An economy may be conceptualised as a collection of economic, social, institutional, legal and technological arrangements through which individuals in society seek to increase their material and spiritual well-being. The two elementary functions of an economy are consumption and production. Consumption is considered as the prime pump of an economy. The classical dictum that ‘the consumer is sovereign’ is based on the consumer power embodied in his demand, which is one of the crucial requirements for the existence of any business enterprise or, for that matter, any economic activity, including production.
India’s economy can be thought of as comprising two main sectors, namely, the rural sector and the non-rural sector. The rural sector is, in turn, composed of two main subsectors, that is, the agricultural subsector and the non-agricultural subsector. The agricultural subsector com prises agriculture and allied economic activities, such as animal husbandry and dairying, fi sheries, poultry and forestry. The non-agricultural subsector consists of economic activities relating to small scale village industries, rural craft, business and services. Industry here refers to cottage and village indus tries, khadi, handloom, handicrafts, and so on. Business refers to micro-enterprises, trading of general goods, small shops, petty traders, and so on, whereas services refers to transport, communications, banking, input supply, mar keting of farm and non-farm produce, and so on. The main stakeholders of the rural sector include farmers, agricultural and non- agricultural labourers, artisans, traders, moneylenders and those engaged in providing such services as transport, communications, processing, banking, and educa tion and extension.
The size of the rural sector could be measured in terms of the size of rural population, livestock population, extent of land resources, water resources, forest resources and fi sheries, quantum of production inputs used and the output produced.
Human Population
According to the 2001 population census, India’s rural population was 1028.7 million, which accounted for 72.25 per cent of the country’s total population. Of the total rural population, 127.3 million were cultivators and 106.8 million agricultural workers. The average annual exponential growth rate of population was 1.95 per cent. The quality of human resources is, by and large, poor in terms of literacy, life expectancy, technical knowledge and skills. Consequently, according to the Global Human Development Report (GHDR) 2007, India ranks 128 among countries with medium human de- velopment out of 177 countries of the world. This poses a serious constraint on India’s development.
Livestock Population
India is endowed with livestock resources of high genetic diversity, and ranks fi rst in the world in terms of the population of cattle and buffaloes. According to the livestock census 2002–03, the country had 185 million cattle, 98 million buffaloes, 61.5 million sheep, 124 million goats,14 million pigs and 489 million poultry birds (Government of India [GoI] 2005a: 318). However, like land, the livestock has relatively low productivity in terms of average yield of milk, meat and wool per head. Besides, livestock density is relatively high vis-à-vis the carrying capacity of grazing lands and fodder resources of the country. The livestock population exerts high pressure on the country’s limited land and water resources, leading to their degradation in many ecologically fragile regions such as hilly, arid and semiarid areas.
Land Resources
Land is one of the natural resources that affects the level and pace of development in gen- eral and agricultural development in particular. India has the total geographical area of about 329 mha, of which about 188 mha is degraded, which is 57 per cent of the country’s total geographical area. Of the 188 mha of degraded land, about 149 mha was affected by water erosion, 13.5 mha by wind erosion, about 14 mha by chemical deterioration and 11.6 mha by waterlogging (Sehgal and Abrol 1994).
In 2003–04, India had the total gross irrigated area of about 75 mha and net irrigated area of about 55 mha, and it ranked fi rst in the world in terms of irrigated area. The net irrigated area accounted for about 39 per cent of the net area sown in the country and contributed about 55 per cent to the country’s total agricultural output. The cropping intensity was 150 per cent. The average productivity of land in India in terms of crop yields is low when compared to that in some of the developed countries of the world. For example, the average yield of paddy in India in 2004–05 was 2,900 kg per ha as against 9,800 kg in Egypt and 7,800 kg in the United States of America (USA), and the average wheat yield in India was 2,700 kg per ha as compared to 7,700 kg in the United Kingdom (UK) and 4,250 kg in China.
Water Resources
Water is a fi nite but renewable natural resource and, like other natural resources, it is an integral part of the environment. It is essential for the survival of all living beings on this planet and also for the socio-economic development of households, communities and nations all over the world. It is also necessary to maintain and enhance biodiversity and quality of environment. India, as a whole, is reasonably well endowed with fresh water resources. It receives nearly 3,800 billion cubic metres (bcm) of fresh water annually through rainfall and snowfall. Most of the rainfall is concentrated in 100 to 120 days during the period of June through September. Besides, there are also wide variations in the annual rainfall from region to region: 100 mm in parts of western Rajasthan to as high as 11,000 mm in Cherrapunji in the eastern part of Meghalaya. Thus, the dis- tribution and availability of water is not uniform over space. Similarly, there are wide year-to-year fl uctuations in rainfall in the country.
