Changing dynamics in Indian agriculture requires newer solutions
By Pranshu Badoni & Antony John
Agriculture has been central to Indian civilisation for millennia, from the Rig Veda’s blessing of the plough to Mahatma Gandhi’s observation that “God cannot appear to the hungry except in the form of bread”. Over time, Indian agriculture has evolved through government-led transformations like the Green, White, Yellow, and Blue Revolutions, significantly boosting productivity and food security.
Yet, despite these gains, challenges persist. Farmer suicides, indebtedness, poor livelihoods, and resource depletion continue to plague the sector. This paradox of progress amidst distress raises critical questions about the structural issues in Indian agriculture.
Changing dynamics
To understand the distress of farmers, we must examine the changing dynamics of the agricultural sector. Since independence, and particularly with the emergence of the Green Revolution, the crops grown by farmers have largely remained confined to rice and wheat.
This trend was largely driven by the adoption of High Yielding Variety (HYV) Seeds and significant government interventions such as the Minimum Support Price (MSP), fertiliser subsidies, and irrigation facilities. However, over time, cropping patterns have shifted from monoculture to more diverse forms of agriculture.
The prevalence of these policies has contributed to serious issues such as groundwater depletion and soil degradation. In addition to changes in cropping patterns, there has been a significant shift in land holding structures, driven by population pressure and the division of land among heirs. In 1970-71, the average operational landholding size was approximately 2.28 hectares, but by the 2015-16 Agricultural Census, this had reduced to 1.08 hectares.
Despite these evolving trends, many of the policies introduced decades ago continue to persist, proving insufficient to address the broader challenges faced by farmers today.
These were the policies which were helpful according to the need of that time but now prevalence of these is not reaping benefits for the larger population of farmers (86% small and marginal farmers).
From MSP to MSS
It has become increasingly common that in every election, whether for the Lok Sabha or state assemblies, political manifestos emphasise a hike in the Minimum Support Price (MSP) for crops. Recently, in the BJP-ruled states like Haryana, election manifestos have promised MSP for 23 crops grown by farmers. However, a critical question arises: how long will Indian farmers remain dependent on the government for support prices?
According to Nobel laureates in economics like Theodore Schultz and Amartya Sen, whose primary focus was on human capability, the current debate on subsidies and support prices seems to have lost its relevance. Schultz’s argument of farmers being “efficient but poor” and Sen’s Capability Approach, which stresses giving people the freedom to make their own choices, have not been sufficiently considered by the government in shaping its agricultural policies.
Given the contemporary challenges of environmental degradation, shrinking landholdings, and changing cropping patterns, it is imperative for the government to create a robust support structure, powered by technology, to make India a hub for “ease of doing agriculture”. Instead of solely relying on MSP, the government must offer a Minimum Support Structure in the form of formal agricultural credit, improved storage facilities (godowns), better access to markets, technical education, information about e-market platforms, and a system for connecting local farmers to global markets. Such comprehensive reforms would empower farmers and reduce their long-term dependence on government intervention.
Shambling condition of MSS
Due to a lack of robust supply-chain infrastructure and mechanisms to efficiently channel produce from farmers to consumers, significant food wastage occurs, which poses a direct threat to both food security and the environment. According to a 2023 FAO report, 13.2 percent of global food production is lost between harvest and retail. Furthermore, the UNEP estimates that an additional 17 percent of food is wasted between retail and consumption. Together, this means that approximately 30 percent of global food production is wasted. If even half of this wasted food could be saved, it could potentially
feed the world’s hungry population, while also contributing to environmental conservation by reducing the resources wasted in producing the lost food.
In India, the All India Post Harvest Loss Survey conducted by NABCONS in 2022 revealed that the country experiences significant food losses, amounting to Rs 1.53 trillion. These losses span across cereals, oilseeds, pulses, and horticultural crops. Horticultural crops, in particular, suffer due to inadequate storage infrastructure, which results in a decrease in the availability of fresh produce and a reduction in farmer incomes.
While existing surveys often focus on quantifying losses, researchers at ICRIER-ADMI have worked to estimate the quality losses. In 2022, a comprehensive survey was conducted with 1,200 farmers across Punjab, Bihar, and Madhya Pradesh for key crops like wheat, rice, soybean, and maize. The study found that soybean experiences the
highest post-harvest losses, followed by wheat, paddy, and maize. These losses primarily occur during harvesting, threshing, drying, and storage, largely due to low mechanisation and inadequate logistical infrastructure.
