UNIT – 3

Transformation in Indian Agriculture, Allied sector, and Rural India: Is

there less Krishi in Bharat?

1. Backdrop

The agricultural sector has undergone a profound transformation over centuries, evolving
from rudimentary food-gathering activities like hunting and fishing to a sophisticated and
intensive production system. This evolution has been driven by several factors: population
growth, increasing incomes, urbanisation, technological advancements, and the liberalisation
of global trade. In the early stages of economic development, agriculture constitutes the
largest portion of a country’s economic output and employs the majority of its labour force.
However, as development progresses, the industrial and services sectors begin to expand
more rapidly. Consequently, agriculture’s share in both GDP and employment declines, with
labour migrating to manufacturing and service industries. This structural transformation is a
hallmark of economic progress. Parallel to this shift, there is also a significant change in the
nature of demand for agricultural products. As incomes rise and urban populations expand,
the demand shifts away from basic cereals towards higher-value food items such as dairy,
fruits and vegetables, meat and processed products. This shift also stimulates growth in the
agri-food industry, encompassing processing, wholesale, and retail sectors.

Against this backdrop, the paper prepared by the National Council of Applied Economic
Research (NCAER) for NABARD under the NABARD Chair Professor Scheme seeks to analyse
the evolution of Indian agriculture and allied sectors over the six decades since
independence. A central focus of the paper is to assess the changing role of allied sectors—
such as livestock, forestry, and fisheries—in agricultural output and the broader economy. It
seeks to identify the major drivers behind these changes and interpret their policy
implications. NABARD, which holds the dual mandate of promoting both agricultural and
rural development, is particularly interested in understanding whether the transformation of
Indian agriculture has fundamentally altered the traditional link between agriculture and
rural India. Historically, agriculture was not only central to rural livelihoods but also seen as
the primary engine of rural development. If this relationship has weakened—as some recent
evidence suggests—then supporting agriculture may no longer suffice to promote rural
development, and vice versa.

This evolving relationship has significant implications for NABARD’s strategy and operations.
If rural development is becoming increasingly delinked from agricultural growth, NABARD
may need to recalibrate its focus to also incorporate non-agricultural rural investments.
There may be emerging opportunities in areas such as rural infrastructure, connectivity, and
non-farm sectors that contribute to both agricultural productivity and broader rural
economic vitality. These insights are drawn from household-level data published in a
December 2014 Government of India report based on the 70th Round of the National
Sample Survey (NSS), conducted from January to December 2013.
3. Main drivers of the transformation of agriculture and allied sectors