It is estimated that out of the total quantity of rainwater received annually, 700 bcm seeps into the ground and 500 bcm is lost due to evaporation and transpiration. Of the total quantum of seepage, nearly 432 bcm is replenishable groundwater through recharging of underground aquifers, of which 396 bcm can be annually extracted economically. The surface run-off to the ocean is estimated at 1,900 bcm, which is approximately half of the total annual rainfall received. This leaves nearly 690 bcm as the fresh utilisable surface water, which together with the extractable groundwater of nearly 396 bcm makes the utilisable water resources of the order of 1,086 bcm. So far, of the total utilisable water resources, nearly 600 bcm has been put to use in the country (GoI 1999: 14–15).
It is estimated that India accounts for about 4 per cent of the world’s fresh water resources. This, when seen against India’s share of 2.50 per cent in the total land area of
the world, seems more than adequate. However, when we consider the fact that India accounts for about 16 per cent of the world’s human population and 15 per cent of the world’s animal population, the picture changes from optimistic to pessimistic. The picture is bleak when we consider the declining trend in per capita availability of fresh water.
The per capita renewable fresh water availability in the country at present is estimated to be only 1,086 cubic metres (cm) per annum. It has been declining over time and will continue to do so in future also. While this is the picture at the aggregate national level, there are signifi cant regional and temporal variations in water availability caused by spatial and year-to-year fl uctuations in the annual rainfall that India receives. This causes the problems of regional and seasonal scarcity and surpluses. There are regions where the average per capita fresh water availability is far below 500 cm per annum. Below this level of availability, water becomes a constraint to life. Droughts and fl oods have been recurrent phenomena in many parts of the country for ages. They further aggravate the regional and seasonal scarcity of water. Droughts and fl oods result in enormous economic loss to the nation and sufferings to the millions of affected people.
Forest Resources
Forests are natural renewable resources and have always been an integral part of India’s economy and culture since time immemorial. They are held in high esteem by people.
The ancient religious, political and literary writings are a testimony to the fact that people were considered as an integral part of nature and not superior to it. Forests occupy an important place in India’s economy in terms of their contribution to the GDP, em- ployment and livelihoods of poor people. In 2002–03, forests contributed Rs 27,013 crore at current prices to India’s GDP, which was 1.2 per cent of the total GDP. The contribution of forests to India’s GDP has varied from one to 1.5 per cent over the nine year period from 1993–94 to 2002–03 (Central Statistical Organisation [CSO] 2004).
The recorded total forest area of India as per legal documents was 7,68,463 sq km in 2001, of which 4,23,311 sq kmwas under reserved forests, 2,17,245 sq km under protected forests and 1,27,881 sq kmwas unclassifi ed. The forest area accounted for 23.38 per cent of the total geographical area of the country in 2001 (Forest Survey of India [FSI] 2001). It is estimated that out of 76 mha of area recorded as forest, only 64 mha sustains the actual forest cover and, out of this, only 35 mha has adequate cover, which accounts for only about 11 per cent of the total geographical area of the country at present. The National Forest Policy (NFP) (GoI 1988) stipulates that the country as a whole should aim at keeping about one-third of the geographical area under forest cover. The forests are being degraded by the ever increasing biotic pressure and, hence, they need to be rehabili- tated by afforestation not only for environmental considerations but also for meeting the local demand for fi rewood, small timber, fodder, and for defence and industry.
In India, forests meet nearly 40 per cent of the energy needs of the country of which more than 80 per cent is utilised in the rural areas, and they also meet about 30 per cent of fodder needs of the cattle population. Forest products also play a very important role in rural and tribal economy as many of the Non-Wood Forest Products (NWFP) provide
sustenance to the rural poor. For landless families and marginal farmers, forest related activities often represent the primary source of income. Besides the direct tangible economic benefi ts mentioned above, forests confer a number of benefi ts which are not directly visible to the human eye and, yet, they have a great infl uence in affecting the quality of life. Some of those benefi ts include the amelioration of climate, conservation of soil and soil moisture, and fl ood control.
Fishery Resources
India is now the third largest producer of fi sh and the second largest producer of inland fi sh in the world. India has a marine coastline of 12,700 km, maritime area of 4.52 lakh sq km and an Exclusive Economic Zone (EEZ) of 200 lakh sq km (Singh 1994: 10). The fi sheries sector occupies an important place in the socio-economic development of India. It contributed nearly 1 per cent of India’s total GDP and 5.3 per cent of the GDP from agriculture in 2004–05. It is a source of cheap and nutritious food and is an important foreign exchange earner. In 2006–07, the value of fi sh and fi sh products exported from India was Rs 7,019 crore (GoI 2008).2 Besides, it is considered as a major source of livelihood for 11 million people in the country, engaged fully or partially, or in subsidiary activities pertaining to the sector. It is estimated that the fi sheries sector alone can provide 1 million jobs in the next fi ve years.
Fish production in the country has registered tremendous growth over the last two decades or so, ranging from 5.5 per cent to 5.8 per cent per annum, which is much higher than that for the agricultural sector as a whole. The total fi sh production in India was only 7.52 lakh tonnes in 1950–51, which increased to about 69 lakh tonnes in 2006–07.
Fish production can be increased signifi cantly if judicious development, conservation and harvesting of marine and inland fi shery resources of the country by way of adopting suitable scientifi c technologies and conservational measures were adopted.
