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Impact of Economic Reforms on Agriculture

The serious foreign-exchange crisis in 1990 led to a number of well-publicized economic reforms in the early 1990s dealing with trade, industrial licensing, and privatization. The reforms had an impact on the agricultural sector through the central government's effort to withdraw the fertilizer subsidy and place greater emphasis on agricultural exports. The cut in the fertilizer subsidy was a result of the government's commitment to reduce New Delhi's fiscal deficit by removing grants and subsidies from the budget. The government action led to a reduction in the use of chemical fertilizers and protests by farmers and opposition political parties. The government was forced to continue the subsidies but at a somewhat lower level.

New import and export policies aim at enhancing export capabilities of the agricultural sector by increasing productivity and promoting modernization and competitiveness. The measures to facilitate export growth include allowing the import of capital for the agricultural sector, reducing the list of agricultural products that cannot be exported, and removing the minimum export price from a number of products. Agricultural exports increased by 30 percent in FY 1991 and 14 percent in FY 1992 in terms of rupee value, but declined by 8 percent from FY 1990 to FY 1992 in United States dollar terms because of the devaluation of the rupee in 1991.

In the mid-1990s, it was expected that agriculture would continue to be the most important sector of the economy for the rest of the decade in terms of the proportion of GDP. However, even when it is not the sector providing the largest share of GDP, the importance of agriculture is not likely to diminish because of its critical role in providing food, wage goods, employment, and raw materials to industries. Despite their preoccupation with industrial development, India's planners and policy makers have had to acknowledge the critical role of agriculture in the early 1990s by changing basic policy. The gains in agricultural production should not lead to complacency, however. Continuing increases in productivity, developing allied activities in rural areas, and building infrastructure in rural areas are essential if India is to continue to be self-reliant in food and agricultural products and provide a modest surplus for exports.

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There is abundant literature on Indian agriculture, and much of it is highly detailed. A source that brings together a wide variety of useful information is Subhash C. Kashyap's National Policy Studies , which provides a good overview of agricultural policy. A critical review of agricultural development and policy is provided by B.M. Bhatia's Indian Agriculture: A Policy Perspective . N.S.S. Narayana, K.S. Parikh, and T.N. Srinivasan's Agriculture, Growth, and Redistribution of Income is a more rigorous analysis of policy issues that also contains a large amount of descriptive information. The Indian Ministry of Information and Broadcasting's India: A Reference Annual is a valuable source. The Ministry of Finance's annual Economic Survey gives a detailed account of developments in agriculture. The Economic and Political Weekly is India's premier source of news and analysis regarding all issues connected with agriculture. (For further information and complete citations, see Bibliography.)

Data as of September 1995