The transformation of Indian agriculture and its allied sectors over the past six decades has
been driven by a dynamic interplay of both supply and demand-side factors, mirroring global
trends in agrarian change. On the supply side, key drivers included state-led growth policies,
better utilisation of land and labour resources, technological innovations, expanded use of
modern agricultural inputs such as chemical fertilisers, and enhanced irrigation
infrastructure. Infrastructure development—such as roads and power supply—also played a
vital role. On the demand side, demographic changes, income growth, urbanisation, and the
gradual liberalisation of international trade significantly shaped the evolution of the sector.
However, the influence of these drivers was not uniform across time; rather, their specific
roles varied across three distinct phases of transformation identified in the analysis.
Phase 1: TE 1952-53 to TE 1972-73 was characterised by India's urgent need to achieve self-
sufficiency in food grain production. In the post-independence period, India was heavily
reliant on cereal imports to meet domestic food shortages, and the agricultural sector was
underdeveloped, with limited irrigation and recurring droughts. The central objective during
this phase was to boost domestic food production and provide raw materials for the growing
industrial sector. The response included expanding irrigation, reorganising agriculture, and
implementing development schemes alongside imports. The advent of the Green Revolution
—driven by high-yielding varieties (HYVs), chemical fertilisers, and irrigation—led to
significant increases in cereal production, especially wheat and rice. Gross cropped area
expanded by 22% (from 134.3 to 164.4 million hectares), and irrigated area increased by 50%
(from 23 to 39 million hectares). Fertiliser use rose dramatically—by 33 times—and
investment in agriculture surged by 113%, predominantly from the public sector.
Infrastructure also improved with increased roads and electricity generation. On the demand
side, population growth was the dominant factor, with an addition of 189 million people,
while urbanisation was minimal (rural population share only declined from 83% to 80%). Per
capita income grew slowly, and foreign demand was negligible. In terms of food
consumption, cereals and fruits/vegetables saw a rise in per capita expenditure, while
livestock products like milk, meat, and eggs saw a decline, indicating limited diversification of
the food basket. The decline in forestry’s contribution was largely due to the strong growth in
cereals and horticulture.
Phase 2: TE 1972-73 to TE 1992-93 marked the consolidation and expansion of earlier gains.
The Green Revolution extended to more regions and crops, while the White Revolution
revolutionised milk production. Special programmes were launched in the late 1970s and
mid-1980s to spread agricultural technologies to previously excluded areas. Gross cropped
area increased modestly by 12% (to 185 million hectares), but irrigation grew by 27 million
hectares. Inputs like fertilisers and infrastructure continued to grow, though at a slower pace.
Agricultural investment rose by 96%. A major development was Operation Flood, launched in
the 1970s, which used dairy imports (milk powder, butter oil from EEC) and institutional
innovations (dairy cooperatives) to stabilise prices and create supply chains, later supported
by World Bank aid. The Technology Mission on Oilseeds (TMO) in the 1980s attempted a
similar transformation in edible oils, boosting area under oilseeds but achieving limited
productivity gains. These interventions led to a 75% rise in cereal production (from 93 to 162
million tonnes), a 153% surge in milk output (from 22 to 56 million tonnes), and a 122% rise
in oilseed production (from 9 to 19 million tonnes). Demand-side dynamics also
 strengthened: population grew by 302 million, urbanisation picked up pace (rural population
share fell from 80% to 74%), and per capita income grew at 2.4% annually—faster than the
previous phase. Export performance improved dramatically as net trade balance in
agricultural and allied products grew from US$ 410 million to US$ 6.4 billion. Rising incomes
led to increased consumption of milk, meat, and fruits/vegetables, which became key drivers
of food basket expansion, overtaking cereals in importance.
Phase 3: TE 1992-93 to TE 2012-13 coincided with India’s broader economic liberalisation
and a distinct shift in agricultural transformation drivers from supply-side to demand-side
factors. While irrigation still expanded (from 65 to 87 million hectares), the growth in gross
cropped area plateaued. Fertiliser use, which had surged in the earlier phases, slowed down.
Infrastructure development—roads, electricity—and investment continued, but their
incremental impact on production was more muted. The production of major commodities
like cereals, oilseeds, and sugarcane showed limited growth, with notable exceptions being
fruits and vegetables, and cotton. Livestock products—milk, eggs, and meat—continued their
growth trajectory. The most striking development was the steep rise in per capita income,
which fuelled a substantial increase in consumption of high-value food items—meat and
meat products, dairy, fruits, and vegetables—while consumption of cereals declined. Thus,
the composition of the food basket continued to shift away from staples toward high-value
items, reinforcing trends from Phase 2. Additionally, exports of agricultural and allied
products surged, making India a net exporter of various agri-products. Though agriculture's
share in total exports remained modest, the scale and diversification of exports underlined
the sector’s increasing integration with global markets.
Overall, these three phases collectively depict a trajectory of Indian agriculture moving from
subsistence to market orientation, from reliance on cereals to diversification into livestock
and horticulture, and from inward-looking policies to global integration. The transformation
was deeply shaped by evolving policy priorities, technological progress, infrastructural
investment, and shifting patterns in domestic and global demand.

4. Is there less Krishi in Bharat? Evidence from recent household surveys

Here is a comprehensive and in-depth summary of the section "Is there less krishi in Bharat
now? Evidence from Recent Household Surveys", based on the data and arguments
presented:

Decline of Agriculture as the Dominant Rural Identity in India

India’s rural identity has long been synonymous with agriculture, but recent evidence from
household surveys suggests that this assumption no longer holds true. Although agriculture
by its nature remains a rural activity, rural India is increasingly moving beyond farming. This
structural transformation of the rural economy—driven by shifts in employment, income,
and consumption patterns—is reshaping the foundation of rural development policies.
Institutions like NABARD, historically focused on agriculture, may need to re-evaluate their
strategies to align with the emerging rural realities.
Two critical data sources provide evidence of this transition: the Situation Assessment
Survey of Agricultural Households (SAS) by the National Sample Survey Organisation (NSSO),
and the India Human Development Survey (IHDS) by the National Council of Applied
Economic Research (NCAER). SAS 2003 (59th Round) and SAS 2013 (70th Round) aimed to
 assess rural livelihoods, but changes in the definition of an agricultural household between
the two surveys make direct comparison difficult. The 2003 definition required land
possession, whereas in 2013, the criteria shifted to income earned (minimum ₹3,000
annually from agriculture and allied activities) and self-employment in agriculture, thereby
broadening the scope to include more diverse income earners.

