POLICIES AND REFORMS NEEDED TO TRANSFORM INDIAN

AGRICULTURE IN THE NEXT DECADE

PRIYANI KAWATRA (2022ECO1010)

HIMAANSHI VIR (2022ECO1055)

Sri Guru Tegh Bahadur Khalsa College, University of Delhi

BA Economics Honours

7 APRIL 2025
 Abstract

Indian agriculture plays a vital role in the nation’s economy, yet it faces constant challenges
related to income instability, policy execution, and regional disparities. This study adopts a
secondary data-based approach, using graphical comparison between Minimum Support
Prices (MSP) and market prices to evaluate the effectiveness of current price support
mechanisms, and it highlights inconsistencies in the MSP system's effectiveness across crops
and regions. The findings reveal that these gaps underscore the broader need for systemic
reforms focusing on credit access, strengthening Farmer Producer Organizations (FPOs),
improving market infrastructure, and promoting sustainable practices. As India moves toward
transforming agriculture in the coming decade, one critical question remains: Will future
reforms truly address the grassroots realities faced by small and marginal farmers or remain
limited to policy frameworks?

​
1. Keywords

Indian agriculture, price policy analysis, agricultural transformation, rural livelihoods,

sustainable farming practices, policy implementation, income stability, policy transformation,
transformation in the next decade

2. Objectives of the Study

1.​ To identify and analyze the key challenges facing Indian agriculture in the
contemporary context, including resource limitations, low productivity, and
demographic pressures.
2.​ To examine existing policy gaps in India’s agricultural sector, particularly in terms of
public expenditure priorities, structural reforms, and institutional support.
3.​ To evaluate opportunities for reforms in Indian agriculture, especially concerning
technological advancements, climate-smart practices, and inclusive institutional
development.
4.​ To critically assess current agricultural policies such as PM-KISAN, e-NAM, and the
Agriculture Infrastructure Fund and their impact on farmers' welfare and sectoral
growth.
5.​ To recommend policy and institutional reforms needed over the next decade to ensure
sustainability, equity, and productivity in the agricultural sector.
3. Literature Review:

Indian agriculture faces structural and ecological challenges that constrain its productivity
and sustainability. Selvan et al. (2021) note that "India... has only 2.2% of world geographical
area and supports 15% and 18% of livestock and human population, respectively" (p. 465),
creating pressure on land, water, and soil. Bathla et al. (2022) observe a "limited success in
achieving structural transformation," with over 45% of the workforce contributing just 15%
to national income (p. 253) amid climate shocks and fragmented landholdings.

Despite decades of farm policies, gaps persist. Bathla et al. (2022) highlight a consistent bias
toward subsidies over investment, noting that "the agriculture sector... has always received
relatively lower priority in public expenditure" (p. 252). Policy inefficiencies are worsened by
limited decentralization. Saha et al. (2024) report that farmers felt recent reforms would "take
away the safety net offered by the state" (p. 3), revealing a disconnect between policy design
and on-ground realities.

However, the sector holds potential for transformation. Bathla et al. (2022) advocate for
targeted infrastructure, regional focus, and better support for marginal farmers to drive
investment and efficiency (p. 253). Emphasis on climate-resilient farming, digitization, and
localized planning is essential. Initiatives like PMFBY and e-NAM show promise but face
implementation hurdles. Reddy (2022) notes that "results have been limited due to
insufficient state capacity and fragmented institutional frameworks" (p. 108).

Future reforms must prioritize sustainability, innovation, and inclusivity. Dev and Sengupta
(2021) recommend crop diversification, water-use efficiency, and R&D for long-term security
(p. 14). Integration with allied sectors and participatory governance is vital. As Saha et al.
(2024) argue, reform should ensure "dignity, empowerment, and participatory governance"
(p. 4), with a focus on risk protection, skill development, and ecological resilience.

