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AN AGRICULTURAL ECONOMY

Agricultural performance has always a vital role in the state of the Indian economy and its Gross Domestic Product. Policies have emphasised the importance of agriculture. Many instruments have been tried to enable the common farmer to take advantage of reduced interest rates on agricultural finance. New generation banks have devised innovative supply chain solutions to agricultural finance, through the entire chain of value creation in farm finance. Agro-based industries, dealers, seed finance and fertiliser finance are major components in this value chain. Innovative financial solutions are essential for an effective loan delivery mechanism to support these operations.

Policy measures apart, Indian agriculture is absolutely dependent on timely monsoons. The overall pattern has been positive with the total grain production almost doubling since 1960. India is also the second largest producer of fruits and vegetables in the world.

However, fertilizer and pesticide use have grown by over an order of magnitude during the same period. This chemical intensity has become a source of concern since a significant portion of fertilizer and pesticide applied to the soil runs off into surface water or leaches into groundwater. These present a grave potential for ecological damage, like eutrophication of surface water from nitrogen and phosphorous runoff, or human toxic effects, like 'Blue Baby Syndrome' from nitrates in groundwater, or cancer and organ damage from breathing and ingesting pesticides. Increases in cropped area and irrigation have their own associated impacts, like soil erosion, waterlogging, and the steady buildup of salts.

The "Green Revolution" phenomenon, post 1967 deserves mention here. Between 1947 and 1967, efforts at achieving food self-sufficiency were not entirely successful. Efforts until 1967 largely concentrated on expanding the farming areas. In a perfect case of Malthusian economics, population was growing at a much faster rate than food production. This called for drastic action to increase yield. The action came in the form of the Green Revolution.

There were three basic elements in the method of the Green Revolution:

1) Continued expansion of farming areas: Quantitative expansion of farmlands

2) Double-cropping existing farmland: Instead of one crop season per year, the decision was made to have two crop seasons per year. The one-season-per-year practice was based on the fact that there is only natural monsoon per year. This was correct. So, there had to be two "monsoons" per year. One would be the natural monsoon and the other an artificial 'monsoon.' The artificial monsoon came in the form of huge irrigation facilities. Dams were built to arrest large volumes of natural monsoon water which were earlier being wasted. Simple irrigation techniques were also adopted.

3) Using seeds with improved genetics: The Indian Council for Agricultural Research developed new strains of high yield value (HYV) seeds, mainly wheat and rice but also millet and corn. The most noteworthy HYV seed was the K68 variety for wheat. This was the most scientific aspect of the Green Revolution.


Economic results of the Green Revolution

1) Crop areas under high-yield varieties needed more water, more fertilizer, more pesticides, fungicides and certain other chemicals. This spurred the growth of the local manufacturing sector. Such industrial growth created new jobs and contributed to the country's GDP.

2) The increase in irrigation created need for new dams to harness monsoon water. The water stored was used to create hydro-electric power. This in turn boosted industrial growth, created jobs and improved the quality of life of the people in villages.

3) India paid back all loans it had taken from the World Bank and its affiliates for the purpose of the Green Revolution. This improved India's creditworthiness in the eyes of the lending agencies.



 
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