Grouping States by Agricultural Dependence

To understand the diversity across states, the report classifies Indian states into three groups
based on the proportion of rural households primarily dependent on agriculture:
 Group 1 (more than 50% dependent): Includes states like Chhattisgarh, Madhya Pradesh,
Assam, and Uttar Pradesh, where 72% of rural households are engaged in farming. Yet, only
53% consider it their principal income source.
 Group 2 (25%-50% dependent): The largest category, comprising 13 states. Here, 55% of
rural households engage in agriculture, but only 38% earn a majority of income from it.
 Group 3 (less than 25% dependent): Includes Kerala and Tamil Nadu, the most urbanised
major states. Only 32% of rural households engage in agriculture, and merely 19% depend on
it primarily.
Nationally, 58% of rural households are engaged in agriculture or allied activities, yet only
40% depend on it as the principal source of income. This finding is corroborated by NSHIE
2012 and underscores the changing character of rural India.

Disparities in Agricultural Incomes and Indebtedness

Agricultural households in Group 3 states (like Kerala and Tamil Nadu) earned significantly
more than their counterparts in Groups 1 and 2. Specifically, Group 1 households earned
19% less than Group 2, and 71% less than Group 3 households. Similarly, consumption
expenditures mirrored this trend, being lowest in Group 1 and highest in Group 3.
Despite falling dependence on farming, 52% of agricultural households are indebted, with
an average outstanding loan of ₹47,000. Institutional credit (banks, cooperatives,
government) accounts for around 60% of the loans, while professional moneylenders make
up 25.8%. Interestingly, states with less agricultural engagement often exhibit higher
indebtedness, suggesting a potential link between transitions to non-farm activities and
financial stress.

Transformation in Employment Patterns

Data from IHDS-II (2011-12), which follows the same households as IHDS-I (2004-05), reveals
a sharp decline in agricultural employment. In 2004-05, 50% of rural men and 83% of rural
women worked solely on farms. By 2011-12, non-farm employment surpassed farming for
rural men in states like Punjab, Haryana, Assam, Kerala, and Tamil Nadu. Even rural women in
Kerala and Tamil Nadu now predominantly work outside agriculture, though 66% of rural
women nationally still engage primarily in farming.
The IHDS also documents a troubling trend: the workforce participation rate for rural
women (ages 15-59) fell from 47% in 2004-05 to 44% in 2011-12, with the decline observed
even among younger women. In contrast, the slight fall in male participation (from 79% to
77%) is attributed to rising educational enrolment—an explanation not applicable to women.
Wages, however, have risen sharply. For men, daily wages in agriculture nearly tripled, while
non-farm wages more than doubled. Women’s wages also increased significantly, so wage
suppression cannot explain their falling participation.
A Rural India Beyond Krishi
SAS 2013 shows that only 57.8% of rural households (around 9 crore of 15.6 crore) engage
in farming activities. But even among these, only 59.8% of their income comes from
cultivation and allied activities, with the rest from wage labor, non-farm businesses,
remittances, and other sources. Thus, for nearly 40% of these so-called agricultural
households, the majority of income is non-agricultural. Only 68.3% of agricultural
households even report farming as their main income source, bringing the national estimate
of rural households primarily dependent on agriculture down to just 39.5%.
This debunks the assumption that rural India is stagnating simply because agriculture
contributes only about 15% of GDP while hosting nearly 69% of the population. On the
contrary, rural India is diversifying. For example, in Kerala, only one-fourth of rural
households are agricultural, and only a third of their income comes from farming. Even in
Rajasthan, where over 78% of rural households are agricultural, nearly 45% of their income
is from non-farming sources.