4. Data
The study uses secondary data collected from the following sources:
Minimum Support Prices (MSP):
MSP data for the years 2019 to 2023 were obtained from the Commission for Agricultural
Costs and Prices (CACP) reports published by the Ministry of Agriculture & Farmers
Welfare, Government of India.
Market Prices:
Average annual market prices for the same crops were sourced from the Agmarknet portal,
which is maintained by the Directorate of Marketing and Inspection (DMI), Ministry of
Agriculture. The data represents average modal prices across major agricultural markets
(mandis) in India.
Crops Covered: Five major crops were selected for the analysis based on their national
importance and coverage under MSP: Wheat, Paddy (Rice) – Common variety, Maize, Tur
(Arhar), and Mustard.
5. Methodology
Data Collection: For each crop and year (2019 to 2023), the officially announced MSP was
recorded from CACP reports. Corresponding average annual market prices were calculated
using available Agmarknet mandi-level price data.
Averaging Market Prices:
Monthly or weekly price data were collected and averaged annually for each crop,
considering major producing states. In the absence of region-specific data, national modal
price averages were used as proxies.
Percentage Deviation Calculation:
Percentage Deviation = ((Market Price −MSP)/MSP)*100.
This metric helped assess how far actual prices received by farmers deviated from the
guaranteed MSP in each year.
1. Minimum Support Prices (MSP):
The MSPs for these crops, as announced by the Government of India, are presented in the
following table:

2. Average Market Prices:

The average market prices for these crops over the same period are as follows:
Graphical comparison between MSP and average market price

Results and Discussion

The graphical comparison between Minimum Support Prices (MSP) and average market
prices from 2019 to 2023 highlights inconsistencies in the MSP system's effectiveness across
crops and regions. While market prices generally hovered around the MSP, crops like paddy,
maize, and tur (arhar) often saw prices fall below it, raising concerns about the actual benefits
to farmers. In contrast, wheat and mustard performed better, particularly in states like Punjab,
Haryana, and Rajasthan, where procurement systems are stronger. Pulses and maize showed
the most significant price deficiencies, likely due to limited procurement and market
inefficiencies. Price gaps narrowed in 2022–2023, possibly due to improved interventions
and global trends. Regional disparities were evident, with states like Bihar and West Bengal
showing greater deviation from MSPs due to weaker procurement infrastructure.
6. Core literature discussion
6.1 Key Structural and Operational Challenges in Indian Agriculture

Overexploitation of Water Resources​

Irrigation is key to raising productivity and reducing agricultural risks. Investments have
expanded irrigated areas, but free or subsidized power in some states has led to overuse,
encouraging water-intensive crops in unsuitable regions. Though half the area is rainfed,
agriculture uses nearly 90% of India’s water. Declining groundwater in 36% of blocks, even
in rich regions, reflects unsustainable extraction, risking water quality and future availability.

Low Efficiency and Price-Led Growth​

Despite impressive output growth, productivity lags behind global peers. Practices like
fertilizer broadcasting and flood irrigation show little improvement. Higher productivity often
comes with rising production costs, requiring price increases to stay profitable. Growing
dependence on government support weakens competitiveness.

Low Income of Farmers​

Agriculture’s low share in national income versus its high employment share causes income
disparity. Per worker income in non-agriculture is 3.75 times higher. Small landholdings,
excess labor, low productivity, and poor markets keep farm incomes low. There's a need to
boost both farming and non-farm income avenues for households.

Viability of Smallholders​
68% of farms are under 1 hectare; 85% are under 2 hectares—too small for sufficient income
under current practices. These farmers need to shift to high-value crops or supplement
earnings from non-agricultural sources. Smallholders also struggle with scale in input and
output markets, needing institutional support.

Technology Generation and Dissemination​

Agricultural R&D faces climate change and IPR issues, reducing tech spillovers. NARS
emphasizes applied over strategic research, limiting breakthroughs. Poor extension services
slow tech adoption. ICAR now handles wider responsibilities, including KVKs, but its
capacity and effectiveness face questions.

Mismatch Between Output and Workforce Structure​

As India developed, agriculture’s GVA share fell faster than its employment share. By
2019–20, it contributed 18.4% to GVA but employed 45.6%. The slow workforce shift
highlights the need for new employment strategies.

Nutrition, Food Safety, and Health​

Despite rising food production, India ranks poorly in hunger and nutrition. Diets are
diversifying, but animal and horticultural supply grows slowly compared to China, affecting
health outcomes. India produces plenty but still faces "hunger amid plenty."

Wasteful Investment​
Irrigation investments exceed ₹30,000 crore/year, yet canal irrigation stagnates. Delays and
disputes stall projects, leading to underutilized potential. Canal irrigation’s share fell from
37.5% in 1984–85 to 23% in 2018–19, shifting pressure to groundwater.