Mechanisation has been shown to significantly reduce post-harvest losses. For instance, farmers who use combine harvesters report lower losses. However, according to the All India Debt and Investment Survey (2019), only 4.4 percent of farming households in India own tractors, and just 5.3 percent use power tillers, combine harvesters, or threshers. Small and marginal farmers, who make up 86 percent of India’s agricultural households, often cannot afford such machinery. This issue is particularly stark in regions like Bihar, where only 10 percent of farmers use combine harvesters, compared to 97 percent in Punjab.
When it comes to access to credit, the same survey (AIDIS 2019) by the National Statistical Office reveals that only about 30 percent of agricultural households are connected to formal credit sources such as banks and cooperative societies. This leaves 70 percent of farmers reliant on informal sources like moneylenders, relatives, or local traders, often at significantly higher interest rates. Moreover, many farmers are diverting loans taken for agricultural purposes to non-agricultural activities. There is an urgent need to ensure that loans are effectively channelled into agriculture to enhance efficiency and productivity in the sector.
Market access is equally important for farmers to sell their produce efficiently. However, the Agricultural Produce Marketing Committees (APMCs) in India face several challenges, including limited reach, the presence of middlemen, poor infrastructure, and monopolistic control. While states like Punjab and Haryana, with large landholdings, have relatively well-functioning mandi systems, states like Kerala and Uttarakhand, with smaller landholdings, lack comparable infrastructure. These challenges pointed to the need for reforms in the APMC system, leading to the introduction of the Farm Laws in 2020.
The Farm Laws aimed to address these issues by allowing farmers to sell their produce outside of APMC mandis, promoting contract farming, and encouraging private sector participation. However, these laws sparked widespread protests, particularly in Punjab and Haryana, as farmers feared that the reforms would undermine the Minimum Support Price (MSP) system and expose them to potential exploitation by corporations.
Due to these concerns, the government ultimately repealed the laws in November 2021.
Comparison between countries and state
Agricultural reforms in different countries and states have followed unique paths, each offering valuable insights. China’s agricultural reform in the 1970s marked a critical shift from a collectivised, state-controlled system to one that embraced market mechanisms and individual incentives. This transformation spurred significant economic development, with the Chinese government providing robust infrastructure to support a wide variety of crops. Additionally, the government prioritised regional crops, ensuring that each region received the specific support it needed for its agricultural practices. The result was a more diversified and efficient agricultural sector that boosted productivity and rural income.
Similarly, Muhammad Yunus’s transformative work in Bangladesh, particularly through the Grameen Bank, indirectly revolutionised the agricultural sector. While not targeting agriculture directly, Yunus’s microfinance model empowered rural farmers— especially women—by providing them access to financial resources. This enabled smallholder farmers to invest in agriculture, diversify their livelihoods, and adopt sustainable farming practices. By focusing on technology, sustainable agriculture, and market access, Yunus helped farmers move beyond subsistence farming to become part of a system that fostered rural empowerment and economic growth. Data show that social returns for investments with similar are trifold. India too has had such initiatives in the form of RRBs and ESAF.
The MSP system in India guarantees a minimum price for certain crops, primarily rice and wheat, aimed at providing farmers with a safety net. However, despite MSP being declared for 23 crops, actual government procurement remains limited to just a few, creating a disparity in benefits across the agricultural landscape. The reliance on middlemen and commission agents further complicates the procurement process, especially for small farmers, resulting in only about 6% of farmers receiving direct benefits from MSP due to insufficient government procurement. In contrast, countries like the United States and the European Union employ more comprehensive agricultural support systems that include direct payments, price supports, and crop insurance. These systems not only cover a broader range of crops but also have established robust procurement infrastructures, making it easier for farmers to access government support. For instance, the US has programs that allow farmers to receive payments based on historical production levels and current market conditions, which can offer more stability compared to India’s relatively rigid MSP model.
