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Twelfth Five Year Plan
(2012–2017)
Economic Sectors
Volume II
Copyright © Planning Commission (Government of India) 2013
All rights reserved. No part of this book may be reproduced or utilised in any form or by any means, electronic or mechanical,
including photocopying, recording or by any information storage or retrieval system, without permission in writing from the Planning
Commission, Government of India.
First published in 2013 by
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Library of Congress Cataloging-in-Publication Data
India. Planning Commission
Twelfth fi ve year plan (2012/2017)/Planning Commission, Government of India.
Volumes cm
1. India—Economic Policy—1991–92. Finance, Public—India. I. Title.
HC435.3.I39 338.954009’0512—dc23 2013 2013009870
ISBN: 978-81-321-1368-3 (PB)
The SAGE Team: Rudra Narayan, Archita Mandal, Rajib Chatterjee and Dally Verghese
Twelfth Five Year Plan
(2012–2017)
Economic Sectors
Volume II
Planning Commission
Government of India
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Contents
List of Figures vii
List of Tables viii
List of Boxes xii
List of Acronyms xiv
List of Annexures xxv
12. Agriculture 1
13. Industry 51
14. Energy 130
15. Transport 195
16. Communication 258
17. Rural Development 286
18. Urban Development 318
19. Other Priority Sectors 362
Figures
12.1 Growth and Fluctuations in GDP Agriculture and Allied 2
12.2 All India Average Real Daily Wage Rate at 2011–12 Prices (` Per Day) 9
13.1 Contribution of Manufacturing to GDP Very Low in India 52
13.2 India and Global Manufacturing States 52
13.3 New Approach to Industrial Policy 55
13.4 Focus on Sectors as well as Cross-cutting Issues 59
13.5 Strategy for Land Issues 81
13.6 Description of Land Acquisition Process 83
13.7 Two Connected ‘Tracks’ for Implementation and Systems’ Improvement 101
13.8 Capability Map 102
14.1 Exploration Blocks awarded in NELP Rounds 172
14.2 Renewable Power Capacities, Top Five Countries, 2010 183
14.3 Cost of Renewable Energy Technologies Per MW 185
15.1 Existing and Proposed Thermal Power Plants on National Waterways 232
15.2 National Waterway-2 234
15.3 Kaladan Multimodal Transit Transport Project 234
16.1 Telephone Subscribers Growth during 2007–12 259
16.2 Distribution of Urban and Rural Subscribers 260
16.3 Number of Telephone and Broadband Connections 260
16.4 Mobile Tariff Trends V/s Growth in Mobile Subscribers in India (1999–2012) 261
17.1 Access to Household Amenities in Rural India (2001 to 2011) 303
17.2 Households by Type of Latrine Facility in Rural India in 2001 304
17.3 Households by Type of Latrine Facility in Rural India in 2011 304
17.4 PURA Transaction Structure 312
17.5 Institutional Structure for PURA 314
18.1 Sources of Increase in Urban Population 319
18.2 Key Constitutes of India’s Urban Future 324
Tables
12.1 Growth Rate of Agricultural and Allied Sectors 1
12.2 Some Weather Details 3
12.3 Averages and Standard Deviations of Annual Growth Rates of GSDP from Agriculture and
Allied Sectors
4
12.4 Growth of Output, Inputs and Productivity 6
12.5 Gross Capital Formation (GCF) in Agriculture, Forestry and Fishing (2004–05 prices) 8
12.6 Average Annual Growth Rates in Yields Per Hectare 10
12.7 Public Sector Capital Formation and Subsidies to Agriculture (Centre and States) 13
12.8 Real Prices of Agricultural Produce 17
12.9 Demand and Supply of Food Commodities during the Twelfth Plan 18
12.10 Expenditure on Agricultural Research and Education 30
12.11 Outlays and Expenditure of MoA and Its Three Departments (DAC, DAHDF and DARE) 47
12.12 Gross Budgetary Support (Department-wise) 50
12.13 Comparison of States Outlay and Expenditure for Eleventh and Twelfth Plan 50
13.1 Rate of Growth of GDP at Factor Cost at 2004–05 Prices (Per cent) 53
13.2 GCF in Industry 53
13.3 Employment by Sector 54
13.4 Processes that Enable Learning 62
13.5 Manufacturing Ecosystem Infrastructure 62
13.6 Registered MSMEs—Manufacturing 85
13.7 Definition of MSME 85
13.8 Manufacturing GDP by Sector and Employment Projections 96
13.9 Key Variables and Assumptions 105
13.10 Ministry/Department-wise Twelfth Five Year Plan (2012–17) Outlays Industry Sector 129
14.1 Energy Intensity for Total Primary Energy* 130
14.2 Energy Intensity 131
14.3 Household Access (%) 132
14.4 Trends in Supply of Primary Commercial Energy 133
14.5 Share of Each Fuel in Total Energy Production and Consumption 134
14.6 Installed Capacity Addition during the Eleventh Plan (in MW) 136
14.7 Mode-wise/Sector-wise Break-up of Generation 137
14.8 All-India Cumulative Generating Capacity (as on 31 March 2012) (in MW) 137
14.9 Planned Manufacturing Capacity MW Per Annum 139
14.10 Cumulative Achievement of Transmission Lines at the End of the Eleventh Plan 140
14.11 Aggregate Technical and Commercial Los ses of State Power Utilities (within State) 141
14.12 Viability of Major State Utilities Not Improving (Excluding Delhi and Odisha) 142
14.13 Details of Year-wise Progress Achieved on Restructured APDRP (as on 31 March 2012) 142
Tables ix
14.14 Status on RGGVY Progress during the Tenth and the Eleventh Plan 143
14.15 Outlay/Expenditure: Centre, States and UTs (` Crore) 146
14.16 Sector-wise and Mode-wise Capacity Addition (Provisional) during the Twelfth Plan (MW) 146
14.17 Changing Structure of Fuel for Electricity 147
14.18 Status of Hydro Electric Potential Development 148
14.19 Fuel Requirement during 2016–17 149
14.20 Transmission Line at the End of the Twelfth Plan Period 150
14.21 Inter-Regional Flow of Power at the End of Twelfth Plan Period 151
14.22 Details of Coal and Lignite Production 160
14.23 Inventory of Coal and Lignite Reserves as on 1 April 2012 160
14.24 Accretion of Coal Reserves 161
14.25 Coal Washing Capacity by the end of Eleventh Plan Period 162
14.26 Financial Performance of the Coal Sector 165
14.27 Coal Demand during the Twelfth Plan 165
14.28 Coal Production 166
14.29 Share of Underground Production in Total Production 167
14.30 Price Comparison of Domestic Coal with other Countries 167
14.31 Consumption of Petroleum Products 171
14.32 Physical Performance of Petroleum and Natural Gas Sector 172
14.33 Share of Overseas Hydrocarbon Production 173
14.34 Under-Recoveries on Petroleum Products 174
14.35 Demand of Petroleum Products 176
14.36 Projection of Crude Oil Production in the Twelfth Plan 176
14.37 Natural Gas Demand for Twelfth Five Year Plan 176
14.38 Projection of Natural gas production in Twelfth Plan (BCM) 177
14.39 Breakup of the Exploration Programme for the Twelfth Plan 177
14.40 Likely Under-Recoveries on Petroleum* Products 178
14.41 Projected Refining Capacity during Twelfth Plan (MMTPA) 178
14.42 R&D Expenditure by Major Oil and Gas Companies 180
14.43 Eleventh Plan Power Capacity Addition through Grid Interactive Renewable Power 185
14.44 Cost of Power for Various Renewable Energy Sources 186
14.45 Power Capacity Addition through Off Grid Renewable Power 186
14.46 Eleventh Plan Financial Allocations and Expenditure: MNRE 187
14.47 Indicative Twelfth Five Year Plan Outlay for the Various Ministries/Departments in the
Energy Sector
190
15.1 CO2 Emissions from Various Transport Modes 196
15.2 Overview of Financial Position of the Indian Railways 199
15.3 Investment in Railways during Eleventh Plan 200
15.4 Performance of Freight Business during Eleventh Five Year Plan 201
15.5 Performance of Passenger Business during Eleventh Five Year Plan 201
15.6 Losses in Passenger Services 201
15.7 Capacity Creation during Eleventh Plan 202
15.8 Throw Forward of Infrastructure Projects as on 1 April 2012 202
15.9 Rolling Stock Performance during Eleventh Plan 203
15.10 Productivity Performance 203
15.11 Benchmarking Indian Railways with Chinese and Russian Railways 204
15.12 Traffic Projections 206
x Tables
15.13 Passenger Traffic Projections for Twelfth Plan 207
15.14 Projection of Originating PKM for Twelfth Plan 207
15.15 Creation of Fixed Assets during the Twelfth Plan 209
15.16 Rolling Stock Requirement during the Twelfth Plan 210
15.17 Passenger Service Yields in some Major Economies 213
15.18 Freight Yields in some Major Economies 213
15.19 Physical Achievements under NHDP during the Eleventh Five Year Plan 215
15.20 Progress of NHDP up to 30 April 2012 216
15.21 Physical Progress of Non-NHDP NHs during Eleventh Five Year Plan 217
15.22 State Roads Progress during the Eleventh Plan 218
15.23 Physical Progress–PMGSY (as on 31 March 2012) 219
15.24 Financial Progress (as on 31st March, 2012) 219
15.25 Habitation Coverage–Bharat Nirman (as on 31 March 2012) 220
15.26 Cumulative Physical Progress under Bharat Nirman (up to March 2012) 220
15.27 Targets for the Twelfth Plan 223
15.28 Projected Road Freight and Passenger Traffic 225
15.29 Financial Performance of the Shipping Sector in the Eleventh Plan 227
15.30 Estimated Requirements of Additional Vessels and Investment 228
15.31 Eleventh Plan Projection and Achievements of Traffic and Capacity by Major Ports 237
15.32 Commodity Wise Capacity Creation by Major Ports during Eleventh Plan 237
15.33 Traffic Handled at Major and Non-Major Ports during Eleventh Plan 238
15.34 Trend of the Productivity Parameters during Eleventh Plan 238
15.35 Year-wise Awards during Eleventh Plan under PPP 238
15.37 Commodity wise Capacity by the end of Twelfth Plan 239
15.36 Major Ports wise Traffic/Capacity Projections by End of Twelfth Plan 239
15.38 Commodity Wise Traffic by the End of Twelfth Plan (2016–17) 240
15.39 Growth Projections for the Twelfth Five Year Plan: Passenger and Cargo Traffic Forecasts 243
15.40 Investment Requirements during the Twelfth Plan 243
15.41 Comparison of ATF Prices in India with Competing Hubs 245
15.42 Flights/Week 247
15.43 Ministry/Department–wise Twelfth Five Year Plan (2012–17) Outlays for Transport Sectors 251
16.1 Targets and Achievements 267
16.2 Key Targets for the Twelfth Plan for the Electronics and IT-ITeS Industry 268
17.1 Overview of MGNREGA Performance, 2006–12 287
17.2 (A) Average Daily Wage Rates for Agricultural Labour: Male 289
17.2 (B) Seasonality of MGNREGA Employment Provided during 2010–11 290
17.3 Additional List of Permissible Works Under MGNREGA 291
17.4 Wage Payment Cycle under MGNREGA 294
17.5 Accountability Matrix for Delays in Wage Payments under MGNREGA 295
17.6 Phasing of the National Rural Livelihoods Mission 299
17.7 Investments in Rural Drinking Water, 1951–2012 300
17.8 Access to Household Amenities in Worst Performing States in Terms of Toilet Facilities in
Rural India, 2011 (Percentage of Rural Households)
303
17.9 Percentage of Households with No Latrine Facilities in Rural India, 2011 304
17.10 Total Sanitation Campaign, Physical Progress, Eleventh Plan 305
17.11 Total Sanitation Campaign, Financial Progress, Eleventh Plan 305
17.12 Major Increase in Unit Cost Support for IHHLs during the Twelfth Plan 305
17.13 IAY-Financial Performance during Eleventh Plan (2007–08 to 2011–12) 307
Tables xi
17.14 Physical Performance of IAY During Eleventh Plan (2007–08 to 2011–12) 307
17.15 Convergence of IAY with other Rural Infrastructure 308
17.16 Scheme for Purchase of Home Site and Incentive for Additional Target under IAY 308
17.17 Infrastructure and Amenities to be Provided, Operated and Maintained under PURA
Project by Private Developer in the Twelfth Plan
313
17.18 NSAP Progress in the Eleventh Plan 314
17.19 Physical and Financial Progress of NSAP Components, Eleventh Plan 315
18.1 Physical and Financial Progress under JNNURM (March 2012) 323
18.2 Estimates of Urban Transport Investments by HPEC 344
18.3 Requirement of CAPEX 344
18.4 Investments under JNNURM 349
18.5 Investment Requirement Estimates by HPEC 350
18.6 Requirement of CAPEX as per Working Group 350
19.1 Construction Sector-Macro Aggregates 362
19.2 Flow of Bank Credit to Construction Sector 371
19.3 Flow of FDI in Construction Activities (including Roads and Highways) 371
19.4 Alternative growth scenarios of tourism 376
19.5 Performance of Handloom Sector during the Eleventh Plan Period 397
19.6 Performance of Handicrafts Sector during the Eleventh Plan Period 402
Boxes
13.1 Examples of Weak Domestic Standards Leading to Influx of Sub-standard Products in the
Country
61
13.2 Dwindling Indian Capital Goods Industry 68
13.3 Strategies for Highest Overall Impact 98
13.4 Key Recommendations for Manufacturing 99
13.5 Key Recommendations 122
13.6 Key Recommendations 125
14.1 Achievements in Power Sector during the Eleventh Plan 136
14.2 Recommendations of Task Force on Open Access 145
14.3 Perform, Achieve and Trade Mechanism 157
15.1 Containerisation In Railways 207
15.2 Business Models for Passenger and Rail Freight Logistics: The JR East and Deutsche Bahn
Ways
208
15.3 Dedicated Freight Corridors (DFCs) – A Game Change for the Indian Rail Sector 209
15.4 New Generation Locomotives 210
15.5 Public-Private Partnership (PPP) in Railways 212
15.6 Key Message from Reports on Railways: The Need for Organisational Reforms 214
15.7 Financing of National Highway Development Programme (NHDP) 216
15.8 Engineering, Procurement, Construction (EPC) Contract 217
15.9 Innovations by some State Governments 223
15.10 Introduction of Electronic Toll Collection (ETC) 225
15.11 Coal Transport to Farakka through Power Station – A Break through for IWT 233
15.12 Development of Airports During the Eleventh Plan 242
15.13 GAGAN—The Indian Satellite Based Augmentation System (SBAS) for Air Navigation
Services (ANS)
244
16.1 Spectrum Trading 263
16.2 Twelfth Plan Targets for the Telecommunication Sector 264
16.3 Key Achievements (as on 31 March 2012) 267
17.1 New Guidelines Strengthen Demand-driven Character of MGNREGA 293
17.2 Limitations of SGSY 298
18.1 Vision of Our Cities 320
18.2 State of Service Delivery—Key Indicators 321
18.3 Transforming Public Transport in Cities 324
18.4 Harmonising the Role of Parastatals with Elected Municipal Bodies 326
18.5 Strategic Densification—International Examples 330
18.6 Recommendation of Isher Ahluwalia Committee on Financial Devolution to ULBs 332
18.7 PPP in Urban Sector under JNNURM 333
Boxes xiii
18.8 FSI and Coverage Areas Can be Combined to Increase Densities 338
18.9 Metro—A Transformational Approach to Public Transport 341
18.10 Reforms and Desired Outcomes Related to Water Supply and Sanitation 348
18.11 Reforms under JNNURM Comprehensive List of Reforms in Urban Sector 355
18.12 Major Schemes for Urban Renewal at a Glance 358
19.1 Financing Instruments for Affordable Housing 374
19.2 Popular Choice by Design! 399
19.3 Twelfth Plan Interventions for Handlooms 401
19.4 Twelfth Plan Schemes for Handicrafts 404
19.5 Upturn in India’s Sporting Performance 410
Acronyms
2G/3G/4G Second Generation/Third
Generation/Fourth Generation
AAI Airport Authority of India
AAY Antodaya Anna Yojana
ACA Additional Central Assistance
ACC Artisan Credit Card
ACS Average Cost of Supply
ADB Asian Development Bank
ADC Access Deficit Charges
ADDA Asansol Durgapur Development
Authority
AES Acute Encephalitis Syndrome
AI Artificial Insemination
AIBP Accelerated Agriculture Benefit
Programme
AIC Agricultural Insurance Corporation
AIR All India Radio
AIU Association of Indian Universities
AL Arable Land
AML Anti-Money Laundering
AMM Abandoned mine methane
AMPC Automated Mail Processing Centre
ANM Auxiliary Nurse Midwife
AnSI Anthropological Survey of India
AOC Agreement of Collaboration
APL Above Poverty Line
APMC Agriculture Produce Marketing
Committee
APMSS Andhara Pradesh Mahila Samakhya
APO Assistant Programme Officer
ARPU Average Revenue Per User
ARR Average Revenue Realised
ARYA Attracting & Retaining Youth in
Agriculture
ASHA Accredited Social Health Activist
ASI Archaeological Survey of India
ASPIRE Agriculture Science Pursuit for
Inspired Research Excellence
ASSOCHAM Associated Chamber of Commerce
ATC Air Traffic Control
ATF Automatic Transmission Fluid
ATFC Agriculture Technology Forecast
Centre
ATls Administrative Training Institutes
ATMAs Agriculture Technology
Management Agency
ATS Apprentice Training Scheme
B.P.Ed. Bachelor of Physical Education
BAF Batch Annealing Furnace
BC Business Correspondent
BCM Billion cubic metres
BDOs Block Development Officers
BE Budgetary Estimate
BEE Bureau of Energy Efficiency
BEML Bharat Earth Movers Ltd.
BFDAs Brackish water Farmers
Development Agencies
BFO Business Facilitation Officer
BHEL Bharat Heavy Electricals Ltd.
BIPP Biotechnology Industry Partnership
Programme
BIRAP Biotechnology Industry Research
Assistance Programme
BIS Bureau of Indian Standards
BLY Bachat Lamp Yojana
BMPTC Building Material and Technology
Promotion Council
BORL–Bina Bharat Oman Refineries Limited
BOT Build-Operate-Transfer
BPCL Bharat Petroleum Corporation
Limited
BPL Below Poverty Line
BPO Branch Post Office/ Business
Process Outsourcing
BPR Business Process Re-engineering
BRCs Block Resource Centres
Acronyms xv
BRO Border Roads Organisation
BRT Bus Rapid Transit
BSUP Basic Services to the Urban Poor
BTKM Billion Tonne Kilometre
BU Billion Unit
BWA Broadband Wireless Access
C&AG Comptroller & Auditor General
CA Conservation Agriculture
CACP Commission for Agriculture Costs
& Prices
CAG Comptroller and Auditor General
CAGR Compound Annual Growth Rate
Cal/Kg Calorie/ kilogramme
capex Capital expenditure
CBDT Central Board of Direct Taxation
CBM Coal bed Methane
CBOs Community Based Organisations
CBRM Capacity Building and Reform
Management
CCDA Coal Conservation and
Development Act
CCL Central Coalfields Limited
CCRF Code of Conduct for Responsible
Fisheries
C-DAP Comprehensive District Agriculture
Plants
C-DOT Centre for Development of
Telematics
CDP City Development Plans
CEA Central Electricity Authority
CEF Citizen Engagement Framework
CEIG Chief Electrical Inspectorate to
Govt. of India
CERC Central Electricity Regulatory
Commission
CERT Computer Emergency Response
Team
CERT–In Indian Computer Emergency
Response Team
CETP Common Affluent Treatment Plan
CeWiT Centre for Excellence in Wireless
Technology
CFI Construction Federation of India
CFSI Children Film Society of India
CFT Cluster Facilitation Team/
Combating of Financing of
Terrorism
CGD City Gas Distribution
CGP Cluster of Gram Panchayats
CGRF Consumer Grievance Redressal
Forum
CH4. CO Methane, Carbon Monoxide
CHPs Coal Handling Plants
CIDC Construction Industry Development
Council
CII Confederation of Indian Industry
CLCSS Credit Linked Capital Subsidy
Scheme
CM Confederation of Indian Industries
CMA Counter Magnet Area
CMM Coal mine methane
CMPDIL Central Mine Planning and Design
Institute
CMSA Community Managed Sustainable
Agriculture
CNG Compressed natural gas
CPCB Central Pollution Control Board
CPCL Chennai Petroleum Corporation
Limited
CPE Customer Premises Equipment
CPIAL or
CPIIW
Consumer Price Index for
Agricultural Labour/Consumer
Price Index for Industrial Workers
CPIS Coconut Palm Insurance Scheme
CPMG Chief Post Master General
CPPs Captive power plants
CPWD Central Public Works Department
CREDAI Confederation of Real Estate
Developers’ Associations of India
CRPs Community Resource Persons
CRRI Central Road Research Institute
CRRI-In Indian Computer Emergency
Response Team
CSC Cluster Stimulation Cell/Common
Services Centre
CSIR Council for Scientific and Industrial
Research
CSO Central Statistical Office/Civil
Society Organisation
CSR Corporate Social Responsibility
CSS Centrally Sponsored Scheme
CST Central Sales Tax/Concentrating
Solar Technology
CTL Coal to liquid
CUF Capacity Utilisation Factor
CVO Chief Vigilance Officer
xvi Acronyms
C-WET Centre for Wind Energy Technology
CWG Common Wealth Games
DAC Department of Agriculture &
Cooperation
DAE Department of Atomic Energy
DAHDF Department of Animal Husbandry,
Dairying & Fisheries
DALY Disability Adjusted Life Years
DAP Diammonium Phosphate
DARE Department of Agricultural
Research & Education
DAS Digital Addressable System
DAVP Directorate of Advertisement and
Visual Publicity
DBT Department of Bio-technology
DCI Dredging Corporation of India
DD Doordarshan
DeitY Department of Electronics and
Information Technology
DEMU/
MEMU
Diesel-Electric Multiple Unit/
Mainline Electric Multiple Unit
DFC Dedicated Freight Corridor
DFP Directorate of Field Publicity
DGCA Directorate General of Civil Aviation
DGH Director General of Hydrocarbons
DGPS Differential Global Positioning
System
DIPP Department of Industrial Policy and
Promotion
DIPP Department of Industrial Policy and
Promotion
DoP Department of Posts
DoT Department of Telecommunication
DP Development Plan
DPC District Programme Coordinator
DPRs Detailed Project Reports
DPSU Defence Public Sector Undertaking
DRDA District Rural Development Agency
DRDO Defence Research & Development
Organisation
DRI Differential Rate of Interest
DRM Digital Radio Mondiale
DSM Demand side management
DSS Decision Support System
DST Department of Science &
Technology
DTC Direct Tax Code
DTH Direct to Home
DWDM Dense Wavelength Division
Multiplexing
E&P
companies
Exploration and Production
Companies
EBP
Programme
Ethanol Blended Petrol Programme
ECB External Commercial Borrowing
ECBC Energy Conservation Building Code
ECO Local Cable Operators
EDGE Enhanced Data for Global Evolution
EDMC Electronic Design and
Manufacturing Cluster
EDS Electronics Delivery of Services
EEZ Exclusive Economic Zone
EFC Expenditure Finance Committee
eFMS Electronic Fund Management
System
EIAs End Implementing Agencies
EIL Engineers India Limited
EM Entrepreneur’s Memorandum
EMC Electronics Manufacturing Cluster
EMMC Electronic Media Monitoring
Centre
EMSC Environmental Measures and
Subsidence Control scheme
EMU Electric Multiple Unit
EOL Essar Oil Ltd
EPC Engineering Procurement and
Construction
ERP Enterprise resource planning
ESDM Electronics System Design &
Manufacturing
ETP Effluent Treatment Plant
EWS Economically Weaker Sections
EXIM Export Import
FAB Fabrication Unit
FAO Food and Agriculture Organisation
FAR Floor Area Ratio
FDI Foreign Direct investment
FFDAs Fish Farmers Development
Agencies
FICCl Federation of Indian Chamber of
Commerce & Industry
FM Frequency Modulation
FMD Foot & Mouth Disease
FO/LSHS Furnace oil/Low Sulphur Heavy
Stock
FOLD Forum of Load Dispatchers
Acronyms xvii
FoR Forum of Regulators
FPOs Farmer Producer Organisation
FPS Fair Price Shop
FRBM Fiscal Responsibility and Budget
Management Rules
FSA Fuel Supply Agreement
FSI Floor Space Index
FSRU Floating Storage & Regasification
units
FTA Free Trade Agreement
FTII Films and Television Institute of
India
FYP Five Year Plan
GAIL Gas Authority of India Ltd
GBI support Generation based incentive support
GBS Gross Budgetary Support
GCF Gross Capital Formation
GCV Gross calorific value
GDP Gross Domestic Product
GIPCL Gujarat Industries Power Company
Ltd
GIS Geographical Information System
GKMS Gramin Krishi Mausam Seva
GMO Genetically Modified Organisms
GOI Government of India
GoI-UNDP Government of India-United
Nations Development Programme
GPR Ground Penetrating Radar
GPS Global Positioning System
GPs Gram Panchayats
GQ Golden Quadrilateral
GRIHA Green Rating for Integrated Habitat
Assessment
GSDP Gross State Domestic Product
GSI Geological Survey of India
GSM Global System for Mobile
Communication
GST Goods and Services Tax
GT Gross Tonne
GTO/IGBT Gate Turn Off (Thyrister)/lnsulated
Gate Bipolar Transistor
GW GigaWatt
HD High Definition
HDTV High Definition Television
HEC Heavy Engineering Corporation
HEIs Higher Educational Institutions
HEMM Heavy earth moving machinery
HITS Headend In The Sky
HMCP Hardware Manufacturing Cluster
Park
HMEL Hindustan Mittal Energy Limited
HMT Hindustan Machine Tools
HPCL Hindustan Petroleum Corporation
Limited
HPEC High Powered Expert Committee
HPOs Head Post Offices
HPT High Power Transmitter
HRD Human Resource Development
HRSS High Resolution Seismic Survey
HS Herorrhagic Septicemia
HSIL High Surge Impedance Loading
HTLS High Temp. Low Sag
HTREL High-tech Reconnaissance &
Exploration Licences
HUDCO Housing and Urban Development
Corporation
HUMS Indian Institutes of Urban
Management
I&B Information & Broadcasting
IAAS Integrated Agro-Meteorological
Advisory Service
IAASTD International Assessment of
Agricultural Knowledge, Science &
Technology for Development
IAP Integrated Action Plan
IAY Indira Awaas Yojana
IBF Indian Broadcasting Foundation
IBIN India Backbone Implementation
Network
IBM Indian Bureau of Mines
IBP Indian Broadcasting Foundation
IBS In Building Solutions
IC Integrated Circuit
ICAR Indian Council of Agricultural
Research
ICD Inland Container Depot
ICF Integrated Coach Factory
ICMR Indian Council of Medical Research
ICRIS Integrated Coal Resource
Information System
ICT Information and Communication
Technology
ICTE Information, Communication
Technology and Electronics
IDA International Development
Association
xviii Acronyms
IEBR Internal and Extra Budgetary
Resources
IEC Information Education and
Communication
IFFI International Film Festival of India
IGNDPS Indira Gandhi National Disability
Pension Scheme
IGNOAPS Indira Gandhi National Old Age
Pension Scheme
IGNWPS Indira Gandhi National Widow
Pension Scheme
IHHL Individual Household Latrine
IHSDP Integrated Housing & Slum
Development Programme
IIDS Integrated Infrastructural
Development Scheme
IIFCL India Infrastructure Finance
Company Limited
IIHT Indian Institute of Handloom
Technology
IIIT Indian Institute of Information
Technology
IIPA Indian Institute of Public
Administration
IISc Indian Institute of Science
IIT Indian Institute of Technology
IIUMs Indian Institutes of Urban
Managements
ILCS Integrated Low Cost Sanitation
Scheme
ILRIS Integrated Lignite Resource
Information System
IMD Indian Meteorological Department
IMEI International Mobile Equipment
Identity
IMIS Integrated Management
Information System
IMPCC Inter Media Publicity Coordination
Committee
IMT International Mobile
Telecommunications
INDIPEX India International Philatelic
Exhibition
IOCL Indian Oil Corporation Limited
IP Intellectual Property/Internet
Protocol
IPM Integrated Pest Management
IPR Intellectual Property Rights
IPTV Internet Protocol Television
IPV 4/IPV 6 Internet Protocol version 4/Internet
Protocol version 6
IRDA Insurance Regulatory Development
Authority
IRDP Integrated Rural Development
Programme
ISO Indian Standard Organisation
ISPRL Indian Strategic Petroleum Reserve
Ltd
ISRO Indian Space Research Organisation
ISSHUP Interest Subsidy Scheme for
Housing the Urban Poor
IT Information Technology
ITA-1 Information Technology
Agreement-1
ITI Indian Telephone Industries
ITIs Industrial Training Institutes
IT-ITeS Information Technology-and
Information Technology enabled
Service
IVRS Interactive Voice Response System
IWAI Inland Waterways Authority of
India
IWT Inland Waterways Transport
JE Japanese Encephalitis
JLGs Joint Liability Groups
JMP Joint Monitoring Programme
JNNURM Jawaharlal Nehru National Urban
Renewal Mission
JNNUSM Jawaharlal Nehru National Solar
Mission
JRDA Jharia Rehabilitation and
Development Authority
JV Joint Venture
JWGs Joint Working Groups
KCC Kisan Credit Card
Kgoe/US$ Kilograms of Oil Equivalent/US
Dollar
KVIC Khadi & Village Industries
Corporation
KVK Krishi Vigayan Kendra
KVs Kendriya Vidyalayas
kW Kilo Watt
Kwh Kilowatt hour
L. km Line kilometre
Acronyms xix
LAD Least Assured Depth
LARR Land Acquisition and Rehabilitation
and Resettlement Bill, 2011
LBFL Local Bodies Finance List
LCO Local Cable Operators
LDBs Livestock Development Boards
LDC Land Development Corporation
LDO Light Diesel Oil
LEED Leadership in Energy &
Environmental Design
LHB Linke Holfmann Busch
LIGs Low Income Group
LNCPE Laxmibai National College of
Physical Education
LNG Liquefied natural gas
LPG Liquefied Petroleum Gas
LPT Low Power Transmitter
LR Land Readjustment
LTCCS Long Term Cooperative Credit
Structure
LTE Long Term Evolution
LWE Left Wing Extremism
M&A Mergers and Acquisitions
M.P.Ed. Master of Physical Education
MA Moving Average
MANAGE National Institute for Agriculture
Extension and Management
MAT Minimum Alternative Tax
Mbps Megabits per second
MCCL Mahanadi Coalfields Limited
MCS Monitoring, Control and
Surveillance
MDI Management Devolution Index
MDRR Mines and Minerals (Development
and Regulation) Bill, 2011
MEA Ministry of External Affairs
MES Minimum Economic Size
MFIs Microfinance Institutions
MGNREGA Mahatma Gandhi National Rural
Employment Guarantee Act
MGNREGS Mahatma Gandhi National Rural
Employment Guarantee Scheme
MGR Merry-Go-Round
MHz/GHz Mega Hertz/Giga Hertz
MIS Management Information System
MITI Ministry of International Trade and
Industry, Japan
MMBTU Million Metric British Thermal Unit
MM-III Mini Mission III
MMP Mission Mode Project
MMSCMD Million Metric Standard Cubic
Metre Per Day
MMT Million Metric Tonnes
MMTOE Million tones oil equivalent
MMTPA Million Metric Tonne Per Annum
MNAIS Modified National Agricultural
Insurance Scheme
MNRE Ministry of New and Renewable
Energy
MoA Ministry of Agriculture
MoC Ministry of Coal
MoHUPA Ministry of Housing and Urban
Poverty Alleviation
MoP Ministry of Power
MoP&NG Ministry of Petroleum and Natural
Gas
MoRD Ministry of Rural Development
MoRTH Ministry of Roads Transport &
Highways
MoSPI Ministry of Statistics & Programme
Implementation
MOT Multi-organisation Team/ Muriate
of Potash
MoU Memorandum of Understanding
MoUD Ministry of Urban development
MPCs Metropolitan Planning Committees
MRP Maximum Retail Price
MRPL Mangalore Refinery and
Petrochemicals Limited
MS Motor spirit
MSE-CDP Cluster Development Programme of
the M/o MSME
MSEFC Micro & Small Enterprise
Facilitation Councils
MSIPS Modified Special Incentive
Programme Scheme
MSME Micro, Small & Medium Enterprise
MSMED Act MSME Development Act, 2006
MSP Minimum Support Price
MT Million Tonnes
MTA Mid-term Appraisal
MTEE Market Transformation for Energy
Efficiency
MTOE Million tons of oil equivalent
MW Medium Wave/Megawatt
MWe Megawatt electrical
xx Acronyms
MWp. Megawatt Peak
NABARD National Bank for Agriculture and
Rural Development
NABFINS NABARD Financial Services
NAC Non Agricultural use of Land
NADA National Anti-Doping Agency
NAIS National Agricultural Insurance
Scheme
NAPCC National Action Plan on Climate
Change
NARS National Agriculture Research System
NATRIP National Automotive Testing and
R&D Infrastructure Project
NAVA National Audio-Visual Archives
NBA News Broadcasters Association/
Nirmal Bharat Abhiyan
NBECI National Bio Energy Corporation of
India
NBFCs Non-Banking Finance Companies
NBS Nutrient Based Subsidy
NCC National Cadet Corps
NCP National Competition Policy
NCR National Capital Region
NCTE National Council of Teacher
Education
NDDB National Dairy Development Boards
NDP National Dairy Plant
NDTL National Dope Test Laboratory
NE North East
NEF National Electricity Fund
NEGP National e-Governance Plan
NERUDP North Eastern Region Urban
Development Programme
NELP New Exploration Licensing Policy
NER North Eastern Region
NFAP National Frequency Allocation Plan
NFBS National Family Benefit Scheme
NFDB National Fisheries Development
Board
NFDC National Film Development
Corporation
NFSA National Food Security Act
NFSB National Food Security Bill
NFSM National Food Security Mission
NGN Next Generation Network
NGO Non-Governmental Organisation
NGP Nirmal Gram Puraskar
NGRCA National Gender Resources Centre
in Agriculture
NGRI National Geophysical Research
Institute
NHAI National Highway Authority of India
NHB National Horticulture Board/
National Housing Bank
NHDP National Highway Development
Programme
NHM National Horticulture Mission
NIA Net irrigated area
NICRA National Initiative on Climate
Resilient Agriculture
NIMZ National Investment and
Manufacturing Zone
NIPER National Institute of Pharmaceutical
Education & Research
NIS National Institute of Sports