Decline in the Rise of Agricultural Prices

Prices play an important role in raising the incomes of farmers. In the last one and half years,
the price rise for agriculture has declined significantly and affected the incomes of the
farmers adversely. Table 1 provides implicit price deflators for agriculture GVA and total
GVA. In 2015-16 and 2016-17, inflation for agricultural GVA was higher than that of total
GVA.
Changing Agrarian Structure: Shrinking Size of Farms
The Shrinking size of farms is one of the major problems. The average size of farm holdings
declined from 2.3 ha. in 1970-71 to 1.08 ha. (2.9 acres) in 2015-16. The average size of
marginal holdings is only 0.38 ha. (less than one acre) in 2015-16 (Table 2). The viability of
marginal and small farmers is a major challenge for Indian agriculture.

6.2 Policy Gap

Indian agriculture is frequently faced with policy gaps that restrain its productivity,
sustainability, and inclusiveness. Price and input subsidies for fertilizers, power, and
irrigation are the primary focus of agricultural policies, as compared to investment in
infrastructure, technology, and research. This has led to resource inefficiencies and
unsustainable cropping patterns, such as the cultivation of water-using crops in ecologically
unsuitable regions. Nearly 90% of total farm support is used in price insurance and input
subsidies, with extension services, rural roads, and innovation systems hardly getting enough
financing. There is a growing consensus that India needs to shift from price support towards
more inclusive and fair income support systems for small and marginal farmers. Institutional
credit access is limited, especially for tenant farmers and women, who are without land titles
and are kept out of formal financing. Many rely on informal credit at high interest rates,
perpetuating debt cycles. There is a strong disconnect between the agricultural production
and nutrition policy. There has been an increase in food grain production, but high levels of
malnutrition nonetheless remain because limited policy effort has gone towards
diversification of crops into pulses, vegetables, and fruits. There is another problem of gender
inequality. Women account for close to a third of the farming labor force but lack access to
credit, landholdings, and extension services. Existing agriculture policy is still mostly
gender-blind, leaving out women from mainstream programs, such as climate-smart
agriculture. Huge amounts of money have been invested in canal irrigation, but still, the real
utilization continues to be poor, with a large gap between Irrigation Potential Created (IPC)
and Irrigation Potential Utilised (IPU). This inefficiency has resulted in overdependence on
groundwater, which has resulted in severe depletions, especially in the northwestern states.
Farm, water, and energy policies are often addressed in silos, which create contradictions like
free power for irrigation adversely affecting efforts to conserve groundwater. Market reforms
like liberalisation of the APMC system and FPO strengthening are ongoing but are yet to be
achieved. Without corresponding investment in storage, processing, logistics, digital
infrastructure, and direct market access, farmers remain locked in low-return modes. Unless
these policy disconnects are plugged through holistic, inclusive, and innovation-based
interventions, Indian agriculture can be in danger of being locked into a path of inefficiency,
environmental stress, and rural distress.

6.3 Opportunity for reform

There is a need for structural and policy reforms to improve the state of indian agriculture.
Electronic National Agriculture Market e-NAM is a step toward market integration and price
discovery, but research indicates that its impact continues to be uneven across states because
of poor digital infrastructure and inadequate grading and assaying infrastructure and a lack of
awareness among farmers. Contract farming, as highly touted in connecting farmers to
guaranteed markets and improved inputs, has also raised alarm regarding possible power
imbalances, exploitative relationships, and the necessity of effective legal protection against
smallholders. Precision agriculture with AI, drones, and IoT has demonstrated early gains in
enhancing input use efficiency and yields, especially in pilot areas, but its wider use is limited
by high upfront costs, low digital literacy, and lack of extension services specific to
technology adoption.
Diversification of crops is a strategy for sustainability towards not just soil health and best
use of water but also towards realignment of production with nutritional requirements, given
India's persistent levels of malnutrition. This transition is made possible only when there is
assured market access for non-cereal crops and realignment of procurement policy and
subsidy. Post-harvest facilities, and most importantly, cold chains, warehousing, and
processing plants, are poorly developed, and there are widespread regional gaps, limiting
farmers' ability to ascend the value chain or reduce losses from spoilage. As climatic risks
increase with climate change, evidence is in favor of scaling up climate-resilient practices
such as agroforestry, zero-tillage, water harvesting, and drought-tolerant crops, though
hampered by knowledge gaps and front-end expenses.
Measures of financial inclusion such as Kisan Credit Card (KCC) and Pradhan Mantri Fasal
Bima Yojana (PMFBY) institutions have improved access to credits and possible risk
mitigation, but research studies point out that coverage is not uniform, the disbursal of funds
is delayed, and claims settlement ratios are low. The formalization of land leasing and
clarification of tenancy rights are foundational reforms for efficient land use and providing
tenant farmers access to institutional credit while attracting private agribusiness investment.
Priority development schemes like PM-KISAN and PMFBY are put in as significant safety
nets, though their performance is subject to best beneficiary targeting, digitised delivery
mechanism, and stronger holding accountability systems.

