides the suitability of that crop in a given geo-climatic and cultural setting. The relative yield
index and the relative spread index for the determination of suitability of crop may be
calculated by applying the following formulas: Relative Yield Index = Mean yield of the crop
in a component areal unit/Mean yield of the total area x 100
The area under each crop in a given region may be classified under four groups:

1. High yield, high spread

2. High yield, low spread
3. Low yield, high spread
4. Low yield, low spread

It is apparent that there are countless micro dissimilarity in the cropping patterns. The most
important element of farming in India is the production of grains and the dominant food-chain is
grainman. On this basis, the country may be divided broadly into five agricultural regions.

i. The rice region extending from the eastern part to include a very large part of the
northeastern and the south-eastern India, with another strip along the western coast.
ii. The wheat region, occupying most of the northern, western and central India.
iii. The millet-sorghum region, comprising Rajasthan, Madhya Pradesh and the Deccan
Plateau in the centre of the Indian Peninsula.
iv. The temperate Himalayan region of Kashmir, Himachal Pradesh and Uttar Pradesh and
some adjoining areas. Here potatoes are as important as cereal crops (which are mainly
maize and rice), and the tree-fruits form a large part of agricultural production.
v. The plantation crops region of Assam and the hills of southern India where good quality
tea is produced. There is an important production of high-quality coffee in the hills of the
western peninsular India. Rubber is mostly grown in Kerala and parts of Karnataka and
Tamil Nadu. There are some large estates, but most of the growers would come under the
category of small holders. Sugarcane, which in many countries is a plantation crop, is
almost entirely grown by small holders in India.
On the accessibility of an alternative more efficient crop than the existing ones, new
cropping patterns may come out in a region. The cropping patterns may be strengthening
with the help of high yielding short duration varieties. Any cropping sequence to be
espoused by the cultivators should be flexible.

The aptness of a crop and cropping pattern may be judged on the basis of the following:

1. The crop should not accentuate certain diseases as a result of a fixed continuous rotation.
2. The crop should not exhaust on some specific plant nutrients from a particular depth of the
soil.
3. The crop should be fertility building and soil improving.
4. The crop should obtain good return to the cultivator and should provide the cultivator
employment and income all the year round. Moreover, the crop should make certain the
optimum utilization of his resources, particularly inputs like irrigation water, chemical
fertilizers, insecticides, pesticides, equipment’s, power and family labour.
In most parts of India, agriculture is still mainly subsistent in character. As a result, the food
grain crops occupy over 71 per cent of the gross cropped area. India grows almost each and
every crop. There are varieties of crop grown from Kashmir to Kanyakumari and western coast
of Gujarat to extreme north eastern states of Arunachal Pradesh. Among the cereals rice and
wheat rank first and second correspondingly. Cotton, sugarcane and oilseeds are the major cash
crops.
Among the pulses, gram, lentil, black gram, green gram, pigeon peas are important. The
subsistent cropping patterns of India are based on consumption of the natural fertility of the
soil without the much use of contemporary inputs and technology. The areas in which HYV
have been diffused successfully under the Green Revolution are, however, exceptions.
crops grown in India

The significance of acceptance of proper cropping patterns in a developing country such as