NISC National Institute of Sports
Coaching
NISSM National Institute of Sports Science
and Sports Medicine
NIUA National Institute of Urban Affairs
NKN National Knowledge Network
NLCPR Non-Lapsable Central Pool of
Resources
NLP Natural Language Processing
NMCC National Manufacturing
Competitiveness Council
NMCP National Manufacturing
Competitiveness Programme
NMEEE National Mission for Enhanced
Energy Efficiency
NMSA National Mission for Sustainable
Agriculture
NMSH National Mission on Sustainable
Habitat
NMT Non-Motorised Transport
NOCL Nagarjuna Oil Corporation Limited
NOFN National Optical Fibre Network
NPBB National Programme for Bovine
Breeding
NPBBD National Programme for Bovine
Breeding and Dairy
NPCBB National Project for Cattle & Buffalo
Breeding
NPFAI National Playfields Association of
India
Acronyms xxi
NPFP National Physical Fitness
Programme
NPK Nitrogen Phosphorous & Potash
NPM Non-Pesticidal Management of
Pests
NPMSH&F National Project on Management of
Soil Health & Fertility
NPS New Pension Scheme/ New Pricing
Scheme
NPYAD National Programme for Youth and
Adolescent Development
NRAA National Rained Area Authority
NRDWP National Rural Drinking Water
Programme
NREGS National Rural Employment
Guarantee Scheme
NRL Numaligarh Refinery Limited
NRLM National Rural Livelihood Mission
NSAP National Social Assistance
Programme
NSD National School of Drama
NSDC National Skill Development
Corporation
NSDF National Skill Development Fund
NSF National Sports Federation
NSIC National Small Industry Corporation
NSNIS Netaji Subhas National Institute of
Sports
NSS National Sample Survey/National
Service Scheme
NSSO National Sample Survey Office/
National Sample Survey
Organisation
NTDPC National Transport Development
Policy Committee
NTKM Net Tonne Kilometre
NTP National Telecom Policy
NTPC National Thermal Power
Corporation
NTS National Institute of Sports
NUHHP National Urban Housing and
Habitat Policy
NULM National Urban Livelihoods
Mission
NURTA National Urban Rail Transit
Authority
NUSP National Urban Sanitation Policy
NVG National Voluntary Guidelines on
Soc., Env., & Eco Responsibility for
Business
NVs Navodaya Vidyalayas
NYC National Youth Corps
NYKs Nehru Yuva Kendras
O&M Operation & Maintenance
O+OEG Oil and oil equivalent gas
OBCs Other Backward Classes
ODF Open Defecation Free
OFB Ordinance Factory Board
OIL Oil India Limited
OMCs Oil Marketing Companies
OMS Output per man shift
OMT Operate-Maintain-Transfer
ONGC Oil and Natural Gas Corporation
Limited
OVL ONGC Videsh Ltd
oya Year on Year Average
PACS Primary Agriculture Cooperative
Society
PAPU Pan African Postal Union
PAT Perform, Achieve & Trade
PATM Perform, Achieve and Trade
Mechanism
PCB Pollution Control Board
PCU Policy Coherence Unit
PDAs Pension Distribution Agencies
PEARL Peer Experience and Reflective
Learning
PHPDT Peak Hour Peak Direction Traffic
PIB Public Information Bureau
PIC Public Information Campaign
PKM Passenger Kilometre
PLB Public Land Banks
PLI Postal Life Insurance
PMEGP Pradhan Mantri Employment
Guarantee Programme
PMGSY Pradhan Mantri Grameen Sadak
Yojna
PNG Piped natural gas
PNGRB Petroleum and Natural Gas
Regulatory Board
POL Petroleum, Oil and Lubricants
POLIF Post Office Life Insurance Fund
POs Post Offices
POSOCO Power System Operation
Corporation Limited
xxii Acronyms
PPAC Petroleum Planning and Analysis
Cell
PPAs Power purchase agreement
PPP Public–Private Partnership
PPPP People Private–Public Partnership
PPPIAD Public–Private Partnership
for Integrated Agricultural
Development
PPVFRA Protection of Plant Variety &
Farmers Rights Authority
PRGF Partial Risk Guarantee Fund
PRIs Panchayati Raj Institutions
Provi. Provisional
PSB Public Service Broadcaster
PSCs Production Sharing Contracts
PSUs Public Sector Undertakings
PTA Preferential Trade Agreement
PURA Provision of Urban Amenities in
Rural Areas
PWD Public Works Department
PWSS Piped Water Supply System
PYD Programme for Youth Development
PYKKA Panchayati Yuva Khel aur Krida
Abhiyan
R&D Research and Development
R&M AND LE Renovation & Modernisation and
Life Extension
R&R Rehabilitation and Resettlement
R/P ratios Reserves-to-Production ratio
R–APDRP Restructured Accelerated Power
Development and Reforms
Programme
RAY Rajiv Awas Yojana
RBCs Rural Building Centres
RCUES Regional Centres of Urban and
Environment Studies
RDF Rural Development Flexi-fund
RDSO Research Design and Standards
Organisation
RE bonds Renewable Energy bonds
RE Revised Expenditure
READY Rural Entrepreneurship &
Awareness Development Yojana
REC Renewable Energy Certificate
RFD Result Framework Document
RFID Radio Frequency Identification
RGGVY Rajiv Gandhi Grameen
Vidyutikaran Yojana
RGNIYD Rajiv Gandhi National Institute of
Youth Development
RHF Rural Housing Fund
RIA Regulatory Impact Analysis
RIDF Rural Infrastructure Development
Fund
RIL Reliance Industries Limited
RIL-KG Reliance Industries Limited-Krishna
Godavari Basin
RIS River Information System
RITES Rail India Techno Economic
Services
RKVY Rashtriya Krishi Vikas Yojana
RMSA Rashtriya Madhyamik Shiksha
Abhiyan
ROB/RUB Road Over Bridge/ Road Under
Bridge
RoW Right of Way
RPLI Rural Postal Life Insurance
RPO Renewable Purchase Obligation
RPOLIF Rural Post Office Life Insurance
Fund
RRTS Regional Rapid Transit System
RTE Right to Education
RUDSETIs Rural Development and Self-
Employment Training Institutes
S&DD Song and Drama Division
S&L Standards and Labelling
SAD Special Additional Duty
SAGES Goaf edge supports
SAMETIs State Agriculture Management
Extension & Training Institutions
SARDP-NE Special Accelerated Road
Development Programme for the
North East
SAT Sports Authority of India
SAU/SAUs Social Audit Unit/State Agricultural
Universities
SBD Standard bid documents
SCCL Singareni Collieries Company
Limited
SCs Scheduled Castes
SCSP Scheduled Castes Sub-Plan
SDO Standard Developing Organisations
SDTV Standard Definition Television
SEB State Electricity Board
SEBI Securities & Exchange Board of India
SECC Socio-Economic and Caste Census
Acronyms xxiii
SECF Contribution to State Energy
Conservation Fund
SFAC Small Farmers Agribusiness
Consortium
SFCs State Finance Commissions
SGSY Swarnajayanti Gram Swarozgar
Yojana
SHBs State Housing Boards
SHGs Self-Help Groups
SIBRI Small Industry Business Research
Initiatives
SITP Scheme for Integrated Textile Park
SJSRY Swarna Jayanti Sahari Rozgaar
Yojana
SKO Superior Kerosene Oil
SLNA State-Level Nodal Agency
SLSC State Level Sanctioning Committee
SME Small and Medium Enterprise
SOC Soil Organic Carbon
SOE State Owned Enterprise
SOP Standard Operating Producer
SoRs Schedule of Rates
SPTLs State Pesticide Testing Laboratory
SPV Special Purpose Vehicle
SRFTI Satyajit Ray Film and Television
Institute
SRI System of Rice Intensification
SSA Sarva Shiksha Abhiyan
STB Set Top Box
STL Short term liabilities
STOA Short-Term Open Access
STs Scheduled Tribes
STU/CTU State Transmission Utilities/Central
Transmission Utility
SW Short Wave
SWAN State Wide Area Network
TCF Trillion cubic feet
TCIL Telecommunications Consultants
India Ltd
TCoE Telecom Centres of Excellence
TDB Technology Development Board
TDR Transfer of Development Rights
TDRs Tradable Development Rights
TDSAT Telecom Disputes Settlement
Appellate Tribunal
TEC Telecom Engineering Centre
TFP Total Factor Productivity
TISCO Tata Iron and Steel Company
Limited
TMNE (NE) Technology Mission for North
Eastern Region
TNUDF Tamil Nadu Urban Development
Fund
TOD Time of Day
TOPS Terrestrial Observation &
Prediction System
TPDS Targeted Public Distribution System
TPSs Town Planning Schemes
TQM Total Quality Management
TSC Total Sanitation Campaign
TSDO Telecom Standards Development
Organisation
TSP Telecom Service Provider/Tribal
Sub-Plan
TUFS Technology Upgradation Fund
Scheme
UC Utilization Certificate
UCG Underground Coal Gasification
UGC University Grants Commission
UHV Useful heat value
UID Unique Identification
UID Unique Identification—AADHAR
UIDSSMT Urban Infrastructure Development
for Small & Medium Towns
UIG Urban Infrastructure and
Governance
UK United Kingdom
ULBs Urban Local Bodies
ULIP Unit Linked Insurance Plan
UMPPs Ultra Mega Power Projects
UMTA Unified Metropolitan Transport
Authority
UNICEF United Nations Children’s Fund
UPU Universal Postal Union
USA United States of America
USEPA United States Environment
Protection Agency
USHA Urban Statistics for HR and
Assessments
USIS Urban Sport Infrastructure
USOF Universal Service Obligation Fund
UT Urban Transport
VAS Value Added Services
VAT Value Added Tax
VCFEE Venture Capital Fund for Energy
Efficiency
VFX Visual Effects
VGF Viability Gap Funding
xxiv Acronyms
VLFM Visionary Leadership for
Manufacturing
VLPT Very Low Power Transmitter
VoIP Voice Over Internet Protocol
VUs Vehicle Units
VWSC Village Water and Sanitation
Committee
WBCIS Weather Based Crop Insurance
Scheme
WDM-PON Wavelength Division Multiplexed
Passive Optical Network
WHO World Health Organisation
WiPS Wireless Intrusion Prevention
System
WRDA Warehouse Regulatory &
Development Authority
WSCs Weavers’ Service Centres
WTO World Trade Organisation
XGPON Next Generation Gigabit Passive
Optical Network
Annexures
13.1 Manufacturing GDP by Sector and Employment Projections 105
13.2 Sector-wise Recommendations 106
13.3 Twelfth Five Year Plan (2012–17) Outlays (GBS) for Industry Sector 129
14.1 Eleventh Plan Physical Progress of RGGVY Projects under Implementation 191
14.2 Sectoral Coal Demand/Off-take for Annual Plan 2012–13 192
14.3 Annual Plan 2012–13—Company-wise Production—Ministry of Coal 193
14.4 Physical Targets of Renewable Programme for the Twelfth Plan 194
15.1 Central Road Sector Outlay and Expenditure-At Current Price for Eleventh Plan 252
15.2 Plan-wise Addition to NH Length 254
15.3 Achievement on National Highways 254
15.4 National Highways Development Project Phase I to VII 255
15.5 Physical Performance of Air India Limited during Eleventh Plan Period 256
15.6 Financial Performance of Air India Ltd. during the Eleventh Plan Period 256
15.7 Financial Performance of Airports Authority of India during Eleventh Plan Period 257
15.8 Financial Performance of Pawan Hans Helicopters Ltd. during Eleventh Plan Period 257
16.1 Twelfth Five Year Plan (2012–17) Outlays for the Ministry of Communications and IT and
Ministry of Information and Broadcasting
285
INTRODUCTION
12.1. Although agriculture now accounts for only
14 per cent of Gross Domestic Product (GDP), it
is still the main source of livelihood for the major-
ity of the rural population. As such rapid growth of
agriculture is critical for inclusiveness. Important
structural changes are taking place within the sec-
tor and there are definite signs of improved per-
formance. Agricultural growth has accelerated
compared to the Tenth Plan and diversification
is proceeding (Table 12.1). The National Sample
Survey Organisation (NSSO) data brings out that
rural labourers are shifting to non-agricultural work,
tightening the labour market in agriculture and put-
ting pressure on farm wages. However, dependence
on agriculture remains unchanged among the rural
self-employed whose average farm size continues to
12
Agriculture
decline with population growth. This is also an age-
ing, more feminised population, whose educated
young members are less likely to want to stay in
farming. The viability of farm enterprise, mostly
small farms, must therefore be a special area of
Plan focus in the Twelfth Plan. The Plan must also
focus on other priorities such as resource-use effi-
ciency and technology to ensure sustainability of
natural resources, adaptation to climate change and
improvements in total factor productivity.
RECENT TRENDS: PERFORMANCE AND
POINTERS
GDP Growth
12.2. The average of annual growth rates of GDP in
agriculture and allied sectors during the Eleventh
TABLE 12.1
Growth Rate of Agricultural and Allied Sectors
(in percentage)
Plan Share of Agriculture in the
Economy
Growth Rate of Agriculture
and Allied Sectors
Growth Rate of Total
Economy
(All Figures based on 2004–05 prices)
Ninth Five Year Plan 23.4 2.5 5.7
Tenth Five Year Plan 19.0 2.4 7.6
Eleventh Plan (2007–08 to 2011–12)
2007–08 16.8 5.8 9.3
2008–09 15.8 0.1 6.7
2009–10 14.6 0.8 8.6
2010–11 (2nd RE) 14.5 7.9 9.3
2011–12 (Rev Est.) 14.1 3.6 6.2
Eleventh Plan Average 15.2 3.7 8.0
Source: Central Statistical Office, New Delhi Press Release dated 7th Feb, 2013.
2 Twelfth Five Year Plan
Five Year Plan is now placed at 3.7 per cent. This is
short of the target of 4 per cent but is significantly
better than the achievement of 2.4 per cent in the
Tenth Plan. Failure to reach the target growth is
one reason for the high inflation in prices of food
and other primary commodities that persist despite
the recent slowdown in overall GDP growth.
Consequently, although the overall GDP growth tar-
get of the Twelfth Plan has been revised down since
the Approach Paper, the growth target for agricul-
ture is maintained at 4 per cent.
12.3. A natural question which arises is whether the
target of 4 per cent is attainable in view of past short-
falls. Although growth trends and targets are subject
to high errors due to weather variability (for exam-
ple, the Eleventh Plan average was pulled down by
two successive bad harvests in 2008–09 and 2009–
10), there is reason for cautious optimism because
the turn-around that began after 2004 appears to be
maintaining its momentum. Figure 12.1 plots aver-
ages and standard deviations of annual growth rates
over moving five-year periods, a trend of the growth
averages and also annualised five-year growth rates
based on five-year moving averages. All these show
growth still trending up and variability reducing.
The Eleventh Plan growth rate based on five-year
moving averages is at 3.6 per cent, the highest for any
five-year period ever and, significantly, growth vari-
ability has also reduced to lowest ever.
12.4. The reduction in variability is important since
claims of acceleration or deceleration make sense
only when variability is low. Also, it is a measure
of how well the system is able to cope with inevita-
ble bouts of aberrant weather and yet maintain the
growth momentum. It should be noted that agri-
cultural growth was positive in 2009–10 despite the
worst drought in nearly 40 years. More generally,
whereas earlier periods saw at least one and normally
two years of negative growth in every five year, there
has not been a single year of negative growth of agri-
culture and allied sectors after 2002–03.
12.5. The magnitude of secular decline in growth
variability over the last 30 years is also important.
This is now less than a third of its peak. A major
role must have been played by the increase in irriga-
tion from about 20 per cent of arable area in 1981
to 35 per cent today, based mainly on groundwa-
ter. However, since water tables have fallen and
temperatures risen, the extent of variability decline
is surprisingly large. Even assuming zero variabil-
ity on irrigated land, this implies that variability on
rain-fed land must have reduced very substantially.
Clearly factors such as a more diversified agriculture,
1.0
2.0
3.0
4.0
5.0
6.0
1976–77
1981–82
1986–87
1991–92
1996–97
2001–02
2006–07
2011–12
2.0
4.0
6.0
8.0
10.0
12.0
Average of annual growth rates 5 yr MA Std dev of annual growth rates (axis 2)
FIGURE 12.1: Growth and Fluctuations in GDP Agriculture and Allied
Agriculture 3
extended information reach and investments both
on-farm and in watershed development, appear to
have enabled better responses to depleting natural
resources and weather risk. Although there is con-
siderable scope to improve each of these factors fur-
ther, it is a matter of satisfaction that developments
in these areas are having a positive effect.
The Climate Challenge
12.6. The climate challenge facing agriculture needs
to be taken seriously. Table 12.2 shows a distinct
trend towards both drier and warmer weather, par-
ticularly during the last three Plan periods. Rainfall
in context of agriculture has traditionally been
discussed in terms of the monsoon (that is, June–
September) but annual precipitation is probably
much more relevant now since the dominance of
Kharif crops has reduced. Viewed in this perspec-
tive, it is noteworthy that each of the last three Plan
periods has recorded lower mean rainfall and higher
rainfall variability compared to the immediately pre-
vious period. Three (2008, 2009 and 2011) of the
five Eleventh Plan years had annual rainfall below
95 per cent of long period average, as compared
to only five in the previous 15 years. Temperature
conditions have deteriorated even more. Periods
prior to 1997 can be considered normal, but warm-
ing has increased at an accelerating pace since then.
The Eleventh Plan period contained the two warm-
est years (2010 and 2009) ever recorded since 1900.
Even the coolest year (2008) during these five years
was the thirteenth warmest in the last 110 years.
State-wise performance
12.7. The Mid-term Appraisal of the Eleventh Plan
(MTA) had noted that the recovery in agriculture
after 2004 was associated with clear signs of renewed
dynamism in rain-fed areas. Table 12.3, presents
state-wise averages and standard deviations of
annual growth rates of Gross State Domestic Product
(GSDP) from agriculture and allied activities for four
separate periods since 1981–82. It clearly shows the
following:
1. The all-States average and median growth rates
of GSDP recovered beyond levels before mid-
1990s, to reach near 4 per cent in the period
after 2004–05, this also happened individually in
many states, particularly those with large rain-
fed areas. The states with best performance were
Jharkhand, Chhattisgarh, Manipur, Tripura,
Mizoram, Rajasthan, Gujarat, Maharashtra,
Karnataka and Andhra Pradesh, all with above 5
per cent growth.
2. Despite more difficult weather conditions, all
except few hill states managed substantial reduc-
tion of growth variability (measured by standard
deviation of annual growth rates) during 2005–
12 as compared to the past.
TABLE 12.2
Some Weather Details
1951/52 to
1967/68
1968/69 to
1980/81
1981/82 to
1990/91
1991/92 to
1996/97
1997/98 to
2001/02
2002/03 to
2006/07
2007/08 to
2011/12
Annual Rainfall (cm)
Mean 122.5 118.7 120.1 121.0 118.5 113.7 111.7
Standard Deviation 12.5 10.2 11.5 7.2 8.3 9.4 10.0
Monsoon Rainfall (cm)
Mean 91.9 88.8 88.8 90.0 87.8 83.9 86.6
Standard Deviation 10.1 9.6 11.0 6.5 5.5 7.9 9.7
Annual Temperature anomaly from normal (°C)
Mean 0.04 –0.03 0.09 0.19 0.34 0.56 0.65
Standard Deviation 0.28 0.24 0.03 0.10 0.22 0.11 0.26
Source: Climate bulletins and other publications of the India Meteorological Department.
4 Twelfth Five Year Plan
TABLE 12.3
Averages and Standard Deviations of Annual Growth Rates of GSDP from Agriculture and Allied Sectors
Average of Annual Growth Rates Standard Deviation of Annual Growth Rates
1981–82
to
1993–94
1994–95
to
1999–2000
2000–01
to
2004–05
2005–06
to
2011–12
1981–82
to
1993–94
1994–95
to
1999–2000
2000–01
to
2004–05
2005–06
to
2011–12
Andhra Pradesh 3.9 2.8 4.7 5.0 10.0 13.8 9.7 6.5
Arunachal Pradesh 9.3 –0.8 1.6 5.0 9.7 8.5 7.2 7.8
Assam 2.5 0.2 –0.1 4.1 4.8 2.7 1.4 2.2
Bihar 1.1 3.1 7.4 3.3 12.9 22.7 24.1 11.9
Chhattisgarh 4.9 –2.1 4.6 7.3 10.5 10.5 35.3 9.1
Gujarat 8.8 5.2 9.1 5.5 53.5 27.0 24.2 10.4
Haryana 4.5 2.1 2.7 4.2 12.2 7.0 3.5 5.7
Himachal Pradesh 2.8 0.3 8.0 1.5 12.4 2.1 6.2 9.7
Jammu & Kashmir 1.3 5.2 3.6 0.7 11.2 5.7 3.8 2.9
Jharkhand 1.1 4.3 5.0 8.0 12.9 7.2 19.6 5.1
Karnataka 4.5 4.1 –2.9 5.1 8.7 5.7 15.1 6.8
Kerala 3.2 1.9 1.7 –0.2 6.4 4.9 2.4 3.4
Madhya Pradesh 4.9 1.6 2.2 4.4 10.5 3.4 27.1 4.7
Maharashtra 5.7 3.1 1.6 5.3 17.3 10.1 6.9 11.5
Manipur 2.8 2.1 5.8 5.9 3.6 6.2 6.9 4.4
Meghalaya 1.1 7.2 4.8 3.3 11.2 6.2 2.1 2.2
Mizoram 0.1 5.7 4.8 5.9
Nagaland 14.1 2.5 9.7 2.3
Odisha 2.6 0.0 3.5 3.1 18.6 11.0 16.4 2.5
Punjab 4.9 2.5 1.8 1.8 4.6 4.4 2.6 1.6
Rajasthan 5.9 5.5 10.9 5.5 26.5 14.4 44.9 10.1
Sikkim –1.2 6.5 3.4 11.1 1.0 2.4
Tamilnadu 5.8 1.8 –0.5 4.6 12.7 9.6 14.0 7.0
Tripura 2.5 3.7 4.0 5.7 7.1 5.7 11.4 5.6
Uttar Pradesh 2.8 3.5 1.0 2.8 3.2 5.2 1.8 1.4
Uttarakhand 2.8 2.4 3.3 2.0 3.2 3.5 4.9 4.3
West Bengal 5.3 4.1 2.4 2.6 9.2 4.3 4.0 3.4
Sum of GSDP of:
All above states
3.4
(3.4)
2.5
(3.3)
2.1
(1.7)
3.8
(3.7)
5.8
(5.1)
5.2
(4.6)
6.5
(6.1)
2.8
(2.5)
High irrigation states 3.8 3.2 1.7 2.7 3.1 3.8 2.1 0.9
Medium irrigation states 2.9 1.8 3.1 4.2 9.8 9.1 8.5 3.0
Low irrigation states 3.6 2.8 1.5 4.5 5.6 4.7 9.1 5.3
High productivity states 4.1 2.9 2.5 2.1 3.9 3.1 2.2 0.8
Mid productivity states 3.0 2.4 2.1 3.7 4.0 6.6 4.5 2.3
Low productivity states 3.6 2.6 2.5 5.1 11.0 6.4 16.7 5.4
Across States:
Median 3.6 2.5 3.5 4.2 10.5 6.2 6.9 5.1
Standard deviation 2.2 2.3 3.7 1.9
Note: Figures in brackets use corresponding national GDP agriculture and allied (2004–05 prices) data. High irrigation refers to the
GSDP sum over Haryana, Punjab, Uttar Pradesh and West Bengal (Net irrigated area (NIA)/Arable land (AL) > 55 per cent in 2008–09).
Low irrigation (NIA/AL < 30 per cent) refers to Assam and North-East, Chhattisgarh, Himachal Pradesh, Jharkhand, Karnataka, Kerala,
Maharashtra, Rajasthan and Uttarakhand. Medium refers to the rest. High productivity states (present GSDP/AL > `70,000/hectare
at 2004–05 prices) are Tripura, West Bengal, Kerala, Himachal Pradesh, Punjab, J&K and Haryana. Low productivity (GSDP/AL <
`35,000) states are Rajasthan, Meghalaya, Madhya Pradesh, Chhattisgarh, Maharashtra, Odisha, Jharkhand, Karnataka and Gujarat.
The rest are Middle productivity. The 1980–81 series gives data only for undivided Bihar, MP and UP; these have been split using
1993–94 ratios to get GSDP for new States.
Agriculture 5
3. The variation in performance across States sug-
gests that State-level responses and implementa-
tion play a very significant role in determining
agricultural performance. However, to the extent
that available technology limits potential growth,
it will be difficult to maintain high growth rates
where productivity has increased close to poten-
tial levels. This is relevant because the Eleventh
Plan strategy gave much greater flexibility to
States and focused more on yield gaps within
existing technology, rather than emphasising
new technologies and supporting these. The
growth acceleration since 2005 has therefore
been much stronger in states with lower pro-
ductivity and less irrigation. This suggests that
the strategy may be correcting the past relative
neglect which caused rain-fed farming, covering
over 60 per cent of arable land, to perform well
below potential.
12.8. It is a matter of concern that the recent growth
revival has been weak in areas with high land pro-
ductivity, not only in relatively more irrigated states
such as Punjab, Haryana, Uttar Pradesh and West
Bengal that had green revolution success, but also
in less irrigated states such as Kerala, Himachal
Pradesh and Jammu & Kashmir where high produc-
tivity reflects a high-value cropping pattern based on
horticulture. These States together contribute about
35 per cent of national agricultural output from 20
per cent of arable land, but none of them have been
able to surpass growth rates achieved in the past.
Even Gujarat, a low productivity state that sustained
near 10 per cent growth for almost a decade through
better water use and rapid adoption of Bt cotton
hybrids, slowed down perceptibly in the Eleventh
Plan as Bt adoption saturated and yields reached a
plateau. Clearly, growth is more difficult to acceler-
ate at higher productivity levels without new tech-
nology, particularly if past patterns of growth have
taken a toll on natural resources.
OUTPUTS, INPUTS AND PRODUCTIVITY
12.9. The Eleventh Plan had made four conscious
choices. First, with technology fatigue evident, it
funded research better but emphasised on getting
more from existing technology. Second, since one
size does not fit all, it decentralised plan funds to
encourage initiatives at State and lower levels. Third,
aware of low public investment and food security
needs, it increased Centre’s spending on these, par-
ticularly in disadvantaged regions. Fourth, noting
farmer distress, it tried to focus not just on pro-
duction but also on farm incomes, stressing service
delivery and suggesting encouragement of group
activity with land and tenancy reforms put back on
the agenda. Compared to the original green revo-
lution that built on the best, this strategy sought to
deliver faster growth, that is, more inclusive, more
stable and less concentrated spatially. Nonetheless,
there is a wide demand for a ‘second green revolu-
tion’ with more irrigation and better crop-specific
technologies, with some even claiming that Bt cot-
ton has been the only recent success. The Twelfth
Plan accepts the proposition that a greater techni-
cal thrust is needed, and the strategy for agriculture
should take this into account
12.10. In order to provide a snapshot of the Eleventh
Plan performance and give indication of what the
Twelfth Plan should do differently, long-run data
on growth of output by sub-sector and also rates of
growth of input use and productivity are presented
in Table 12.4. Since performance is almost invari-
ably discussed in the context of well-defined policy
periods, those chosen for this table are same as in the
Eleventh Plan document: (i) Pre-Green Revolution
(1951–52 to 1967–68); (ii) Green Revolution proper
(1968–69 to 1980–81); (iii) Wider technology cover-
age (1981–82 to 1990–91) when focus shifted from
intensification of Green Revolution in best areas
to its spread to new areas; (iv) Early liberalisation
period (1991–92 to 1996–97) when relative prices
became an additional focus, both because agriculture
was expected to gain from reduced trade protection
to industry and also with Minimum Support Prices
(MSP) used for active growth promotion rather than
just passive price support. The other three periods in
the table are subsequent Plan periods: (v) Ninth Plan
(1997–98 to 2001–02); (vi) Tenth Plan (2002–03 to
2006–07) and (vii) Eleventh Plan (2007–08 to 2011–
12). For each of these periods, the average of annual
growth rates is presented for each variable chosen.
12.11. As noted above, growth of agricultural GDP
at 3.3 per cent was short of the 4 per cent target for
6 Twelfth Five Year Plan
TABLE 12.4
Growth of Output, Inputs and Productivity
(period averages of annual growth rates)
Pre-Green
Revolution
Green
Revolution
Wider
Coverage
Early
Liberalisation
Ninth Plan Tenth Plan Eleventh
Plan
1951/52 to
1967/68
1968/69 to
1980/81
1981/82 to
1990/91
1991/92 to
1996/97
1997/98 to
2001/02
2002/03 to
2006/07
2007/08 to
2011/12
I. Value of Output (2004–05 prices)
Cereals 4.2 3.4 3.5 2.4 1.5 1.0 3.0
Pulses 3.0 0.7 3.4 0.8 0.3 1.8 4.2
Oilseeds 3.2 1.8 7.4 4.4 –2.5 7.4 4.5
Sugars 3.3 4.1 4.2 2.4 9.4 1.7 2.2
Fibres 4.4 2.5 5.3 6.5 –5.6 15.1 10.7
Non-horticulture crops 3.2 2.7 3.0 2.1 1.7 2.1 2.8
Horticulture 2.6 4.2 3.1 5.7 3.8 2.6 4.7
All Crops 3.0 3.0 3.0 3.1 2.3 2.1 3.4
Livestock 1.0 3.3 4.8 4.0 3.6 3.6 4.8
Crops and Livestock 2.5 3.0 3.3 3.3 2.6 2.5 3.8
Fishing 4.7 3.1 5.7 7.1 2.7 3.3 3.6
Forestry 1.7 –0.2 0.3 0.3 2.7 1.3 2.3
Agriculture and allied 2.3 2.4 3.0 3.1 2.6 2.4 3.6
II. Value of Intermediate Inputs (2004–05 prices)
Seed 1.5 1.1 2.3 1.6 –0.6 1.4 4.1
Feed of livestock 1.9 4.0 0.1 0.9 3.9 0.7 3.3
Organic manure 0.0 1.3 0.7 0.5 1.6 2.9 3.3
Fertilisers and pesticides 18.2 9.3 8.7 2.0 3.9 4.8 6.7
Diesel oil 26.0 13.1 8.7 4.3 5.1 5.1 5.8
Electricity 18.5 15.2 12.9 14.4 –4.1 2.6 8.0
All inputs crops and
livestock
2.4 4.5 2.2 1.9 3.0 2.5 4.4
Inputs for fishing 4.6 3.3 5.4 6.5 2.7 1.5 3.5
Inputs for forestry 1.7 –0.2 0.1 0.3 2.6 1.3 2.3
All inputs Agriculture and
allied
2.3 3.9 2.1 1.9 3.0 2.4 4.3
III. Gross Value Added (2004–05 prices)
Crops and Livestock 2.7 2.7 3.7 3.7 2.5 2.5 3.5
Fishing 4.7 3.0 5.8 7.2 2.7 3.6 3.7
Forestry 1.7 –0.2 0.4 0.3 2.8 1.3 2.3
Agriculture and allied 2.5 2.4 3.5 3.7 2.5 2.4 3.3
IV. Factor Inputs into Agriculture
Land (Gross cropped area) 1.3 0.4 0.8 0.3 –0.1 0.6 0.3
Labour 1.8 1.1 0.5 2.3 0.3 0.5 –1.5
Net Fixed Capital Stock 2.3 3.6 2.8 3.1 3.4 4.7 6.0
Of which: Public 3.9 2.0 1.4 2.3 3.6
Private 1.4 4.3 5.1 6.6 7.5
V. Partial Factor Productivities (2004–05 prices)
Land productivity 1.2 2.0 2.7 3.3 2.6 1.8 3.1
Labour productivity 0.7 1.4 3.0 1.4 2.2 1.8 4.8
Capital productivity 0.2 –1.1 0.7 0.6 –0.9 –2.4 –2.7
Note: Cropped Area from Ministry of Agriculture, Land use statistics; Labour is agricultural employment from Census till 1971 and
NSSO (weekly status) from 1972–73; all other data are from Central Statistical Office (CSO): National Accounts 2004–05 prices.
Agriculture 7
agricultural GDP but was faster than that in the
Tenth or the Ninth Plan, though lower than the
period from 1981–82 to 1996–97. The growth rates
for individual crops shown in Table 12.4 are for
gross value of output and not value added, but they
present a valid basis for inter-period comparisons.
1. Growth of total value of output in agriculture
proper (crops and livestock) during the Eleventh
Plan averaged 3.8 per cent per year which was
the highest among all seven periods considered.
2. Total non-horticulture crop output grew mar-
ginally faster than target (2.8 per cent against
2.7 per cent target) mainly because of foodgrains
(3.1 per cent actual against 2.3 per cent target),
oilseeds (4.5 per cent against 4 per cent) and
fibres (10.7 per cent against 5 per cent).
3. Horticulture at 4.7 per cent was only marginally
short of the 5 per cent target.
4. Growth of output from livestock (4.8 per cent)
was again highest amongst all the periods consid-
ered but this performance, and even more, so for
fishing (3.6 per cent), fell short of the ambitious
6 per cent target set for these two sub-sectors.
5. Growth of forestry was expectedly slower, pull-
ing down the growth of total value of output in
agriculture and allied to 3.6 per cent, but this
too was the highest among all the seven periods
considered.
12.12. Growth in intermediate inputs has acceler-
ated steadily reaching 4.3 per cent per annum dur-
ing the Eleventh Plan, which was much higher than
growth of output and over twice the growth rate of
intermediate input use during 1981–97. The more
rapid growth in input use explains why despite the
faster growth of the gross value of output during
the Eleventh Plan at 3.6 per cent than in the period
1981–82 to 1996–97 (about 3.0 per cent), GDP in
agriculture (which is a value added concept) grew
more slowly. In other words, agricultural growth
became more input intensive in the Eleventh Plan.
This suggests the need to re-look policies relating to
inputs, especially fertiliser and power.
12.13. Policies towards input use need to distinguish
between traditional inputs such as seed, feed and
organic manure and modern inputs such as chemical
fertiliser, pesticides and farm power. With low seed
replacement, underfed farm animals and soils short
of organic carbon, projections by working groups for
the Twelfth Plan suggest that past growth of these tra-
ditional inputs should be improved upon. However,
these working groups also project lower growth of
‘modern’ inputs than observed during the Eleventh
Plan. For example, 2016–17 requirements of chemi-
cal fertiliser and farm power are placed at levels that
imply annual growth for both fertilisers and ‘mod-
ern’ energy at about 4.5 per cent. These exceed cor-
responding the Eleventh Plan projections but are
much less than the Eleventh Plan actual. Reduced fer-
tiliser and fuel subsidies would be consistent with the
desired moderation in trend of these inputs. Restraint
is also needed on pesticides use which rose sharply in
the Eleventh Plan after years of being subdued.