6.4 Agricultural Policies in India: Key Areas and Reforms

1.​ Macro Economic Policies and Agriculture​

Agricultural economists often focus narrowly on farm-sector policies, but
macroeconomic measures—fiscal, monetary, trade, tariff, and exchange rate—also
significantly impact agriculture. Though aimed at inflation control and fiscal balance,
these policies influence agriculture through tax revenue and public investment in
infrastructure. Financial liberalisation and trade policy can either support or hinder
agricultural growth. Promoting rural non-farm and labour-intensive sectors is key to
easing demographic pressure on agriculture.
2.​ Price and Marketing Policies​
Despite the importance of prices since the Green Revolution, farmers still face
non-remunerative prices due to distorted market policies. Chatterjee and Kapur (2017)
highlight persistent regional price variations, partly unexplained even with improved
 ICT and roads. MSP policy is limited to certain crops and regions, affecting
diversification. The PM-AASHA scheme has three components (PSS, PDPS, and
PPPS) but faces implementation issues. Telangana’s Rythu Bandhu offers a better
operational structure but excludes tenant farmers, raising equity concerns.
3.​ Marketing Reforms and Freedom for Farmers​
Agricultural markets remain inefficient, dominated by intermediaries and fragmented
supply chains. Farmers often receive minimal returns while consumers pay high
prices. Reforms like e-NAM have been slow due to political inertia. Farmers should
have the freedom to sell to any buyer. Institutional arrangements—FPOs,
cooperatives, contract farming—can help improve prices.
4.​ Need to Shift from Cereal-Biased Policies​
Government policies are cereal-centric, mainly benefiting rice and wheat through
MSP and input subsidies. This distorts cropping patterns and harms soil, water, and
health. Punjab and Haryana dominate due to policy support. A policy shift is needed
towards non-cereal crops to enhance growth, incomes, and environmental
sustainability.
5.​ Beyond Harvest: Warehousing, Storage, Value Chains, Food Processing, Exports​
Agriculture must go beyond farming to include storage, logistics, processing, and
retailing. Overregulation discourages private investment. India lacks mid-level
infrastructure like processing and storage. High post-harvest losses and low
processing rates need to be addressed. Removing policy constraints like stock limits
and export bans can encourage private participation.
6.​ Water and Technology​
Water is a critical input and policy area. While irrigation infrastructure has expanded,
water is often used inefficiently due to subsidies. Reforms must include rational
pricing, farmer participation, and groundwater market equity.
7.​ Institutions and Governance​
Weak institutions hinder effective implementation. Reforms in markets, land, water,
and sustainability governance are crucial. FPOs need financial and capacity support.
Poor input quality and high costs increase crop failures. Vaidyanathan (2010)
emphasizes institutional over capital reforms. Irrigation reforms require user
participation, but only 15 states have enacted PIM laws. Success is noted in
Maharashtra and Gujarat. Grassroots institutional platforms are needed to link farmers
 with technology and infrastructure. Decentralisation and stakeholder-driven policy are
essential, but PRIs remain underutilized.
8.​ Policies on Inclusiveness​
Inclusive growth is vital, especially for small and marginal farmers (86% of
landholders) who face multiple risks and low incomes. Credit access remains skewed,
and regional disparities persist. The eastern region has the potential for a second
Green Revolution. Women, who comprise 75% of the agricultural workforce, lack
property rights and access to services. Group farming by women shows higher
productivity. Youth participation is falling, but modern, mechanised agriculture can
reverse the trend. Agriculture's role in nutrition is growing, and diversification into
nutrient-rich crops and livestock can improve outcomes. Gender-sensitive services
and nutrition-focused farming are essential for inclusive development.
9.​ Technology, Research and Extension​
India’s crop yields and TFP growth lag behind countries like Brazil and China.
Investment in R&D, education, and institutions must rise to 1% of agricultural GDP.
Biotechnology has shown promise (e.g., BT cotton), but GM food crops remain
restricted. Gene editing is a viable alternative. Madhur (2016) finds that farmers lose
two-thirds of their potential income due to poor choices; extension services could
triple incomes. Digital India and emerging technologies offer new productivity
pathways.