India cannot be exaggerated. The horizontal development of agriculture is not possible without
heavy capital investment. Only sensible utilization of land by adopting more remunerative
cropping patterns, scientific alternation of crops and multiple cropping may help in overcoming
the food and raw material issues of the country. The change in the cropping pattern and
introduction of crops which improve the soil fertility are crucial to make agriculture more
profitable and sustainable.
To summarize, Crop is intended to give a wider choice in the production of a variety of crops
in a given area so as to expand production related activities on various crops and also to lessen
risk. The cropping pattern in India has undergone significant changes over time. As the
cultivated area remains more or less constant, the increased demand for food because of
increase in population and urbanisation puts agricultural land under stress resulting in crop
intensification and substitution of food crops with commercial crops. Crop diversification in
India is generally viewed as a shift from traditionally grown less remunerative crops to more
remunerative crops. The crop shift (diversification) also takes place due to governmental
policies and thrust on some crops over a given time
Public Distribution System,
functioning, limitations, revamping
The Public Distribution System contribute significantly in the provision of food security. Public
Distribution System in the country enables the supply of food grains to the poor at a subsidized
price. It also helps to control open - market prices for commodities that are distributed through
the system. Government accords great importance to the objective of measuring outcomes of
PDS so as to ensure that equal distribution system serves up the purpose for which it was set
up.
India's Public Distribution System is a broad network. The concept of Public Distribution
System in India emerged during 1942 for the first time in revised form as a result of shortage
of food grains during World War. Subsequently, Government started intrusion in release of
food to the people. Public Distribution System in India is more than half-a century old as
rationing was first introduced in 1939 in Bombay by the British Government as a measure to
ensure equitable distribution of food grains to the urban consumers as a result of increasing
prices. Thus, rationing in crisis period particularly during shortage was the historical antecedent
to the national policy of stabilization and management of food grains. After independence in
1947, major aim of Government of India has been to deliver food security to all the inhabitants
of India. With this objective, Public distribution system was started by Ministry of Consumer
Affairs, Food and Civil Supplies.
Public Distribution System is a network whereby accessibility of vital supplies is guaranteed
which can be easily accessed by the consumers in every part of the country. This is a transaction
system where food grain, sugar, and other needed items such as kerosene oil and edible oil are
made available to the people of the state at fair price to meet their minimum needs. Regular
and timely availability of supplies is assured through close monitoring system to make Public
Distribution System an effective instrument against various forces in the open market and to
keep under check the inflator tendencies. The main commodities are as follows:

 Wheat
 Rice
 Sugar
 Kerosene
Certain supply on fixed and affordable prices also keeps in control the variable trends of market
due to vagaries of whether and subsequent changing prospects of crops. Public Distribution
System serves as a steady stable check on market forces and work as an effective soothing
factor.
In order to efficiently manage and distribute food grains, the government of India has created
Ministry of Consumer Affairs, Food and Public Distribution. The ministry has been divided
into two departments specifically Department of Food and Public Distribution and Department
of Consumer Affairs. The department of food and public distribution is further divided into
two parts for the purchase and storage of food grain. When appraising Public Distribution
System in India, it has been found that among all states, Tamil Nadu has done marvellous job
in implementing the PDS as universal system for the cause of eliminating poverty and
improving standard of living of the people living below the poverty line. Timely supply of
essential commodities is the basic element for the success of the Public Distribution System.
Infrastructure i.e., Fair Price Shops (FPS), godown facilities and employees are other requisites
of the PDS.
In 1997, the government launched the Targeted Public Distribution System (TPDS) to resolve
the problems of poor communities. The prime aim of TPDS is to provide subsidised food and
fuel to the poor through a network of ration shops. Food grains such as rice and wheat that are
provided under TPDS are procured from farmers, allocated to states and delivered to the ration
shop where the beneficiary buys his entitlement. The centre and states share the responsibilities
to identify the poor, procuring grains and delivering food grains to beneficiaries. In September
2013, Parliament passed the National Food Security Act, 2013. The Act relies largely on the
existing TPDS to deliver food grains as legal entitlements to poor households. This made a
shift by making the right to food a justiciable right. In order to understand the implications of
this Act, the note maps the food supply chain from the farmer to the beneficiary, identifies
challenges to implementation of TPDS, and debated alternatives to improve TPDS.
Timeline of Public Distribution System:

There are several issues to consider while evaluating the implementation of TPDS such as

 Identification of eligible households.

 Trends in procurement vis-à-vis production of food grains.
 Storage space for food grains.
 Food subsidy.
 Leakage of food grains.

Objectives of Public distribution system:

The goal of Public Distribution System does not limit itself with the distribution of rationed
articles. Making available sufficient quantities of essential commodities at all times, in places
accessible to all, at prices affordable to all and protection of the weaker section of the
population from the malicious spiral of rising prices is prime objective of public distribution
system.
Major goals of public distribution system are as under:

1. Make goods available to consumers, especially the disadvantaged /vulnerable sections of

society at fair prices.
2. Rectify the existing imbalances between the supply and demand for consumer goods.
Check and prevent hoarding and black marketing in essential commodities.
3. Ensure social justice in distribution of basic necessities of life.
4. Even out fluctuations in prices and availability of mass consumption goods.
5. Support poverty-alleviation programmes, particularly, rural employment programmes,
(SGRY/SGSY/IRDP/ Mid-day meals, ICDS, DWCRA, SHGs and Food for Work and
educational feeding programmes.