12.14. In parallel with high growth of intermediate
inputs, there was acceleration in growth of the net
capital stock in agriculture and allied sectors during
the Eleventh Plan. As shown in Table 12.4 (item IV),
Net Fixed Capital Stock in agriculture expanded at
6.0 per cent per year, much faster than in the pre-
vious two Plans. The public component of capi-
tal stock increased by 3.6 per cent while the private
component increased at 7.5 per cent per year, both
showing acceleration compared to the previous
two Plans. However, public investment in agricul-
ture, which was stepped up very substantially in the
last three years of the Tenth Plan, stagnated in the
Eleventh Plan (Table 12.5). This was mainly because
of a large shortfall in planned investment in irriga-
tion. As a result a key part of the Eleventh Plan strat-
egy to achieve 4 per cent agricultural growth which
was to increase public investment in agriculture to
4 per cent of agricultural GDP and thereby achieve
growth of public sector capital stock in agriculture at
least equal to the required 4 per cent growth of total
capital stock has not fructified. Clearly, to attain 4
per cent agricultural growth in the Twelfth Plan will
require firmer commitment to ensure realisation of
this unattained the Eleventh Plan objective.
12.15. Private investment in agriculture has accel-
erated over the past three Plans. Private investment
8 Twelfth Five Year Plan
TABLE 12.5
Gross Capital Formation (GCF) in Agriculture, Forestry and Fishing (2004–05 prices)
Year GDP from Agriculture
and Allied
2004–05 Prices
GCF in Agriculture and Allied at
2004–05 Prices
GCF in Agriculture as Per Cent of
GDP from Agriculture
Public
Sector
Private
Sector
Total Public
Sector
Private
Sector
Total
1 2 345678
Tenth Plan
2002–03 5,17,559 10,299 63,215 73,514 2.0 12.2 14.2
2003–04 5,64,391 12,683 57,238 69,921 2.3 10.1 12.4
2004–05 5,65,426 16,187 59,909 76,096 2.9 10.6 13.4
2005–06 5,94,487 19,940 66,664 86,604 3.5 11.2 14.6
2006–07 6,19,190 22,987 69,070 92,057 3.7 11.2 14.9
Eleventh Plan
2007–08 6,55,080 23,257 82,484 1,05,741 3.6 12.6 16.1
2008–09 6,55,689 20,572 1,06,555 1,27,127 3.1 16.3 19.4
2009–10 6,62,509 22,719 1,08,420 1,31,139 3.4 16.4 19.8
2010–11 7,09,103 21,500 1,20,754 1,42,254 3.0 17.0 20.1
Source: Central Statistical Office National Accounts Division.
averaged 15.6 per cent of agricultural GDP in the first
four years of the Eleventh Plan as against expected
12 per cent. The main driver of this was a large
relative price shift in favour of agriculture, show-
ing that farmers respond to price incentives. If cal-
culated in current price terms rather than constant,
private investment averaged 13 per cent of agri-
cultural GDP—only slightly higher than expected.
Nonetheless, total capital stock in agriculture grew
more than expected. While private investment in
irrigation and water-saving devices did increase, the
largest increase was in labour-saving mechanisation.
This was a natural response to growing labour scar-
city which is reflected in rising wages.
12.16. Table 12.4 also shows growth rates of the two
other factors of production in agriculture: land and
labour. Not unexpectedly, while capital stock has
grown quite rapidly throughout, the other two factors
have not. As far as labour is concerned, the measure
shown is employment in agriculture by usual sta-
tus estimates of the National Sample Survey (NSS),
which is available almost annually since 1987–88 but
requires interpolation for earlier years. Combined
with Census data, these show continuous increase of
agricultural employment till 1994, although at vary-
ing rates of growth and at a particularly sharp rise in
early 1990s when there was slow-down in rural non-
agricultural employment. Agricultural employment
fluctuated in the next decade, but has clearly declined
after 2004–05. NSS employment data for 2007–08
and 2009–10 show clear evidence of an accelerated
shift of rural labourers to non-agricultural work,
which in itself is not an undesirable development.
For land, the measure shown is gross cropped area
which, despite the loss of nearly 3 million hectares of
arable land to non-agricultural uses since 1990–91,
has increased in all periods excepting a slight dip
in the Ninth Plan. This is because cropping inten-
sity has increased almost continuously. However,
cropped area growth which averaged 0.9 per cent per
annum till 1990–91 has averaged only 0.2 per cent
subsequently.
12.17. Table 12.4 also shows growth rates of partial
productivity of land, labour and capital taking GDP
agriculture and allied as numerator. Labour produc-
tivity growth has historically been low, averaging
2per cent per annum or less except during 1981–90
when it reached 3 per cent. Labour productivity
Agriculture 9
jumped to nearly 5 per cent during the Eleventh Plan.
The accelerated shift of rural labour to non-agricul-
ture caused real wages to rise at about 5 per cent
annually between 2004–05 and 2009–10, according
to the NSS, and latest reports of the Commission of
Agricultural Costs and Prices (CACP) suggest even
faster growth of real wages in the last three years of
the Eleventh Plan at almost 8 per cent per year. The
trend in real wages in 2011–12 prices, as estimated
by CACP, is shown in Figure 12.2.
12.18. Labour saving mechanisation, a significant
contributor to the sharp increase of private invest-
ment in the Eleventh Plan period, was a natural
response to tighter labour markets and rising wages.
But, while mechanisation helped farmers to cope
with labour scarcity, it exacerbated a decline in capi-
tal productivity. Private capital stock in agriculture
has increased twice as fast as agricultural GDP since
the Ninth Plan and, although mitigated by terms of
trade gains and a debt write-off, continued invest-
ment with declining capital productivity may not be
sustainable.
12.19. While greater private investment in farm-
ing is desirable where it reflects both an ability to
invest and a desire to increase farm productivity, the
same phenomenon can become a source of distress if
farmers keep investing to cope with shrinking natu-
ral resources, more frequent adverse weather and
less assured labour supply, and do not get adequate
returns for this investment. The Eleventh Plan had
tried to address this in two ways: first, increase pub-
lic investment to lessen the private burden and add
economies of scale; and second, rework architecture
of the Plan spending on agriculture to make it more
decentralised and flexible but also more coordi-
nated locally to improve total productivity of private
resources by better service delivery in all areas from
extension to input supply and marketing. However,
as noted earlier, public investment did not increase.
And, although combined Plan expenditure of Centre
and States in agriculture did increase from 1.9 per
cent of agricultural GDP in the Tenth Plan to 2.9 per
cent in the Eleventh, this was relatively small and left
research, education and extension under-funded,
leaving much to be desired in the quality of service
delivery.
12.20. Nonetheless, growth of land productivity did
increase significantly (Tables 12.4 and 12.6). Having
climbed from about 1 per cent per annum before
Green Revolution to over 3 per cent during 1991–97,
land productivity growth had decelerated to below 2
per cent. This rebounded to over 3 per cent during
the Eleventh Plan.
12.21. Total factor productivity (TFP) improved
during the Eleventh Plan. Individual factor produc-
tivity data in Table 12.4, weighted by a range of factor
shares suggest that TFP growth during the Eleventh
Plan was back to around 1980s level. For example,
160.00
150.00
140.00
130.00
120.00
110.00
100.00
` per day
Year
2000–01
2001–02
2002–03
2003–04
2004–05
2005–06
2006–07
2007–08
2008–09
2009–10
2010–11
2011–12
Average Real Daily Wage Rage at 2011–12 Price (` per day)
FIGURE 12.2: All India Average Real Daily Wage Rate at 2011–12 Prices (` Per Day)
10 Twelfth Five Year Plan
applying factor shares of 30 per cent land, 40 per
cent labour and 30 per cent capital give the following
averages of annual TFP growth: 0.7 per cent in pre-
Green Revolution period, 0.8 per cent during Green
Revolution period, 2.2 per cent during the wider cov-
erage period, 1.8 per cent during early liberalisation,
1.4 per cent during the Ninth Plan, 0.6 per cent dur-
ing the Tenth Plan and 2.0 per cent in the Eleventh
Plan. Although these estimates must be treated as
tentative since data on factor shares is not robust, it
does suggest that the deceleration of TFP in agricul-
ture observed in the previous two Plans, which had
caused widespread apprehension, may have been
reversed in the Eleventh Plan. In other words, the
Eleventh Plan architecture, with the Rashtriya Krishi
Vikas Yojana (RKVY) as core, appears to have deliv-
ered despite adverse weather, a public investment
shortfall and implementation gaps. The strategy of
spreading known technology wider had paid.
SUB-SECTOR-WISE PERFORMANCE AND
ISSUES
Crop Sector
12.22. In addition to above, two indicators worth
highlighting in the crop sector are the pace and pat-
tern of crop area diversification and trends in yields/
hectare of important individual crops. There has
been gradual but sustained shift in cropping pat-
tern away from coarse cereals and pulses towards
other crops over the last four decades. Area under
coarse cereals had declined by 18 million hectares
and that under pulses by nearly 2 million hectares
from earlier peaks to end of the Tenth Plan. During
the Eleventh Plan, there was further decline of 2mil-
lion hectares in area under coarse cereals but area
under pulses reversed earlier decline to reach a
new peak in 2010–11. Noting, that technology and
price policy had neglected pulses earlier despite
their importance as source of protein, special atten-
tion was given to pulses in both the National Food
Security Mission (NFSM) and RKVY, the two major
schemes launched during the Eleventh Plan. Cotton
gained most area, followed by fruits and vegetables,
with rice area steady, an increase in wheat area and
decline in area under oilseeds and sugarcane.
12.23. Although area under coarse cereals and oil-
seeds declined during the Eleventh Plan, both these
crop groups averaged over 4 per cent output growth.
This was because growth of yields per hectare accel-
erated across almost all crop groups, especially those
mainly rain-fed (Table 12.6). Not only did coarse
cereals and oilseeds yields increase faster during the
TABLE 12.6
Average Annual Growth Rates in Yields Per Hectare
Pre-Green
Revolution
Green
Revolution
Wider
Coverage
Early
Liberalisation Ninth Plan Tenth Plan
Eleventh
Plan
1951/52 to
1967/68
1968/69 to
1980/81
1981/82 to
1990/91
1991/92 to
1996/97
1997/98 to
2001/02
2002/03 to
2006/07
2007/08 to
2011/12
Wheat 3.7 3.3 3.6 2.8 0.7 –0.3 3.0
Rice 3.2 2.7 3.0 1.4 2.1 1.2 2.2
Jowar 3.4 2.9 3.2 1.3 0.2 2.1 3.1
Bajra 2.6 6.3 8.8 6.2 4.9 7.3 8.4
Maize 4.8 1.7 4.1 2.6 3.1 –0.2 6.5
Coarse cereals 2.6 1.5 3.1 4.3 1.3 1.7 7.3
Pulses 2.3 –0.2 2.3 1.9 –0.3 0.6 2.7
Oilseeds 1.3 0.8 4.8 3.3 0.4 3.5 5.4
Cotton 3.0 2.6 5.3 3.1 –6.2 19.4 3.9
Sugarcane 1.6 3.1 1.3 0.4 0.3 0.7 0.5
Note: Data is up to fourth advance estimate for 2011–12, Ministry of Agriculture.
Agriculture 11
Eleventh Plan than in any of the earlier periods, so
did pulses yields. Apart from hybrids in case of maize,
and to less extent in bajra, these yield increases came
mainly from better seed quality, higher seed replace-
ment and better practice rather than from new crop
technology or more irrigation.
12.24. Yield growth of cotton, another largely rain-
fed crop, was also respectable although it was down
sharply from a spectacular performance during the
Tenth Plan following adoption of Bt hybrids. With
more than 90 per cent of cotton area now under
Bt hybrids, and cotton yields more than doubling
over the last decade, there is no doubt either about
general farmer acceptance or its being a clear case
of technological transformation unlike other rain-
fed crops. But disagreements continue about the
extent to which Bt contributed to this yield increase
and on wisdom of India’s total dependence on Bt
hybrids rather than the Bt varieties used in the rest
of the world. There are also legitimate complaints
of non-availability of non-Bt seeds, for example in
Vidharbha. Genetically modified organisms (GMOs)
therefore remain controversial, as was evident in case
of Bt Brinjal. Nonetheless, since significant break-
throughs in production technologies are required
to cope with increasing stress, particularly for rain-
fed crops, it is necessary to remain abreast with lat-
est advances in biotechnology. It is, therefore, time
to put in place scientifically impeccable operational
protocols and a regulatory mechanism to permit
GMOs when they meet rigorous tests that can out-
weigh misgivings, while simultaneously noting that
many feasible advances in biotechnology do not in
fact involve GMOs.
12.25. Moreover, the Eleventh Plan experience is that
continuous less-visible efforts by farmers to adapt
and improve can be made effective. The NFSM,
which aimed to reduce gaps between potential and
actual yields, was designed to aid farmers in their
own efforts by demonstrating and supporting a wide
range of interventions. This seems to have worked.
For example, growth in wheat yields nationally was
negligible during the Ninth and the Tenth Plans but
increased to 3 per cent in the Eleventh Plan. Even
in Punjab, where it was believed that wheat yields
had reached a plateau below 4.5 tonnes per hectare,
yields increased steadily during the Eleventh Plan to
reach 4.9 tonnes, accompanied by wider use of con-
servation practices such as laser levelling, zero tillage
and raised beds. Rice yield growth was also higher in
the Eleventh Plan than in any period after 1991, with
Assam, Bihar, Chhattisgarh, East Uttar Pradesh and
West Bengal contributing 80 per cent of this, again
with growing awareness of conservation practices.
For example, many States are now using RKVY to
mainstream the System of Rice Intensification (SRI)
that was not officially accepted till 2004 and was only
small part of NFSM.
Livestock and Fishery
12.26. Livestock contributes 25 per cent of gross
value added in the agriculture sector and provides
self-employment to about 21 million people. Rapid
growth of this sector can be even more egalitarian
and inclusive than growth of the crop sector because
those engaged in it are mainly small holders and the
landless. Growth of livestock output averaged 4.8 per
cent per annum during the Eleventh Plan recovering
from an average of 3.6 per cent in the Ninth and the
Tenth Plans.
12.27. Growth, of dairying, which is the main con-
stituent of livestock sector though slightly higher
than the 4 per cent averaged since 1990, was short of
demand. With over 75 per cent of cattle located in
rain-fed areas, the major issue is access to feed, fodder
and drinking water which is becoming increasingly
scarce. The problems of the sector are compounded
by growing numbers of unproductive male cat-
tle. Developing a strong fodder base needs inten-
sive effort and innovation in institutional aspects of
pasture protection and management and usufruct
sharing. There is little concerted effort in this area at
present as it is too fragmented across various depart-
ments to be able to provide the technical inputs, insti-
tutional designs and adequate investments to make
a meaningful impact. Richer farmers with access
to groundwater irrigation can grow irrigated fod-
der and increase herd size. Poorer livestock owners,
dependent mainly on commons and agriculture resi-
dues, end up underfeeding the animals. This problem
raises questions about the present breeding strategy
12 Twelfth Five Year Plan
that focuses almost exclusively on induction of breeds
that are high yielding, but are much less tolerant to
adverse conditions in extensive livestock systems.
12.28. These issues, which also affect owners of
small ruminants, poultry and even those involved in
inland fishery, came to the fore during the Eleventh
Plan following the drought of 2009. The consequent
high inflation in feed and fodder, that also led to high
inflation in prices of livestock products, revealed
a need for much greater coordination not only
between agencies responsible for livestock and those
responsible for crops that sustain livestock, but also
with other policies, for example, trade policies that
influence feed and livestock product prices. RKVY
provided a window which cut across departments
to allow States to focus on fodder shortages and
restored growth of livestock output much quicker
than in earlier droughts. Nonetheless, underlying
problems remain, as does so called protein inflation.
The Twelfth Plan must address these problems by
involving dairy cooperatives in breed and feed issues,
revisit breeding strategies and make fodder develop-
ment higher priority in both animal husbandry and
crop programmes.
12.29. India produces about 65 billion eggs annually
and production growth has accelerated from around
4 per cent per annum during the 1990s to over 5 per
cent during the Tenth and the Eleventh Plan. This
acceleration has been achieved despite new chal-
lenges such as periodic outbreaks of avian influenza
and the biofuels effect on international prices of
maize, the main poultry feed, which has now transmit
into the domestic economy. One reason for this vital-
ity has been the growth of a large and vibrant com-
mercial poultry sector with adequate economies of
scale and fairly good backward and forward linkages.
Besides eggs, this commercial poultry sector also pro-
duces over 2 million tonnes of broiler meat which is
an increasing part of total meat production of about 5
million tonnes. Meat, with production growth at over
5.5 per cent per annum during the Eleventh Plan, is
the fastest growing segment in the livestock sector.
12.30. The performance of the fisheries sub-sec-
tor has been impressive on the whole, with growth
more than 5 per cent per annum during the 1980s
and 1990s, but growth in this sub-sector has been
decelerating since mid-1990s. The main reason for
this has been stagnation of marine fishery, a phe-
nomenon which is expected to continue. The major
growth in fisheries in recent years has come from
the inland fisheries, with particularly rapid develop-
ment of brackish water aquaculture. This has been
linked to prawn cultivation for export, although
there is also strongly growing domestic demand for
fresh water fish. Fish prices more than doubled dur-
ing the Eleventh Plan, a higher inflation than either
crops or any other livestock segment, despite a small
acceleration in production growth compared to the
Tenth Plan. A problem in this sector is that although
a National Fisheries Development Board was set up,
responsibilities are still not clearly defined between
this and the Department of Animal Husbandry,
Dairying and Fisheries. This has in particular meant
an inability to realise the vast potential of inland fresh
water fishery. Fish production can be enhanced 2 to
4 times in rain-fed water bodies, whether irrigation
reservoirs, natural wetlands or ponds and tanks cre-
ated by watershed development or Mahatma Gandhi
National Rural Employment Guarantee Scheme
(MGNREGS). If fully harnessed, these can secure
over 6 per cent fishery growth in the Twelfth Plan.
EMERGING IMBALANCES
12.31. Although the discussion so far suggests that
agricultural performance did improve during the
Eleventh Plan, experience of the Eleventh Plan also
points to emerging imbalances in agriculture which
call for a long-term strategic reorientation.
Subsidies vs Public Investment
12.32. The Eleventh Plan document had highlighted
that public investment in agriculture as per cent of
agricultural GDP had halved between the 1980s and
in the end of the Ninth Plan while, simultaneously,
budgetary subsidies to agriculture had doubled as
proportion of agricultural GDP. The tendency for
subsidies to increase much faster than public invest-
ment was checked to some extent during the Tenth
Plan, but it reappeared again during the Eleventh
Plan (Table 12.7). Budgetary subsidies to agriculture
(excluding food subsidy, which should be treated as
Agriculture 13
a consumer subsidy) increased from an average of
4.1 per cent of agricultural GDP during the Tenth
Plan to average 8.2 per cent in the first four years
of the Eleventh Plan. Actual subsidies to agriculture
were higher in both periods since CSO books bud-
geted subsidy on domestic urea manufacture entirely
to industry and because part of the power subsidy
received by agriculture is not budgeted but borne by
utilities. Compared to these numbers, public invest-
ment in agriculture averaged only about 3 per cent of
agricultural GDP during both Plan periods.
12.33. The imbalance between subsidy expendi-
ture and expenditure on public investment raises
the issue whether a shift away from subsidies and
towards greater public investment would not be ben-
eficial. The usual argument for reducing subsidies is
that it will improve the fiscal deficit, but that is not
the relevant point in this context, there is a need to
shift from subsidies to public investment aimed at
increasing land productivity on the grounds that
this would produce better agricultural outcomes and
would also be more inclusive. This is particularly
important in the context of strategies for combating
the effect of climate change where public investment
in conservation and management of water resources
will be crucial.
12.34. There are also other uses of resources in agri-
culture which could be promoted if agricultural sub-
sidies are restrained. The Eleventh Plan document
had pointed to trade-offs that subsidies might have
with other non-Plan revenue expenditures, particu-
larly staffing of essential farm support systems such
as extension. Moreover, capacity and skill short-
ages have made upgrading agricultural universi-
ties an urgent need. The Eleventh Plan had aimed
to increase spending on agricultural education and
research from 0.6 to 1 per cent of agricultural GDP,
but this remains less than 0.7 per cent—a large gap in
a very important area that is miniscule in relation to
subsidies.
TABLE 12.7
Public Sector Capital Formation and Subsidies to Agriculture (Centre and States)
(in ` crore and as per cent to GDP from agriculture and allied at current prices)
Public GCF
Agriculture and
Allied
Budgetary
Subsidies (CSO)
Food Subsidy Total Fertiliser
Subsidy
Subsidy on
Indigenous Urea
All other
Agriculture
Subsidies
Tenth Plan
2002–03 9,563 2.0 43,597 9.0 24,176 5.0 11,015 2.3 7,790 1.6 16,196 3.3
2003–04 12,218 2.2 43,765 8.0 25,181 4.6 11,847 2.2 8,521 1.6 15,258 2.8
2004–05 16,187 2.9 47,655 8.4 25,798 4.6 15,879 2.8 10,243 1.8 16,221 2.9
2005-06 20,739 3.3 51,065 8.0 23,077 3.6 18,460 2.9 10,653 1.7 20,181 3.2
2006–07 25,606 3.5 59,510 8.2 24,014 3.3 26,222 3.6 12,650 1.7 21,924 3.0
Eleventh Plan
2007–08 27,638 3.3 85,698 10.2 31,328 3.7 32,490 3.9 12,950 1.5 34,830 4.2
2008–09 26,692 2.8 1,56,823 16.6 43,751 4.6 76,603 8.1 17,969 1.9 54,438 5.8
2009–10 33,237 3.1 1,39,248 12.9 58,443 5.4 61,264 5.7 17,580 1.6 37,121 3.4
2010–11 34,548 2.7 1,50,170 11.8 63,844 5.0 62,301 4.9 15,081 1.2 39,106 3.1
Note: Public sector agricultural GCF and GDP are from CSO, National Accounts Division; budgetary subsidies, are also from CSO
and are based on the economic and purpose classification of Government expenditure. Food and Fertiliser subsidies are from budget
documents of the Central Government. ‘All other agriculture subsidies’ in the table are defined as budgetary subsidies (CSO) plus
subsidy on indigenous urea minus food subsidy. This is because CSO classifies food subsidy as subsidy to agriculture but classifies
subsidies on indigenous urea as subsidy to industry.
14 Twelfth Five Year Plan
12.35. Another, very important reason why subsidies
should be rationalised and restrained is that some
of these subsidies could actually be doing harm. A
case for subsidies exists if there is clear evidence that
some input is being underused. Conversely, when
with there is clear evidence of overuse of a subsidised
input, there is a case to reduce or even eliminate the
subsidy. Today, there is clear evidence of overuse.
Data from all over India, especially from the prime
green revolution areas, show that high use of chemi-
cal fertilisers and power is causing excessive mining
of other soil nutrients and of groundwater, and that
this is also leading to loss of quality of both soil and
water. There is of course about 20–25 per cent of the
country’s arable area, located largely in North-East,
East and Central India, where use of these inputs is
so low that further intensification is desirable per se.
But with nearly 90 per cent of fertilisers and 95 per
cent of farm electricity currently being used outside
this area, there can be no doubt that the present sub-
sidies are actually encouraging practices that need to
be discouraged.
12.36. Any proposal for reducing subsidies will
be opposed by farmers on the grounds that output
will fall if the subsidy cut reduces input use. This is
true unless other investments are made simultane-
ously but such investments would indeed be facili-
tated by the resources released. Efforts were made
in the Eleventh Plan to encourage more efficient
practices without actually reducing the quantum of
subsidy. For example, many States have undertaken
separation of feeders so that electricity supply for
agricultural use can be treated differently from that
for rural non-agricultural use, and stricter schedul-
ing imposed on the former while maintaining its
lower price. Similarly, the Centre introduced a new
scheme, the ‘National Project on Management of Soil
Health & Fertility’ (NPMSH&F) to promote soil test-
ing and issue of soil health cards to farmers, aimed
particularly to spread awareness of micronutrient
deficiencies resulting from excessive and unbalanced
fertiliser use and to encourage balanced and judi-
cious use of chemical fertilisers in conjunction with
organic manures to maintain soil health and fertility.
Moreover, in order to rationalise fertiliser subsidies,
a nutrient-based subsidy (NBS) system was adopted
to subsidise fertiliser products uniformly on basis of
nutrient content, rather than set product-wise sub-
sidies and separate maximum retail prices (MRPs)
for each product. The objective was to reduce dead-
weight of the fertiliser control order, set nutrient-
specific subsidies that maintain desirable NPK
balance, and evolve a subsidy protocol to encourage
both development of new complex fertiliser products
(including micronutrients) and more investment in
the sector.
12.37. These initiatives have had some success in
particular regions, but they do not as yet show up in
national data in terms of higher additional output
per unit additional use of these inputs. Moreover,
NBS roll-out was seriously flawed since urea was
kept out of its ambit. Urea prices remain controlled
with only a 10 per cent rise at the time of adoption
of the NBS in 2010. Meanwhile prices of decon-
trolled products doubled. The fixity of the urea price
naturally worsened the NPK balance. Also, there has
been very little product innovation. The subsidy bill
has increased because resulting higher urea demand
has been met entirely by imports at a unit subsidy
twice that on domestic output, with little incentive to
expand domestic capacity. The NBS as rolled out has
been counterproductive because urea has not been
included.
12.38. As may be seen from Table 12.6, the fertiliser
subsidy is now much higher than all other subsi-
dies to agriculture put together. While this is partly
because fertiliser consumption rose over 30 per
cent during the Eleventh Plan, the main reason is
that world prices of all fertilisers and feedstock have
doubled since 2006. With world fertiliser prices very
sensitive to demand from India, which is not only
the world’s largest importer of fertilisers but also
dependent almost entirely on imports for feedstock,
improving efficiency of fertiliser use must be a the
Twelfth Plan focus, almost as important as the issue
of water use efficiency taken up in another chapter.
A New Road Map for Fertiliser Policy
12.39. A broad idea of what is necessary is evident
from a few key indicators about the price of urea,
the most important and politically sensitive fertiliser
Agriculture 15
in India. At the world level, urea prices had aver-
aged about 80 per cent of world wheat price during
the 25 years before 2005. Since then, they have been
fluctuating wildly at much higher levels and world
urea prices are now over 150 per cent of world wheat
price. In comparison, the price of urea in India has
been declining continuously in relation to wheat
MSP—from over 150 per cent during the 1980s, to 75
per cent in 2005, to only 41 per cent currently. While
MSP of wheat for 2012 was 90 per cent of April–June
average of world reference price of wheat, the MRP
for urea was only 21 per cent of world reference price
of urea.
12.40. Similarly, achieving the recommended
national 4:2:1 NPK balance has proved elusive, again
partly because urea (main source of N) is priced
cheap relative to other fertilisers. World prices of
DAP (main source of P) and MOP (main source of
K) have fluctuated around 150 per cent and 100 per
cent of world urea price over the last 30 years with no
obvious trend. Relative prices of P to N were similar
in India as globally, and K much cheaper, till decon-
trol in 1992 made these more expensive. The MRP
for DAP and MOP in India were 194 per cent and 92
per cent of urea MRP before NBS, after which these
have risen sharply again. Voluntary MRP for these
are now 380 per cent and 230 per cent of urea MRP.
Unless corrected soon, this large distortion in NPK
prices is bound to reduce crop productivity.
12.41. One way out of the present conundrum is to
bring urea into NBS and decontrol its prices. But this
has not been possible so far and fertiliser decontrol
both in 1992 and again in 2010 excluded urea with
counterproductive effect. The reason for this is not
just opposition to rise in urea prices, but also issues
related to domestic urea industry. For example, sub-
sidy provided to N for decontrolled fertilisers in
the present NBS formula is based on the weighted
average of subsidies on imported (around $320/
tonne) and indigenous (around $160/tonne) urea.
Three consequences would follow if urea prices
were decontrolled fully with the subsidy on both
imported and domestic urea equated to this (around
$200/tonne). First, the domestic urea industry as
a whole would get a windfall gain, and there may
be consequent audit objections, since average unit
subsidy on domestic urea is presently half that on
imported. Second, notwithstanding this, that part
of urea industry which uses feedstock other than gas
would complain that they could become unviable
since their present subsidy is more than the weighted
subsidy. Third, since post-subsidy price of urea
would tend to settle at import cost less the weighted
subsidy; this would, with world urea prices now
about $420/tonne, not only double from the present
MRP of `5,310 per tonne but also be subject to the
very large fluctuations in world urea prices that have
been evident since 2005.
12.42. Although political opposition to decontrol is
mainly on the third point above, the other points,
which relate to differences in costs of production
between different Indian producers and between
Indian costs and world prices, have historically been
at least equally important impediments to reform
in this sector. This is unfortunate since India’s fer-
tiliser industry, although at disadvantage on feed-
stock, is largely efficient and can play a key role both
in ensuring future nutrient supply and in the effort
to increase fertiliser-use efficiency. However, with
more than half of its revenues coming from subsidies
and with Government also allocating scarce feed-
stock cheaply, industry effort currently is more to
meet pre-set requirements and lobby, rather than to
either secure long-term feedstock sources or develop
new products and services for its customer base. This
needs to change, and one way that this can be done
is by reducing industry’s dependence on Central
subsidies, allowing greater space for it to set prices.
The industry’s present cost structure is such that no
subsidy would be required on over 70 per cent of
domestic urea production if urea MRP was allowed
to rise to MSP for wheat or paddy. This level of urea
MRP would reduce subsidy by about `15,000 crore
annually and bring domestic NPK price parities in
line with corresponding world parities while still
leaving absolute fertiliser prices in India at about half
international levels.
12.43. Of course, if this were all, urea prices would
more than double with all its negative consequences.
It would be politically unpopular even with the
16 Twelfth Five Year Plan
5–10 per cent extra increase in MSP that would be
required to compensate increases in cost of produc-
tion. There would definitely be some loss of output
as result of lower urea use and farmers unable to avail
MSP increase would suffer loss of income. But these
negatives can be neutralised and a win-win outcome
ensured if the saving in subsidy is ploughed back to
develop suitable location and crop-specific packages
with adequate price incentives so that farmers do
not suffer income loss and yet are encouraged to use
appropriate combinations not only of NPK but also
organic matter and required micronutrients.
12.44. However, for this, the architecture for pub-
lic intervention will need to go well beyond NBS.
Designing and contracting suitable packages will
require stability in prices of basic NPK in relation to
crop MSPs and also considerable location-specific
input, both scientific and operational. The Centre will
need to ensure some insulation of domestic prices of
straight fertilisers from their large world price fluc-
tuations and devolve many functions and most of the
savings from reduced urea subsidy to States. States, in
turn, will need to involve universities and local bodies
to design suitable local packages of products and sub-
sidies and then contract directly with industry.
Cereals Production and Build up of Stocks
12.45. Another major imbalance that emerged dur-
ing the Eleventh Plan was between production and
consumption of cereals, particularly rice and wheat
on the one hand which led to rising stocks and rising
consumption of edible oils and pulses which led to
imports. Cereals production increased by 37 million
tonnes (8 million tonnes coarse cereals, 11 million
tonnes rice and 18 million tonnes wheat) between
2006–07 and 2011–12. This was the result of sev-
eral factors, including the NFSM, an Eleventh Plan
initiative to increase production, combined with
remunerative prices and an expanding and effec-
tive procurement machinery in Madhya Pradesh
for wheat and Chhattisgarh for paddy. However,
although NFSM exceeded targets and per capita
production has bounced back beyond earlier highs,
much of the increase has been absorbed by increase
in Government stocks. There are lessons that need to
be learnt from this for the Twelfth Plan.
12.46. The rapid accretion of stocks between
2006–07 and 2008–09 was because cereals output
responded quickly to policy, both NFSM and MSP,
rising from 203 million tonnes in 2006–07 to 220
million tonnes, accompanied by even larger increase
in procurement, from 36 million tonnes to 59 mil-
lion tonnes, while off-take from public stocks rose
only from 37 to 39 million tonnes. Consequently,
market availability declined during this period,
increasing grain prices, the dominant source of food
inflation till 2009–10 (Table 12.8). Availability con-
tracted further in 2009–10 because of drought which
caused output to fall back to 203 million tonnes.
Rice and wheat relative prices eased somewhat in
the subsequent two years because output increased
even more rapidly than during 2006–09 to reach 240
million tonnes in 2011–12 and because this time rise
in procurement (to nearly 73 million tonnes) was
less than output and off-take increase (to 56 million
tonne) was relatively much more. Nonetheless, pro-
curement exceeded off-take throughout the Eleventh
Plan, even during 2009 drought, and present stocks
are clearly too high. Costing about `5 per kg per year
to store, these are tying up huge resources that could
have been put to better use.
12.47. One important point to emerge is that
although food inflation is usually ascribed to pro-
duction shortfalls, policy decisions on MSP and on
pricing and quantum of PDS and open market sales
can be even more important. This is of course true
of rice and wheat prices that are directly affected by
such policies, but there are indirect effects as well.
For example, milk, eggs, fish and meat had almost no
effect on food inflation from 2004–05 till 2008–09,
but have contributed most to food inflation subse-
quently (Table 12.8). As discussed earlier, much of
this was due to feed and fodder shortages that the
2009 drought exacerbated. But the high build-up of
rice and wheat stocks may in this context have con-
tributed additionally. Substitution effects from lower
availability of rice and wheat appear to have pushed
up real prices of coarse grain to levels that compare
with and most likely influenced inflation in livestock
products. To maintain rapid agricultural growth, it
will be necessary to continuously assess both MSP
and trade policy in light of domestic production
Agriculture 17
trends, paying attention to such wider linkages, so
as to minimise undue production imbalance and the
inflationary pressures resulting from these.
12.48. Another important and related issue is the
likely future demand for food. The Twelfth Plan
Working Group on Crop Husbandry, Demand
and Supply Projections, Agricultural Inputs and
Agricultural Statistics has made projections for
foodgrains and other food items by the terminal year
of the Twelfth Plan, that is, 2016–17 (Table 12.9)
which would suggest that present levels of cereals
production already exceed likely demand at the end
of the Twelfth Plan. These projections are based on
actual past patterns of observed demand and the fact
that cereals consumption per capita has declined
since at least mid-1990s. However, it is also the case
that India has very high levels of malnutrition and,
although there are many reasons for this, deficiencies
in calorie intake remain one of the most important.
With cereals supplying over 50 per cent of total calo-
rie intake even now, falling cereals consumption is
the main reason why per capita calorie intake has not
increased despite rising incomes. It is not just that the
share of cereals in total food expenditure is falling;
even poor people are reducing the share of income
spent on all foods in order to meet other non-food
needs. In such a situation, where there is a disjunction
between such a basic element of human development
as nutrition and other demands in an increasingly
consumerist society, there is need to ensure that min-
imum nutrition requirements are actually met. This
is the goal of the proposed National Food Security
Act (NFSA) under which a majority of the popula-
tion will be entitled to some very cheap cereals. This
is likely to increase cereals demand from those pro-
jected in Table 12.9, but nonetheless cereals demand
is unlikely to rise much faster than population.