6.5 Reforms needed in indian agriculture in the next decade

1.​ Land Related Reforms

Land issues form a major part of strategies regarding agricultural reforms needed for India
today. Here's what needs to change: Consolidation of landholdings: The biggest challenge
many Indian farmers face today is small farm sizes. Most farmers own less than 2 hectares of
land, making it difficult to use modern machinery or earn enough income. Consolidating
smaller plots into larger, more manageable units can improve farm mechanization and
resource management. Land lease laws: Clear and equitable land lease laws are crucial to
facilitate efficient land use and enable farmers to access land for cultivation, even if they
don't own it. We need better land leasing laws. Many farmers who want to lease their land
fear losing it, while those who could rent and farm more land can't find legal ways to do so.
Clear laws protecting both landowners and tenants would help solve this problem. This would
let farmers work on larger pieces of land, use better equipment, and earn more money.
Land record digitization: Accurate and easily accessible land records are essential for
efficient land administration, dispute resolution, and access to credit. Many villages still have
outdated paper records, leading to disputes and making it hard for farmers to get loans.
Digital land records, properly mapped and updated regularly, would solve many of these
problems.
2. Marketing and Selling Reforms
Farmers often don't get fair prices for their crops because they can't reach the right markets.
Every district should have modern markets with storage facilities. Farmers should be able to
store their produce safely and sell when prices are good, rather than being forced to sell
immediately after harvest. Direct selling platforms, where farmers can sell directly to
consumers or retailers, could help them get better prices. Mobile apps connecting farmers to
buyers have shown promising results and should be expanded.
3. Technology and Training
Upcoming agricultural reforms in India need to ensure that our farmers keep up with modern
agricultural tools as Farming is becoming more technical. This could be achieved by regular
training programs in villages about new farming methods, pest control, and crop selection
would help farmers make better decisions. These should be in local languages and use
practical demonstrations. Weather forecasting services through mobile phones can help
farmers plan their activities better. Early warnings about extreme weather can help them
protect their crops.
4. Insurance and Risk Protection
Farming is a risky business, and better protection can help farmers feel more secure:
Crop insurance needs to be simpler and faster. When crops fail, farmers should get
compensation quickly to prepare for the next season. Insurance companies should use
technology like drones and satellite images to assess crop damage faster. Weather-based
insurance that pays farmers when rainfall is too much or too little could provide better
protection against climate risks.
5. Storage and Processing
A lot of farm produce goes to waste because we don't have enough storage facilities. This is
an important reason why agricultural reforms are needed for India. Every major farming area
needs modern storage facilities where farmers can keep their produce safely. Cold storage for
vegetables and fruits is especially important. Small processing units in villages could help
farmers convert their produce into products that last longer and sell for higher prices. For
example, turning tomatoes into puree or mangoes into pickles.

7. Findings:

The study reveals that although agriculture remains the primary livelihood for many Indians,
the sector continues to struggle with low farmer incomes, limited credit access, poor
infrastructure, and outdated practices. Minimum Support Prices (MSPs), intended as a safety
net, often fail to align with market realities and do not effectively reach all farmers. While
initiatives like PM-KISAN and e-NAM show potential, inconsistent implementation hampers
their impact. Limited awareness and financial constraints also hinder the adoption of
sustainable practices and agri-tech. The findings highlight that crop diversification,
sustainability, and rural infrastructure investment are essential for long-term transformation.
Aligning policies with regional needs and empowering small farmers will be crucial for
revitalizing Indian agriculture in the coming decade.

8. Conclusion:

The research highlights that despite being the backbone of the Indian economy, agriculture
remains riddled with systemic inefficiencies and uneven policy implementation. Analyzing
the gap between Minimum Support Prices (MSP) and market prices reveals that while MSP
aims to safeguard farmers’ incomes, it often fails to do so, particularly for crops like tur and
maize and in regions lacking robust procurement infrastructure. This points to the need for
deeper structural reforms beyond price support mechanisms. The study finds that meaningful
transformation in the next decade will require a multidimensional approach—strengthening
institutional credit, scaling up Farmer Producer Organizations (FPOs), promoting crop
diversification, improving market infrastructure, and encouraging sustainable agricultural
practices. For Indian agriculture to become more productive, equitable, and resilient, policy
design and delivery must be localized, inclusive, and focused on empowering small and
marginal farmers, who form the majority of the agricultural workforce. Only then can the
sector contribute meaningfully to national growth while ensuring dignity and stability for
those who depend on it.
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