Functioning of PDS:
The central and state governments share responsibilities to provide food grains to the identified
recipients. The centre procures food grains from farmers at a minimum support price (MSP)
and sells it to states at central issue prices. It is responsible for transporting the grains to
godowns in each state. States hold the responsibility of transporting food grains from these
godowns to each fair price shop (ration shop), where the beneficiary buys the food grains at
the lower central issue price. Many states further subsidise the price of food grains before
selling it to recipients. The Food Corporation of India (FCI) is the nodal agency at the centre
that is responsible for transporting food grains to the state godowns.
State-level ministries of food and civil supplies control networks of ration shops within their
authorities, and are responsible to allocate licenses to the private traders who operate the shops.
State governments also issue ‘ration cards’ to their residents (at one time on a nominally
universal basis, but more recently on a ‘targeted’ basis), and determine the quantities to which
consumers are entitled. These differ from one commodity to the next. The prices are determined
by state governments. Under Public Distribution System scheme, each family below the
poverty line is eligible for 35 kg of rice or wheat every month, while a household above the
poverty line is entitled to 15 kg of food grain on a monthly basis. The Central Government take
responsibility for procurement, storage, transportation, and bulk allocation of food grains. State
Governments hold the responsibility for distributing the same to the consumers through the
established network of Fair Price Shops (FPSs). State governments are also responsible for
operational responsibilities such as Allocation and Identification of families below poverty
line, Issue of ration cards, Supervision and Monitoring the functioning of Fair Price Shops.
Major functioning of Public Distribution System encompasses following (Logistical
Management of PDS):
1. Procurement of Food Grains: The food grains offered to recipients under TPDS are procured
from agrarians at MSP. The MSP is the price at which the FCI purchases the crop directly from
farmers; typically the MSP is higher than the market price. This is intended to provide price
support to farmers and incentivise production. It is done by the central government. They
procure the food materials from the Food Corporation of India and the State Agencies at
Minimum Prices which include wheat, rice, kerosene and sugar. Other essential commodities
like iodized salt, Palm oil, candles, Ghee and cloth etc. have also been purchased.
Currently procurement is performed in two ways:
(i) Centralised procurement: Centralised procurement is done by the FCI, where FCI
purchases crops directly from farmers.
(ii) Decentralised procurement: Decentralised procurement is a central scheme under which
10 states/Union Territories (UTs) procure food grains for the central pool at MSP on behalf
of FCI. The scheme was launched to inspire local procurement of food grains and minimise
expenditure incurred when transporting grains from surplus to deficit states over long
distances. These states directly store and distribute the grains to beneficiaries in the state. Any
surplus stock over the state’s requirement must be handed over to FCI. In case of a shortage
in procurement against an allocation made by the centre, FCI meets the deficit out of the
central pool.
The centre procures and stores food grains to fulfil the prescribed minimum buffer stock norms
for food security, release food grains under TPDS on a monthly basis, meet emergency
situations arising out of unexpected crop failures, natural disasters and sell through the Open
Market Sale Scheme (OMSS). The central government introduced the Open Market Sale
Scheme (OMSS) in 1993, to sell food grains in the open market; this was intended to increase
the supply of grains to moderate or stabilise open market prices.
2. Identification of poor and needy: The centre and states identify eligible BPL households
through a detailed process.
Table: Process of identification of BPL families: (Sources: Department of Food and Public
Distribution; Planning Commission; Ministry of Rural Development; PRS).
Details
Authority Role

Consumer expenditure is the expenditure of

National sample household on some basic goods and services.
Conduct sample survey of consumer The expenditure on this basket of goods is the
survey
expenditure every five year basis of poverty line.
organization

Estimates state wise poverty such as

Planning number of people below the poverty
line. Uses NSSO household expenditure data
commission

The number of BPL families has been

Allocates food grains to each states calculated using 1993-94 poverty estimates by
based on state wise poverty Planning commission. This number has not
Central estimates of planning commission been revised despite the release of new
government and population projections of the poverty estimates by the planning commission
register general of India as March in 2004-52011-12.
2000