12.49. This means that agricultural production
must diversify during Twelfth Plan so as to satisfy
both tastes and nutrition. In particular, MSP policy
should be more restrained for rice and wheat and
made more effective in case of pulses and oilseeds
where India is a net importer. Although MSP for
pulses and oilseeds have been increased substan-
tially in recent years, farmers are still not encouraged
enough to put in the effort and resources required
to substitute for current imports of these commodi-
ties. This is primarily because procurement efforts in
these commodities, which are currently not part of
Public Distribution, simply do not offer farmers the
certainty that they have from procurement effort in
rice and wheat.
TABLE 12.8
Real Prices of Agricultural Produce
(WPI commodity/WPI all commodities, 2004–05 base)
2004–05 2005–06 2006–07 2007–08 2008–09 2009–10 2010–11 2011–12
Rice 100 101 99 105 112 121 117 110
Wheat 100 101 112 115 117 127 120 108
Coarse Cereals 100 107 110 115 113 123 122 136
Pulses 100 108 134 124 124 146 137 129
Vegetables 100 109 103 118 113 124 128 115
Fruits 100 99 99 98 102 104 114 119
Milk 100 97 98 98 98 112 123 124
Eggs, Fish and Meat 100 102 101 100 99 116 133 137
Oilseeds 100 86 85 97 104 103 99 102
Sugarcane 100 96 91 87 80 81 109 107
Fibres 100 92 91 96 109 107 138 140
All Agriculture 100 99 101 104 106 115 123 122
Note: All agriculture comprises food and non-food primary articles.
18 Twelfth Five Year Plan
Public Distribution System
12.50. The Eleventh Plan period witnessed sig-
nificant improvements in administration of the
Targeted Public Distribution System (TPDS). A
nine-point action plan has been useful in elimina-
tion of large number of ghost ration cards, reduction
in leakages and greater transparency in the con-
duct of TPDS operations. While carrying forward
these initiatives with greater vigour, there is a need
for rejuvenated approach towards the TPDS dur-
ing the Twelfth Plan period. The foremost amongst
those is the move towards facilitating rights-based
approach under TPDS by enacting the National
Food Security Bill (NFSB). The Bill has been intro-
duced in the Parliament and is expected to provide
food and nutritional security, in human life-cycle
approach, by ensuring access to adequate quantity of
quality food at affordable prices to people to live a
life with dignity. This would require strengthening of
existing infrastructure and taking up new initiatives
and schemes. Reforms in the TPDS would be crucial
as it would bring about more efficiency in the sys-
tem with enhanced transparency and accountability.
Entitlements of foodgrains are expected to shift from
per household basis to per capita basis. One of the
important challenges for implementation of NFSB
would be proper identification of beneficiaries which
may be based on the ongoing Socio-economic and
Caste Census. Another important initiative required
during the Twelfth Plan is the end-to-end comput-
erisation of the TPDS operations with the help of a
comprehensive Plan scheme. This shouldnot only
address current challenges but also facilitate proper
tracking foodgrains and lifting by consumers using
Aadhaar numbers or adopting innovative methods
like smart cards.
12.51. The up-scaling of the TPDS for proper imple-
mentation of NFSA is an opportunity to expand PDS
coverage to include coarse cereals, pulses and edible
TABLE 12.9
Demand and Supply of Food Commodities during the Twelfth Plan
(in million tonnes)
Crop/Group of Crops Projected Demand (million tonnes) Projected Supply
(million tonnes)
2016–17
Actual Production (million tonnes)
2016–17 2020–21 2006–07 2011–12
Rice 110 117 98–106 93 104*
Wheat 89 98 93–104 76 94*
Maize 19 22 15 22*
Coarse Cereals 36 38 42–48 34 42*
Cereals 235 253 240–251 203 240*
Pulses 22 25 18–21 14 17*
Foodgrains 257 277 258–272 217 257*
Oilseeds/Edible oils 59 71 33–41 24 30*
Sugarcane/Sugar 279 312 365–411 355 358*
Vegetables 161 189 116 147**
Fruits 97 124 59 75**
Milk 141 173 103 122**
Fish 11 14 6.9 8.3**
Meat, other than poultry 3.7 5.0 2.3 2.7**
Poultry Meat 3.3 4.3 2.2@
Source: Twelfth Plan Working Group on Crop Husbandry, Demand and Supply Projections, Agricultural Inputs and Agricultural
Statistics; *4th advance estimate for 2011–12; **Production for the year 2010–11; @Production 2010–11 for only commercial poultry
meat.
Agriculture 19
oils and thereby bring scale and certainty to their
procurement. However, given that consumption and
production patterns vary greatly from state to state,
this is probably something that can be done better
by the States themselves than by any Central agency.
Nonetheless, as part of PDS reform, the Central
Government could moot the idea not only of decen-
tralised procurement but also the innovative meth-
ods of transferring food subsidy. One option could
be that, while the Centre continues to bear respon-
sibility for delivering adequate quantities of cereals
to every State, these may be priced close to market
and food subsidy transferred to the States as recom-
mended by the High Level Committee on Long Term
Grain policy in 2002. Alternatively, subsidy could be
credited directly to the bank accounts of the benefi-
ciaries or the FPS dealers using authentication mech-
anism of Aadhaar numbers. Other option could be
to have a comprehensive electronic benefit trans-
fer system whereby subsidy is loaded on to a smart
card and consumers have a choice of commodities
or fair price shops. These initiatives are expected to
bring down leakages significantly as there would be
little incentive left for intermediaries to divert the
PDS foodgrains into the open market. While imple-
menting these measures, it would be pertinent to
address the issue of viability of FPS and improve
their functioning. The Gross Budgetary Support for
the Department of Food and Public Distribution is
`1,523 crore for the Twelfth Five Year Plan.
Consumer Welfare and Protection
12.52. Consumer welfare has been one of the core
concerns of the Government since the post-Inde-
pendence period. Policies have been designed and
legislations enacted to protect the interests of con-
sumers and grant them the rights of choice, safety,
information and redressal. For the Twelfth Plan
period, it would be apposite to expedite formula-
tion of a comprehensive National Consumer Policy
in conformity with the UN guidelines on consumer
protection. Secondly, there would be a need to revisit
existing legislations administered by the Department
of Consumer Affairs so as to bring the provisions in
line with the changes in the economy, trade, business
and consumer expectations. This, inter alia, includes
amendments in Bureau of Indian Standards Act and
Forward Contracts (Regulation) Act. There is also a
need to conceptualise a National Policy for Quality
Infrastructure covering standardisation, testing and
legal metrology so as to provide the infrastructure
for development of definitive standards, systems
of legal metrology and conformity assessment. The
commodity futures markets need to be strengthened
to enable it to serve the dual purpose of price dis-
covery and risk management. Besides, a structured
system of information, counselling and mediation
need to be put in place with emphasis on rural con-
sumers. The data analysis and price monitoring also
need to be more comprehensive and structured so as
to make informed decisions on market intervention.
The Gross Budgetary Support for the Department
of Consumer Affairs is `1,260 crore for the Twelfth
Five Year Plan.
MAJOR CHALLENGES AND PRIORITIES
DURING THE TWELFTH PLAN
12.53. The main lesson from the performance in
the Eleventh Plan is that while there has been a wel-
come turn-around from the deceleration that was
evident in the decade to 2005, and while several
indicators have shown marked improvement and
potential to build upon, several policy imbalances
exist that can prove to be major handicaps. There
are also other formidable challenges, for example,
a shrinking land base, dwindling water resources,
the adverse impact of climate change, shortage of
farm labour, and increasing costs and uncertainties
associated with volatility in international markets.
The Twelfth Plan will need to face these challenges
boldly.
12.54. The key drivers of growth will remain:
1. viability of farm enterprise and returns to invest-
ment that depend on scale, market access, prices
and risk;
2. availability and dissemination of appropriate
technologies that depend on quality of research
and extent of skill development;
3. Plan expenditure on agriculture and in infra-
structure which together with policy must aim to
improve functioning of markets and more effi-
cient use of natural resources; and
20 Twelfth Five Year Plan
4. governance in terms of institutions that make
possible better delivery of services like credit,
animal health and of quality inputs like seeds,
fertilisers, pesticides and farm machinery.
12.55. In addition, certain regional imbalances
must be clearly addressed. A national priority from
view of both food security and sustainability is to
fully extend Green Revolution to areas of low pro-
ductivity in the eastern region where there is ample
ground water, and thereby help reduce water stress
elsewhere. Rain-fed areas continue to be at a disad-
vantage, and their development still requires some
mindset changes.
FARM VIABILITY: SECURING ECONOMIES OF
SCALE AND BETTER MARKET ACCESS AND
RETURNS
12.56. Farm profitability is central to achieving rapid
and inclusive agricultural growth. Improved agricul-
tural prices (Table 12.8) were an important driver
in success of the Eleventh Plan. But slower growth
of demand in some major sub-sectors (Table 12.9),
combined with higher input costs due to world price
trends, could cause this driver to be more muted in
Twelfth Plan unless offset by increase in productiv-
ity. The reports of the Commission on Agricultural
Costs and Prices show low net farm revenue for
many crops, particularly rain-fed. Diversification
towards higher value crops and livestock remains
the best way not only to improve farm incomes and
accelerate growth, but also to reduce stress on natu-
ral resources which form farmers’ production base.
This needs better infrastructure and emphasis on
integrated farming systems, combining crops and
livestock, including small ruminants, for different
location-specific endowments. This also requires
innovative institutional and contractual arrange-
ments so that smallholders have the requisite tech-
nology and market access.
(A) The Centrality of Smallholdings
12.57. Small farms typify Indian agriculture and this
predominance continues to increase. Agriculture
Census 2005–06 reported the average size of an
operational holding at only 1.23 hectare, with farms
less than 2 hectares comprising 83 per cent of all
holdings and 41 per cent of area. No agricultural
development Plan can be credible unless it is relevant
to this vast majority of farmers. Also, 12 per cent of
rural households are now female headed with even
smaller holding, and the feminisation of agriculture
poses special problem.
12.58. An important step that would help small and
marginal farmers is to reform the tenancy laws. These
were originally meant to help small and marginal
farmers but now operate against them. Even limited
legalisation of agricultural tenancy and freeing the
land lease market with proper record of ownership
and tenancy status will help such farmers. Some small
farmers may lease out land to shift to other occupa-
tions, provided they were assured that they could
resume the land if they wished. Some large farms may
lease in land and even employ the small owner on his
own farm to grow specific crops under supervision.
Moreover, a stark reality of India’s farm situation
today is that while land hunger continues unabated
amongst the poor and uneducated, especially female,
educated young men in richer households are leaving
agriculture. The rapid rise of wages for rural casual
labour during the Eleventh Plan period has further
increased the relative cost of cultivating with hired
labour. Many large and absentee owners are leaving
land under-cultivated which could be leased out if
they were assured of retaining ownership.
12.59. The Eleventh Plan had set out in detail the key
elements necessary to make land policy effective for
equity and efficiency. These are:
1. Modernisation of land records must be both
time-bound and comprehensive. Full digitisa-
tion of land records, including GIS maps, should
be completed with required survey/settlement
by end of the Twelfth Plan, during which pilots
should also be initiated to enable movement
towards a Torrens system in the Thirteenth Plan.
2. Although there is no strong case to change
existing ceiling laws, there are several pending
implementation issues that can and should be
addressed as land records are modernised.
3. Land issues in tribal areas require urgent and
special attention.
Agriculture 21
4. Although no major new redistribution of agri-
cultural land is likely, it is possible to ensure that
all rural households have at least homestead-
cum-garden plots.
5. Tenancy should be legalised in a ‘limited’ man-
ner. Prescribed rents, if any, should allow a band
wide enough for rents to be contracted mutually
over contract periods long enough to encourage
investment by tenants while protecting owner-
ship rights so that landowners have incentive to
lease out land rather than keep this underutilised
or fallow.
6. Small and marginal farmers, particularly women,
lack adequate access to credit, extension, insur-
ance and markets. While every effort should be
made to strengthen delivery of public services in
their favour, the intervention likely to be most
potent is support to group action by farmers
themselves. It was suggested that subsidies in
Government schemes give preference to group
activity.
12.60. Most of these issues, as well as the associ-
ated matter of consolidating fragmented holdings in
course of survey/settlement, are in the State domain
and progress is uneven. Ongoing efforts of Ministry
of Rural Development (particularly, Department of
Land Resources) and Ministry of Tribal Affairs also
address some of these issues, although not necessar-
ily related directly to agriculture. However, there was
little progress during the Eleventh Plan on the sug-
gestion to redesign schemes so that subsidies favour
group activity among small and marginal farmers.
In fact, a criticism of the Eleventh Plan schemes has
been that these diluted earlier specific support for
such farmers.
12.61. Almost all the Twelfth Plan working groups
set up by the Agriculture Division of Planning
Commission have strongly recommended that the
Twelfth Plan should put special focus on building
capacity that encourages group formation and col-
lective effort by small, marginal and women farm-
ers, rather than simply provide additional subsidy to
individuals in these categories. Existing group activ-
ity takes many forms depending on purpose. From
lower tiers of formal cooperative structures in credit,
marketing, dairy and fishery, extending to self-help
groups (SHGs), farmer clubs, joint liability groups
(JLGs) and, more recently, to producer compa-
nies. For simplicity, these can all be termed Farmer
Producer Organisations (FPOs).
12.62. The Twelfth Plan Working Group on Disad-
vantaged Farmers, including women has provided
evidence-based assessment of the ground situation.
New insecurities of tenure from urbanisation and
industrialisation are impacting small farms which
are efficient but lack adequate access. Its main rec-
ommendation is that a collective approach should
be promoted in agriculture for small and women
farmers at all points of the value chain. It cites many
successful examples that stretch from the Gambhira
farmer’s collective in Gujarat, initiated in 1953 and
still going strong, to several initiatives of women’s
group farming in Andhra Pradesh such as one ini-
tiated by Deccan Development Society in 1989 and
another initiated by a UNDP-GoI project in 2001
and sustained since 2005 by the Andhra Pradesh
Mahila Samakhya (APMSS). The most recent suc-
cess story is the collective farming initiative launched
in 2007 under Kudumbashree jointly by Kerala
Government and NABARD. Success of these in
increasing production and empowering women
point to a need for States to experiment with (i)
channelising NGO strength in mobilising people to
encourage small holders to shift from an individual
to a group-oriented approach; and (ii) facilitating
land access by groups of disadvantaged farmers with
appropriate arrangement for provision of inputs,
including credit. Financing such experiments should
be permissible under RKVY.
12.63. Since land access was the most difficult part
in all the above efforts, the Working Group has sug-
gested that, except distribution of homesteads to the
homeless which should have the highest priority,
future Government land distribution should be to
groups of landless and women farmers rather than
to individuals. This could take the form of long-term
lease which would expire if the group broke down,
for which it would be necessary to legalise tenancy
at least for this purpose. Moreover, an innovative
suggestion of both this Working Group and the
22 Twelfth Five Year Plan
Working Group on Marketing is to set up Public
Land Banks (PLB) at Panchayat level. Landowners
could ‘deposit’ uncultivated land and receive regular
payments from the PLB varying by period of deposit
and rents actually obtained with the guarantee that
this ‘deposit’ can be withdrawn with suitable notice.
The PLB could then lease out to small and women
farmers or their collectives. A form of ‘limited’ ten-
ancy aimed at fuller agricultural use of available farm
land and to slow down speculation in such land for
future non-agricultural use, this idea excludes leas-
ing to corporate entities. However, to set up PLBs
will require some initial seed capital and a clear legal
framework. If States provide the legal framework
and the necessary guarantees, the seed capital could
also be permissible under RKVY.
12.64. Access to finance, especially by small hold-
ers, is crucial for improved agricultural performance.
Credit flow doubled in the Eleventh Plan but mainly
by credit deepening, with little increase in farmer
coverage and still leaving 60 per cent of farmers
without institutional credit. There are several ways
in which credit access can be widened. Primary
Agricultural Co-operative Societies (PACS) still have
the widest coverage and must be made more member-
driven and less dependent on higher tiers. Joint
Liability Groups (JLGs) are still the most appropri-
ate mechanisms for farmers and livestock owners
who have productive assets but cannot access credit
because they have no land records, are located too far
from banks or have last mile problems. The SHG-
Bank Linkage programme is still the most appropri-
ate financial mechanism to extend credit to marginal
and dry land farmers as this allows better income
smoothing since SHGs provide space for diversity
in loan purposes and sizes, enabling financing of a
variety of activities that such families select as part of
livelihood strategies when income from agriculture
is low.
12.65. Commercial banks have not supported JLGs
or SHGs as much as they could have, preferring
instead to comply with priority sector requirements
by offering bulk finance through Non-Banking
Financial Companies (NBFC) and Micro-Finance
Institutions (MFI). However, NBFC–MFI lending
is mainly individual and based on standard prod-
ucts imposing short repayment schedules which
did not dovetail with cash flows from agriculture.
This caused multiple borrowings, increased risk
to borrowers and led to a backlash. The solution is
to restore the principle of group decisions by bor-
rowers both in the borrowing process and in use of
borrowed resources. This need not exclude NBFC–
MFI so long as shortcuts are avoided. For example,
NABFINS, a NBFC promoted by NABARD, lends
only to groups and uses a Business Correspondent
(BC) Model that also provides working capital to sec-
ond level institutions like cooperatives and producer
companies which aggregate, add value and market
commodities. The SHGs have a stake in these second
level institutions which help expand their livelihood
base.
12.66. Small and marginal farmers face problems
not only with shrinking land assets and with credit;
they have difficulty in accessing critical inputs for
agriculture such as quality seeds and timely techni-
cal assistance. In this situation, FPOs offer a form
of aggregation that leaves land titles with individual
producers and uses the strength of collective plan-
ning for production, procurement and marketing
to add value to members’ produce through pooled
resources of land and labour, shared storage space,
transportation and marketing facilities. These also
improve bargaining power of small farmers and,
most importantly, reduce transactions costs of banks
and buyers to deal them. Investing in such group
efforts has strong externalities.
12.67. The Twelfth Plan Working Group on Agri-
cultural Marketing, Infrastructure, Secondary
Agriculture and Policy for Internal and External
Trade has in fact suggested that an institutional
development component, along lines of NABARD’s
farmer club scheme, be introduced in all Centrally
sponsored schemes to specifically target FPO for-
mation among small producers, especially tribals,
dalits and women. It notes that a majority of FPOs
that are likely to emerge as a result of such an inter-
vention will remain focused on addressing issues of
crop planning, technology infusion, input supply
and primary marketing. But, with adequate support
Agriculture 23
for business development, about one fourth to a
third would seek to leverage presence further up the
value chain, most likely at the lower end (for exam-
ple, setting up pack houses, grading centres, small
cold stores, drying or quick freezing plants). Larger
FPOs, for example, existing cooperatives could pro-
vide this support and in fact could aim bigger, but
issues may be different. For example, the National
Dairy Development Board’s SAFAL has had only
limited success although the wide network and logis-
tics of milk cooperatives make these obvious incuba-
tors for village-level aggregation of other perishable
products. Therefore, the Twelfth Plan must try to
mainstream support for FPO formation and capac-
ity building using all credible agencies for the pur-
pose: existing cooperatives, NABARD and the Small
Farmers’ Agribusiness Consortium (SFAC).
(B) Issues in Expanding Agricultural
Marketing and Processing
12.68. A major problem facing cultivators is that they
do not get remunerative prices because of uncer-
tainties caused by inadequate market information,
unnecessary controls, lack of physical infrastruc-
ture and price volatility—both domestic and global.
In order to provide adequate incentives to farmers,
the Twelfth Plan will have to focus on leveraging the
required private investment and also policies that
make markets more efficient and competitive.
12.69. Reforming the Agricultural Produce Market-
ing Committee (APMC) Acts should therefore have
priority as emphasised in the Eleventh Plan and the
Mid-term Appraisal. The introduction of the Model
Act in 2003 was directed towards allowing private
market yards, direct buying and selling, and also to
promote and regulate contract farming in high-value
agriculture with a view to boost private sector invest-
ment in developing new regularised markets, logistics
and warehouse receipt systems, and in infrastructure
(such as cold storage facilities). This is particularly
relevant for the high-value segment that is cur-
rently hostage to high post-harvest losses and weak
farm-firm linkages. While many States have moved
towards adoption of the Model Act, actual progress
has been limited. Often the permissions given are
subject to unacceptable restrictions which make
them ineffective. Vested interests in maintaining the
existing mandi system intact are very strong. In view
of the slow progress, the Ministry of Agriculture
set up a Committee of State Ministers in-charge of
agricultural marketing. The Committee submitted
a ‘First Report’ in September 2011 which has been
circulated to all States and UTs. The report calls for
‘speedy reforms’ of Agricultural Produce Market
Committees (APMC) Act across different States
along with ‘time-bound development’ of marketing
infrastructure. Calling for a ten-year perspective plan
to improve infrastructure of backward and forward
linkages for agriculture production and marketing,
the report has suggested that agricultural marketing
be given access to priority sector lending. Thus, the
process to secure necessary amendments in APMC
Acts and thus create the enabling legal environment
is still ongoing. The Twelfth Plan will need to fast-
track modernisation of mandi infrastructure, with
adequate provision of communication and transpor-
tation, and also empower small producers through
their organisations and marketing extension.
12.70. Post-harvest losses, probably average 10 to
25 per cent, being particularly high in horticul-
ture, livestock and fisheries. Very large investments
are required in developing agricultural markets,
grading and standardisation, quality certification,
warehouses, cold storages and other post-harvest
management of produce to address this problem.
Such large investments are possible only with the
participation of the private sector which, in turn,
require freedom from controls on sales/purchase of
agricultural produce, its movement, storage and pro-
cessing. Many new initiatives were taken up during
the Eleventh Plan, including both terminal markets
under Public–Private Partnership (PPP) mode in the
National Horticulture Mission (NHM) and a model
of public sector investment combined with profes-
sional management by stakeholders as exemplified
by NDDB’s fruit and vegetable wholesale market at
Bengaluru and APEDA’s Modern Flower Auction
Houses.
12.71. The Twelfth Plan Working Group on Horti-
culture and Plantations which studied the matter
in detail has observed that participation by traders,
24 Twelfth Five Year Plan
wholesale buyers, exporters and processors has actu-
ally been very low in all these new initiatives because
of reluctance to be subject to transparent operating
procedures. It has come to the conclusion that the
present model of Market Sector Reforms which is
trying to create space for a new set of modern mar-
kets in coexistence with much less transparent pro-
cedures in APMC regulated markets is unlikely to
result in any major private investment in modern
marketing infrastructure. In its view, to break the
barrier of reluctance to participate in business of
modern markets it is necessary as part of marketing
reforms to define and introduce a common Standard
Operating Procedure (SOP) for all markets: both
the new modern markets envisaged as well as exist-
ing regulated markets under APMC Acts. Therefore,
it proposes that managements of existing regulated
markets must be made to adopt the modern market-
ing model: that is, undertake the auction function
themselves and all payments to sellers ensured by the
Market Committee through a system of bank credit
limits of the buyers. This would involve redefining
the role of APMC management with introduction
of SOP and an open policy of registering buyers;
permitting setting up of private markets in APMC
areas; removal of interstate barriers to allow an uni-
fied national market, either by using entry 42 of the
union list or at least for sealed container cargo; and
single point levy at first point of sale.
12.72. While this entire area of regulation of agri-
cultural product markets is thus in some flux and
movement is still slow, an important initiative in
the Eleventh Plan involved setting up a Warehouse
Regulatory and Development Authority (WRDA) to
set standards and modernise warehousing. The aim
is enlarged use of negotiable warehouse receipts that
can be linked to e-trading, both spot and future, so
that farmers have an alternative to mandis. However,
so far less than 300 warehouses have been registered
and there is yet no effective coverage of perishable
products. Cold storages have recently been brought
under WRDA but minimum standards are yet to be
set. This may be as difficult as meeting the require-
ment of cold storage additional capacity estimated
at around 32 million tonnes over the next decade.
Present cold storages are of inadequate quality, most
domestic component manufacturers do not have
certified performance ratings, BIS standards do not
exist for many critical components of cold chain
infrastructure and critical storage conditions pre-
scribed internationally for cold chain structures have
yet to be validated for many Indian agro-climatic
conditions or cultivars.
12.73. Although India ranks second in world pro-
duction of fruits and vegetables, only 6–7 per cent of
this is processed, compared to 65 per cent in US and
23 per cent in China. A well-developed food process-
ing industry is expected to increase farm-gate prices,
reduce wastage, ensure value addition, promote crop
diversification, generate employment opportunities
and boost exports. Further, issues concerning food
processing industry are dealt with in Chapter 9.
12.74. The private sector needs to invest much more
in creation of warehousing capacity, cold storages
and supply chains. In this context, the Planning
Commission had also set up a Committee on
Encouraging Investments in Supply Chains includ-
ing provision for cold storages for more efficient
distribution of farm produce, which submitted its
report in May 2012. The Committee has indicated
that with regard to foodgrains, the Department of
Food and Public Distribution has initiated steps
for creation of 17 million tonnes of additional stor-
age capacity including 2 million tonnes in the form
of silos. This additional capacity is expected to take
care of public sector’s warehousing requirement dur-
ing the Twelfth Plan. The Committee has recom-
mended to exempt perishables from the purview of
APMC, provide freedom to farmers and make direct
sales to aggregators and processors, introduce elec-
tronic auction platforms for all the mandis where
daily transaction is above `10 crore, and replace
licensees of APMC markets with open registration
backed by bank guarantees to ensure wider choice to
growers and to prevent cartelisation by traders. The
Committee has recommended encouraging large-
scale private investments in the cold chain sector
using PPP Model with Viability Gap Funding besides
providing budgetary support and capitalising on
schemes such as Rural Infrastructure Development
Fund (RIDF). An Inter-Ministerial Group on Cold
Agriculture 25
Chain Infrastructure and Allied Sectors has been set
up by the Government to facilitate implementation
of these recommendations.
12.75. There is merit in planning part of such invest-
ment as infrastructure to reduce waste and enlarge
markets rather than wait for corporate investment in
processing or retail. The extent of wastage is not eas-
ily ascertainable and new research suggests that some
of the older estimates were quite likely exaggerated,
especially if quality loss leading to lower prices is not
counted as waste. Also, the experience so far is that
corporate entrants have not fared very well in the
competition with incumbent traders since existing
trading margins, although high, are in fact much less
than, for example, in the USA. However, there is no
doubt that modern storage and logistics do reduce
waste. If such infrastructure also improves farm
shares, social returns could exceed the private and
justify subsidies. Subsidy rates, increased recently
to 25–50 per cent, are now quite high and policy
should be clear on whether the goal is just capacity
targets or wider market access and improved mar-
keting efficiency. If the latter, eligibility criteria need
to be specified and also linked clearly with market-
ing reform. Social returns to subsidy will be more if
access to both the infrastructure and to markets is
more open. The real test is whether these can spawn
and sustain enterprise in aggregation, grading and
processing at the bottom, preferably by FPOs, but
also by lead farmers and even by existing commis-
sion agents.
12.76. The recent decision to open up debate on FDI
in retail must be seen in this context. With multi-
brand retail already open to the domestic corpo-
rate sector, FDI in retail should not be viewed as an
entirely new disruptive factor affecting traditional
retail. It will only add depth and competition to the
present situation. Deeper pockets and technology,
and the compulsions to invest in supply chain devel-
opment which is not there for domestic modern
retail may accelerate investment in logistics, quicken
consolidation of retail trade and create new pro-
prietary supply chains. It must be emphasised that
FDI alone will not resolve back-end issues related
to modernising agricultural markets that have so
far muted the domestic corporate effort and invest-
ment. FDI has an added potential to link farmers to
wider markets by expanding exports. However, the
Eleventh Plan had also noted the legitimate concern
that if front-end investment outpaces backward
linkage, the outcome could instead be more imports
and lower farm prices. The introduction of FDI will
increase, not lessen, the importance of priorities
identified above: marketing reforms, aggregation
at the bottom and public funding of stand-alone
infrastructure.
12.77. With less than 40 per cent of farm produce
presently consumed in urban areas and much less
processed, use of public funds to improve market
efficiency will have a positive effect on farm growth.
There are benefits in coordinating this effort with
other steps to encourage corporate investment in
this area. For example, the NHM was designed
based on a concept of adequately sized area clus-
ters so that processors could plan capacities based
on anticipated future fruit production that would in
turn ensure markets for farmers when trees finally
bore fruit. But processors have preferred to wait and
watch while farmers, not sure of adequate market for
any single crop, have usually chosen to diversify their
production basket. Most clusters have therefore not
developed in the manner intended. A larger thrust to
modernise processing and retail will require bringing
more synergy between corporate actors and farmers,
particularly in infusion of technology and capital at
the farm end.
12.78. The Ministry of Agriculture has proposed a
RKVY window for Public–Private Partnership for
Integrated Agricultural Development (PPPIAD) for
States to facilitate ‘large scale integrated projects led
by private sector players with a view to aggregating
farmers and integrating agricultural supply chains.’
The idea is to leverage corporate interest and mar-
keting solutions to part-finance mobilisation of
expertise to form FPOs and infuse technology and
capital to enhance farm production and value addi-
tion. This is in line with views of various working
groups, and needs to be piloted. But since this will
in effect be public subsidy to contract farming, it
is necessary to be clear on what should and should
26 Twelfth Five Year Plan
not be subsidised. First, project selection should
go beyond where contract farming would normally
occur; that is, give priority to proposals involv-
ing FPOs composed mainly of small and marginal
farmers in less accessible and rain-fed locations.
Second, tangible assets that are property of the cor-
porate partner cannot be subsidised by RKVY. Only
stand-alone assets of farmers or their FPOs should
be subsidised. Third, a transparent project selection
mechanism will be required to rank proposals, for
example, by assigning marks based on States’ priori-
ties to deliverables offered, with outcome indicators
for subsequent monitoring. If this works, it might be
a game changer, not only to form FPOs and widen
farm-industry linkage but also to fast-track desir-
able changes in cropping patterns.
(C) Credit and Cooperatives
12.79. The Twelfth Plan Working Group on
Institutional Finance, Cooperatives and Risk
Management has projected the demand for credit
during Twelfth Plan at between `31,24,624 crore
and `42,08,454 crore, depending on the methodol-
ogy used. At the higher end of these estimates, that
is, assuming agriculture growth at 4 per cent and
ICOR at 4.5, the size of the credit requirement in
the Twelfth Plan period translates into about double
the flow during the Eleventh Plan, that is, `8 lakh
crore per year, as against the level of `4.68 lakh crore
achieved during 2010–11.
12.80. This projected level of credit appears feasible
in view of the Eleventh Plan achievement. As against
credit flow of `2,29,401 crore in agriculture during
2006–07, the total institutional credit flow to agri-
culture in 2011–12 was `5,11,029 crore. But despite
this very robust growth, many issues continue to
confront agricultural credit, particularly in the area
of financial inclusion necessary for ensuring inclu-
sive growth. Agricultural credit continues to neglect
certain sub-sectors, the flow of term lending is dwin-
dling and there is inordinate increase in the share of
indirect finance. Credit dispensation by institutions
to small and marginal farmers has been disappoint-
ing, including by the Cooperative Credit Structure
(CCS) which has traditionally catered to relatively
smaller farmers.
12.81. On these issues, the working group has
pointed to the need for more objective assessment of
credit requirements for direct and indirect financ-
ing of agriculture and also to redefine the priority
lending sectors. It has suggested updating of KCC
databases with priority analysis of KCC percent-
age provided to the small and marginal farmers and
more intensive use of ICT applications to track the
flow of credit and transmission losses, with refer-
ence to such farmers.
12.82. Some ongoing and emerging changes appear
to hold promise of triggering off better financial
inclusion for banking activity:
1. The Core Banking Platform provides seamless
connectivity which, with the telecom infrastruc-
ture, brings a new architecture to access financial
services.
2. The BC model, together with mobile phones, can
along with post offices provide significant last-
mile connectivity.
3. Mandating payments (for example, of wages
under the National Rural Employment
Guarantee Act, pension dues and so on) through
formal channels, including post offices, is help-
ing to reach financial services to those so far not
reached.
4. The enormous economies of scale generated
by SHG Federations (each of 150–200 SHGs) is
enabling banks to give larger loans for housing
and health facilities for their members. A variety
of insurance services are also being made avail-
able, including life, health, livestock and weather
insurance.
5. The UID project of the GoI with biometric
identity may facilitate easier opening of bank
accounts, although this has yet to happen.
12.83. The financial health of the Long-term
Cooperative Credit Structure (LTCCS) continues to
deteriorate with accumulated losses of `5,275 crore
by March 2010, resulting in erosion of 59 per cent in
owned funds. A quick decision is warranted on the
implementation of the revival package for the LTCCS
too on the lines of the Short-term Cooperative Credit
Structure (STCCS).
Agriculture 27
12.84. Notwithstanding, the relatively improved
financial health of the STCCS following implemen-
tation of the revival package, its share in total insti-
tutional credit continues to show a declining trend.
The package for STCCS was conditional to radical
restructuring of coops into autonomous, democratic
and self reliant institutions without intrusion of
politics and bureaucracy. The States have not imple-
mented these recommendations with full serious-
ness. Therefore, Cooperative Sector Reforms should
continue to be insisted upon during the Twelfth
Plan.
12.85. In the interest of strengthening of the ground
level tier, there is also need for considering disci-
plined refinancing of PACS as stand-alone institu-
tions, provided that these are member driven. PACS
still have the widest coverage and the recent develop-
ment of financing PACS through commercial banks
needs to be widened, deepened and strengthened,
especially in cases where higher tiers of the STCCS
are weak and not in a position to fund them.
(D) Farm Income Variability: Managing World
Price Volatility and Climate Risk
12.86. The Eleventh Plan document had noted that
farmers are now subject to much greater risk than
what Indian farmers have been used to in the past.
The frequency and severity of risks in agriculture
have increased on account of climate variability and
this has been accompanied by much greater variabil-
ity of world prices and their quicker transmission
into the domestic economy. On price variability,
it had recommended much greater co-ordination
between MSP and trade policies and for putting
in place a system whereby tariffs on imports and
exports of farm products could be varied quickly
in response to world price movements rather than
having to take recourse to outright bans which hurt
both farmers and trade. On climate variability, it had
recommended going beyond current insurance mea-
sures and to put in place a tertiary mechanism for
management and assessment through climate fore-
casting and mapping of agricultural losses.
12.87. World agricultural prices rose sharply dur-
ing the Eleventh plan period, with inflation about
9 per cent per annum in US dollar terms and price
volatility much higher than before, accompanied by
even higher world inflation in fuels and fertiliser.
It is now generally agreed that among the several
factors that contributed to this were more frequent
weather shocks, policies to promote biofuels and
increased demand on commodity future markets as
a result of speculation and portfolio diversification.
