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With a population now approaching 1.2 billion, India is the world's largest democracy and its second most populous nation, after China. Real Gross Domestic Product (GDP) grew 5.7 percent annually during the 1990s and accelerated to 7.8 percent annually during the 2000s, making India the second fastest growing major economy in the world during each period (after China).  India's economy, as measured by GDP, is Asia's third largest, after Japan and China.  Although economic growth has led to a significant reduction in poverty since the 1980s, India still accounts for the largest share of the total world population classified as poor and food insecure. About 21.8 percent of the population remains poor using India's national poverty line, and about 41.6 percent are poor using the common international standard of $1.25 per day (in Purchasing Power Parity terms).  Per capita gross national income of about $1,220 in 2009 continues to rank India among the world's low-income countries. 

India's annual population growth rate declined from 2.2 percent in the 1980s and 2.0 percent in the 1990s to 1.6 percent during 2001-2010, and is projected at 1.2 percent during 2011-2020. Despite the decline, India is expected to overtake China as the world's most populous country in the coming decades. Although about 70 percent of India's population remains rural and about 58 percent of the population relies primarily on agriculture for income and employment, the urban population is growing at more than 2.0 percent annually. Middle-class households, accounting for about 160 million consumers, are the fastest growing segment of the population and are having an increasing impact on the growth and diversification of food demand. With about 47 percent of household expenditures, on average, devoted to food, consumer demand is highly responsive to both rising incomes and changing relative prices.

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Agricultural Sector

India has a large and diverse agricultural sector, accounting, on average, for about 16 percent of GDP and 10 percent of export earnings. Its arable land area of 159.7 million hectares (394.6 million acres) is the second largest in the world (after the United States), and its gross irrigated crop area of 82.6 million hectares (215.6 million acres) is the largest in the world. India is among the top three global producers of a broad range of crops, including wheat, rice, pulses (chickpeas, pigeon peas, lentils, dry peas, etc.), cotton, peanuts, fruits, and vegetables. Worldwide, India has the largest herds of buffalo and cattle, is the largest producer of milk, and has one of the largest and fastest growing poultry industries.

Table 1: India: Area, yield, and production of major crops

Area
Yield
Production
  2007/08 2008/09 2009/10* 2007/08 2008/09 2009/10* 2007/08
2008/09
2009/10*
Cereals
100.4
100.7
98.0
2.15
2.18
2.08
216.0
219.9
203.6
Rice
43.9
45.5
41.9
2.20
2.18
2.13
96.7
99.2
89.1
Wheat
28.0
27.8
28.5
2.80
2.91
2.83
78.6
80.7
80.7
Coarse grains
28.5
27.4
27.6
1.43
1.46
1.22
40.8
40.0
33.8
Pulses
23.6
22.1
23.4
0.62
0.66
0.63
14.8
14.6
14.6
Oilseeds
26.7
27.6
26.1
1.12
1.01
0.95
29.8
27.7
24.9
Cotton
9.4
9.4
10.3
0.47
0.40
0.39
4.4
3.8
4.1
Sugarcane
5.1
4.4
4.2
68.81
64.49
66.13
348.2
285.0
277.8
* =Preliminary.
Source: Government of India, Ministry of Finance, Economic Survey.
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India achieved strong growth in food grain production during the 1970s and 1980s because of its extensive agricultural resource base, the introduction of high-yielding wheat and rice varieties, and supportive government policies. This enabled India to achieve its key policy goal of self-reliance in cereals during 1990-2010. However, gains in farm output, including cereals, slowed beginning in the early 1990s, even as growth in the rest of the economy strengthened. Yields of most major crops in India remain low by world standards, as the development and use of high-yielding varieties, irrigation, and modern inputs has been slow to spread beyond wheat and rice production.

Table 2. Growth rates in production of major crops and animal products in India 1/

1980-1990 1990-2000 2000-2010
Real GDP, agriculture                  
3.5%
3.2%
2.4%
Crop production              
Rice
4.1%
1.9%
0.0%
Wheat
4.3%
3.1%
1.0%
Coarse grain
0.7%
0.1%
0.7%
Pulses
2.5%
-0.3%
1.5%
Oilseeds
6.0%
1.0%
2.8%
Cotton
3.2%
0.0%
9.9%
Sugarcane
4.4%
2.2%
-0.1%
Potatoes
5.2%
4.4%
3.8%
Onions
2.6%
3.8%
11.0%
Crop yield
Rice
3.5%
1.3%
0.8%
Wheat
3.6%
2.0%
0.4%
Coarse grain
2.3%
2.1%
2.4%
Pulses
2.2%
0.7%
0.8%
Oilseeds
2.8%
1.4%
1.3%
Cotton
3.8%
-1.4%
8.2%
Sugarcane
1.8%
0.5%
-0.5%
Potatoes
2.2%
1.7%
0.0%
Onions
0.4%
-0.2%
4.5%
Animal product production 2/
Milk
5.3%
4.2%
3.7%
Eggs
7.6%
5.3%
6.0%
Fish
4.8%
4.0%
3.4%
Broiler meat 2/
NA
12.7%
9.5%
Beef 3/
2.4%
0.6%
0.4%
Mutton & lamb
3.0%
1.2%
0.5%
1/ Annual growth rates between 3-years averages centered on years indicated.
2/ Last column is 2000-2008 growth rate.
3/ USDA data.