Criteria for classification of BPL families, as per

Comes out with criteria for inclusion
Ministry of rural BPL census 2002, include parameters like size
and exclusion from BPL list as part of
development of land holding clothing owned, food security
its BPL census
means of livelihood.
State Based on above criteria
Identify eligible households
government

The government does not identify APL households; therefore, any household above the poverty
line is eligible to apply for a ration card. The centre allocates food grains to states for APL
families in addition to BPL families. Nevertheless, this allocation is based on availability of
food grains in the central stocks and the average quantity of food grains bought by states from
the centre over the last three years. Hence, the allocation to a state increases if its offtake
increases over the previous years.
3. Issue of ration cards to poor people: A Ration Card is a file issued under an order or
authority of the State Government, as per the Public Distribution System, for the purchase of
essential commodities from Fair Price Shops. State Governments issue unique Ration Cards to
Above Poverty Line, Below Poverty Line and Antyodaya families and conduct periodical
review and checking of Ration Cards. An Indian citizen may get the application form for
making a new Consumer (Ration) Card from any Circle Office. Person will require some
documents to get ration card such as a photograph of the head of the family attested by a
gazetted officer/MLA/MP/Municipal Councilor, proof of residence and the Surrender/
Deletion Certificate of the previous Ration Card, if there was any. In case, if person is not able
to provide proof of his/her residence, the Circle FSO conducts spot inquiries by recording the
statements of two independent witnesses in the neighbourhood. The standard prescribed time
schedule for the preparation of a Ration Card is generally 15 days. However, the procedure and
time limit may vary. In case, Ration card holders lost their card or it is stolen or burnt, they can
also obtain a duplicate ration card if the same could not be traced out within one month after
its loss by submitting applications, duly endorsed by the Fair Price Depot dealer, to the Deputy
Director of the Tahsildar, as the case may be, by enclosing a passport size photograph of the
applicant and a duplicate card will normally be issued within a week. If card holder has
transferable job, within the District, the card could be transferred to the new place and if the
place of residence happens to be outside the District, the card-holder will be issued a Surrender
Certificate after surrendering it to the office so as to enable him/her to obtain a new ration card
at the new place.
4. Storage: Besides the food grains requirement for immediate distribution under targeted
public distribution system, the central government maintains minimum buffer reserves of food
stocks for emergencies. The food grains procured for targeted public distribution system and
other contingencies are maintained and stored as the central pool stock. Food Corporation of
India is the main government agency delegated with the storage of food grains in the central
pool. According to the storage rules of the Food Corporation of India, food grains are normally
stored in covered godowns, silos, and in the open, referred to as Covered and Plinth (CAP).
However, FCI’s own storage capacity has been inadequate to accommodate the central pool
stock of food grains. Consequently, Food Corporation of India hires space from various
agencies such as the central and state warehousing corporations, state government agencies and
private parties. In an evaluation of the storage management of food grains by FCI, the
Comptroller and Auditor General (CAG) noted that there is sub-optimum utilisation of the
existing storage capacity available with FCI and states. It is apparent that inadequate storage
will result in wastage of food. Therefore, proper Storage becomes an essential factor in
Logistics Management. The Food Corporation of India has huge responsibility to perform job
of storing the grains efficiently. There is a regular monitoring mechanism under which
inspections at all levels are carried out to ensure safe preservations of food grains in Food
Corporation of India.
The steps taken to monitor the warehouse are under:

i. Food grains are to be stored by adopting proper scientific code of storage practices.
ii. Adequate materials are to be used to prevent entering of moisture from the floor to the food
grains.
iii. Spraying of insecticides.
iv. Effective rat control measures taken in godowns.
v. Regular periodic inspections of stocks.
vi. The principle of “First in First Out” (FIFO) is to be followed to the extent possible so as to
avoid longer storage of food grains in godowns.