Rethinking Rural: Definitional and Policy Implications

Part of this disconnect arises from how “rural” is defined. According to the Census, a place is
rural if it is not urban—i.e., lacks 5,000 people, a density above 400/km², or 75% male
workforce in non-agriculture. Thus, many places with minimal farming are still deemed rural.
This leads to a situation where the share of agriculture in GDP is declining, but the rural
classification of areas remains unchanged. It reinforces the reality that rural India is
becoming less agricultural even if not yet fully urban.
Some analysts estimate that agriculture’s share within rural GDP could be as low as 25%, and
that up to 75% of new factories and 70% of new manufacturing jobs created in the last
decade are in rural areas. These transformations demand a strategic reorientation of
institutions like NABARD, which must look beyond agriculture and invest in broader rural
development.

Policy Imperatives: Beyond Agriculture

Rural development can no longer be equated solely with boosting agricultural production. A
more inclusive approach is needed, one that integrates the non-farm economy, supports
economic diversification, and promotes livelihood security across sectors. Infrastructure
(both physical and social), institutional effectiveness, and access to formal financial services
are critical enablers for this transformation.
A significant gap persists in access to institutional credit, with many rural households still
relying on informal sources or self-financing. Despite efforts like priority sector lending,
formal credit outreach is limited, particularly for non-farm enterprises. This calls for a review
and expansion of rural financial services to encompass both agricultural and non-
agricultural households.

Conclusion
The evidence suggests that there is indeed less “krishi” in Bharat now. While the rural
population remains large, their economic engagement is increasingly non-agricultural. The
myth that rural India equals farming is fast eroding. This evolution necessitates a
corresponding shift in rural development policy: one that balances support for agriculture
with investments in the rural non-farm economy, ensures access to credit, builds
infrastructure, and fosters institutional development. Recognising and responding to this
 rural transformation is crucial for designing effective strategies to alleviate poverty and
ensure sustainable development in India.

5. Outcome and Policy Implications

Outcomes and Policy Implications – In-depth Notes

The paper presents a detailed assessment of the long-term transformation of Indian
agriculture, allied sectors, and rural regions over a span of six decades, tracing both progress
and persistent challenges. The evaluation is structured around two central components: the
key outcomes of this transformation, and the corresponding implications for policy.

5.1 Outcomes in Agriculture, Allied Sectors, and Rural India

Over the past sixty years, India’s agricultural and allied sectors have demonstrated a gradual
but clear acceleration in growth across three broad phases. Although these sectors have
grown more slowly than the overall economy, growth rates have increased from Phase 1 to
Phase 3. This reflects a broader shift in the structure and composition of agricultural output.
While forestry has seen a decline in its share due to inconsistent growth, livestock and
fisheries have steadily increased their contribution to total agricultural output, particularly in
the second and third phases. Yet, on aggregate, the share of allied sectors (livestock, forestry,
fisheries) has remained relatively stable, with the gains in livestock compensating for the
decline in forestry.
Cereal production, which dominated in the early decades, particularly during the Green
Revolution (Phases 1 and 2), has lost ground in the most recent phase (Phase 3). Its decline in
share has been matched by the rising prominence of fruits and vegetables, whose share in
agricultural output has more than doubled since the 1950s. This marks a significant structural
transformation towards high-value horticultural crops. Similarly, non-cereal crops such as
oilseeds, sugarcane, and cotton have registered modest gains, with oilseeds rising in Phase 2
and cotton and others gaining in Phase 3.
The evolution of agriculture has been influenced by both supply-side factors—such as state-
driven investments, technological interventions, and policy reforms—and demand-side
factors like population growth, urbanisation, income enhancement, and liberalised trade.
While Phase 1 was mostly driven by supply-side initiatives (notably the Green Revolution),
later phases have been increasingly shaped by demand-side pressures. This dual engine of
transformation has also enabled India to not only attain food self-sufficiency but to emerge
as a net exporter of multiple agricultural commodities including cereals, fish, meat, cotton,
oilcakes, and more.
Irrigation expansion and diversification have mitigated the adverse effects of droughts, as
seen in the relatively smaller dips in output during the drought years of 2002–03 and 2009–
10, compared to much deeper declines in earlier decades.
Despite this, a critical challenge remains: agriculture’s declining share in GDP has not been
matched by a proportionate decline in agricultural employment. As a result, a large share of
rural labour continues to depend on low-productivity agricultural work. However, rural India
is evolving. Household surveys reveal that rural livelihoods are becoming increasingly
diversified, with non-farm and SME enterprises emerging as significant sources of
employment. This structural shift has important implications for poverty reduction, as seen in
China’s success in creating rural non-farm jobs that have rapidly alleviated poverty.
Land fragmentation continues to worsen under demographic pressure. The average
landholding size has shrunk to 1.2 hectares, and about 85% of all holdings are now classified
as marginal or small (less than 2 hectares). Meanwhile, the expansion of cultivable land has
halted, and the overuse of land and water resources is raising serious environmental
concerns.
Agricultural labour productivity, once the engine of growth during Phases 1 and 2, has
slowed significantly in Phase 3. Yield growth has plateaued or declined in many crops,
reflecting a technological stagnation. Cotton is an exception, with productivity surging due to
the adoption of Bt cotton. Nevertheless, India continues to lag behind comparable emerging
economies in terms of crop yields.
Despite considerable capital investment, rural infrastructure remains underdeveloped.
Inadequate roads, storage, electricity, transportation, and communication systems result in
high post-harvest losses, particularly for perishables like fruits and vegetables—wastage
remains as high as 25%. This undermines both income generation and food security.