There is also consensus that linkage between agri-
cultural prices and price of oil is now very strong
and may cause high volatility to persist. As com-
pared to this, domestic Indian agricultural prices
were much less volatile and domestic prices of fuel
and fertiliser were increased much less than corre-
sponding international prices. Indian farmers were
thus relatively better protected against both higher
price volatility and higher costs. However, this has
involved repressing inflation in fuel and fertiliser
and required bans on exports during world-price
spikes. Co-ordination between MSP and tariff
policy is still very weak. For example, while other
aspects of a recent CACP suggestion for oil palm
development can be met by ongoing schemes,
the proactive tariff support required is a sticking
point. These will need to be addressed during the
Twelfth plan.
12.88. On the climate side, a number of initiatives
taken by the Indian Space Research Organisation
(ISRO) and the India Meteorological Department
(IMD) during the Eleventh Plan have significantly
improved the scope and quality both of climate data
and of other remote sensing tools. Although IMD’s
long-range forecasts of the monsoon still have a
very large margin of error, its shorter-range prod-
ucts not only have greater accuracy but cover an
array of agro-meteorological variables with fairly
high resolution. There is also much better co-ordi-
nation today between ISRO and IMD on one hand
and the Ministry of Agriculture, corresponding State
departments and NARS on the other. For example,
Department of Agriculture and Cooperation (DAC)
has set up a Mahalanobis National Crop Forecasting
Centre with ISRO collaboration to augment pre-
sent crop forecasts and assessment with regular
remote sensing, GIS and Global positioning System
(GPS) data.
28 Twelfth Five Year Plan
12.89. With better satellite products, an Eleventh Plan
innovation was the Integrated Agro-Meteorological
Advisory Service (IAAS) which now issues regular
weekly Agro-Met Advisory Bulletins up to district
level on field crops, horticulture and livestock. This
involves agricultural universities to collect and organ-
ise soil, crop, pest and disease information and amal-
gamate this with weather forecasts to assist farmers
in their decisions. Though still of very variable qual-
ity from district to district, and limited since dis-
trict is too big a unit for useful advisory, a 2009–10
NCAER study concluded that this brought large sav-
ings to farmers. In the Twelfth Plan, a Gramin Krishi
Mausam Seva (GKMS) will be launched to extend
IAAS to block level, initially on experimental basis.
Also, IMD will implement the Monsoon Mission
aimed at generating better seasonal monsoon rainfall
forecasts in different spatial ranges.
12.90. In a parallel Eleventh Plan initiative, that
took advantage of IMD experience with Automatic
Weather Stations technology, Government launched
a Weather Based Crop Insurance Scheme (WBCIS)
through the Agricultural Insurance Corporation
(AIC). Initiated as a pilot in Kharif 2007 in 70 hob-
lis of Karnataka for 8 rain-fed crops, by 2010–11 the
Scheme was being implemented in 17 States and
covered more than 67 lakh farmers growing crops
on 95 lakh hectares spread over 1,010 blocks in 118
districts.
12.91. At present WBCIS has about one-third the
coverage of the National Agricultural Insurance
Scheme (NAIS), the main crop-insurance vehicle.
Based on results of crop-cutting experiments, this
has been in operation since 1999–2000. Although
a useful device, especially for farmers growing rela-
tively risky crops, the main problem with NAIS is
that it is not actuarial insurance. Premiums for most
important crops are fixed at all-India level irrespec-
tive of risk and Central and State Governments
pay for the entire excess of claims over premium
received. Moreover, being compulsory for all bor-
rowers from banks in States where it is in force, and
with relatively few non-loanee farmers involved,
it mainly insures banks against default following
poor harvest. Further, its popularity with farmers is
limited since crop-cutting experiments delay claims/
payments until well after harvest and risk covered is
only of yield shortfalls at the block level.
12.92. For these reasons AIC is also piloting a
Modified National Agricultural Insurance Scheme
(MNAIS) since 2010 that aims to (i) reduce the insur-
ance unit from block to village panchayat with higher
indemnity as proportion of threshold yield, (ii) move
to actuarial premiums supported by upfront subsi-
dies instead of NAIS practice of Government paying
the entire excess of claims over premium, and (iii)
extend insurance cover to situations such as failed
sowing, cyclonic rains and localised calamities, such
as hailstorms and landslides. The main problem is
lowering insurance unit which although good for
farmers increases the cost and effort on crop-cutting
experiments exponentially.
12.93. As a result, the Government of India is cur-
rently implementing four schemes, that is, NAIS,
MNAIS, WBCIS and another pilot Coconut Palm
Insurance Scheme (CPIS). Only NAIS is being
implemented as a full-fledged scheme and the other
three are being implemented on pilot basis. The
pilot programmes will be evaluated early in the
Twelfth Plan for future revisions/modifications to
evolve a National Agricultural Insurance Programme.
For this, the following will be necessary. First,
define what should be the core programme which
Government should set up and what should be left to
companies to devise their own insurance products.
Second, to examine the trade-off between competi-
tion and benefits of risk pooling, that is, a centralised
reinsurance system. Third, arrive at an optimum mix
between weather-based insurance and those depend-
ent on yield measurements whether by crop-cutting
experiments or remote sensing.
12.94. Some suggestions, based mainly on the
Twelfth Plan Working Group on Institutional
Finance, Cooperatives and Risk Management, are:
1. Taking as core the ongoing NAIS, modifications
being made through the pilot MNAIS should be
continued. The high cost of lowering the insur-
ance unit should be dealt with progressively in
Agriculture 29
consultation with States. Centre may share part
of the cost of crop-cutting experiments in the
short-run but should shift to new technologies
such as satellite imagery in the long run.
2. The issue of private-sector involvement in agri-
cultural insurance can be creatively addressed,
for example, through a system of co-insurance
under which the AIC is lead insurer (with under-
writing responsibilities and contacts with mul-
tiple agencies).
3. Weather-based insurance should continue, again
focused on customisation and innovation such
as double trigger (weather and yield) and index-
plus products, with State Governments choos-
ing what to subsidise. Roll-out of AWS can be
demand-led and private sector also involved
but with mandatory accreditation from a com-
petent third-party designated by Government to
ensure consistent and high-quality weather data.
Further, Terrestrial Observation and Prediction
Systems (TOPS) platforms need to be pilot
tested.
4. Other innovative products such as community-
based mutual insurance, savings-linked insur-
ance, a properly designed product fort contract
farming arrangement and so on can help estab-
lish insurance culture, especially if linked to FPO
formation.
5. Agriculture insurance, being specialty insur-
ance with huge Governmental intervention
should be seen more as a social instrument of the
Government rather than a commercial instru-
ment, hence is unlikely to be effectively adminis-
tered unless backed by a statute.
6. To protect non-insured farmers from extreme
financial distress, Government may con-
sider ‘Catastrophe Protection.’ A blanket Life
Insurance cover could be devised for at least
small/marginal farmers (including tenant farm-
ers) to meet liabilities to banks or other RFIs
in the unfortunate eventuality of death and to
secure some financial support to families of the
deceased. Premia on such group/blanket insur-
ance could be funded by Central/State Govern-
ments and financing banks, in full or in part.
7. Crop losses arising out of natural calamities are
presently compensated by Government funding
or concessions like loan/interest waivers/defer-
ments. This practice is fraught with inefficiency,
besides crippling repayment ethics. It is, there-
fore, necessary that dealing with loan losses
should be internalised within the banking system
through the constitution of Relief and Guarantee
Funds and Stabilisation Funds (set up partly with
Government funding, by diversion of subsidies
for loan repayments and so on).
AGRICULTURE RESEARCH AND EDUCATION
12.95. Agricultural research has played a vital role in
agricultural transformation and in reducing hunger
and poverty and its role in the Twelfth Plan will be
crucial. The Eleventh Five Year Plan had noted that
research in the past had tended to focus mostly on
increasing yield potential by more intensive use of
water and biochemical inputs, paying less attention
to either the long-term environmental impact of this
approach or to methods and practices for efficient
use of inputs and natural resources (Table 12.10). But
now that limitations of this approach were evident,
there appeared to be lack of any clear agricultural
research strategy or to assign definite responsibili-
ties and prioritise the research agenda rationally. It
had proposed that ICAR institutes undertake basic,
strategic and anticipative research, focusing particu-
larly on problems of rain-fed agriculture, while SAUs
concentrate on generating required manpower and
on applied and adaptive research to address local
problems. It had emphasised that research should
shift from a commodity based approach to a farm-
ing systems approach through convergent efforts of
R&D agencies within each agro-climatic region to
address local problems identified by stakeholders,
including development agencies. It had also stressed
the need to enhance spending on NARS and pro-
posed to raise this to 1 per cent of agriculture GDP
by end of the Plan period.
12.96. As it turns out, research spending at 2006–07
prices, although reaching nearly 0.9 per cent in 2010–
11, averaged only 0.7 per cent during the Eleventh
Plan. At current prices, it was even less, averaging
only 0.64 per cent during the Eleventh Plan. Part of
the reason was a shortfall of about 20 per cent in the
30 Twelfth Five Year Plan
Centre’s Plan expenditure from that originally tar-
geted, but the main reason was inadequate spending
by States. While Centre’s expenditure (non-Plan and
Plan, including RKVY) increased 68 per cent in real
terms between the Tenth and the Eleventh Plan peri-
ods, corresponding States expenditures increased
only 22 per cent. In particular, non-Plan spending
on SAUs increased less than 17 per cent, less than
required to meet the pay commission awards in most
States. Consequently, most SAUs are understaffed
and underfinanced. This is undoubtedly the most
serious problem confronting NARS.
12.97. Nonetheless, new SAUs continue to be cre-
ated, especially in animal husbandry, which lack ade-
quate staff, have little infrastructure and are grossly
underfunded. Emphasis has to be laid on arresting
proliferation and improvement, especially in core
disciplines like modern biology, to ensure a steady
supply of quality human resources. ICAR should
specify minimum standards, and meeting these
standards could be an eligibility condition for States
to get RKVY funding.
12.98. Significant contributions of public-sec-
tor research during the last decade have included
breakthroughs in basmati varieties, improved
wheat varieties resistant to rust including race ug99,
improved varieties of soybean, Bengal gram, mus-
tard, chickpea and single cross hybrid maize; which
have led to higher growth in these crops. Similarly,
although most Bt cotton hybrids that are commer-
cially successful are from private producers, these are
based mostly on public material. With respect to nat-
ural resource management, public research claims
significant contribution in developing resource
conservation technologies like integrated farming,
micro-irrigation, laser levelling, zero tillage and agri-
cultural practices to improve efficiency of nutrients
and water, including in situ rain water harvesting.
In fruits and vegetables, better varieties and hybrids,
disease management and multiplication of planting
material and in livestock and fisheries, disease man-
agement technologies (vaccines and diagnostics),
feed and fodder management, improving reproduc-
tive health and production of fisheries seed.
12.99. Broadly, although NARS has yet to respond
to changes suggested in the Eleventh Plan, there are
signs of some new research priorities and agendas.
As example of new collaborative research, ICAR
launched the ‘National Initiative on Climate Resilient
TABLE 12.10
Expenditure on Agricultural Research and Education
(` crore at 2006–07 prices)
Tenth Plan 2007–08 2008–09 2009–10 2010–11 2011–12 Eleventh Plan
States Plan 4,151 694 965 1,070 1,289 1,382 5,401
Non-Plan 6,477 1,464 1,315 1,497 1,755 1,599 7,629
Total 10,629 2,158 2,279 2,567 3,044 2,981 13,030
Centre Plan 4,977 1,210 1,418 1,402 1,909 1,998 7,938
Non-Plan 4,125 852 1,040 1,235 2,168 1,512 6,808
Total 9,102 2,063 2,458 2,636 4,077 3,510 14,745
RKVY Plan 55 197 63 100 160 576
Centre and
States
Plan 9,128 1,961 2,580 2,534 3,298 3,540 13,914
Non-Plan 10,603 2,316 2,355 2,732 3,923 3,111 14,437
Total 19,732 4,277 4,935 5,266 7,221 6,652 28,351
GDP Agriculture and
Allied (2006–07 prices)
33,40,648 7,64,890 7,65,601 7,73,565 8,27,969 8,50,812 39,82,837
Research/Education
as % GDP Ag
0.59% 0.55% 0.61% 0.67% 0.86% 0.76% 0.70%
Agriculture 31
Agriculture (NICRA)’ in February 2011 as a network
project with several collaborating institutions with a
view to enhance resilience of Indian agriculture to
climate vulnerability through strategic research and
technology demonstration. The research on adapta-
tion and mitigation covers crops, livestock, fisher-
ies and natural resource management. The project
aims to enhance resilience through development
and application of improved production and risk-
management technologies. It plans to demonstrate
site-specific technology packages on farmers’ fields
for adapting to current climate risks and to enhance
the capacity of scientists and other stakeholders in
climate resilient agricultural research and its applica-
tion. This will be continued during the Twelfth Plan.
12.100. For the Twelfth Five Year Plan, the ICAR
has proposed a number of new initiatives in its man-
ner of functioning, such as extramural funding for
research, creation of funds for agri-innovations and
agri-incubation and setting up of an Agriculture
Technology Forecast Centre (ATFC). To improve
staff strength and quality it has proposed an Adjunct
Professor Scheme, Agriculture Sciences Pursuit for
Inspired Research Excellence (ASPIRE), e-courses
and more post-doctoral fellowships. Modernisation
of SAU farms is also contemplated. In particular, it
has proposed the following new thrusts:
• Conceived Research Platforms: Research con-
sortia platforms are proposed for focused, time
bound multi-disciplinary research in areas of
‘Agro Biodiversity Management; Genomics;
Seed; Hybrids; GM Foods; Biofortification; Plant
Borers; High Value Compounds/Phytochemicals;
Nanotechnology; Diagnostics and Vaccines;
Conservation Agriculture; Waste Management;
Water Management; Natural Fibre; Health
Foods; Precision Farming, Farm Mechanisation
and Energy; Secondary Agriculture and Agri-
incubators.’ These will involve partnership of
ICAR with R&D organisations inside and out-
side NARS. Inter-departmental platforms for
research in these priority areas and also capacity
building in basic sciences, remote sensing and
medium range agri-advisory services will be fos-
tered involving CSIR, DBT, ICMR, DRDO, DST
research institutes as well as general universities
and Ministries of Environment, Space and Earth
Sciences.
• National Agricultural Education Project: A
National Agricultural Education Project for
Systemic Improvement in Higher Agricultural
Education and Institution Development is pro-
posed to be undertaken as an externally-funded
project to improve education quality in State
Agricultural Universities.
• National Agriculture Entrepreneurship Project:
Another externally-funded project is proposed in
order to build an ecosystem for nurturing entre-
preneurship development through translational
research for technology commercialisation, man-
agement of technologies for commercialisation,
research for breakthrough technologies for accel-
erated growth and higher-economic impact.
• Farmer FIRST: In order to make technology deliv-
ery process more effective through the existing
630 Krishi Vigyan Kendras, this new initiative
will enhance farmers–scientist contact through
multi-stakeholders’ participation to move beyond
production and productivity to privilege the com-
plex, diverse and risk prone reality faced by most
farmers.
• Student READY: A one-year composite pro-
gramme, the Rural Entrepreneurship and
Awareness Development Yojana (READY) is pro-
posed with the objective to develop professional
skills for entrepreneurship: knowledge through
meaningful hands-on experience in project mode;
confidence through end to end approach in prod-
uct development; and enterprise management
capabilities including skills for project develop-
ment and execution, accountancy and national/
international marketing.
• Attracting and Retaining Youth in Agriculture
(ARYA): This initiative will be implemented with
a youth-centric approach, targeting areas of agri-
culture research which can be converted into via-
ble economic enterprises and build capacities to
attract rural youth to agriculture.
12.101. The Twelfth Plan allocation for ICAR is of a
size that will allow spending on NARS to reach 1 per
cent of agriculture GDP by end of the Plan provided
32 Twelfth Five Year Plan
States fund SAUs similarly. The above ICAR propos-
als can have priority if defined in terms of delivera-
bles, rather than areas. Also, NARS should address
the following issues on priority basis during the
Twelfth Five Year Plan:
• Strengthening soil organic carbon (SOC) research,
particularly on the quality of organic matter and
microbial activity, physical properties of SOC,
validation and refinement of models and SOC
dynamics under different land uses and manage-
ment regimes.
• Developing Models and technology interventions
on rational use of inputs, especially nutrients and
irrigation water, under diverse agro-ecologies
through interdisciplinary and farmer participa-
tory mode in order to enhance their use efficiency,
as also farm profits.
• The Expert Group on Pulses has been critical of
NARS. Efforts to enhance the yield potential of
pulses, by analysing physiological and biochemi-
cal limitations of the current crop and designing
more efficient types, is a priority which should
also involve improving the nutritional quality
of pulses and reducing various anti-nutritional
factors.
• Another priority continues to be the development
of heat resistant varieties of wheat.
• Greater thrust needs to be given to post-harvest
management, secondary agriculture and value
addition, along with by-products and waste man-
agement. The agricultural technologies which
have been developed and matured in the Eleventh
Plan should be taken for commercialisation in the
Twelfth Plan. Accordingly, the human resource
development including para-technicians should
be emphasised.
• Private agriculture input and seed companies use
the research products of public system to generate
profits. The public research system should seek a
share in such profits which is possible if the pub-
lic research system takes due care in protecting its
intellectual property rights under the Protection
of Plant Variety and Farmers’ Rights Authority
(PPVFRA). This requires development of an
appropriate pricing mechanism and preparing a
suitable licensing system.
NATIONAL MISSION ON EXTENSION AND
TECHNOLOGY MANAGEMENT
12.102. The extension system of State agricultural
departments is the weakest link in the chain between
research and the farmer. Large number of vacan-
cies of extension workers in the State Agriculture
Department was one of the gravest concerns
expressed by the Eleventh Plan document. During
the Eleventh Plan, efforts were initiated to improve
extension services by extending Central support to
State extension reforms. This has resulted in 604
Agriculture Technology Management Agencies
(ATMAs) to be established across the country with
21,000 new posts sanctioned with Central assistance
at State, district and block levels. Also, since a con-
tinuous problem plaguing extension has been lack
of organic link between the research system and
the extension machinery, R&D linkage guidelines
were jointly brought out by the DAC and ICAR
and sent to all States and SAUs. The basic thrust of
these guidelines were to get ATMAs and KVKs to
work together at the district level and below, keep-
ing in view the priorities reflected in Comprehensive
District Plans. Although neither has delivered full
results, there is now much greater acceptance that
things must be done together.
12.103. Seed is also an area where NARS made much
greater effort than in previous recent Plan periods.
12.104. Along with seeds, farm mechanisation was
also highlighted earlier as a source of the Eleventh
Plan labour productivity gains. In view of emerging
labour shortages in many states, there is demand to
expand custom hiring services, as well as for new
implements. During the Twelfth Five Year Plan it
is proposed to give a co-ordinated thrust on seeds,
farm mechanisation and extension through a new
Mission on Extension and Technology Management.
This should also have a component to fund ICAR
research platforms to find solutions to problems
thrown up by extension and requiring expertise
beyond SAU.
(A) Seeds and Planting Material
12.105. Three major yield successes during the last
decade relate to cotton, maize and basmati rice.
Agriculture 33
These were driven by new seeds of which cotton and
maize hybrids were mainly from private sector while
basmati rice varieties were almost entirely public.
Increased adoption of hybrids in cross-pollinated
crops like cotton, maize, pearl millet and sorghum
has been led largely by the private sector, which
accounts for three-fourths of hybrids developed so
far in the country. But there is discernable change
in role of public sector in development of hybrids
after 2001–02. Till 2001–02, private sector devel-
oped 150 hybrids of cotton compared to 15 by pub-
lic sector; 67 hybrids of maize compared to three in
public sector. In the next seven years, public sector
increased its share from 8 per cent to 19 per cent in
cotton, from 4 per cent to 40 per cent in maize and
from 25 per cent to 58 per cent in rice, with similar
changes in other crops. In parallel, public production
of quality seeds of varieties have increased rapidly
in recent years, expanding the public share in total
seed use. Production of quality seed doubled from
140 lakh quintals in 2004–05 to 280 lakh quintals in
2009–10, contributing significantly to the Eleventh
Plan yield performance. Private sector accounted for
39 per cent of this seed production. Nonetheless, the
ratio of quality seed to total seed use by farmers is
still much lower than norm and there is considerable
scope to raise crop productivity by raising this ratio.
12.106. There are several pending issues regarding
seeds. For example, at present there is no regulatory
mechanism to protect farmers against non-perfor-
mance, say poor seed germination rate. The Seeds
Bill, 2004, introduced in Parliament in 2004, is still
under consideration of the Parliamentary Standing
Committee on Agriculture. It aims to regulate the
quality of seeds and planting material of all agricul-
tural, horticultural and plantation crops to ensure
availability of true to type seeds to Indian farmers;
curb the sale of spurious, poor quality seeds; pro-
tect the rights of farmers; increase private partici-
pation in seed production, distribution and seed
testing; liberalise import of seeds and planting mate-
rials while aligning with World Trade Organization
(WTO) commitments and international standards.
Comprehensive and authentic databases on seed
production and trade in India by public and private
sectors as required under the seed and plant variety
laws need to be built up. The seed chain and the
norms for quality control should be followed with-
out any compromises or shortcuts.
12.107. At present, the public sector is responsi-
ble for most valuable germplasm while private seed
agencies concentrate on more remunerative high
value seed segment. Under the circumstances, clear
protocols need to be developed for sharing precious
germplasm with the private sector on payment of
royalty, while ensuring their conservation and pre-
venting possible erosion of the national interest in
the context of international agreements on plant
variety and intellectual property rights. If this can be
done, there is vast scope to expand linkages between
the private seed industry and public research institu-
tions to take advantage of the positive aspects of both
the segments for the benefit of farmers.
12.108. ICAR needs to revisit procedures for variety
identification, release and notification to cover pri-
vate and farmers’ varieties and also to avoid bias in
favour of varieties evolved by the testing institutions.
The number of seed testing centres in the coun-
try should be expanded rapidly, if necessary in PPP
mode and with third party oversight, to reduce the
time taken in assessment and refinement of varie-
ties and hybrids and technologies for production
and protection of crops. There is also a need for
‘Phytosanitary’ certification, especially for export/
import of seeds. The State Seed Corporations may
establish at least one such certification centre in each
major State.
12.109. The DAC made the present assessment of
seed requirement during the Twelfth Plan for its
proposed Seed Mission with respect to some of the
major crops which brings out that even excluding
requirements arising from possible shift to hybrids,
seed production of varieties will need to increase by
about a third to meet the projected increase in seed
replacement rates. Since seed-production planning
should be done with a long-term perspective (con-
sidering the viability of the seed) and also to keep
buffer stock of seed to meet eventualities of natural
calamities that require replanting, the actual pro-
duction requirements may be higher. To meet the
34 Twelfth Five Year Plan
seed demand for 45 major crops produced within
the country and required under diverse conditions,
seed hubs need to be identified to produce seed and
supply the same to the farmers in each area. This will
save cost of transportation. Public agencies will also
need to strengthen infrastructure for seed process-
ing, storage, transportation and distribution.
12.110. Adequate availability of quality seeds is a par-
ticular challenge for farmers in rain-fed areas where
rainfall risks are high and productivity depends cru-
cially on timely sowing within a short rainfall win-
dow. The seed system must be capable of providing
seeds of contingency or alternative crops during
prolonged dry spells. With protection of crop diver-
sity important in rain-fed areas, strengthening and
improving local-seed systems and linking these to
NARS is a necessity for productivity enhancement.
12.111. An important part of the new Mission will
therefore be to better integrate farmers with produc-
tion and distribution of quality seeds through, for
example, seed village programmes and by encour-
aging NGOs to help FPOs take up seed production.
Therefore, capacity building will be vital to success.
Fodder seeds that are presently neglected and scarce
will need to be emphasised. Equally, the Mission
must be enabled to convey to NARS accurate feed-
back from farmers on seed suitability.
(B) Farm Machinery
12.112. Wages have increased significantly in recent
years and with labour accounting for more than 40
per cent of variable cost, many farm organisations
report that shortage of labour is obstructing opera-
tional efficiency. Animal power is also declining,
with commercial banks reluctant to extend loans
for bullocks. This has naturally led to an increase in
farm mechanisation. However, farm mechanisation
has so far been biased in favour of tractors and been
concentrated in irrigated-command areas paying lit-
tle attention to the needs of farmers in dryland areas
and the scope for introducing small machines that
might be useful to meet their needs.
12.113. Considering the farm sizes and prevailing
skills, farm mechanisation penetration would have
to be enhanced through promotion of custom hir-
ing models as well as individual ownership. While
draft animal power based implements and manual
tools should be owned by individual farmers (with
appropriate financial incentives, for example, off
season employment for animal power by integrat-
ing some services such as ‘manure transport’ with
MGNREGS), expensive machinery should be pro-
moted thorough custom hiring. This could be done
by promoting machinery service centres involving
existing FPOs or by groups of farm youth trained in
machinery operation and maintenance.
12.114. Greater impetus is needed to develop need-
based and regionally differentiated farm machin-
ery. Ongoing efforts by NARS need to be suitably
strengthened with appropriate participation of com-
mercial agricultural machinery manufacturers.
Financial incentives could be linked to require-
ments thrown up by extension experience from dif-
ferent locations or from FPO demand. The Mission
should identify and convey to NARS the critical
mechanisation gaps and, in particular, specific local
requirements related to machinery for soil and water
conservation and gender-friendly implements.
(C) Strengthening Extension
12.115. During the Eleventh Plan, the task of
strengthening and restructuring agricultural exten-
sion was approached through a wide mix of differ-
ent initiatives. The context for this was that while
public sector extension arrangements have weak-
ened, the number and diversity of private exten-
sion service providers have increased in the last two
decades. These include the media, NGOs, producers
associations, input agencies and agri-business com-
panies. Many provide better and improved services
to farmers, but their effective reach is limited and
most poor producers are served neither by public
nor private sector in many distant and remote areas.
Notwithstanding the important role being played
by private sector extension, there are also concerns
with regard to wholesomeness of information, given
equity and long-term implications.
12.116. Although setting up ATMAs in almost all
districts was the single most important achievement,
Agriculture 35
this went hand-in-hand with efforts to enhance qual-
ity through domain experts and regular capacity
building. Other efforts included interactive ways of
information dissemination, public–private partner-
ships and pervasive and innovative use of ICT/Mass
Media. Efforts were also made to involve agri-entre-
preneurs, agri-business companies and NGO experts
to bolster public extension. Most of these efforts will
have to continue in the Twelfth Plan since exten-
sion is a continuous process. But, in view of the ini-
tial broken down condition, there are considerable
gaps even after the subsequent effort. For example,
an evaluation of ATMAs by the Agricultural Finance
Corporation in 2009–10 found that although 52 per
cent of respondent farmers said that they gained
knowledge of new practices and technologies from
this, only 25 per cent felt that this had helped to
increase production. It is perhaps time to conduct
a country-wide extension census to identify exten-
sion resources (manpower, infrastructure, expertise)
available in public and private sectors.
12.117. It is also necessary to continue with experi-
mentation. There are number of models which have
been successfully implemented in several States and
countries which can be tried as pilots by ATMA and
then expanded. Many civil society organisations have
successfully experimented with community managed
extension systems with members of the local com-
munity acting as agents of agricultural extension. In
the Community Managed Sustainable Agriculture
(CMSA) model of Andhra Pradesh, members of the
village community have been trained and developed
as Community Resource Persons (CRPs). CRPs
adopt elements of sustainable and eco-friendly agri-
cultural practices in their own farms and are in a bet-
ter position to motivate and convince other farmers
than normal extension workers. Working with agri-
cultural scientists and extension personnel under the
broad ATMA umbrella, CRPs can help technology
transfer and diffusion.
12.118. Agricultural extension covering crops and
allied sectors is primarily the responsibility of the
States and it is expected that States should drive the
extension reforms process. Any national effort in this
regard can only support States’ efforts. Moreover,
as noted by the Twelfth Plan Working Group on
Agricultural Extension, while public policy in agri-
culture increasingly recognises importance of pub-
lic–private partnership in extension, the experience
so far is that PPPs have been the exception rather
than the rule. States must adopt PPP, but this is not
substitute for strengthening the public extension sys-
tem. Future collaboration between public and pri-
vate players will have to focus more on the public
sector’s ability to set standards and monitor progress
so that these standards are enforced on all players,
including public extension agents, while providing
institutional training and support.
12.119. An important task of the new Mission
should therefore be to consult with States so as to
evolve a standards and regulatory framework for cer-
tifying and validating extension activities by all play-
ers, including public extension agents. MANAGE
and SAMETIs should take the leading role in driv-
ing extension reforms at the National and State levels
respectively. The corporate sector should be encour-
aged to involve itself in this effort and in agricultural
extension in general, if only as part of their Corporate
Social Responsibility (CSR). Even more important
than funding under CSR, the corporate sector can
support by providing adequate extension training
to their extensive promotion network of distributors
and dealers so as to meet required standards.
12.120. The Twelfth Plan Working Group on
Agricultural Extension has noted that although
ATMAs exceeded targets on training, demonstra-
tions and exposure visits, the number of farm schools
set up was well below target and that matters were
lagging also on strengthening and extending Farmer
Advisory Committees at every level. Since active
involvement of farmers in planning and executing
extension reforms was a key ATMA goal, the new
Mission must concentrate on this and on feedback,
particularly on technology and on agricultural plans
at district and lower levels. A critical aspect of this
will be ATMA–KVK coordination and more inten-
sive ICT use.
12.121. Extension services must also be gender-sensi-
tised, and this will require joint efforts, involving the
36 Twelfth Five Year Plan
Mahila Kisan Sashaktikaran Pariyojana component
of the National Rural Livelihood Mission (NRLM)
under MoRD, the Project Directorate for Women in
Agriculture of ICAR and National Gender Resource
Centre in Agriculture (NGRCA) of Ministry of
Agriculture (MoA). Further, since the present exten-
sion system does not pay adequate attention to live-
stock, fishery and fodder and separate extension
machinery for animal husbandry and fishery is not
feasible in many states, this function will need to be
integrated with ATMA with suitable KVK and NGO
backstopping. Indeed, convergence should be a basic
goal of the new Mission, both on the side of technol-
ogy dissemination and feedback as well as for plan-
ning integrated agricultural development.
12.122. The ultimate objective of the Mission should
be to upgrade ATMA from a society operating as an
adjunct to line agricultural departments to an inde-
pendent entity with technical capability to offer local
solutions and deliver feedback to NARS on location-
specific technology needs. The larger trends of pub-
lic policy point towards decentralised governance
of natural resources and the promotion of growth
with increasing emphasis on district (and lower)
level planning. It is necessary to see decentralised
planning as an iterative planning—doing—learn-
ing—planning cycle rather than as simply a one-
time activity. The challenge is to institutionalise this
process and ensure that the agency facilitating plan-
ning also has accountability in the overall outcome.
ATMAs are a natural choice for such an agency in
the present context.
SPECIFIC PLANS AND OBJECTIVES FOR THE
MAJOR SUB-SECTORS
(A) Livestock
12.123. For achieving growth rate of 5–6 per cent
per annum the animal husbandry sector would need
to address important challenges during the Twelfth
Plan. These include delivery of services, short-
age of feed and fodder and frequent occurrence of
deadly diseases. Compared to its contribution in
the economy livestock sector has received much less
resources and institutional support. Livestock exten-
sion remains grossly neglected. The country still lacks
adequate facilities and the infrastructure for disease
diagnosis, reporting, epidemiology, surveillance and
forecasting. Livestock markets are underdeveloped,
which is a significant barrier to commercialisation
of livestock production. Besides, the sector is also
coming under significant pressure of increasing glo-
balisation of agri-food markets. Although there is
demand for Indian meat products in international
markets, lack of international processing standards
is a hindrance. Unfortunately, schemes on moderni-
sation of slaughterhouses and by-product utilisation
have not been effectively implemented. In the animal
husbandry sector, the major priority areas during
Twelfth Five Year Plan will be breed improvement,
enhancing availability of feed and fodder and pro-
vision of better health services, including proper
breeding management. Conservation and perpetua-
tion of diverse local germplasm, which are adaptable
to Indian climate conditions and resistant to various
endemic diseases, will be another important area,
with clearer focus on sub-sectors such as small rumi-
nants that have so far been neglected.
12.124. An important Twelfth Plan initiative is
the National Dairy Plan (NDP), which has already
been launched as a central sector scheme with
credit support from the International Development
Association (IDA). To be implemented by the
National Dairy Development Board (NDDB)
through a network of End Implementing Agencies
(EIAs), mainly dairy cooperatives and producer
companies, this aims to (i) increase productivity of
milch animals and thereby increase milk production
and (ii) provide rural milk producers with greater
access to the organised milk-processing sector. These
objectives would be pursued through adoption of
focused scientific and systematic processes in provi-
sion of technical inputs, supported by appropriate
policy and regulatory measures.
12.125. An important sub-component of (i) above
will be scientific progeny testing and pedigree selec-
tion of bulls for semen required in artificial insemi-
nation (AI) services. It is planned to make available
about 900 high genetic merit bulls for replacement of
bulls maintained at all ‘A’ and ‘B’ graded semen sta-
tions and thereby achieve 100 per cent high genetic
Agriculture 37
merit bull replacement at these semen stations by
end of the Twelfth Plan. It is estimated that this
would produce some 100 million high-quality dis-
ease-free semen doses annually.
12.126. Taking NDP into account and, with RKVY
incentives for States to substantially enhance pub-
lic sector investment in agriculture and allied sector
during the Eleventh Plan, the Department of Animal
Husbandry, Dairying and Fisheries (DAHDF) has
also decided to redesign its schemes. It aims to pro-
vide more flexibility to States while reducing the
number of Centrally Sponsored Schemes (CSS) and
reorientating these to secure better programmatic
focus.
12.127. On genetic improvement in bovines, the
current major programme is the ‘National Project
for Cattle and Buffalo Breeding (NPCBB)’ which
is being implemented since October 2000. Unlike
NDP, which aims to provide breeding services from
the dairy side, NPCBB is administered as part of
States’ veterinary services. DAHDF proposes to con-
tinue NPCBB in this present form since the DAHDF
target is to expand the artificial insemination pro-
gramme from present coverage of about 25 per
cent of breedable population to 50 per cent, which
will require an expansion of AI services beyond the
about 35 per cent coverage planned for under NDP.
This is because NDP will not cover all States and
there are likely to be farmers not covered by dairy-
led breeding services even in States covered by NDP.