Sources: Computed using data from Government of India, Ministry of Agriculture, 2010; FAO, FAOSTAT; and USDA, PS&D Online database.

Despite gains in irrigated area, Indian agriculture continues to be constrained by its dependence on variable monsoon rainfall for a large share of cropland. Also, major farm policies-including price supports, input subsidies, and public sector research-that traditionally focused on the wheat and rice sectors have been slow to adjust to meet the needs of India's increasingly diverse domestic market or of competing in global markets. Alongside the robust gains in output and investment that have occurred in the overall economy since the early 1990s, public and private investment in agriculture has shown comparatively little growth.

The combination of rising incomes and food demand, sluggish agricultural production and investment, and more liberal import policies is leading to stronger growth in India's agricultural imports. While cereal imports have declined, India is now among the world's leading importers of edible oils and pulses and is a rapidly expanding market for an array fruit, vegetable, and processed food products. Despite rising imports, India remains a substantial net agricultural exporter. About half of its agricultural exports consist of traditional items-including tea, coffee, spices, fruits and nuts, and tobacco-but nontraditional items-including rice, meat, and soybean meal-now account for a growing share of farm exports. See the Trade section of this topic for more information on India's agricultural imports and exports.

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Macroeconomy and Reforms

From independence in 1947 until the late 1980s, Indian economic policy was characterized by extensive central planning and regulation of economic activity, including quantitative controls on imports and exports that made India one of the most closed economies in the world. Under this system, the economy registered relatively slow 3-percent annual growth, accumulated large fiscal deficits, and operated with a chronically weak balance of payments stemming from uncompetitive domestic industries. In 1991-93, India introduced major reforms to industrial, trade, and exchange-rate policy that led to India's emergence as one of the fastest growing economies.

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Since 1990, India's overall economic growth has accelerated, rising from an annual average of 5.2 percent during 1991-95 to 8.4 percent during 2006-10. Economic performance has generally been consistent with two key policy priorities-employment generation and price stability. Since 2008, however, inflation-including food price inflation-has emerged as a threat to sustained growth and consumer welfare. Following a prolonged period of general stability in real food prices extending back to the 1970s, real wholesale food prices have averaged 3.8 percent higher, and retail prices about 2 percent higher, during 2006-10. Higher food prices have been associated with some transmission of higher global prices into the domestic market, as well as sluggish growth in domestic farm output. While India's overall economic growth has been accelerating, farm sector growth has slowed from 2.8 percent annually in the 1990s to just 2.2 percent annually during 2009-10.

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Chart data   

India's balance of payments-the balance of trade and capital flows with the rest of the world-were a chronic weakness of the Indian economy prior to the reforms of the early 1990s, but have now become robust. Domestic regulatory reforms have helped make Indian industries more competitive, while the removal of most quantitative trade restrictions and reduced tariffs have made the economy significantly more open to trade. The depreciation of the Indian rupee after it was made fully convertible on the current (or trade) account in 1991 also boosted the competitiveness of Indian exports. With less restricted trade, less domestic regulation, and rupee depreciation, Indian goods and services industries became increasingly competitive in global markets. Two-way trade has expanded more than eleven-fold, rising from just $46 billion in 1990/91 to about $465 billion in 2009/10. India's foreign exchange reserves have shown even more growth, climbing from $5.8 billion in 1990/91 to about $279 billion in 2009/10, affording policymakers with substantial flexibility in macroeconomic and trade policy management.

Reflecting more market-oriented domestic and trade policies, the inflow of foreign direct investment to India has also increased. Inflows from international investors, including nonresident Indians, climbed from negligible levels in the early 1990s to $4.0 billion in 2000/01 and $37.2 billion in 2009/10.

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Key Statistics

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Additional information on India's agricultural markets and policies is available from:

Last updated: Wednesday, May 30, 2012

For more information contact: Maurice Landes

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