Use of Inputs and Outputs
The major inputs used in agriculture consist of seeds, organic manure, chemical fertilisers, plant protection chemicals, irrigation water, human labour, animal and mechanical power including electricity and livestock feed, and credit. Table 2.1 presents estimates of the value of selected major inputs used in India’s agriculture, and output of agriculture and livestock. In terms of physical quantities, the total fertiliser consumption in terms of nitrogen, phosphorus and potash (NPK) nutrients in India was merely 2.92 lakh tonnes in 1960–61. It increased to 5.52 million tonnes in 1980–81, to about 14 million tonnes in 1995–96 and to about 22 million tonnes in 2006–07. The average per ha consumption of NPK nutrients increased from a mere 1.90 kg in 1960–61 to 75 kg in 1995–96 and to 113 kg in 2006–07. The quantity of certifi ed/quality seeds distributed increased from about 25 lakh quintals in 1980–81 to about 155 lakh quintals in 2006–07. The use of pesticides (technical grade) in India was only 8,620 tonnes in 1960–61. It increased to 75,000 tonnes in 1990–91 but came down to 37,950 tonnes in 2006–07 (GoI 2008).3 The number of tractors in use in
agriculture increased from 10.63 lakh in 1991 to 15.25 lakh in 2001. The fl ow of institu- tional credit to agriculture in the country was Rs 34,274 crore in 1997–98, which increased to Rs 2,03,296 crore in 2006–07. It was expected to increase to Rs 2,40,000 crore by the end of March 2008. Besides, farmers now have access to credit through 582.50 lakh Kisan Credit Cards (KCC) issued to them through a vast rural banking network in the country.
Table 2.2 presents estimates of production of food grain, milk and fi sh for selected years in India from 1950–51 to 2006–07. As shown in the table, the total production of food grains increased from 51 million tonnes in 1950–51 to 212 million tonnes in 2006–07, milk production increased from 17 million tonnes to 100 million tonnes in 2006–07 and fi sh production from 7.52 lakh tonnes to 69.00 lakh tonnes in 2006–07. In 2007–08, the total production of food grain in the country is estimated to be about 219 million metric tonnes—an all time record—and milk production is expected to be 102 million metric tonnes (GoI 2008).4 India now is self-suffi cient in food grains and milk production. The per capita availability of milk in the country has increased from 176 gms/day in 1990–91 to 245 gms/day in 2006–07. The total value of output from agriculture and livestock increased from Rs 5,26,568 crore in 1999–2000 to Rs 5,71,615 crore in 2004–05.
The level of use of energy is an important determinant of rural devel opment. The rural sector is starved of energy. For example, in 2001–02, consumption of electricity
Table 2.1 Value of Major Agricultural Inputs and Output in India at 1999–2005 Prices (Rs Crore)
S. No. Item 1999–2000 2002–03 2003–04 2004–05
Value of selected inputs
1.1 Chemical fertilisers 20,846 18,378 18,210 18,520
1.2 Diesel oil 7,436 8,750 9,246 9,404
1.3 Organic manure 6,322 6,913 7,061 7,182
1.4 Seeds 10,210 8,856 9,062 9,217
1.5 Livestock feed 57,610 62,537 63,735 64,222
2.0 Value of output 5,26,658 5,20,193 5,67,412 5,71,615
2.1 Agriculture 3,95,981 3,73,216 4,17,911 4,17,189
2.2 Livestock 1,30,677 1,46,977 1,49,501 1,54,426
Source: CSO (2006: xxxiv).
Table 2.2 Production of Food Grains, Milk and Fish in India
Year Food Grains
(Million tonnes) Milk
(Million tonnes) Fish
(Lakh tonnes)
1950–51 50.82 17.00 7.52
1960–61 82.02 20.00 11.60
1970–71 108.42 20.79 17.56
1980–81 129.59 31.60 24.42
1990–91 176.39 53.99 38.36
1999–2000 213.19 78.3 52.00
2004–05 198.36 92.50 63.00
2005–06 208.60 97.1 65.70
2006–07 211.78 100.00 69.00
Sources: GoI (2004a, 2007a)5, NABARD (2007).
for agricultural purposes in India was 81,673 million kilowatt hour (mkwh), which was only 25.33 per cent of the total electricity consumption in the country. This was not adequate to meet even half the potential demand in the agricultural sector. It will be a challenging task to meet the growing demand for energy from households, industry, trans port, agriculture and business. The pattern of demand for energy is also changing over time. Analysis of total commercial energy consumption shows that there is an increasing trend in the consumption of petroleum products, natural gas and electricity.
Measures will have to be initiated for reducing the energy intensity in different sectors through changes in technology and processes. Interfuel and intrafuel substitution will have to be optimised. The main emphasis will have to be on maximising the use of renewable sources of energy, with affordable cost to low income groups in rural and urban areas. Major stress should be laid on effi ciency, conservation and demand management to bring down the energy elasticity of output.