5.2 Policy Implications

The ongoing changes in rural India necessitate a new policy paradigm. Agriculture is no
longer the dominant activity in rural areas; hence, there is an urgent need to enhance
agricultural productivity while simultaneously promoting rural non-farm employment.
Development of rural manufacturing, particularly food processing and SMEs in peri-urban
areas, must become a policy priority. Institutions like NABARD, tasked with promoting
agriculture and rural development, must take a leading role in this transition.
Evidence from household surveys confirms the trend of rural diversification. Policy support
should both enable non-farm transformation and simultaneously address productivity
constraints in agriculture and allied sectors. Enhancing productivity will require intelligent
public investment in technology, research, extension services, and efficient logistics, along
with resource-use efficiency. Strategic incentives should be designed to maximise returns
from natural and capital resources while reducing waste.
Changing consumption patterns, driven by urbanisation and income growth, are shifting
demand toward dairy, meat, fruits, vegetables, and their processed forms. Liberalisation of
trade has also integrated Indian agriculture with global markets. Meeting this new demand
will require robust supply chains involving collection, grading, storage, packaging, and
transport. While some progress has been made, the paper stresses the need for a
coordinated, integrated strategy. NABARD is well positioned to lead such initiatives.
Policy formulation must also account for persistent malnutrition, a critical challenge in India.
While the Right to Food initiative is commendable in spirit, it lacks clarity on delivery
mechanisms. Policies aimed at poverty and nutrition must be better targeted, avoid market
distortions, and promote environmentally and economically sustainable outcomes. It is vital
that such schemes create pathways into productive employment, particularly given looming
climate and economic stresses.
Infrastructure investment must rise significantly to match the needs of a transforming rural
economy. Although NABARD and the government are investing in roads, irrigation, and other
facilities, the scale of required development is much larger. Land fragmentation demands
innovative responses—such as group farming, producer collectives, and bulk procurement
and sales. Modern retail and supermarket supply chains can help smallholders access
markets, stabilise prices, and reduce logistic inefficiencies.
As the role of agriculture evolves, so too must the institutional framework. NABARD, since
its inception, has provided critical financial and technical support to agriculture, directly and
through refinancing of rural credit institutions. It must now help develop new institutional
arrangements, such as smallholder groups, to strengthen market access and value chain
integration. Partnerships with organisations like the National Dairy Development Board
(NDDB) could expand this model across allied sectors.
Many persistent sectoral issues arise from poor implementation rather than poor policy
design. Programs such as RIDF and Bharat Nirman have often fallen short of targets due to
administrative inefficiencies. Therefore, implementation efficiency and accountability must
become core concerns. NABARD should strengthen its evaluation capacity, possibly through
external research networks and initiatives like the NABARD Chair Professor Program, which
can contribute to evidence-based policy design. While the program is currently being
revamped, its purpose—to create scientific policy evaluation capacity—should remain
central to NABARD’s mission.