Moreover, States have already established Livestock
Development Boards (LDBs) in the present format
to implement bovine breeding programmes with
a stated focus on development and conservation of
important indigenous breeds. The critical require-
ment is that NPCBB and States’ efforts through
LDBs share common standards and protocols with
NDP in progeny testing, pedigree selection and to
improve conception rates. If so, resources are suffi-
cient to achieve 5 per cent growth of milk production
in the Twelfth Plan
12.128. Since standards and protocols will be the key
to success on the breeding side and basic commonal-
ity will have to be brought between NDP, LDBs and
NPCBB, there is need for some architectural rede-
sign during the Twelfth Plan. Therefore, although
NPCBB will continue, this will be as a component
of a new National Programme for Bovine Breeding
and Dairy (NPBBD) which will subsume all DADF
existing schemes on dairy development. Thus,
NPBBD will have two main components, namely
National Programme for Bovine Breeding (NPBB)
and Dairy Development. The component for Dairy
Development will mainly focus on States/areas not
covered under NDP and, in addition to existing
support areas, convergence will be attempted in a
phased manner so that dairy cooperatives which are
not part of NDP also offer breeding and extension
services. It is hoped that such combined activities in
respect of dairying with breeding will be more effec-
tive in extension of artificial insemination services,
feed management and marketing of good quality of
milk which are essential for improving productivity
and income of farmers. In the meantime, NPBB will
continue existing NPCBB functions through LDBs
and the veterinary side with two areas of focus: first,
to harmonise breeding standards and protocols; and,
second, to achieve the so far unrealised stated focus
on development and conservation of important
indigenous breeds.
12.129. The main programme on the veterinary side
will be an expanded scheme for Livestock Health
and Disease Control. Such an expansion is necessary
because occurrence of diseases like foot and mouth
disease (FMD), hemorrhagic septicemia (HS), bru-
cellosis, mastitis, blood protozoon and so on, have
been accentuated with introduction of exotic breeds.
Taking into account the economic losses from these
diseases, and also those of small ruminants (PPR or
peste-des-petits ruminants), particularly to small,
marginal and landless farmers including women
farmers, it is necessary to have a strong focus on
national control programmes for all major animal
diseases, backed by epidemiological analysis and
assessment of the animal diseases in different agro-
climatic regions. Unrestricted movement of live-
stock, as well import of germplasm, and changes
in ecosystems due to climate change are adding to
occurrence of diseases. The availability of improved,
potent and efficacious vaccines meeting international
38 Twelfth Five Year Plan
standards against major prevalent diseases can ena-
ble better management, containment and control of
the diseases. The new programme will associate all
ICAR institutes specialising in animal diseases and,
in consultation with the State Governments, formu-
late and implement more effective strategies for con-
trol of different diseases.
12.130. The third major programme of DADF will
be the National Livestock Mission (NLM). Apart
from bovine breeding, dairying and livestock health
schemes, DADF runs a plethora of other schemes
relating small ruminants, poultry, piggery and fod-
der development which although of extreme impor-
tance, especially to small, marginal, landless and
women farmers, have so far not received focused
attention. The multiplicity of small schemes in these
livestock sectors has been a major constraint since
this limits the capability of states to effectively access
funding under various schemes. In order to provide
greater flexibility to states in formulating and imple-
menting various projects, it is proposed to merge
these schemes with the main objective of achieving
sustainable development and growth of the livestock
sector.
12.131. The NLM will have an important mini-mis-
sion of feed and fodder, with an objective to sub-
stantially reduce the gap between availability and
demand. The deficit of dry fodder (10 per cent),
concentrates (33 per cent) and green fodder (35 per
cent) continues to be high, although availability of
feed resources has improved somewhat. The forage
and fodder seed need varietal and quality improve-
ment alongside better availability. The NLM will
encourage seed companies and SAUs to take up for-
age seed production on a priority basis. Developing
common property resources, including grazing land
and wasteland, and better utilisation and enrichment
of crop residues/agricultural by-products is the other
priority. Ration balancing, which is being promoted
under NDP, will also be promoted under this mini-
mission on feed and fodder.
12.132. The NLM will also have an additional mini-
mission relating particularly to development of
small ruminants, but also covering poultry, piggery
and other minor livestock species. While subsum-
ing some of the existing Central Sector Schemes for
poultry, small animals and fodder development, the
objective will be fuller development of the animal
biodiversity available in our country, which is a rich
treasure of germplasm. NLM will also focus on pre-
dominantly non-descript pig populations, concen-
trated in NE region and eastern region there have
poor productivity. Indian poultry industry is well
equipped and organised to achieve target growth rate
of 11 per cent for commercial broilers and 7 per cent
for layers although it failed to diversify in favour of
duck, quail, turkey and emu production. Need-based
import of grandparent stock of reputed international
brands may be continued with strict enforcement of
bio-security measures. Rural poultry sector however,
needs financial, infrastructure and technological
support to raise the present 2 per cent growth rate
to 3 per cent. All these, including the conservation of
threatened breeds, will be covered by NLM in a flex-
ible but more focused programmatic manner.
12.133. Other issues that NLM will address include
livestock insurance and extension and any innovative
initiative proposed by states for development of the
livestock sector, for example, to deal with unhygienic
slaughtering and processing. If State Governments
notify minor veterinary services accordingly, short-
age of human resources of veterinary staff could also
be supplemented by recruitment of para-vets, similar
to that of ASHA, to provide minor veterinary ser-
vices and supplement the livestock-extension activ-
ity in the States. In this context, it might be noted
that as public-sector spending is enhanced for devel-
opment of livestock, there is need for continuous
assessment of the efficacy of AI and of animal health
programmes in terms of success rates, lactating effi-
ciency and of potential and actual yield per animal.
(B) Fisheries
12.134. Potential of fisheries sector in providing
quality food and nutrition, creating rural livelihoods,
advancing socio-economic development in the rural
and far flung areas is widely demonstrated and glob-
ally recognised as a powerful tool for poverty reduc-
tion and fostering rural development. Annual fish
production has reached to the level of 8.30 million
Agriculture 39
tonnes during 2010–11 (P). Annual export earning
has also touched record US$2.9 billion mark con-
tributing about 17 per cent to national agricultural
export. About 14.5 million people are engaged in
fishing, aquaculture and other allied activities of
which about 75 per cent are in inland fisheries and
the remaining in marine fisheries.
12.135. In marine fisheries, uncontrolled fishing
capacity has led to over-exploitation of the coastal
resources. The estimated potential of the offshore
waters offers opportunities which calls for upgra-
dation of the fleet as well as skills and capacities of
the fishers and incentives to promote diversified
fishing in the offshore waters. Implementation of
Monitoring, Control and Surveillance (MCS) as a
new programme in the ensuing Plan is expected to
bring more discipline and regulate the activities so as
to maintain the growth rate in a sustainable manner.
There is a need of additional infrastructure and also
upgradation of facilities infrastructure for landing
and berthing facilities of marine fishing fleet and for
domestic marketing that have been the main reasons
for post-harvest losses.
12.136. Freshwater aquaculture, which contributed
to the ‘Blue Revolution’ in the country in late 1970s,
is now almost stagnating in terms of species diversi-
fication and yield rates due to less focus on sustain-
able development of inland capture fisheries in past
Plans; increasing pressure on the resources, includ-
ing habitat degradation; and multiple use of inland
water bodies with least priority to fishery require-
ments. Average yield rates are around 1,000 kg/ha/
yr, against potential of 3–4 thousand kg/ha/yr. The
efforts to raise productivity should, however, be
accompanied by formulating guidelines and regula-
tory measures for the judicious use of critical inputs
keeping in view the principles of the FAO Code of
Conduct for Responsible Fisheries.
12.137. Quality fish seed is the most critical input to
enhance the productivity and production of fishes.
But, there are no organised brood-stock production
and management facilities in the country. Therefore,
there is need to set up brood banks in each State with
one at the Central level. There is need to promote
commercial fish feed mills and indigenously formu-
lated fish feeds with locally available ingredients by
supporting the private players with enhanced capi-
tal subsidy especially in the States where there are no
feed mills.
12.138. Adequate infrastructure is not available for
disease diagnosis and treatment for fish disease man-
agement. There is a strong need for capital invest-
ment as well as support for the State Governments
in capacity building and managing the disease diag-
nostic laboratories. There is also a need for creating
a disease surveillance and communication agency/
mechanism at National level along with its wings at
suitable regional locations to build awareness and
send alerts to the stakeholders. This agency shall
have adequate regulatory powers to ensure the dis-
ease control.
12.139. The gradual decline of Freshwater Fish
Farmer’s Development Agencies (FFDAs) and
Brackish water Farmer’s Development Agencies
(BFDAs) and their resultant poor performance
coupled with weak extension services has impacted
the overall growth of aquaculture in the country.
Rejuvenation and consolidation of the two field-level
agencies (FFDA and BFDA) into a single agency—
Fisheries and Aquaculture Development Agency or
can undertake extension of technologies, promote
networking of farmers and fishers (mainly from
reservoirs) and provide effective liaison between
the farmers and developmental and other extension
agencies such as the Krishi Vigyan Kendras and the
ATMAs as well as sourcing the public finance for
fishers.
12.140. An important initiative of Government of
India for development of fisheries sub-sector has
been to launch ‘National Fisheries Development
Board’ (NFDB) as a Special Purpose Vehicle (SPV)
in the year 2006 for implementing fishery develop-
mental schemes in an integrated manner. The scope
of NFDB would be expanded to include manage-
ment of fish diseases and creation of related infra-
structure which is a gap in the present scenario.
During the Twelfth Plan, the existing CSS on inland
and marine fisheries (except welfare of fishers) will
40 Twelfth Five Year Plan
be merged with NFDB to facilitate expansion of fish-
eries through integration of a wide array of activities,
but with its main focus on inland fresh water fishery.
The schemes will be implemented under the aegis
of NFDB removing any duplication or overlap of
efforts. This clear demarcation of work, it is hoped
will enable the growth rate of the sector to rise to 6
per cent during the Twelfth Plan.
12.141. DADF would focus its efforts on policy, reg-
ulation and welfare of fishers, and will implement the
scheme relating to welfare of inland and marine fish-
ers. The DADF will also handle the strengthening of
fisheries data base, implementation of the proposed
scheme on Monitoring, Control and Surveillance
(MCS), all fisheries policy and legal matters, coordi-
nation with the sister Ministries/Departments at the
Centre and the States to make the sector’s founda-
tion more robust and sustainable and build stronger
linkages between research and development. Future
course of fisheries management will have to work
at two fronts—sustainable utilisation of healthy
resources and rehabilitation of threatened resources
by habitat restoration and appropriate conservation
measures. Climate change and its possible impact on
fisheries and fishers is again an additional challenge.
Thus, the future course of management will require
highest level of compliance of acts and regulations,
extensive adoption of BMP and implementation of
CCRF (Code of Conduct for Responsible Fisheries
introduced by FAO) which would be possible only
through the cooperation and active participation of
resource user communities as partner in the devel-
opment and management process.
(C) Horticulture
12.142. With increasing per capita income, Indians
are consuming more of fresh and processed horticul-
tural products indicating growing scope of horticul-
ture by improving crop productivity and efficiency
in the value chains. The initiatives taken in the hor-
ticulture sector during the Tenth Five Year Plan
have helped in achieving high growth in produc-
tion. During the Eleventh Five Year Plan, the growth
rate of horticulture is expected to be 4.7 per annum,
slightly short of the projected 5 per cent. There has
been a marked push to the expansion in area under
horticulture crops since taking up of a number of ini-
tiatives for horticulture development through NHB,
TMNE (NE) and then NHM in 2005–06.
12.143. However, in quest for area-expansion efforts,
the states have neglected due thrust on increasing
productivity of existing orchards through technol-
ogy infusion or by capital investment in fertigation,
input management, plant protection and farm mech-
anisation. The area expansion programmes have
also lacked the proper backward linkage with supply
of quality seed and planting material. Even where
Nursery Act exists, it has not been enforced effec-
tively. A proper system of accreditation and rating of
nurseries, with clearly defined protocols, is the most
important priority and will have to be put in place
during the Twelfth Plan.
12.144. Adequate attention to post-harvest manage-
ment and market development and processing has
yet to pick up and is the weakest aspect of diversifi-
cation towards high-value products resulting in fre-
quent and sharp fluctuations in prices of fruits and
vegetables in domestic market. As discussed earlier,
marketing sector reforms implemented by States
have so far not resulted in efficient marketing of per-
ishables, or put in place transparent system of auc-
tion and price discovery. There are huge logistic gaps
between production clusters and marketing centres,
often at long distance, and private sector investment
in post-harvest management and in marketing infra-
structure has not come forward to the desired extent.
There is also lack of proactive steps to enhance
export competitiveness for high-end export desti-
nations. The availability of adequate regular, unin-
terrupted, affordable power supply for setting up
infrastructure like tissue culture labs, seed process-
ing plants, bio control labs and post-harvest manage-
ment units like cold storages, ripening chambers and
so on is a constraint which needs to be addressed at
least in and around horticulture clusters. Since hor-
ticulture operations are cost intensive and hi-tech,
horticulture growers need to be provided affordable
credit with higher ceiling and insurance against risk.
12.145. The horticulture development missions
depend on a loose set-up of Technology Support
Agriculture 41
Groups for technology inputs. This has proved inad-
equate. Many States do not have adequate techni-
cal trained manpower to implement programmes.
Unless State Governments fill up vacant posts and
create additional posts to provide necessary technical
input, it should be deemed that they are uninterested
and the mission wound up in those States.
12.146. During the Twelfth Five Year Plan the
National Horticulture Mission will integrate the
several existing schemes in this sector and aim at
holistic growth of horticulture sector, including
bamboo, through area-based regionally differenti-
ated strategies, which include research, technology
promotion, extension, post-harvest management,
processing and marketing, in consonance with
comparative advantage of each State/region and its
diverse agro-climatic features. The Mission will also
facilitate marketing reforms discouraging payment
of unnecessary market levies and encouraging pri-
vate investment for setting up horticulture produce
markets. While continuing existing efforts, and aim-
ing at 5 per cent growth of horticulture production
during the Twelfth Plan, the main objective will be
to build required capacities at State level, and assess
their seriousness, so that the horticulture develop-
ment related activities can be transferred fully to
States by end of the Twelfth Plan.
12.147. Another objective will be to improve horti-
culture statistics which continue to be weak, lacking
both a validated methodology for data collection of
horticulture crops and adequate machinery to col-
lect such data. Generation and dissemination of
quality data can also help in averting frequent situ-
ations of gluts and shortages and exploitation of
such situations by the middlemen and speculators.
DAC needs to take up a one-time horticulture cen-
sus with the objective of generating reliable base line
data. Further, as recommended by NSSO commit-
tee on improvement horticulture statistics, there is
need to set up an extensive network of Horticulture
Information Systems (HIS) with proper data units
in all relevant districts and at State and Centre level
covering all relevant aspects. To facilitate this, at least
3 per cent of Mission funds should be earmarked for
this purpose.
(D) Food Grains and Oil Seeds
12.148. Since cultivated land is limited, with poten-
tial for only marginal future increase through higher
cropping intensity or development of cultivable
wasteland, future increase in production will have
to come mainly from yield improvement. Declining
average annual growth of food grains yields from 3.2
per cent in 1980s to 1.6 per cent in 1990s and further
to only 0.6 per cent during the Tenth Plan, taking this
well below population growth, had led to widespread
concern about future food security. The issue was,
therefore, analysed fully with several alternatives
considered and the National Food Security Mission
(NFSM) was formulated for the Eleventh Plan. This
was based on an assessment of yield gap data then
available, and was focused on increasing yields in
low-yield districts using a variety of known interven-
tions, with particular attention to availability of qual-
ity seeds. Although this has paid off, with food grains
yield growth increasing to 3.3 per cent during the
Eleventh Plan, a valid question regards continuation
of NFSM is whether yield gaps are still large?
12.149. A committee set up under Chairmanship of
Chief Minister of Haryana has recently examined the
issue and suggested continuing with the strategy to
bridge the gap between real and potential yields. The
analysis of gap between potential and achieved yields
presented to this committee suggests that there is
considerable potential of increasing yields even in
high productivity irrigated areas with the current
technology. For these areas, the strategies will need
to concentrate on propagation of balanced use of fer-
tilisers and application of micro-nutrients, water and
soil-saving technology. In case of wheat, however,
there is need to step up research to develop varieties
resistant to temperature. The major yield gaps are
due to management practices. Other reasons for this
gap need to be ascertained through specific studies
and addressed through appropriate interventions.
12.150. In addition to enhancing productivity
of food grains in the low productivity areas, it is
equally important to stabilise the productivity gains
in these areas as well as in areas where productivity
levels are comparatively high. With these issues in
mind, the National Food Security Mission (NFSM)
42 Twelfth Five Year Plan
will be revamped during the Twelfth Plan. While
the Eleventh Plan approach of focused attention on
identified districts and crops in a location specific,
target-oriented manner will continue, greater atten-
tion will be put in most areas to shift from exclusive
focus on individual crops to the cropping system/
farming system approach. In particular, the Mission
will be extended to cover coarse cereals and fodder,
in addition to wheat, rice and pulses as at present.
The Mission contemplates that promotion of pack-
age of practices in compact blocks in a hand hold-
ing approach would not only help in enhancing the
production and productivity of a region but also help
in changing mindsets of farmers due to its positive
large-scale impact. This approach will ensure inclu-
sion of all farmers in the compact block irrespec-
tive of their size of holding or social status and will
be compatible with other efforts that encourage
strengthening of institutions, including building of
farmers organisations and FPOs. The Mission will
also build upon the Eleventh Plan experience regard-
ing conservation agriculture.
12.151. However, the main way in which NFSM
will be extended during the Twelfth Plan is through
greater emphasis on strategic-area development.
The two programmes that were started as RKVY
sub-components in the Eleventh Plan namely, the
60,000 pulses village programme and the inten-
sive millets production programme will largely be
shifted into NFSM. On another sub-component of
RKVY—Bringing Green Revolution in Eastern India
(BGREI)—a view will be taken by DAC in consul-
tation with States regarding format of its continua-
tion during the Twelfth Plan. Also, some additional
districts in Himachal Pradesh, Uttarakhand and the
north-eastern region will be included to provide a
specific thrust on foodgrains cultivation in hill areas.
12.152. Such restructuring of RKVY and NFSM will
address the problem of bridging the existing large
gap between potential and realised rice yields in
eastern States and the challenge of increasing pulses
production. Since BGREI allows components which
are not part of NFSM, and since development of the
eastern region requires significant investments in
power and marketing infrastructure, the final design
of how to proceed on the relative contributions of
RKVY and NFSM will need to be decided in con-
sultation with the States. Also, since a counterpart
of expanding rice production in eastern States is to
reduce rice area and resulting groundwater stress
in the North-West, a decision will have to be taken
on what components of the latter effort should be
stressed in NFSM/RKVY.
12.153. Preliminary targets under the NFSM for the
Twelfth Plan are enhancing production by addi-
tional 25 million tonnes of foodgrains consisting of
10 million tonnes of rice, 10 million tonnes of wheat,
3 million tonnes of pulses and 2 million tonnes of
millet. Also it aims to expand fodder production to
meet the demand both of green and dry fodder. In
all probability, the requirement of sufficient quantity
of dual purpose feed and fodder will require rais-
ing this target to 30 million tonnes, with additional
production of coarse cereals put at 7 million tonnes.
All these targets are less than was actually achieved
during the Eleventh Plan and are consistent with
demand forecasts. This would amount to targeting
2–2.5 per cent increase in foodgrains production in
the Twelfth Plan.
12.154. Another consequence of the expanded scope
of NFSM will be to absorb the pulses and maize
components presently in the Integrated Scheme for
Oilseeds, Oil palm, Pulses and Maize Development.
During Twelfth Five Year Plan, it is proposed to
replace this scheme with a new Mission on Oilseeds
and Oil Palm which will be launched with a prelimi-
nary target to increase the production of oilseeds by
at least 4.5 per cent per annum, that is, the same rate
of growth as actually achieved during the Eleventh
Plan. The core of this Mission will therefore be to
continue past efforts with a clearer focus on oil-
seeds. However, since production of oilseeds has not
been able to match the increasing demand of edible
oils, resulting in persistence of a huge gap between
demand and production of edible oils in the country,
the Mission will also aim to expand area under oil
palm to realise the latent potential of the oil palm in
the country. This part of the Mission will fully con-
sider a proposal made recently by CACP and incor-
porate whatever is feasible.
Agriculture 43
NATURAL RESOURCES
(A) Water
12.155. The water resource potential of India is
assessed as 186.9 million hectare meter, mostly from
rainfall. With annual availability still more than
utilisation and with its uneven spatial and tempo-
ral distribution leading to floods/droughts in some
or other parts of the country every year, there is a
strong demand to fully utilise this potential as soon
as possible. The total States proposals on investment
in Irrigation and Flood Control for the Twelfth plan
add up to about `4,00,000 crore, which alone would
amount to over the 4 per cent of cumulative GDP
from agriculture and allied sectors being targeted
as total public investment in this sector during the
plan. Recognising both the criticality of irrigation for
agricultural growth and the potential available, the
Centre’s Twelfth plan gross budgetary support for
development of water resources (including on AIBP)
is being stepped up to `1,09,552 crore from the
Eleventh plan actual expenditure of `41,427 crore.
12.156. However, the performance in respect of
creation and utilisation of irrigation facilities during
the Eleventh Five Year Plan was not satisfactory. The
original Eleventh Five Year Plan target for creating
irrigation potential was 16 million ha. This was sub-
sequently revised to 9.5 million ha, which has been
achieved. However, utilisation out of the created
potential is expected to be only 2.7 million ha. The
ever increasing gap between created potential and
its utilisation is an issue that is a Twelfth Plan prior-
ity, steps to address which are discussed in another
chapter.
12.157. In recent decades irrigation facilities have
increasingly been created through exploitation of
groundwater deployment. However, non-judicious
exploitation of groundwater for irrigation purposes
in India is already showing signs of crisis in many
parts of country. Studies report that more than
26 cubic miles of groundwater has already disap-
peared from underground aquifers in large areas of
Haryana, Punjab, Rajasthan and Delhi, between 2002
and 2008 (NASA 2009). Global Runoff Data Centre,
University of Hampshire and International Earth
Science Information Networks have projected that
around 30 per cent area of India falls in the extreme
water scarce zone having less than 500 m3/person/
year supply of renewable fresh water. The informa-
tion from the Central Ground Water Board reveals
that situation has worsened in most of the states
since 2004. The groundwater level has been declin-
ing annually by about 4 cm during the past decade,
often resulting in drying of rivers and wetlands
and contamination with arsenic, fluoride and other
toxic substances. This requires effective regulatory
framework and participatory watershed develop-
ment, especially because groundwater extraction is
often highly unfavourable to the small farmers who
cannot keep investing to tap deeper aquifers. Apart
from developing appropriate regulatory framework,
and people’s participation, the need of water saving
devices and crop planning cannot be overempha-
sised. Micro-irrigation coverage will be given pri-
ority both in irrigated and rain-fed areas, as part of
comprehensive local planning.
(B) Watershed Development
12.158. Watershed development has long been one
of the major channels directing public investment
to natural resource base and production systems
in rain-fed agriculture. From their earlier empha-
sis on soil and water conservation, the focus in case
of watershed projects is shifting towards livelihood
security and income generation. It is also now gen-
erally accepted that to be effective, the watershed
development and soil conservation investments have
to be complemented with farming systems invest-
ments in a watershed-plus framework that takes into
account the diversity of rain-fed agriculture.
12.159. However, despite considerable emphasis on
this in the Eleventh Plan design and development of
common guidelines, actual performance in regard
to watershed development was poor during the
Eleventh Plan. The details of the Eleventh Plan had
target and achievement may be seen in the Chapter
on Water. Since all watershed development pro-
grammes have been transferred to the Department of
Land Resources, the Ministry of Agriculture has to
redefine its initiatives for rain-fed farming and sus-
tainable agriculture.
44 Twelfth Five Year Plan
12.160. The National Rainfed Area Authority was
constituted with the specific objective of inte-
grating schemes/programmes and activities of
various Departments of the Centre and the State
Governments with regard to dryland farming as
well as providing technical back stopping for water-
shed development in a comprehensive manner.
The authority was expected to play a major role in
training of the officials associated with the water-
shed development projects and also take a lead role
in social mobilisation which is critical in the suc-
cess of the watershed development programmes. It
was also expected to take up studies for evaluation
of the implementation of projects by the States. So
far Departments both at the Central and State level
has not taken much interest in associating NRAA
either in evaluation of the programmes or for pro-
viding technical input for these. NRAA expertise will
be better utilised during the Twelfth Plan.
(C) Land and Soil Health Management
12.161. Land is the prime natural resource of which
140.02 million hectares are net sown area. Since
1990–91 there is gradual but sustained decrease in
net sown area from 143 million hectare to 140 mil-
lion hectares with corresponding increase in fallow
land. The demand from non-agricultural uses like
industrial and urban requirement as well as specula-
tive demand on account of rising land value is put-
ting pressure on availability of land for agricultural
use. There is an urgent need for State Governments
to lay out clear policies to protect productive agricul-
tural land and provide specific guidelines on pres-
ervation of commons and their protection. There
are also other important institutional and policy
issues concerning land: proper recording of land
titles, easing tenancy rigidities, computerisation of
land records as well as addressing declining size of
holdings.
12.162. An important aspect of land is its degrada-
tion in terms of mechanical, chemical and biologi-
cal. Widespread and continuing erosion of country’s
natural resource base is threatening the sustenance
of agriculture sector’s growth rate. Over 120 mil-
lion ha have been declared degraded or problem
soils (NAAS 2010). Conservation agriculture (CA),
integrated nutrient management, carbon sequestra-
tion, erosion control, saline and alkaline soils man-
agement, legislation for soil protection, development
of remote sensing and GPS-based Decision Support
System (DSS) and amelioration of polluted soil are
required to rejuvenate deteriorated soils.
(D) Use of Fertilisers and Pesticides
12.163. Fertiliser consumption in the country has
been increasing over the years and now India is the
second largest consumer of fertilisers in the world,
after China, consuming about 26.5 million tonnes
of NPK. However, imbalanced nutrient use coupled
with neglect of organic matter has resulted in multi-
nutrient deficiencies in Indian soils. These deficien-
cies are becoming more critical for sulphur, zinc
and boron. As nutrient additions do not keep pace
with nutrient removal by crops, the fertility status of
Indian soils has been declining rapidly under inten-
sive agriculture and is now showing signs of fatigue,
especially in the Indo-Gangetic plain. Potassium is
the most mined nutrient. Sulphur deficiencies are
also showing up in all parts of the country especially
in the southern region. In a comprehensive study
carried out by ICAR through their Coordinated
Research Project on Micronutrients, Toxic and
Heavy metals, based on an analysis of 2,51,547 soil
samples from different states, it was found that 48
per cent of these samples were deficient in zinc, 33
per cent in boron, 13 per cent in molybdenum, 12
per cent in iron, 5 per cent in manganese and 3 per
cent in copper. The micronutrient deficiency is a
limiting factor lowering fertiliser response and crop
productivity. As a result of over-emphasis on chemi-
cal fertilisers and imbalanced fertiliser use, efficien-
cies have become abysmally low: hardly 35 per cent
for N, 15–20 per cent for P and only 3–5 per cent for
micronutrients like zinc, resulting not only in high
cost of production but also causing serious environ-
mental hazards. At this rate, the National Academy
of Agricultural Sciences has estimated that for meet-
ing the food needs of the country by 2025, India
may have to increase NPK supply to over 45 million
tonnes from the current level of 26.5 million tonnes
and of organic manures from 4 to 6 million tonnes.
The Twelfth Plan envisages NPK demand at 34–36
million tonnes by 2016–17, but the more important
Agriculture 45
priority should be to give much greater empha-
sis than hitherto on fertiliser use efficiency and soil
health.
12.164. Restoration of soil health requires initiatives
for continuous monitoring of soil health, measures to
arrest decline of soil health, creating adequate facili-
ties for soil testing, fertilisers testing, developing and
upgrading testing protocols, ensuring judicious and
efficient use of fertilisers and pesticides. Judicious
use of fertiliser requires adequate soil testing facili-
ties. By 2010–11 there were 1,049 soil tests labs in the
country with a soil analysis capacity of 106 lakh soil
samples per annum. The State Governments have
issued 40.8 million soil health cards to the farmers
by October 2011. Although a massive achievement in
fairly short time, this remains far below the require-
ment of soil testing capacity. To augment the capac-
ity the State Governments need to utilise resources
from Rashtriya Krishi Vikas Yojana and also engage
State Agricultural Universities, Agricultural Produce
Marketing Committee and other institutions.
There is need for widespread awareness creation
for soil-test–based fertiliser use by involving State
Agricultural Universities and KVKs and NGO and
other stakeholders.
12.165. Measures to soil health improvement need
to be comprehensively centred on addition of soil
organic matter in substantial quantities over time.
The efforts for production and use of available bio-
logical sources of nutrients like bio-fertilisers, organic
manure, bio-compost for sustained soil health and
fertility and improving soil organic carbon and so on
as alternative inputs have been inadequate so far. For
promotion of these inputs in conjunctive use with
chemical fertlisers, and to promote organic farm-
ing we need to formulate and define standards for
unregulated organic and biological inputs and bring
them under quality control mechanism and define/
upgrade standards and testing protocols.
12.166. Similarly, use and availability of safe and
efficacious pesticides and their judicious use by
the farming community is critical to a sustained
increase in agricultural production and productiv-
ity. Quality of pesticides is monitored by the Central
and State insecticide inspectors who draw samples
of insecticides from the market for analysis in the
68 State Pesticide Testing Laboratories (SPTLs)
that have a total annual capacity of 68,110 samples
in 23 States and one Union Territory. However,
sale of low quality/spurious pesticides by dealers is
widespread and is an issue that States need to han-
dle with seriousness. Further, since use of synthetic
pesticides needs to be confined to target control in
the right quantity and at the right time, presence of
pesticides residue in food commodities is becom-
ing a serious food safety matter. DAC implements
a scheme for monitoring pesticide residues and
sharing outcomes of the sample analysis with State
Governments as well as advising States to take nec-
essary action including promotion of the Integrated
Pest Management (IPM) approach, which empha-
sises a safe and judicious use of pesticides. Many
NGOs, however, represent that sporadic promotion
of IPM is not helping in establishment of sustain-
able agriculture practices and that Non-Pesticidal
Management (NPM) of pests is the only sustainable
answer.
NATIONAL MISSION FOR SUSTAINABLE
AGRICULTURE
12.167. A major new mission that will be launched
during the Twelfth Plan is the National Mission for
Sustainable Agriculture (NMSA). Conceived origi-
nally as part of the National Action Plan on Climate
Change (NAPCC), this aims at transforming Indian
Agriculture into a climate-resilient production sys-
tem through adoption and mitigation of appro-
priate measures in the domains of both crops and
animal husbandry. Since a number activities relat-
ing to sustainable agriculture are already parts of
other proposed missions, NMSA as programmatic
intervention, will primarily focus on synergising
resource conservation, improved farm practices
and integrated farming for enhancing agricul-
tural productivity especially in rain-fed areas. Key
deliverables under this mission will be develop-
ing rain-fed agriculture, natural resource manage-
ment, enhancing water and nutrient use efficiency,
improving soil health and promoting conservation
agriculture.
46 Twelfth Five Year Plan
12.168. Nonetheless, since sustaining agricultural
productivity through climate and other challenges
to the natural resources base is the focus of this mis-
sion, it will have to go beyond its programmatic
interventions to bring mind-set changes required in
transiting from the past focus on irrigated, chemi-
cal intensive agriculture. The recent ICAR network
project on National Initiative on Climate Resilient
Agriculture (NICRA) provides some insights on
requirements of adaptation. NMSA can collaborate
with ICAR on specific matters regarding adapta-
tion to climate change. The key to this is a paradigm
shift that moves towards a knowledge-based, farmer
centric and institutionally supported system where
the Government is prime mover and facilitator to
demonstrate at scale the overall strength and impact
of rain-fed agriculture packages that have slowly
emerged through several years of grass-roots work
by Government and civil society organisations and
have shown the strength of combining water and
other interventions at a micro-level. The starting
point of NMSA must be an accurate assessment of
the natural resource, comprising water, land, climate
and biodiversity, which determine the opportunities
for livelihoods of the people.
(E) Design of NMSA
12.169. While the decision to launch the National
Mission for Sustainable Agriculture (NMSA) is quite
historical, there are design issues both in view of the
fact that the Ministry of Agriculture no longer has
a watershed development component in its pro-
grammes and because there are strong differences
on the matter of fertiliser and pesticides use. While
the current National Mission on Micro-Irrigation,
the National Project on Management of Soil Health
and Fertility and the Rainfed Areas Development
Programme (RADP) window in RKVY can be
merged with NMSA, none of these address fully
the issues that have been raised by the Twelfth Plan
Working Group on Natural Resources Management
and Rainfed Farming. Its main recommendation is
to observe the following:
1. Focus on stabilising and securing diverse crop-
ping by bringing a focus on ‘Rainfall Use
Efficiency’ as central to policy as against mere
use efficiency of applied water. This shift calls for
two major focal areas:
a. Promote measures for in-situ conservation
and efficient use of rainwater
b. Invest in shared and protective/supportive
irrigation
2. Harness the inclusive growth potential in the
so far untapped Agronomic and Management
Innovations that are aligned to enhancing sus-
tainability of natural resources, reducing costs,
increasing efficiency of resource use and improv-
ing total factor productivity. System of Rice
Intensification and non-pesticidal management
(NPM) of pests as mentioned in the Approach
Paper and options evolving in conservation agri-
culture are some examples.
3. Strengthen the extensive livestock systems
depending wholly or partly on commons and
agriculture residues through intensive efforts
in improving health care, feed, fodder, drink-
ing water, shelter, institutions and so on. The
domain of public policy and intervention must
shift to these from the present almost exclusive
focus on high yielding breeds.
4. Invest in decentralised and local institutional
capacities that enable a shift away from one-
time Planning to ‘iterative Planning—imple-
mentation—learning cycles’ anchored by local
institutions.
5. Enhance institutional capacities in local gover-
nance and resource management, particularly
related to Commons and strengthen Panchayat
Raj, cooperatives and other stakeholder institu-
tions. Such institutional base is a prerequisite
for evolving location and agro-ecology specific
mechanisms of programme designing, credit
access, filling in infrastructure gaps, marketing
and so on.
12.170. The specific recommendations of this work-
ing group, including the setting up of a National
programme on rain-fed farming, could be another
component of NMSA, financed by resources cur-
rently expended under the scheme of Macro-
management in agriculture which housed the
Agriculture 47
watershed development schemes of DAC and will
now have to be wound up. This component could
mainstream the learning that has emerged from the
International Assessment of Agricultural Knowledge,
Science and Technology for Development (IAASTD)
along with ICAR’s National Initiative on Climate
Resilient Agriculture (NICRA).
PLAN FINANCING
Expenditure on Agriculture and Allied Sectors
12.171. During the Eleventh Five Year Plan, a com-
bined Plan outlay of `1,36,381 crore (at 2006–07
prices) by the Centre, States and UTs was envisaged
for the agriculture and allied sectors. The realisa-
tion is estimated to be `1,30,076 crore at 2006–07
prices, that is, 95 per cent of projected Plan. The
priority to agriculture and allied sectors in alloca-
tion of resources in the combined Plan of Centre,
States and UTs has been around 5.6 per cent in the
Eleventh Plan, an improvement over 3.6 per cent
during the Tenth Plan. At present about 50 per
cent of the agriculture and allied sectors plan in the
country is being financed by the Centre, includ-
ing expenditure on Rashtriya Krishi Vikas Yojana
(RKVY).