5. Allocation of food grains to states: The central government allocates food grains from the
central pool to the state governments for distribution to BPL, AAY and APL families.
Allocation for BPL and AAY families is performed on the basis of the number of identified
households. Conversely, allocation for APL families is made on the basis of:

1. The availability of food grains stocks in the central pool.

2. The past off take (lifting) of food grains by a state from the central pool.

Given the food grains stocks in FCI, the centre has the discretion to allocate more grains to
states on an ad-hoc basis. Earlier, ad-hoc allocations have been provided in the disaster of
floods, droughts, and festivals.
6. Transportation of food grains to all Fair price shops: In India, food grains and other items
are normally transported through Roadways and Railways. Choice of transport depends on
volume of food grain.
Through roadways, food grains are transported that are distributed at short distances. Railways
deliver food items with high speed and suitable over long distances. This means of
transportation have large carrying capacity, and can carry bulky goods.
7. Fair price shop (Ration Shops): Fair Price Shops (FPS) are called at ration shops in general
way. In these centres, the consumer gets a Ration Card on the basis of which he is given food
grains. The state government has given license to the Ration Shops to sell the food grains at
comparatively lower price.
8. Consumer: Consumer are the people who buy the food grains from the Fair Price Shops at
Minimum Market Price. They are availed to purchase food grains only if they own a ration
card.
Logistic management of public distribution system

Recently Aadhaar (unique national identity card) can also be used in public distribution system
to simplify a number of processes. The most frequent consumers belong to the BPL category.
Which includes Marginal Farmers, Pottery, and Craftsmen.
Numerous reforms have been suggested to make the targeted public distribution system more
effective. Major reforms include using information technology and leveraging Aadhaar to
improve identification of beneficiaries.
There is immense role of Aadhaar card in public distribution system. It has been realized that
one major problem in the implementation of the targeted public distribution system is the
inclusion and barring errors in the identification of recipients. It has been proposed to integrate
the Unique Identification or Aadhaar number with several government schemes, including
TPDS to address this problem. The Aadhaar number would be used to precisely identify and
authenticate beneficiaries entitled to receive subsidies under the targeted public distribution
system and other government schemes. It has been documented that the Unique Identification
Authority of India, using Aadhaar with TPDS would help remove duplicate and fake
beneficiaries, and make identification of beneficiaries more accurate.
Technology-based reforms of the targeted public distribution system implemented by states:
The Supreme Court appointed a committee under the chairmanship of Justice Wadhwa to look
into reforms to the TPDS that have been implemented by various states. In its 2009 report, the
Wadhwa Committee found that certain states had implemented computerisation and other
technology-based improvements to the targeted public distribution system. Technology-based
reforms helped plug leakages of food grains during TPDS. The Committee found that the
current manual recording of suitability of beneficiaries and transactions was prone to human
mistakes and tampering. Additionally, there was pilferage through the distribution network and
there is no central monitoring system to guarantee end-to-end delivery. The Committee
observed that end-to-end computerisation could control large-scale diversion and help track the
delivery of food grains from state depots to recipients.
Table: Technology based reforms in targeted public distribution system in several states of
India (Source: Justice Wadhwa Committee Report on Computerisation of PDS Operations,
2009; PRS):
States implement reforms
Type of reforms Benefits of reform

-Allows for online entry and verification of

beneficiary data
Andhra Pradesh, Chhattisgarh,
Delegation of ration -Online store of monthly entitlement of
Tamil Nadu, Madhya Pradesh,
cards beneficiary, number of dependants, offtake of
Karnataka, Gujarat.
food grains by beneficiary from FPS.

Computerized allocation to FPS, declaration of

stock balance, web based truck challans.
Computerized Chhattisgarh, Delhi, Madhya
-Allow for quick and efficient tracking of
allocation to FPS Pradesh, Tamil Nadu
transaction.

-Secure electronic devise to store beneficiary

data

-Stores data such as name, address, biometrics,

Issue of smart card in BP/ APL category and monthly entitlement of Haryana, Andhra Pradesh,
place of ration card beneficiary and family members. Orissa.

-Prevents counterfeiting.

