India : Supporting the Transformation of the Indian Agriculture System

Agriculture, natural resources and rural development / Agricultural policy, institutional and capacity development

India's population and most of its poor are largely in rural areas,a where the MPI is 0.155 with headcount ratio 32.75% and intensity 47.38%, which is significantly higher than the national and urban area figures.b Manual and casual labor (51.18%) and cultivation (30.1%) are the major sources of rural household income.c Agriculture provides most of this employment (accounting for 54.6% of the country's work force), with a high proportion of rural women engaged in agriculture (37% of women vs. 63% of men).

Although declining steadily for the past two decades, the share in total GVA at current prices (2021-22) of the agriculture and allied sectors stands at 18.6%. The sector is showing opportunities for growth despite the decline in its share of the total GVA. India is rapidly emerging as a net exporter of agricultural products. In 2020-21, exports of agriculture and allied products grew by 18% from the previous year, reaching an all-time high of $50.2 billion. It remained relatively strong during the pandemic, achieving growth rate of 3.3% in 2021-22 while overall economy shrank by 4.8%.

Growth in the agriculture and allied sectors remain challenged by various factors, such as fragmented land holdings, inadequate extension services, low productivity, inefficient water and input use, inadequate infrastructure, and a lack of access to finance and fair market price for produce. Infrastructure deficit in rural areas also hinders access to services and economic opportunities. About 139.3 million ha, or 42% of the country's total land area, are considered net sown area. is irrigated, while the remaining areas (broadly spread across arid, semi-arid and sub humid regions of the country) are highly dependent on rainfall for both crop production and allied activities.e The country receives 4,000 billion cubic meters of rainfall annually, however, it still faces a water crisis because of erratic and uneven distribution of rainfall, which is further exacerbated by climate change, as well as unscientific agricultural practices, non-judicious use of groundwater, poor soil and moisture conservation practices. The increasing occurrence of droughts disincentivizes farmers from making necessary investments in asset creation and use of technology, which limits their productivity and income. The immediate and future impacts of climate change and variability (e.g., rising temperatures, droughts and more variable and intense monsoon rains and cyclones) present additional challenges across the various agroecological zones that threaten the country's food and nutritional security. The Global Climate Risk Index lists India as the seventh most vulnerable country in the world in 2019.

The TA is consistent with ADB's Strategy 2030 Operational Priority 3: Tackling Climate Change, Building Climate and Disaster Resilience, and Enhancing Environmental Sustainability; and Operational Priority 5: Promoting Rural Development and Food security. The TA is aligned with India Country Partnership Strategy and will support the strategic pillar 2 (Catalyze Climate-Resilient Green Growth), and strategic pillar 3 (Deepen Social and Economic Inclusiveness). TA is not included in in the India country operations business plan 2021-23.