FINANCIAL PERFORMANCE OF THE MINISTRY
OF AGRICULTURE
12.172. Table 12.11 gives the outlay and expendi-
tures of the MoA and its three departments, DAC,
DAHDF) and Department of Agricultural Research
and Education (DARE), which implement plans and
programmes for development of agriculture and
allied sectors. The Ministry is likely to realise 88 per
cent of the outlay at current prices. A noticeable fea-
ture is that RKVY, which was initiated in 2007–08,
accounted for 38 per cent of MoA’s total plan expen-
diture in 2011–12(RE).
12.173. DAC with utilisation of around 94 per cent
of projected outlay for Eleventh Plan at current
prices has shown a better performance. The NHM
fell short of targets mainly on account of below par
performance in grounding the Terminal Market
Complexes. The NFSM and horticultural pro-
grammes except NHM have achieved the envisaged
financial targets and expenditure on agricultural
insurance exceeded the Eleventh Plan projection
because of demands arising from the drought of
2009. DAHDF incurred major shortfall in the Plan
expenditure. One of the reasons for this was the
attempt to introduce a large number of schemes
with small outlays during Eleventh Plan which faced
problems in their conceptualisation, formulation
and approval at various stages. Inadequate staff in
the State implementing Departments and resulting
limitations on absorption capacity of the States to
implement the programmes has also been respon-
sible for the shortfall. Both DAC and DAHDF also
transferred increasing amounts through State/
District level autonomous bodies, which will need to
be avoided in future since this limits the capacity of
States to plan comprehensively for agriculture devel-
opment. Plan realisation is expected to be around 77
per cent in the case of DARE.
TABLE 12.11
Outlays and Expenditure of MoA and Its Three Departments (DAC, DAHDF and DARE)
DAC DAHDF DARE RKVY WDPSCA Total
Eleventh Plan proposed (Current Prices) 41,337 8,174 12,588 25,000 240 87,339
2007–08 Actual 5,769 782 1,280 1,247 40 9,118
2008–09 Actual 6,545 865 1,630 2,887 39 11,966
2009–10 Actual 6,827 871 1,707 3,761 40 13,206
2010–11 Actual 10,208 1,096 2,522 6,720 40 20,585
2011–12(RE) 8,654 1,357 2,850 7,811 50 20,722
Total Eleventh Plan Actual 38,003 4,970 9,989 22,426 209 75,597
% utilisation during Eleventh Plan 92 61 79 90 87 87
48 Twelfth Five Year Plan
RASHTRIYA KRISHI VIKAS YOJANA
12.174. The National Development Council (NDC),
in its meeting held on 29 May 2007 resolved to ini-
tiate a special Additional Central Assistance Scheme
viz. Rashtriya Krishi Vikas Yojana (RKVY). The pur-
pose behind this programme was to encourage States
to draw up District and State agricultural plans and
also increase their own spending on the sector so as
to reorient agricultural development strategies for
rejuvenating Indian agriculture during the Eleventh
Plan (2007–12). RKVY is preferred by States for its
inbuilt flexibility in selecting interventions and set-
ting State specific targets.
12.175. One objective of RKVY during the Eleventh
Five Year Plan was incentivising States to increase
expenditure on agriculture and allied sectors. State
plan expenditures (excluding RKVY receipts) as per-
centage of GDP in agricultural and allied increased
from 1.0 per cent in the Tenth Plan to 1.4 per cent
in the Eleventh Plan. State plan expenditures on agri-
culture and allied sectors (excluding RKVY) have
also increased as percentage total plan spending by
States, from about 5 per cent during the Tenth Plan
to over 6 per cent during the Eleventh Plan. RKVY
was therefore successful in motivating States to pay
greater attention to agriculture, besides providing
increased Central assistance for the sector.
12.176. RKVY as assistance was particularly use-
ful for the funds-starved animal husbandry, dairy-
ing and fisheries sectors. Projects amounting to over
`5,000 crore were sanctioned under RKVY for these
sectors during the Eleventh Plan, about 20 per cent of
the total sanctioned RKVY projects, and more than
spending on DAHDF’s schemes. This has provided a
substantial push to these sectors which account for a
significant contribution to the agricultural GDP.
12.177. However, preparation of Comprehensive
District Agriculture Plans (C-DAPs) has been a weak
area in many states, partly due to lack of capacity at
District/State level. Although there are reservations
regarding quality and effective capability of district
level planning and project design, this was an origi-
nal NDC intention and must be fully implemented
during the Twelfth Plan. At least 25 per cent of pro-
jects sanctioned by SLSCs should originate from
the district level, preferably approved by District
Planning Committees. For the purpose, suitable
units will have to be formed involving ATMA/KVK/
SAU and any other technical support unit that States
may specify. As mentioned earlier, it is necessary to
see decentralised planning as an iterative planning—
doing—learning—planning cycle rather than simply
a one-time activity. The challenge is to institutional-
ise this process and ensure that the agency facilitat-
ing planning is also accountable for the outcome.
12.178. Further, while there is very strong anecdo-
tal evidence of the early success of RKVY, a detailed
impact assessment of the scheme is needed for fur-
ther experience and learning. Moreover, two modi-
fications are desirable in the present practice. First,
there should be a proper committee to examine and
vet all projects proposed to the SLSC. Second, that at
least this vetting committee or even the SLSC work
closely with, and preferably be coterminous with,
State level bodies that select MoRD projects, particu-
larly for watershed development. This would permit
better convergence and better project selection.
12.179. Many States have requested changes in the
allocation criteria of RKVY and some have objected
to opening of new windows within the RKVY. A
decision has been taken that no more than 20 per
cent of RKVY funding will be in such windows of
national importance. A decision has also been taken
that at least 40 per cent of RKVY spending should
be on hard infrastructure spending. A meeting of all
States will be held to discuss proposals for changes in
allocation criteria.
12.180. Finally, future RKVY design needs to be
seen in the context of many pending key reforms.
Despite efforts by the Central Government, progress
in agricultural marketing, extension and cooperative
reforms continue to be sluggish. Delivery of services
has not been efficient due to lack of staff at various
levels. State Agricultural Universities (SAUs) need
greater funding support from the State Governments.
Inadequacy of agricultural infrastructure hampers
achievement of growth potential of the agriculture
sector. During the Twelfth Plan RKVY will need
to be reoriented to facilitate such market reforms,
higher expenditure on SAUs and for infrastructure
Agriculture 49
development, besides emphasising effective formu-
lation and implementation of District Agriculture
Plans. These could be incorporated by changing the
current eligibility conditions and allocation formula
for RKVY. The proposed meeting of all States as
mentioned above will need to be held before these
changes in RKVY are proposed to Cabinet.
AGRICULTURAL STATISTICS
12.181. Statistics are the hard input into planning.
There are numerous gaps in agricultural statistics
hampering the agricultural development planning
some of which include reliable and timely avail-
ability of forecasts of agricultural crops especially
foodgrains, reliable statistics for small areas like
blocks and Panchayats, estimates of agricultural
production losses due to pests, diseases, floods and
drought, good estimates of production of minor
crops including spices, condiments, medicinal
plants, floriculture and so on, estimates of require-
ment of foodgrains for seed, feed and industrial use,
harvest and post-harvest losses in agricultural pro-
duction and estimates of meat production. Further,
the available estimates generated through sample
surveys suffer from organisational and operational
problems bringing in inconsistency in these surveys.
12.182. The Vaidyanathan Committee has rec-
ommended setting up a National Centre for Crop
Statistics, independent of the present system, for pro-
viding reliable quick estimates at the National and
State level. This should have high priority since not
only are there strong doubts about quality of present
data among experts, the large increase in number
of crop-cutting experiments for insurance purposes
may further vitiate the system. An independent
source of high-quality data is vital for improving the
quality of agricultural statistics in India.
12.183. The existing database relating to horticul-
ture sector needs to be strengthened as mentioned
earlier in the horticulture section. Cost of produc-
tion data for animal husbandry products also needs
improvement. Development of appropriate meth-
odology for estimation of feed consumed by live-
stock will help in updating ratios currently used
by the National Accounts Division. Similarly, the
existing methodology for generation of fishery statis-
tics needs fine tuning.
12.184. For ascertaining the reliability of land use
statistics in the context of diversion of agriculture
land to other uses for residential, industrial, urbani-
sation, roads and so on, there is a need for conduct-
ing a study for checking the land records through
khasra registers/other records of those villages where
the area have come under diversion of agriculture
land to non-agriculture uses particularly in the vicin-
ity of the metropolitan cities.
12.185. Pilot studies need to be undertaken for per-
fecting remote sensing techniques and GIS/GPS tools
to develop reliable estimates of area under agro-for-
estry area under crop production, land-use planning,
land development and precision farming and so on.
12.186. All in all, the Twelfth Plan objective is to
continue with the decentralisation thrust of RKVY,
while reducing number of Centrally Sponsored
Schemes. As discussed in relevant sections above,
this vision on decentralisation could extend to fer-
tiliser and food subsidies also. While doing this, the
main Twelfth plan foci are:
• Bringing scale through development of Farmer
Producer Organisations
• Emphasising technology, both on the research
and development sides
• Stressing standards and protocols and standard
operating procedures in every scheme
• Improving statistics and evaluation
• Initiating a shift towards sustainable and climate-
resilient agriculture, not only through NMSA but
more generally by laying emphasis on rain-fed
areas and bringing about shifts of water-intensive
rice cultivation from water-stressed North-West
India to Eastern India.
• Preparing for faster growth through a more
diversified agriculture, with investment in the
necessary modern infrastructure required for per-
ishable products.
12.187. As shown in Table 12.13, States have indi-
cated that they will more than double their plan
50 Twelfth Five Year Plan
expenditure on agriculture and allied sectors from
`1,11,824 crore during the Eleventh plan to `2,26,500
crore during the Twelfth Plan. The Centre shall also
more than double its plan expenditure. The alloca-
tion for RKVY is being raised to `63,246 crore for
the Twelfth Plan from actual expenditure of `22,426
during the Eleventh Plan. The indicative Twelfth
Plan Gross Budgetary Support (GBS) for all other
schemes of the MoA is `1,11,232 crore. This is against
corresponding the Eleventh Plan actual expenditure
of `53,171 crore. Refer to Table 12.12 for depart-
ment-wise break-up, excluding RKVY:
TABLE 12.12
Gross Budgetary Support (Department-wise)
Department Gross Budgetary Support (GBS) (` Crore)
Department of Agriculture and Cooperation (DAC) 71,500
Department of Agriculture and Research Education (DARE) 25,553
Department of Animal Husbandry, Dairying and Fisheries (DAHDF) 14,179
TABLE 12.13
Comparison of States Outlay and Expenditure for Eleventh and Twelfth Plan
(` in crore at current prices)
Name of Sate Eleventh Plan Outlay Eleventh Plan Expenditure Twelfth Plan Outlay Increase in
Twelfth Plan
over Eleventh
Plan Expdr. (%)
Agriculture
and Allied
Sector
% of Total
Plan
Agriculture
and Allied
Sector
% of Total
Plan
Agriculture
and Allied
Sector
% of Total
Plan
Andhra Pradesh 3,487.44 2.4 9,510.46 6.0 17,138 5.0 80
Arunachal Pradesh 752 9.5 617.71 5.7 1,114 5.3 80
Assam 877.86 2.1 2,335.56 7.8 3,272 5.9 40
Bihar 3,672.73 4.8 4,805.33 6.3 15,613 6.0 225
Chhattisgarh 4,613 8.6 5,637 12.7 8,284 6.9 47
Goa 211.76 2.5 325.39 3.6 1,046 3.9 221
Gujarat 9,092.94 0.7 8,879.8 6.9 19,712 7.8 122
Haryana 1,638.82 4.7 2,733.02 5.7 6,288 5.4 130
Himachal Pradesh 1,470.08 10.7 1,642.82 12.1 2,174 9.7 32
Jammu & Kashmir 1,818.21 7.0 892.98 3.5 2,843 9.7 218
Jharkhand 3,130.53 7.8 2,319.85 5.9 4,157 3.8 79
Karnataka 8,426.85 8.3 10,484.4 7.7 19,824 8.9 89
Kerala 2,649.11 7.8 2,931.54 7.6 8,831 11.5 201
Madhya Pradesh 3,408.18 4.8 6,057.09 7.3 17,076 8.5 182
Maharashtra 9,507.64 5.9 10,636.4 7.3 19,325 7.03 82
Manipur 386.55 4.7 234.04 3.2 643 3.1 175
Meghalaya 735.52 8.0 845.2 9.8 2,114 10.7 150
Mizoram 536.31 9.6 387.86 7.1 346 2.8
Orissa 1,230.29 3.8 3,580.37 8.2 8,387 7.4 134
Nagaland 434.31 8.3 725.08 11.3 1,795 13.8 148
Punjab 1,309.13 4.5 1,410.77 4.0 1,524 2.9 8
Rajasthan 2,919.07 4.1 5,990.67 6.2 7,255 5.6 21
Sikkim 260.43 6.9 228.27 6.4 469 4.1 106
Tamil Nadu 7,831.57 9.2 8,170.01 8.8 20,680 10.0 153
Tripura 798.51 9.0 858.79 11.3 980 6.8 14
Uttar Pradesh 19,146.37 10.6 14,164.8 7.8 24,354 8.5 72
Uttarakhand 2,478.5 8.4 2,079.25 10.0 2,673 5.9 29
West Bengal 1,846.50 2.9 3,339.26 5.1 8,583 5.5 157
Total States 94,670.21 3.6 1,11,824 7.2 2,26,500 7.1 103
13.1. India has become one of the fastest growing
economies in the world over the last two decades,
undoubtedly aided in this performance by eco-
nomic reforms. The striking aspect of India’s recent
growth has been the dynamism of the service sector,
while, in contrast, manufacturing has been much less
robust, contrary to the experience in other emerging
market countries, where manufacturing has grown
much faster than GDP; this has not happened in
India. Consequently, manufacturing sector’s contri-
bution to the GDP has stagnated at 16 per cent, rais-
ing questions about India’s development strategy,
especially its implications for generating adequate
employment. Additionally, employment in manu-
facturing declined in absolute terms from 55mn to
50mn between 2004 and 2005 and 2009–10, after
having grown by 25 per cent between 1999 and 2000
(44mn) to 2004–05 (55mn).
13.2. The Eleventh Plan period was marked by unfa-
vourable global economic conditions brought on
by the financial sector crisis of 2007–09 followed by
the risks of sovereign debt crisis mid-2011 onwards.
While this led to slackening demand, exchange-rate
volatility and economic uncertainty, domestic dif-
ficulties such as poor implementation and delayed
reforms also slowed the growth of the Indian man-
ufacturing sector. The year 2009–10 witnessed a
fleeting return of manufacturing buoyancy largely
on account of a few sectors such as the automotive
sector along with a revival in cotton textiles, leather
and food products. This brief spurt, however, has
now moderated. The net result is that the share
of the manufacturing sector in the country’s GDP
13
Industry
continued to be stagnant, a trend now observed for
nearly three decades and remained relatively lower
than other emerging and developed economies (refer
to Figure 13.1).
13.3. Further, India was not able to fully leverage the
opportunities provided by the dynamics of globalisa-
tion that resulted in a dramatic shift of manufactur-
ing to developing countries over the last decade. The
increasing gap in both, the sectoral share of manu-
facturing and the competitiveness of the manufac-
turing sector in India, compared with countries, such
as China, is testimony of that (Figure 13.2).
13.4. This shift of manufacturing capacities from
developed nations to rapidly developing economies
(RDEs) is likely to continue. It is estimated that by
2025 RDE production will account for over 55 per
cent of global production compared to 36 per cent
presently. Hence, India’s ability to capitalise on this
by capturing a disproportionate share of such a shift
in global economic setting through an accelerated
growth rate will be imperative.
PERFORMANCE REVIEW OF THE
MANUFACTURING SECTOR
Growth Rate
13.5. The manufacturing sector averaged a growth
of 7.7 per cent (till 2009–10) during the Eleventh
Plan (refer to Table 13.1). Growth peaked at 14.3 per
cent in 2007–08 and then started decelerating. The
decline in manufacturing growth was primarily
responsible for the slowdown in GDP in 2011–12.
52 Twelfth Five Year Plan
FIGURE 13.1: Contribution of Manufacturing to GDP Very Low in India
Growth rate for ‘99–’09 Share of mfg. GDP
Manufacturing GDP Growth for most
Countries higher than GDP Growth
Share of manufacturing GDP in India is low at
~15% when compared to other economies
x% GDP growth rate for 1999–2009
China Thailand
10.3% 36%
9.9%
7.0%
3.9%
4.8%
5.3%
4.0%
4.9%
2.5%
4.9%
3.6%
3.3%
3.3%
(0.8)%
(1.3)%
6.8% 31%
6.7% 30%
6.7% 26%
6.6% 23%
6.6% 21%
5.4% 21%
5.0% 19%
4.4% 18%
3.9% 18%
2.7% 16%
2.2% 16%
0.8% 16%
0.6% 15%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
0% 3% 6% 9% 12%
India South Korea
Poland China
Malaysia Malaysia
Russia Hungary
Thailand Germany
Egypt Argentina
Hungary Japan
South Korea Poland
Turkey Turkey
Brazil Russia
Argentina Brazil
Germany Egypt
Japan India
Manufacturing needs to grow at higher than GDP growth to capture better share of GDP
Source: Economic intelligence Unit, Data Monitor, Euro-monitor, World Bank Work Development Indicators, BCG analysis.
2,000 1,923 1,856
1,084
614 308 282 279 268 231 226 209 179 176 170
1,500
1,000
500
0
China
USA
Japan
Germany
Italy
Brazil
Korea
France
UK
India
Russia
Mexico
Indonesia
Spain
1990
2000
2010
3
1
1
2
2
3
3
4
6
5
12
6
8
7
7
8
5
9
13
10
16
11 12
920
13
11
14
8 1 2 3 4 12 13 7 6 16 9 14 25 10
Global
Rank
Manufacturing Gross Value Added ($bn)
Manufacturing Output as % of World Total
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0% UK
2.3%
18.2% 18.9%
10.7%
6.0% 3.0% 2.6% 2.2%
USA China Japan Germany Italy France India
1970 1980 1990 2000 2010
FIGURE 13.2: India and Global Manufacturing States
Source: UN National Accounts Main Aggregates Database.
Industry 53
Initial deceleration in industrial growth was largely
on account of the global economic meltdown. Fragile
economic recovery in US and European countries,
and subdued business sentiments affected the growth
of the manufacturing sector. Rising interest rates and
appreciation of the rupee during the Eleventh Plan
period also contributed to this slow down. It is sig-
nificant to note though, that volatility of manufac-
turing growth has become more pronounced over
the last five years. An important implication of this
is the need for greater flexibility both in policy and
non-policy factors which have a bearing on the man-
ufacturing sector.
Investment
13.6. Investment and capacity additions are critical for
sustained industrial growth. National accounts data
clearly indicate a moderation in the growth of gross
capital formation (GCF) in industry (Table 13.2).
The rate of growth of GCF in four broad sectors of
industry comprising mining, manufacturing, elec-
tricity and construction averaged 10.9 per cent dur-
ing 2004–11, almost the same as the rate of growth
of GCF in the economy as a whole. For manufactur-
ing to grow faster than other sectors in the economy,
rate of GCF in manufacturing will have to be higher.
Employment
13.7. Employment in manufacturing increased from
44 million to nearly 56 million between 2000–01 and
2004–05. However, employment in manufacturing
reduced by 5 million between 2004–05 and 2009–10
(Table 13.3). The net increase in employment over
the decade 2000–01 to 2009–10 was around 6 mil-
lion, that is, a 13 per cent increase over 10 years.
Manufacturing in India contributes to only ~11 per
cent of total employment. This compares unfavour-
ably to other emerging economies where the share
of employment in manufacturing range from 15 per
cent to 30 per cent.
TABLE 13.1
Rate of Growth of GDP at Factor Cost at 2004–05 Prices (Per cent)
2007–08 2008–09 2009–10PE 2010–11 QE 2011–12 AE
Agriculture, Forestry and Fishing 5.8 0.1 1 7 2.5
Industry 9.7 4.4 8.4 7.2 3.9
Mining and Quarrying 3.7 2.1 6.3 5 –2.2
Manufacturing 10.3 4.3 9.7 7.6 3.9
Electricity, Gas and Water Supply 8.3 4.6 6.3 3 8.3
Construction 10.8 5.3 7 8 4.8
Services 10.3 10 10.5 9.3 9.4
GDP at Factor Cost 9.3 6.7 8.4 8.4 6.9
Source: CSO.
TABLE 13.2
GCF in Industry
(` Crore at 2004–05 Prices)
2004–05 2005–06 2006–07 2007–08 2008–09 2009–10 2010–11 CAGR
(Eleventh Plan*)
Mining 37,322 52,259 60,456 68,372 57,045 65,984 70,389 3.9%
Manufacturing 3,44,517 4,04,928 4,74,405 6,11,928 4,20,506 5,98,445 6,40,982 7.8%
Construction 54,445 57,531 95,799 1,15,157 88,523 86,290 98,426 0.68%
Total Industry 4,89,584 5,79,391 7,07,029 8,81,464 6,65,067 8,52,999 9,13,051 6.6%
Share of GCF in Industry as
% to Total GCF
48.4 49 51.8 54.9 42.5 49.6 48.3
Source: Economic Survey 2011–12; *CAGR has been calculated for a period of four years.
54 Twelfth Five Year Plan
TABLE 13.3
Employment by Sector
(in Millions)
Sectors 1999–2000 2004–05 2009–10
Agriculture 237.67 258.93 244.85
Manufacturing 44.05 55.77 50.74
Mining 2.17 2.64 2.95
Electricity, Gas
and Water Supply 1.13 1.3 1.25
Construction 17.54 26.02 44.04
Services 94.2 112.81 116.34
Total 396.76 457.46 460.22
Source: Planning Commission.
13.8. One hundred and eighty-three million addi-
tional income seekers are expected to join the work-
force over the next 15 years. Agriculture cannot be
expected to provide more jobs. Manufacturing must
provide a large portion of the additional employment
opportunities required for India’s increasing num-
ber of job seekers. Unless manufacturing becomes
an engine of growth, providing at least 70 million
additional jobs, it will be difficult for India’s growth
to be inclusive. Since the pattern of development of
the manufacturing sector so far has not delivered the
desired growth in output and employment, a change
in strategy is required. This Plan is a description of
the strategy, and the process for its implementation,
without which the national objectives cannot be
achieved.
OBJECTIVES FOR THE TWELFTH PLAN
AND BEYOND
13.9. In order to create a paradigm shift in the
manufacturing sector, it is essential to consider the
objectives over a longer timeframe, such as 15 years.
The National Manufacturing Policy, which was
introduced in 2011, states these objectives and these
are the underlying objectives that the Plan aims to
achieve as well. These objectives are:
1. Increase manufacturing sector growth to 12–14 per
cent over the medium term to make it the engine
of growth for the economy. The 2 to 4 per cent
differential over the medium term growth rate of
the overall economy will enable manufacturing
to contribute at least 25 per cent of the national
GDP by 2025.
2. Increase the rate of job creation in manufactur-
ing to create 100 million additional jobs by 2025.
Emphasis should be given to creation of appro-
priate skill sets among the rural migrant and
urban poor to make growth inclusive.
3. Increase ‘depth’ in manufacturing, with focus on
the level of domestic value addition, to address
the national strategic requirements.
4. Enhance global competitiveness of Indian man-
ufacturing through appropriate policy support.
5. Ensure sustainability of growth, particularly with
regard to the environment.
REALISATION OF OBJECTIVES NEEDS A
PARADIGM SHIFT
13.10. The Eleventh Five Year Plan as well as Plans
that preceded it aimed at establishing a strong manu-
facturing sector but this has not happened. This sug-
gests that a radical change in the policy approach is
needed.
13.11. Comparison with the performance of other
countries shows that the countries that managed to
catch up with the earlier industrialised, high-income
countries were the ones whose governments proac-
tively promoted structural change. Industrial policy,
and with a special focus on manufacturing, is back
on the national agendas of many countries and we
need to consider what lesson we can draw given our
particular circumstances. In other words, the criti-
cal question now is not whether there should be an
industrial policy but what should be the architecture
of the industrial policy.
13.12. Industrial policies, where they have suc-
ceeded, have generally not been an outcome of
Centrally planned economies but of economies that
have had the active involvement of private enter-
prises and other non-governmental stakeholders.
Successful strategies evolve from ongoing produc-
tive interactions between government and produc-
ers. Therefore, the government must improve the
process of interaction, collaboration and learning
amongst producers and itself. This is very differ-
ent from the paradigm of Indian industrial policy
Industry 55
prior to India’s economic reforms commencing in
the 1980s. In that era, industrial planning was a top-
down control activity with Government determining
who should produce what, where and how much and
also what technology they should use. The roadmap
for the Twelfth Plan and beyond can definitely not
be a return to this type of planning.
Nature of Industrial Policy
The Question of ‘Industrial Policy’
13.13. The Government of India needs a strategy to
accelerate the growth of the country’s manufacturing
and industrial sectors to meet the goals and obtain
the outcomes mentioned. The concept of ‘industrial
policy’ has varied across countries and also over time.
In India, industrial policy becomes assaulted under
a stifling system of bureaucratic controls through
licenses and quotas for industrial production. There
is no doubt that these controls were highly dysfunc-
tional and needed to be dismantled but the mere
removal of these controls and reliance on markets
alone was not sufficient. The collapse of the Soviet
Union and the ascendancy of Western free-market
approaches to economic growth which was fash-
ionable for a time in the 1990s implied abandon-
ment of any concept of ‘industrial policy’ altogether.
However, this is not the recipe which delivered rapid
industrial growth for many of the post-war success
stories, whether we think of Japan or Korea or, more
recently, China. In planning a strategy for rapid
growth of industry in India we need to learn from
these success stories and apply them suitably to our
circumstances.
Paradigms of Industrial Policy
13.14. Countries that have succeeded in growing
the competitiveness and scale of their manufactur-
ing sectors have adopted different policy approaches.
However, a common element in their approaches has
been a close coordination between producers and
government policymakers, with Governments play-
ing an active role in providing incentives for domes-
tic industrial growth and in relieving constraints on
industrial competitiveness. The process by which
this coordination has been achieved has differed
according to the political structure of each coun-
try’s economy (Figure 13.3). In Japan the coordina-
tion between Government and industry (and within
Government) was very successfully orchestrated
by MITI in partnership with Japanese industrial
associations. In South Korea, the Chaebol and the
Government collaborated to create world-class and
world-scale winners. In Singapore, the Government
identified industries to be developed and created
ecosystems (skilled human resources, tax regime,
Government incentives and so on) to support growth
of competitive enterprises in the country. In China,
Input–output matrix with
control of investments and
outputs. The Indian approach
prior to the mid 1980s
Big bets on national
champions and
technologies
Leaving it completely to
the ‘market’
No Industrial PolicyPicking WinnersCentrally Planned Economy
Ineffective Models
Rethinking ‘Industrial Policy’ and Our Approach
A national
ecosystem that
facilitates competitive
abilities of enterprises
The three
‘rails’ of
manufacturing
policy
Stakeholder involvement
Implementation
Learning
FIGURE 13.3: New Approach to Industrial Policy
56 Twelfth Five Year Plan
the large State Owned Enterprise (SOE) sector has
enabled the Chinese Government to adopt a very
muscular ‘industrial policy’. Along with preferential
treatment to domestic companies, large investments
in technology development/acquisition, massive
investments in infrastructure and restraints on its
exchange rate, China’s industrial policy has been
remarkably successful. Germany’s manufacturing
sector remains very successful in spite of high labour
costs and a strong currency because collaboration
between stakeholders in the German industrial sys-
tem is deeply embedded in policymaking processes
and also within industrial enterprises.
13.15. A deeper analysis of such successes (Japan,
Korea, China and Germany) of ‘industrial policy’
and also of its failures (India, the Soviet Union and
some instances in Latin America) reveals the essence
of successful industrial policy. Firstly, ‘industrial pol-
icy’ is a web of ongoing changes that facilitates the
growth of a competitive industrial/manufacturing
ecosystem in the country. Secondly, Governments
have a key role in facilitating the process of learning
and collaboration between producers and policy-
makers. Thirdly, and this is key, it is the quality of
this process of collaboration and the speed of learn-
ing and execution in the system that enables the sys-
tem to improve its competitiveness faster than other
countries’ systems. Government policymakers must
have the skills and orientation to facilitate and coor-
dinate, rather than to control. Industrial policy will
not produce a competitive manufacturing ecosystem
if the orientation of the Government and its func-
tionaries is to control and micro-manage. It will also
fail if Government and its functionaries do not mas-
ter the skills and build institutional capabilities for
better coordination within Government, smoother
collaboration with industry (which must be organ-
ised in line with the industrial–political economy
of the country, as mentioned before) and, above all,
faster learning.
13.16. The paradigm we must adopt is to build an
ecosystem for rapid learning and capability building,
which will encourage entrepreneurship and support
innovation, and which will provide the system-wide
processes to support collaboration and build stronger
value chains with depth. This paradigm requires a
change in the mindset of Government functionar-
ies from being ‘controllers’ to ‘facilitators’, from
‘resource allocators’ to ‘knowledge managers’ and
from ‘scheme managers’ to ‘continuous learners’.
Essential Features of a Manufacturing
Ecosystem that Learns
13.17. A dynamic manufacturing ecosystem has
three features that enable it to learn and grow.
1. Firstly, it must have depth (value addition) in
manufacturing processes. A manufacturing sec-
tor, no matter how large, that is composed mostly
of low value addition assembly industries, can-
not create new technological capabilities. It may
compete on low costs on account of scale and low
labour costs, but it can easily lose these advantages
to other countries which have even lower labour
costs. Also, merely having R&D capabilities, with-
out the wherewithal around them to convert ideas
into manufactured products will not enable the
growth of manufacturing industries.
2. Second, it must combine four capabilities:
human skills, embodied technology in hardware,
knowledge (intellectual property) and a large
and demanding customer base. All four compo-
nents grow together to create a productive and
competitive industry.
3. Third, it must have a range of different sized
firms, especially small and medium sized ones.
Small firms provide the first stages for skill devel-
opment. They take up larger numbers of people
into the industrial workforce with less capital
investment, and they provide nurseries for experi-
mentation too. Some of these small firms can
grow into specialised, internationally competitive,
medium sized firms. Such firms are the backbone
of the German industry, and also the strength of
India’s internationally recognised automotive
component, pharmaceutical and IT sectors.
13.18. Firms operating in such an ecosystem would
be able to flourish in an open competitive global
economy. While there is a case for special sup-
port for strategically chosen industries for a limited
Industry 57
period, the only way the industry can demonstrate
competitiveness is to be able to export to global mar-
kets within a defined period.
13.19. In addition to the three features described
above, there are five processes that enable the ecosys-
tem to learn.
• Firstly, learning is accelerated through the interac-
tion of the diverse components of the system: R&D
with producers, both with customers, producers
with institutes for skill development, and inter-
actions amongst adjacent sectors and technolo-
gies that spur new combinations and innovations.
Thus complexity breeds further technological
development and growth. This requirement trans-
lates into the strategies for building clusters, and
linking research and development institutes with
producers.
• Second is the process of Innovation. Innovation
can be spurred by several enablers that create
‘safe-failing’ spaces for experimentation. These
enablers include early stage risk capital, incuba-
tors and quick exit/bankruptcy laws. Analysis
reveals that the Indian industrial ecosystem has
inadequate support systems for experimentation
and innovation.
• Third is a regime of Standards. Standards are an
embodied learning of the ecosystem. They enable
firms, small ones in particular, with a base of
knowledge, and also act as means to reduce trans-
action costs with their customers and suppliers,
domestically and globally.
• Fourth is an IP regime. Like Standards, a good IP
regime provides a base of knowledge for research-
ers and producers to develop upon further with-
out having to reinvent the wheel. An IP regime
also provides incentives for taking risks by assur-
ing rewards.
• The fifth category of processes that enable system-
wide learning and continuing improvement are
a class of processes such as total quality manage-
ment, total productive maintenance, business
excellence and so on. In fact, such processes have
been the foundations for the rapid, country-wide
growth of productivity and competitiveness of
the Japanese and Korean industry. The power of
such processes has been realised by some sectors
of Indian industry too, such as the auto industry,
steel industry and so on.
The Architecture of a Strategy to Accelerate
Growth of Manufacturing
13.20. Manufacturing enterprises, unlike IT and
financial services enterprises, involve the production
and movement of material goods. They, therefore,
require good physical infrastructure to be competitive
and this means improving transportation, uninter-
rupted power and adequate land to build. Moreover,
the materiality of manufacturing activities also results
in more regulations—of safety, pollution, factory
inspections, labour conditions—and hence a more
complex administration structure too. The qual-
ity and efficiency of the physical and administrative
infrastructure is a basic requirement for productive
manufacturing enterprises. This is a major weakness
in India at present. The thrust in Government’s New
Manufacturing Policy (2011) to create good infra-
structure for manufacturing enterprises along trans-
portation corridors is, therefore, overdue.
13.21. Good physical infrastructure and smoothly
functioning administrative infrastructure are
threshold requirements for Twenty-first century
manufacturing enterprises to compete in the inter-
national arena. However, these will not be sufficient.
Competitive manufacturing, requires the develop-
ment of complex capabilities—technologies, skills
and management abilities to coordinate diverse
interactions and processes of learning. Such capa-
bilities can be learned and improved. Continuous
improvement in these capabilities is the key to sus-
tainable competitive advantage, even absent advan-
tages from raw materials required for manufacturing,
as Japan and Korea have demonstrated. Therefore,
the thrust of Government strategy must be on the
enrichment of the composition of these capabilities
in the country’s manufacturing ecosystem.
Three Components of India’s Manufacturing
Strategy and Plan
13.22. India’s Manufacturing Plan strategy in the
Twelfth Plan must be built around three compo-
nents. The first are capabilities and processes that
58 Twelfth Five Year Plan
go across many, if not all sectors of manufacturing,
and that build into the ecosystem the processes for
rapid learning and building of capabilities.
13.23. The second component has to be the plans
to strengthen the performance of selected sectors.
The selection of these sectors is done by a combi-
nation of top-down and bottom-up analysis. From
the top, certain sectors appear more important to
meet the goals of the Plan for more employment, for
example, to produce goods that India needs for its
strategic security. On the other hand, the capabili-
ties created by Indian entrepreneurs in some sectors
provide potential for more growth, and they should
be supported. For example, the pharmaceutical and
auto parts sectors. Thus the Plan, at present, has
identified 18 such sectors.