In contrast, states like Punjab and Haryana in India are heavily dependent on the Minimum Support Price (MSP), particularly for wheat and rice. While MSP provides income stability, it has led to overproduction, environmental degradation, and limited diversification, as farmers focus on these government-supported crops. The over-reliance on MSP has also contributed to issues like groundwater depletion and soil degradation due to the monoculture of water-intensive crops.
On the other hand, states like Maharashtra, Gujarat, and Kerala have adopted more diversified and resilient agricultural systems. These states have reduced their dependency on MSP by encouraging market-driven agriculture, focusing on high-value and cash crops, and adopting sustainable farming practices. For example, Maharashtra’s emphasis on horticulture, Gujarat’s success with cooperative models like Amul, and Kerala’s focus on plantation and export-oriented crops have created agricultural models that are more sustainable in the long run. These states provide valuable lessons in balancing the safety net of MSP with the need for diversification, market access, and longterm agricultural sustainability.
This comparison highlights the importance of tailoring agricultural support to specific regional needs, whether through market mechanisms, financial inclusion, or sustainable practices. It also underscores the need for states like Punjab and Haryana to move toward more diversified and sustainable systems, drawing lessons from the success stories of other states and countries.
Revolutionising Agriculture: eNAM and supply chain upgrades
Indian agriculture is undergoing a digital revolution with the introduction of eNAM (Electronic National Agricultural Market), signalling a shift from traditional Minimum Support Price (MSP) to a more comprehensive Minimum Support Structure (MSS).
eNAM, a digital platform connecting farmers directly to buyers, has shown promising results. It’s inclusive, with 29% marginal and 25% small farmers participating, alongside 27% medium and 18% large farmers. This digital marketplace has led to 5.5% higher prices for farmers compared to pre-adoption scenarios. Some states are embracing it wholeheartedly, with Gujarat seeing 80% of smallholders participating, and Telangana and Uttar Pradesh both at 65%. Interestingly, even some landless labourers cultivating on tenant lands have started selling through eNAM in UP, MP, and Gujarat, albeit in small numbers. Over 55% of farmers report that eNAM’s quality testing is better than manual mandis. However, challenges remain, as seen in the low satisfaction rates in states like Uttar Pradesh (16%) and Madhya Pradesh, primarily due to inadequate infrastructure. On the other hand, e-auction facilities are well-regarded by large proportions of farmers in Haryana (75%), Maharashtra (99%), and Telangana (100%). As of 2021, eNAM has integrated 1,000 mandis across 18 states and 3 union territories, with over 1.68 crore farmers and 2 lakh traders registered on the platform. The total trade value through eNAM has surpassed Rs 1.22 lakh crore, with more than 150 commodities being traded.
Alongside eNAM, there’s a growing focus on improving supply chain infrastructure to address significant waste in perishables. Current wastage levels range from 4.6% to 15.9% in fruits, 5.2% in inland fish, 10.5% in marine fish, 2.7% in meat, and 6.7% in poultry. To combat this, agricultural warehousing capacity is expanding rapidly, projected to increase from 154.82 metric tons in 2019-20 to 166.2 metric tons in 2020-21, and
further to 223 metric tons by 2026-27, a substantial 44% rise over seven years. This expansion aims to establish and enhance efficient cold chain infrastructure from farm gates to end consumers. The cold chain sector in India presents a considerable opportunity due to these substantial wastage levels in perishable goods.
Conclusion
Indian agriculture is at a critical juncture where increasing the Minimum Support Price (MSP) may lead to greater dependence on government support among farmers. Instead, this is the opportune time for the government to focus on empowering farmers through comprehensive policies. The new debate should centre on the facilities and support systems that farmers need to engage in unhindered agriculture in India. These policies should not only cater to specific crops and larger landholdings but also address the needs of marginalised and neglected farmers.
By shifting the focus from merely enhancing MSP to building a robust support infrastructure, the government can foster a more sustainable and self-reliant agricultural sector. The holistic approach, combining digital markets with improved physical infrastructure, represents the essence of the shift towards MSS, aiming to create a more efficient and equitable agricultural sector that benefits both farmers and consumers. The transformation is gradual but promising, addressing long-standing issues such as inadequate infrastructure, limited market access for small farmers, high intermediation costs, and lack of market information.
(Pranshu Badoni is a student of Public Policy, and Antony John is a geospatial analyst)