Use of global positioning technology to track

Use of GPS movement of trucks carrying food grains from
state depots to FPS. Chhattisgarh, Tamil Nadu
technology

Allow monitoring by citizens so they can register

their mobile numbers and send/ receive SMS
SMS based alerts during dispatch and arrival of TPDS Chhattisgarh, Uttar Pradesh,
monitoring commodities. Tamil Nadu

Publicizes grievances redressal machinery such

Use of web based
as toll free number for call centres to register Chhattisgarh
citizen’s portal
complaints or suggestions
Limitations of Public Distribution System:
The problems of Public Distribution System have not been undeviating in the nation. In some
states, the administration is weak and dishonest. In these states, deficiencies regarding huge
shortage of stocks, fake supply entries in ration cards, diversion of commodities for sale to
open market and bogus ration cards are recorded. Public Distribution System suffers from
irregular and poor quality of food grain made available through Fair Price Shops.
In general, the public distribution system has following limitations.

1. Identification of poor by the states is not fool proof. A large number of poor and needy
persons are left out and a lot of fake cards are also issued.
2. Fair Price Shop owner gets fake Ration cards and sell the food grains in the open market.
3. People do not get the permitted amount of food grains from the Fair price shop.
4. Diversion of Food grains by Fair Price Shops holder and mediator.
5. Many times, good quality food grains are replaced with poor quality cheap food grains.
6. Public distribution system includes only few food grains such as wheat and rice, it does not
fulfil the requirement of complete nutrition.
7. Uneven distribution of Food generations, procurement and distribution. For example: north
eastern states are very far from Punjab and Haryana, from where wheat is procured. To
transport food grains from Punjab to far flung areas in North east will entail cost and time
both.

Main problem involved in the operation of public distribution system is the issue of containing
the food subsidy to reasonable levels. Other major issues which confront the system include
the issue of targeting the system to benefit the actual poor and restricting the coverage of public
distribution system to only the major commodities. De-centralization of operations and
devolving to the states the key decision making powers as regards the operation of public
distribution system are some major issues that needs to be addressed.
Government agencies can reform the system by introducing innovative ideas such as food
stamps and food credit/debit cards to facilitate better working of the system with a view to
reduce malpractices like diversion and reducing the costs of food delivered to the poor.
Though government has taken several measures to improve public distribution system like
decentralised procurements, introduction of UIDAI etc. but still these measures are not
completely espoused. More measures like universalization of public distribution system are
need of the hour. Public distribution system can provide food security only when it covers wide
range of food grains. With introduction of Food Security Ordinance, It is expected that public
distribution system will be able to fulfil the long valued goal of Food security.

Revamping of Public Distribution System:

The scheme of Public Distribution System has immense importance in distribution of essential
commodities to the weaker sections of the society since last four decades. However, it was
found in surveys that poor people are not getting full benefit of this scheme. It may be due to
their disadvantageous geographical location, lower purchasing power, and lack of
communication etc. (Deep and Deep Publications, 2001). Reports indicated that in country with
sufficient production of food grains and large buffer stock, 200 million people remain hungry.
This reflect poor functioning of public distribution system. There is a need to revamp the public
distribution system scheme and then any tempering of the system in place should be dealt with
severely. Instead of storing food grains in distant storage places, local food banks should be
created so that the movement and utilization become easier and cheaper (G.N. Karalay, 2005).
To assure that the public distribution system reaches out to the farthest place of the country,
the Revamped Public Distribution System (RPDS) was introduced in, 1992. According to this
scheme families living below the poverty line are entitles to draw 10 Kg (20 Kg as per the
proposal in Union budget, 2000) of food grains per month and that too at half of the central
issue price. In Haryana state, this scheme is implemented with full swing (Deep and Deep
Publications, 2001).
Details of targeted Public Distribution System in Haryana (Source: Deep and Deep
Publications, 2001, Profile of food and supply department Haryana, 1989)
Total population: 1.64 crores

as per 1991 census

Population as on 28. 2.98 1.96 crores (Approximately)

BPL Beneficiaries:

Research estimates 7.33 lac families

As per local survey 7.20 lac families

APL families 27.2 lac families

Stamping done 5.62 lac families

With the implementation of this scheme, old schemes have been discontinued for the
distribution of food grains (Deep and Deep Publications, 2001).
It is summarized that the Public Distribution System is a crucial resource for the food security
of the poor people, particularly the urban poor, and women, who manage household food
supplies. It is a major challenge for government to increase food availability to the poor. Public
Distribution System has played vital role in serving the poor people as many people earlier died
because of malnutrition. When analysing in Indian context, India’s Public Distribution System
is the major distribution network of its kind in the world.