Within the agricultural sector, a sharper deceleration was observed in the non-food grain production. While there was deceleration in output growth, the variability of the growth process has significantly declined during the 1990s as compared with the 1980s.
The reasons for slowdown in agricultural growth were many. The pre-occupation with food security led to restrictive trade policies regulating trade in agricultural commodities. Alongwith this, high protection to industry resulted in unfavourable terms of trade for agriculture until the early 1990s. The negative consequences of such policies were to be offset by the provision of high subsidies on inputs such as irrigation and fertilisers.
However, such input subsidies assumed large proportions over time and reduced the capacity of the Government to invest in agricultural infrastructure. Further, the discretionary pricing system of agricultural commodities with Minimum Support Prices (MSP) favouring production of rice and wheat, provided adverse incentives for crop diversification.
The falling world prices of agricultural commodities during the latter half of 1990s further reduced the competitiveness of the agricultural exports. The relatively higher MSPs on the one hand, and the increasing production of rice and wheat on the other, all led to increased procurement of food grains, and in the face of lower off-take, resulted in piling up of food grain stocks. Thus, the slowing down of agriculture growth in the 1990s, despite a generally favourable macroeconomic environment, could be attributed to limited reforms in this sector.
The deceleration in the growth of food grains production to 2.0 per cent in the 1990s from 2.9 per cent in the preceding decade was caused predominantly by declining yield growth, reflecting a diminishing growth in productivity. Among food grains, growth in rice production decelerated due to a decline in yield growth, despite a marginal increase in growth of area under cultivation.
On the other hand, production of wheat in the 1990s witnessed an identical rate of growth to that of the 1980s, due to substantial increase in acreage, even as yield growth decelerated. The increased area growth in wheat and rice during the 1990s led to a decline in area under coarse cereals and pulses. Despite a decline in acreage, production of coarse cereals was maintained almost at the levels attained in the preceding decade on account of increased yield growth.
Growth in pulses production decelerated in the 1990s due to a deceleration in yield growth coupled with a decline in acreage. Following the changes in acreage under food grains during the 1990s, the shares of rice and wheat increased and those of coarse cereals and pulses declined, which had implications for input usage and procurement of food grains.
The decelerating growth in the index of non food grains production to 2.6 per cent in the 1990s from 3.8 per cent in the earlier decade was also marked by a slowdown in the yield growth. Within non food grains, oilseeds production growth witnessed a sharp deceleration from 5.5 per cent in the previous decade to 2.3 per cent in the 1990s due to a decline in yield growth and stagnation in area coverage.
Stagnation in area under these crops seems to have been induced by the freeing of imports of major edible oils in 1994 that had considerably weakened the protectionist atmosphere in respect of the oilseeds sector.
The growth in sugarcane production during the 1990s was identical to that in the 1980s, due to some acceleration in area growth, while yield growth decelerated marginally. In the case of cotton, the substantial yield growth attained in the 1980s appears to have influenced the farmers’ preference to cultivate cotton in the 1990s with acreage increasing substantially by 2.7 per cent per annum.
This increase in acreage led to an increase in output of cotton by 2.3 per cent even as yield growth turned negative to 0.4 per cent. The deceleration in yield growth, spread across both food grains and non-food grains led to a perceptible slackening in the growth of agricultural production to 2.3 per cent in the 1990s from 3.2 percent in the earlier decade. Moreover, increased variability in agricultural production during the later part of the 1990s, primarily emanating from the fluctuations in acreage in case of food grains, and from fluctuating yields in case of non-food grains is also a matter of concern.