13.24. India’s sectoral strategy has to be broad-based,
covering many sectors, to achieve the large-scale
growth that India needs in manufacturing. India
cannot achieve its goals by ‘picking winners’. In each
of these sectors, a sector strategy is required to grow
capabilities and relieve constraints. Such sector strat-
egies should be formulated jointly by the associations
of producers in the sector (and other principal stake-
holders too) and the relevant Government depart-
ment. They should describe the opportunity for the
sector and the actions required from the producers
themselves, along with support from Government
policies.
13.25. The third, vital, component of the Strategy is
the institutional ability for effective consultation
and collaboration between producers and public
policymakers and implementers and the systemic
reform of existing systems and processes within the
Government. The strength of this process has been
found to be the common factor in the success sto-
ries of all countries that have built large, competitive
manufacturing sectors.
13.26. Lack of co ordination amongst government
ministries, and the relatively poor quality of inter-
action between business associations and govern-
ment—which is constrained by the competition
amongst associations, and the orientation, by and
large, towards lobbying and financial sops—prevents
improvement in the process of collaborative learning
and capability building that India needs to grow its
manufacturing sector.
13.27. The challenges to developing and implement-
ing a cohesive manufacturing strategy in democratic
India are many. Cohesion can be brought about
through more effective coordination amongst agen-
cies, and more effective consultation amongst stake-
holders. Apart from this, the Government will also
require specialised skills such as consensus build-
ing and programme management to manage this
process. Government should consider a ‘Backbone
Organisation (BBO)’ to facilitate this process.
ISSUE IDENTIFICATION AND STRATEGIES TO
ADDRESS THE VARIOUS CROSS-CUTTING
ISSUES
13.28. The focus of this Plan has specifically been on
transforming the approach to align the varied stake-
holders to a common national goal, instead of having
silo-limited views on individual sectors and individ-
ual goals (Figure 13.4). In order to achieve this coor-
dination between the various sectors, and to identify
the underlying causes of the slow progress of manu-
facturing, a set of thematic ‘cross-cutting’ issues were
identified in addition to the major sectors of manu-
facturing. The ‘cross-cutting’ issues affect the growth
of manufacturing across sectors. They fall into two
categories: one category is those issues that ‘industry’
ministries and industrial enterprises have responsi-
bility to address, albeit in collaboration with other
stakeholders; and the other category is those broader
issues that affect the economy overall in which the
responsibility primarily lies with other ministries.
13.29. In the first category is the weak development of
human resources, of which a vast quantum is essential
to achieve our goals. Another key issue, common to
all sectors, is depth within the country of technology
in the sector’s supply chain. Yet another is a set of the
infrastructural challenges, both physical and adminis-
trative, related to acquisition of land and water man-
agement, and the business regulatory framework, in
which industry has a key role to play in developing
and implementing solutions in consultation with
Industry 59
other stakeholders. These cross-cutting issues have
been identified in the National Manufacturing Policy
recently approved by the Cabinet. This Plan describes
the actions to be taken in all these areas and a process
for their implementation and monitoring.
13.30. The second category, that of external inputs to
industry that affect the economy as a whole too, and
which are managed outside industry, includes four
principal constraints on the growth of manufactur-
ing: transport infrastructure, power, cost and avail-
ability of credit, and the exchange rate. Transport
infrastructure and power have a direct bearing on
the competitiveness of manufacturing. Energy and
logistics are critical requirements for competitive
manufacturing operations. While significant invest-
ment were made in transportation infrastructure in
the Eleventh Plan, Indian industries continue to suf-
fer from severe infrastructure handicaps compared
with the infrastructure available to manufacturers
in other countries. Ports are already close to full-
capacity utilisation resulting in extremely inefficient
turnaround times and similarly roads suffer from
congestion resulting in heightened costs. Unreliable
and inadequate power supply continues to be a seri-
ous impediment in India in spite of the considerable
efforts made to enhance power generation capacity
in the country. Improving the supply and quality of
both transport infrastructure and power are essential
requirements for attaining the targeted growth rates
for manufacturing in the Twelfth Plan and beyond.
13.31. Adequate availability of low-cost credit is
a vital requirement for sustainable manufacturing
growth. Continued monetary tightening due to the
recent turn of global events has resulted in a high
cost of capital, adversely impacting manufacturing
investment and growth in India. Cost of capital is key
for ensuring competitiveness, especially of exports,
of the manufacturing sector and needs to be carefully
managed through a more balanced blend of fiscal
and monetary measures. Specifically for MSME’s,
access to credit continues to remain a challenge and
besides a host of measures to facilitate greater flow
of credit to this segment detailed in Section 5, the
overall pool of available capital needs to be enlarged
to include alternate sources of capital such as private
equity, venture capital and so on.
Focus given not only to ‘vertical’ sectors by also to ‘horizontal’ issues that cut across sectors
Automotive
Fertilizer
Petrochemical
& Chemical
Drugs and
Pharmaceuticals
Mineral Expl.
& Development
Ship-building
& Repair
Steel
Textiles & Jute
Cement
Capital Goods
& Engineering
Leather and
Leather Goods
Paper
Food Processing
Industries
Gems & Jewellery
Defence Equip.
Aerospace
Technology & Depth
Human Resource Development
Business Regulatory Framework
Role of PSEs
National Investment and Manufacturing Zones
Boosting India’s Manufacturing Exports
Environment Sustainability
Land and Water
Clustering and Aggregation
MSMEs
Sectoral Groups
Cross-cutting
Groups
FIGURE 13.4: Focus on Sectors as well as Cross-cutting Issues
60 Twelfth Five Year Plan
13.32. Finally, the exchange rate is an enormously
important factor affecting the international com-
petitiveness of a country’s manufacturing sector.
Large fluctuations in exchange rates can disrupt the
management of supply chains. Monetary and fis-
cal authorities need to be cognisant of the impact
that such fluctuations have on the growth of
manufacturing.
TECHNOLOGY AND DEPTH
13.33. A principal objective of the Twelfth Plan must
be to increase ‘depth’ in manufacturing, to increase
domestic value addition, and meet national strategic
requirements. The technological depth of the coun-
try’s manufacturing sector goes up when it becomes
an active player in more parts of the manufacturing
value chain (research, development and production).
Depth defined in these terms increases synergies
across the value chain and also strengthens the over-
all trade position. It may be noted that depth is not
necessarily required in all sectors. There is merit in
being part of a global value chain but substantial part
of industry must have technological depth.
13.34. Depth in technology is extremely important
for a country to sustain its competitive advantage
in a global economy. It is not only important from
the point of view of greater value addition, but it is
also required to attract new industries and maintain
competitive advantage of current industries.
13.35. The key requirements for improving technol-
ogy and depth are to:
• Provide an enabling environment for domes-
tic enterprises to invest in technology creation,
technology absorption and achieve higher value
addition
• Ensure availability of demand for products devel-
oped and/or manufactured indigenously
• Provide enabling environment for foreign enter-
prises to invest in manufacturing and research
activities in the country, in the areas in which the
country needs foreign technology
• Mitigate the risks of MSMEs investing in technol-
ogy development and technology upgradation
Status and Key Challenges
13.36. Lack of depth in technology is one of the
foremost issues affecting the growth of manufac-
turing sector in the country. India’s R&D spend is
0.9 per cent of GDP, whereas China, UK and Israel
spent about 1.2 per cent, 1.7 per cent and 4.3 per
cent, respectively. India needs to increase its R&D
expenditure to improve its depth. The private sec-
tor finances 70 per cent of the total R&D spending
of China, 65 per cent in United States and 75 per
cent in Korea and Japan, while Indian private sector
funds only 25 per cent of the total R&D spend. As
majority of private sector funding of other countries
is towards industrial R&D, Indian corporate sector
needs to increase its spending on industrial R&D
(see chapter on Science and Technology).
13.37. The key challenges faced by Indian industries
are:
• The Indian Industry has not given sufficient
importance to the documentation of knowledge
and creation of IP. As a result, not only were
opportunities lost to create IP, but we lost IPs to
other countries, such as in traditional agricul-
tural products (IPs filed by western countries on
neem, turmeric and basmati rice, which India has
contested). Our regulatory framework, speed of
award of IPs and the enforcement of IP regula-
tions needs improvement. India’s approach on IP,
hence, needs to distinguish between shaping the
framework for IP creation and improving its IP
management processes.
• Though there is an improvement in the indus-
try-academia collaboration in creating pat-
ents/technologies, still there is a large scope for
improvement.
• While FTAs signed with other countries are
favourable for some products, they often create a
distortion in the market in terms of inverted duty
structure for other products.
• Many segments of the industry, especially
MSMEs, have limited information and access to
risk capital for sourcing/developing and internal-
ising new technologies.
• The weak attention to standards not only invites
dumping of sub-standard products by other
Industry 61
countries (refer to Box 13.1), but also makes it dif-
ficult for the industry participants to benefit from
each other’s learning and improve their technol-
ogy depth.
• Absence of national agenda and policy framework
to support innovation.
A Systems Improvement Framework
13.38. It is essential to set the context before mov-
ing to the recommendations. Government support is
essential to enable a country’s industrial ecosystem
to gain depth because technological learning takes
a long time, requires large investments and is risky.
Support to the enterprises should be in such a way
that it motivates and enables enterprises to learn and
develop complex capabilities and not become com-
placent and inefficient, which was the outcome of the
industrial policy adopted by India until the 1980s.
13.39. Table 13.4 and Table 13.5 capture the generic
policy levers that should be moved for faster growth
of manufacturing over the next five years. The spe-
cific policy interventions must be tailored to fit the
requirements of sectors by a process of industry—
Government consultation which, as has been empha-
sised before, will be the key to ‘get it right’. MSMEs
and large enterprises will require different kind of
interventions from Government.
13.40. MSMEs play a critical role in innovation,
thanks to their nimbleness and their ability to
experiment with new technologies on small scales.
However, they often suffer from lack of funds,
inability to take risks associated with technology
developments and the difficulty of attracting skilled
manpower. Policy interventions for MSMEs must be
tailored to their conditions. Government policies for
MSMEs should therefore help them improve their
technological capabilities by focusing on:
• Providing access to risk capital
• Setting up of standards for the industry
• Improving Industry/research institute/academia
interaction, mostly in clusters
• Stimulating demand/providing scale through
preferential treatment in government purchases
Box 13.1
Examples of Weak Domestic Standards Leading to Influx of Sub-standard Products in the Country
A) Absence of standards
In the absence of technical standards, it becomes easy to import poor-quality products into the country. This hurts the domestic
industry as the domestic industry is unable to match the price of these poor-quality products; it also exposes consumers to
the harmful effects of spurious products. In the absence of such standards, it would not be possible to make such technical
regulations which would curb import of poor-quality products. Some of the examples include mobile telephones, batteries for
the mobile telephones, digital blood pressure measuring equipment, decorative lights (imported from China during Diwali
festival), medical equipment and so on.
Mobile telephones: Lack of manufacturing standards and testing/sampling labs are prompting dumping by foreign
manufacturers. For example, till 2009, there was no standard mandating all imported mobile phones to have an IMEI number.
As a result, Chinese handsets without IMEI numbers had a market share of about 13 per cent at that time.
B) Lack of a clear framework for voluntary and mandatory compliances
In some situations, where Indian Standards exist for products or processes, the Central Government has not notified them
for mandatory compliance.
Toys: Standards have been laid out for safety of toys such as quality of plastics and paints, electrical and mechanical hazards,
migration of heavy elements (Lead, Cadmium) and so on. However it is not mandatory to comply with, and hence toys from
other countries are being dumped in the Indian market.
Structural steel: This is used in building damns, bridges and so on. Standards in the manufacturing of structural steel are
voluntary and lack the need to specify end use. The lack of compliance to such voluntary guidelines and the absence of the
need for requisite certification lead to dumping of poor grade structural steel.
62 Twelfth Five Year Plan
competitive products for domestic as well as global
customers. They compete with global manufacturers
in local as well as in global markets. The Government
policies for large enterprises can focus on:
• Improving IP regime
• Ensuring human resource availability by estab-
lishing institutions for technology education and
research, educational institutions and so on
• Ensuring access to critical raw materials
Strategies for Change
13.42. Some high impact strategies for India at this
time to accelerate the development of technological
depth in the manufacturing sector have been anal-
ysed. These should receive special attention in poli-
cymaking and implementation.
13.43. Creation of coherence amongst existing insti-
tutional agencies towards developing national priori-
ties for indigenous technology development.
13.44. Several countries like China and Singapore
have followed a comprehensive approach to iden-
tify critical technologies to be developed indig-
enously and have formulated mechanisms to
TABLE 13.4
Processes That Enable Learning
Process that Enables Learning Policy Levers
1. Interaction between diverse components of
the system—R&D, producers, customers,
Government, institutes of skill development and so
on.
• Cluster development
• FDI and JVs
• Industry/research institute/academia partnership
• Higher education in the country
2. Creating ‘safe-failing’ spaces for experimentation
by firms
• Access to risk capital, technology funds
• Subsidy on interest costs
• PPP model of funding
3. Creating a regime of ‘Standards’ • Setting up a system of National Standards benchmarked to International
Standards
4. IP regime, which helps firms to build on each
other’s innovation
• Effective ‘IP’ regime
• Improving awareness of IP
5. System-wide improvement: Processes such as
‘Total Quality Management’
• Mainly the firm’s role to adopt such tools and increase organisational
learning
• Nation-wide, and State-wide campaigns to improve ‘Total Quality’ in
all enterprises, including MSMEs, should be sponsored by Government
through institutions such as Quality Council of India
Source: Planning Commission.
TABLE 13.5
Manufacturing Ecosystem Infrastructure
Ecosystem
Infrastructure
Policy levers
1. Physical
infrastructure
• Cluster development
• Special manufacturing zones (NIMZ)
2. Improving
capabilities
• Skill development
• Total quality management
• JV, Technology transfer, FDI
3. Creating the
manufacturing
ecosystem
• Developing MSMEs
• Common facilities through clusters
• Developing Standards
• Availability of quality human
resources
• Demand availability for manufactured
products
Source: Planning Commission.
• Modular industrial estates/laboratories near pre-
mier technical institutions with the required plug
and play facilities.
Setting Up of a Technology Acquisition and
Support Fund
13.41. On the other hand, large enterprises handle
complex technologies and manufacture globally
Industry 63
ensure that these technologies were funded and
incubated.
13.45. In India, we have various agencies like the
Department of Science and Technology, NMCC
and the Planning Commission working in this area.
Connections between these agencies remain weak
as they continue to function in silos, resulting in a
cluttered approach to technology development. To
make this process more robust and comprehensive
(including funding and incubating projects), the pre-
sent process/institutional arrangements should be
reviewed and fine-tuned/restructured. The industry,
as key stakeholders, should be involved and con-
sulted in the design of new arrangements.
Create ‘Safe-failing’ Spaces for Companies to
Engage in Innovation
13.46. Government participation in funding of
research through a ‘Technology Fund’ or ‘Tech-
nology Upgradation Fund’ is an important instru-
ment for reducing the risk for firms in investment
in research. The structure of the ‘Technology Fund/
Technology Upgradation Fund’ has to evolve over
a period of time. Traditionally such funds have
been operated in the form of Government grants
or schemes. However, they can be more effective in
producing outcomes if they were managed by pro-
fessionally managed investment entities.
13.47. The ways in which the Government could
provide/redesign fiscal incentives for R&D activities
are:
• Tax credit instead of tax incentives: With the
imposition of Minimum Alternate Tax (MAT)
of 20 per cent, companies are unable to avail full
benefit of weighted deduction. Equivalent benefits
of weighted deduction on R&D spend should be
treated as tax credit and be allowed to be set off
against Tax and/or MAT payable.
• Credit on inputs/capital goods used for R&D out-
side the factory premises: The Cenvat Rules pro-
vide that credit can be availed on inputs and
capital goods if they are used in the factory of the
manufacturer. Enterprises having R&D facility
separately from manufacturing facility will not be
able to claim Cenvat benefits on inputs and capi-
tal goods used for R&D. This anomaly should be
removed and the Cenvat benefits to be available
for inputs and capital goods used in R&D, even if
the R&D is carried out in a different premises, as
long as linkage between manufacturing and R&D
activities can be established. Due to this lacuna,
assesses with sizeable investments in R&D facili-
ties outside their factory of manufacture will not
be entitled to avail Cenvat credit on investments
and certain operating expenses. Consequently,
this forms a disincentive to setting up of R&D
centres by increasing the costs of setting up such
centres.
13.48. The tax incentives should be provided in such
a way that they do not penalise existing enterprises
that do not operate in special economic zones or
particular locations/States. To ensure a ‘level playing
field’ to all domestic manufacturers and to provide
a wider stimulus by the incentives, the tax incen-
tives should be available for all enterprises involved
in a specific activity rather than for a few enterprises
operating in some specific locations. Knowledge
sharing should be improved between the industrial
and financial sectors.
13.49. The financial sector works with many indus-
trial sectors and thus can see patterns and, with
its perspective, obtain insights that are not avail-
able to people within industrial institutions.
There are several programmes like Small Industry
Business Research Initiatives (SIBRI), Technology
Development Board (TBD), Biotechnology Industry
Partnership Programme (BIPP) and Biotechnology
Industry Research Assistance Programme (BIRAP)
which promote early stage innovations and PPPs.
These institutes should work more often and closely
with financial sector institutions to share knowledge
that can improve policies for the manufacturing
sector.
64 Twelfth Five Year Plan
Strengthen the IP Regime and Systems to
Leverage IP
13.50. A strong intellectual property regime is a pre-
requisite for creation of global IP from India. It has
also become a requirement under WTO. While the
importance of IP for creation of innovations in the
industry is well understood, the question is whether
developing countries will get penalised given that
they are starting with a low base compared to devel-
oped countries. Various alternatives like ‘utility
model’ of patents (as China has) to manage this need
to be examined to put in place an efficient model that
can help generation and protection of incremental
innovations in Indian manufacturing.
13.51. Given the need for a strong IP regime from a
long-term point of view, the following steps need to
be taken:
• Improve IP management and protection
mechanisms.
• Develop global information database on IPs
accorded.
• Strengthen and modernise the process of patent
examination and according patents.
13.52. Also, in order to leverage the benefits of IP:
• Build awareness about IP through education and
training.
• Create national IP mission to continually evolve
the IP strategy of the nation.
• Encourage joint IP filings by industry/academia/
research institutes.
• Encourage the formation of companies specialis-
ing in IPs (through tax incentives).
• Exempt income tax for the income generated
from domestic IPs.
Strengthen Partnership between Industry
and Academia/Other Research Institutes to
Create IPs Domestically
13.53. Industry–academia partnerships are relatively
weak in India compared to many other countries.
The partnership should aim for building an eco-
system which can create a virtuous cycle of educa-
tion and research leading to IP creation and its
subsequent commercialisation. Such aspect in turn
will incentivise and inspire further innovation. Some
of the policy measures that Government can use to
accelerate the development of industry–academia
partnership are:
• Joint ownership of IP arising out of these
collaborations.
• Align the goals and annual planning processes of
central research institutions with that of indus-
tries through industry associations.
• Incentivise Central/State Research institutes to
create joint IPs with Industry.
• Tying up a certain percentage of their budget to
the number of collaborative IPs created.
• Incentivise university and industry for forging
successful partnerships in university’s gover-
nance, infrastructure, course curriculum design,
faculty/students development and research.
• Create cluster innovation centres at universities
with the aim to foster a favourable ecosystem and
enforce industry–academia linkage.
• Provide an institutional framework for active
interface between funding agencies, academia and
industry.
Clusters (and NIMZ) Can Provide Enabling
Infrastructure to Improve Technological
Depth
13.54. Clusters play a critical role in propagating
technological depth by facilitating technological
learning and manufacturing through the presence of
the entire ecosystem in the same geographical loca-
tion. The National Manufacturing Policy, which out-
lines creation of NIMZs, was cleared by the Cabinet
in November 2011. It ensures that business is pro-
vided with the ecosystem required for growth, not
only in manufacturing, but also for investments in
research and development. The attractiveness of
NIMZs will be even higher for new high-technology
industries, which will benefit from the localised pres-
ence of the entire value chain of participants. Also,
the benefits of industrial clusters to MSME par-
ticipants are also well understood, and the MSME
Ministry is using the cluster approach to drive the
growth and depth of MSME industries.
Industry 65
Improve Technical Standards, Voluntary
Compliance and Conformity Assessment
13.55. Standards are a form of embodied technical
knowledge accessible to all types of business that
enables more effective product and process devel-
opment. They promote and enable the diffusion of
technology in a form that is readily assimilated by
firms with the complementary capabilities to take up
and use the new methods. Standards, therefore, con-
stitute one of the important foundations for the tech-
nological depth in manufacturing, and are accorded
high importance by the policy planners in the devel-
oped world.
13.56. During the Twelfth Five Year Plan, the focus
on technical regulations should be on:
• Developing a policy on technical regulations.
• Capacity building of regulators (BIS).
• Review of technical regulations to identify the gap
vis-à-vis national standards.
• Sensitising the industry regarding the need to
provide scientific data to regulators to formulate
effective technical regulations.
• Setting up of helpdesks in industry bodies and
export promotion councils for information
dissemination.
13.57. In addition, voluntary compliance initiatives
must be strengthened:
• Promoting and funding a ‘Standards Cell’ in
industry associations and Standards Developing
Organisations (SDO).
• Capacity building of SDOs.
• Capacity-building programmes for the training
of technical staff in the industry for writing com-
pany- and industry-level standards.
13.58. Government should also create a database-
based/software-based system to track the changes in
technical standards/voluntary compliances globally
and alert Indian manufacturers of development.
13.59. While the Standard-setting process sets the
standards to be followed, conformity to the stand-
ards is assessed by conformity assessment agencies.
While many conformity assessment agencies have
sprung up in the last few years, it is important that
these conformity assessment agencies are of world
class and their certificates are acceptable across the
world.
13.60. To achieve these, the following steps are
envisaged during the Twelfth Five Year Plan period:
• Promoting the acceptance of Indian conformity
assessment globally
• Capacity building for inspection bodies/certifica-
tion bodies
• Developing regulation on conformity assessment
13.61. Quality Council of India, set up jointly by the
Government of India and the top industry associa-
tions—CII, FICCI and ASSOCHAM, has been work-
ing to
• Establish and maintain an accreditation structure
in the country
• Help representing India’s interest in International
forums
• Spread the quality movement through the country
13.62. The Twelfth Plan will focus on strengthening
the capabilities and role of the QCI.
Removing Anomalies in Duty Structure
• Remove special schemes that allow import of fin-
ished goods at concessional custom duty: In almost
all promotional schemes where import duties are
reduced (nil duty project imports, certain defence
purchases, SAD exemption under ITA Agreement
for IT products and so on), imports get the ben-
efit of reduced duties/nil duty. This erodes the
level of protection which would have otherwise
been available, thereby, creating a systemic dis-
advantage for local manufacturers. It is therefore
recommended that import of finished goods at
concessional custom duty under special schemes
be discontinued.
• Inverted duty structures (Higher duty on inter-
mediate products vs. final products): For speci-
fied purposes, presently there is higher duty on
66 Twelfth Five Year Plan
intermediate goods (used by the domestic manu-
facturer for assembly/manufacture of goods), as
compared to duty on finished goods. This in turn
leads to higher input cost for the domestic manu-
facturer. It is therefore recommended that duty on
intermediate goods be brought in line or set lower
than applicable for final products.
13.63. The Government has corrected, as best pos-
sible, the issues related to inverted duty structures
(illustrated above) raised by industry. It must review
any new case that is brought to its notice and must
undertake a study of effective rate of protection
across sectors.
13.64. Some issues regarding CST/VAT retention
and VAT/SAD were also analysed:
• CST/VAT Retention: Interstate movement of
goods by domestic manufacturers carries added
cost in the form of central sales tax (on interstate
sales)/retention of input VAT credits (on inter-
state stock transfers). This can be avoided in case
of imports by executing sales in the course of
import or through directly consigning the goods
to the customer’s state. This creates disadvan-
tage to domestic manufacturers. Therefore, CST
on interstate sales and provisions with respect to
retention of input VAT on interstate stock trans-
fers should be abolished.
• VAT vs. SAD: VAT rates have been increased
from 4 per cent to 5 per cent, however there has
been no consequential increase in the rate of SAD
on imported products which is levied in lieu of
VAT. Therefore, SAD should be increased to 5 per
cent to reflect the pan-India based trend of revi-
sion of the VAT/CST rate bracket of 4 per cent to
5 per cent.
13.65. In order to resolve the aforesaid issues, it is
necessary for the Central and State Governments to
quickly build consensus on the design of a compre-
hensive GST and implement the same at the earliest.
Encouraging FDI and Joint Ventures
13.66. FDI (investments by foreign companies
in Indian ventures) and Joint Ventures of Indian
companies with foreign partners can provide access
to technology in areas in which domestic expertise
is inadequate. The Government must identify the
areas, in consultation with the industry, in which
FDI and Joint Ventures can help to bring technol-
ogy. Several problems that are impeding FDI/JVs
need to be addressed. Some these are:
• The ambiguity in the characterisation of income
arising to foreign investor on transfer of tech-
nology from the perspective of direct-tax obli-
gations. This leads to uncertainty with regards
to its taxability in the hands of foreign investor
thereby discouraging the flow of technology from
outside India. The foreign investor is required
to obtain PAN to enable the payer to withhold
taxes at appropriate rates. Also, the foreign inves-
tor is required to file its annual return of income
before the tax authorities in India for the purpose
of claiming credit with respect to the taxes with-
held by the payer in India. Such additional com-
pliances could become quite cumbersome for
the foreign investor in India especially where the
foreign investor does not have any operations in
India.
• The R&D cess paid by the importer cannot be
adjusted against any output taxes paid by the
importer, resulting in additional cost of 5 per cent
for the technology importer.
• Service tax paid on import of technology cannot
be adjusted against taxes paid on output, if the
manufacturing is outsourced.
• Limitation on technology cost as percentage of
total investment available for state tax exemptions.
Preference for Domestic Products in
Government Procurement
13.67. The cost of any manufacturing activity
(excluding raw materials and utilities) depends on
the maturity of manufacturing technology used
and the magnitude of the demand. For a matured
technology, the cost of manufacturing will be
relatively low, due to the learning curve effects.
Similarly, due to scale effects, the unit cost of man-
ufacturing goes down with the increasing demand.
Therefore, a domestic enterprise using new indig-
enous technology will have a cost disadvantage
Industry 67
compared to a global enterprise that has the ben-
efits of matured technology. Unless there is some
incentive provided to domestic enterprises to off-
set this handicap, developing indigenous technol-
ogy will be difficult.
13.68. Therefore, Governments in many countries,
developing as well as developed, provide preference
in Government procurement to domestic enter-
prises. However, to ensure that this policy measure
does not lead to development of substandard qual-
ity products or create inefficiencies in the domestic
enterprises, the preference in procurement can be
made applicable with minimum quality standards;
a cap on the permissible price differential between
domestic and imported products, and also a sunset
clause.
13.69. Some ways in which the preference for indig-
enous products can be provided in Government pur-
chases are:
• In sectors of strategic importance, procurement
should be done only from those vendors, who
have locally established manufacturing base.
• A multi-tier tax structure can be introduced,
which offers concessional tax rates for products
with higher local value addition.
• A certain percentage of Government procure-
ment to be reserved for enterprises using domes-
tic manufacturing/domestic IP; and a certain
percentage of it can be reserved for firms in
MSME Sector.
13.70. However, as a prerequisite to implementing
this procurement strategy, streamlining of procure-
ment functions is essential. Public procurement
organisations must be clear about how national
policy goals should be translated into procurement
practices without compromising quality. ‘Least cost’
is not always the right strategy and needs to be bal-
anced by other guidelines (life-cycle costs such as
service agreements, continuous improvement con-
tracts and so on). A balanced approach should be
taken to determine the weight assigned to price ver-
sus other qualifying criteria.
Aligning Investment Obligations Under
‘Offset Policy’
13.71. Offsets as a policy tool should be encour-
aged for public procurement in sectors where the
Indian industry does not have existing technol-
ogy or capability. The obligations of investments of
foreign companies under ‘Offset Policy’ should be
targeted towards investment in industries in which
the country needs to improve technological depth.
Articulation of clear objectives for an offset pro-
gramme, not just for defence industry but also for
the economy as a whole can become an instrumental
lever to further investment and growth of the coun-
try’s manufacturing sector.
Encouragement of Local Value Addition in
Critical Natural Resources
13.72. Some natural resources like good-quality coal
and iron ore are becoming short in supply in the
global economy with growing demand from devel-
oping economies especially China and now India.
Domestic availability of some of these raw materi-
als provides us a competitive advantage which we
should leverage to build domestic industries that
add value to these resources, thus creating additional
jobs and improving our trade balance. Going further
up the value change Government policies and duty
structure should be designed in a way to incentivise
value addition of steel rather than exporting steel in
raw material form.
13.73. In general the trade-off between export of
inputs which are in demand elsewhere in the world,
and use of those inputs for improving the competi-
tive position of domestic user industries is a tricky
one, while promoting entrepreneurial freedom and
free trade. These trade-offs must be understood
and sensitively managed to ensure competitive and
sustainable growth of domestic manufacturing.
Examples of vulnerabilities that have developed for
Indian industries, when longer term consequences of
policies have not been foreseen, are the virtual disap-
pearance of production of intermediaries for generic
drugs which China is now dominating, and also the
dwindling of Indian capital goods industries (refer to
Box 13.2), where too Chinese industry is becoming a
big international supplier. Chinese industrial policy
68 Twelfth Five Year Plan
has evidently done far better than India’s in building
depth in China’s industries.
HUMAN RESOURCE DEVELOPMENT, JOB
CREATION AND SOCIAL PROTECTION
13.74. One of the primary objectives of the plan is
to increase the competitiveness of Indian manufac-
turing. Human resources are of critical importance
for the growth of knowledge and technology, value
addition and improvement of competitiveness in
manufacturing through processes of continuous
improvement. In fact, the human resource is the only
‘appreciating resource’ in a manufacturing system.
It is the only resource that has the motivation and
ability to increase its value if suitable conditions are
provided, whereas all other resources—machines,
building, materials and so on—depreciate in value
with time. The best enterprises view their people as
their prime asset and the source of their competitive
advantage. Nations that have achieved sustainable
competitiveness in manufacturing even when they do
not have raw materials required, such as Germany,
Japan and South Korea, have created systems for the
continuous improvement of the capabilities of their
human resources.
13.75. India must invest in and build its human
resource capabilities to catch up with other countries
that have moved ahead and thereafter sustain com-
petitive advantages in manufacturing. Indeed the
contentious debate of ‘labour’ versus ‘capital’ in the
enterprise, as well as disputes between the institu-
tions that represent the people working in the enter-
prise and owners of the capital could be reframed if
employees were seen as assets, with value that can
appreciate, rather than as labour costs.
13.76. The purpose of this section is to propose a
set of holistic changes in key areas that require close
involvement and buy-in from various stakeholders.
Box 13.2
Dwindling Indian Capital Goods Industry
The capital goods industry can be considered as the ‘mother’ of all manufacturing industry and is of strategic importance
to national security and economic independence. It is in the interest of User Sectors that the capital goods industry be
strengthened since it is well established that the presence of a strong domestic industry increases competition and helps in
reducing the capital cost of projects. And most importantly, in economical maintenance of plant and machinery. Imported
plants come at lower cost but the foreign suppliers make up for that in their high priced spares and maintenance contracts.
However, Indian capital goods industry is facing severe competition from Chinese companies over the last few years. In the
case of machine tools, imports account for about two-thirds of the domestic requirements and is increasing further. The
import of power-generation equipment from China at much lower cost is also making the domestic industry uncompetitive.
The major factors responsible for increasing Chinese competitiveness are:
• Artificially depreciated Chinese currency
• Tax advantages and Government subsidies given by the Government
• Much lower interest rates
• Simpler labour laws
• Better infrastructure leading to lower cost of power, transportation and cluster approach helping specialisation of labour
and engineering skills
This is further complicated by the absence of level playing field for Indian manufacturers:
• All domestic manufacturers of capital goods are rendered uncompetitive due to additional burden of sales tax, entry tax,
octroi, VAT and other local duties and levies.
• For specified projects (Oil and Gas, mega nuclear/hydel power, fertiliser, refinery and so on) zero/5 per cent customs duty
applies on capital goods.
While it may be preferable from user industry point of view to allow the import of capital goods at lower costs in order to
improve their competitiveness, this will result in over reliance of Indian industry on other countries for key strategic inputs,
exposing itself to vagaries to the policies of these countries. Also, this does not help in building technological depth of the
Indian industry and manufacturing ecosystem.
Industry 69
Consensus about these holistic changes is more
likely to be achieved if, as mentioned before, the pri-
mary challenge was reframed as the development of
human assets to build India’s manufacturing eco-
system and strengthen India’s manufacturing enter-
prises, rather than merely management of costs of
labour.
13.77. Challenges in meeting the objectives lie
broadly in three areas:
• From a skill development perspective, there is
a significant gap between the existing training
capacity and people entering the workforce. A
very small proportion of total manufacturing
workforce is currently skilled.
Moreover, less than 25 per cent of the total
number of graduates are estimated to be employ-
able 1 in manufacturing.
• The total training capacity in the country is about
4.3 million for all sectors including manufactur-
ing.2 The Apprentice Training Scheme (ATS),
which is supposed to provide a bridge from edu-
cation to employment, has very low penetration
and is suffering from significant administrative
issues.
• For entrepreneurs and other employers, the per-
ceived lack of flexibility of changing the size and
nature of the workforce can act as a retardant in
making investments that could lead to greater
employment opportunities. Furthermore, the
complexity of labour laws and the administrative
mechanism of the laws make it harder to do busi-
ness in the country.
• By 2025, an additional 8 million management
workers3 (supervisors and above) are estimated to
be required. Well-trained management/supervi-
sory staff are critical for improving the productiv-
ity and industrial relations in large as well as small
manufacturing enterprises.
Strategy and Key Recommendations
13.78. Human resources should be managed as
a source of sustainable competitive advantage.
Government policy changes should induce and sup-
port such firm level strategies. The key stakeholders
who will need to work together to make the neces-
sary changes to the system in key areas mentioned
above are: Government (at the Centre and State
level), Industrial organisations and the unions.
13.79. The strategies for meeting the objectives are
in the following categories:
• Inducing job creation by reducing the cost of gen-
erating employment.
• Developing a supply of qualified human resources
to meet the demand from additional job creation.
• Enhancing skill levels of current workforce to
improve productivity.
• Improving the state of manufacturing manage-
ment in the country.
• Providing social protection to low-income
workforce.
• Improving industry–workforce relationships.
Inducing Job Creation by Reducing the Cost of
Generating Employment
13.80. There are two major barriers to employment
generation: limited flexibility in managing the work-
force and cost of complying with labour regulations.
Both these barriers must be removed in order for
jobs to be created at a much faster rate.
Limited Flexibility in Managing the Workforce
13.81. The recommendations to increase the level of
flexibility while ensuring fairness are:
• Companies should be allowed to retrench
employees (except categories such as ‘protected
workmen’ and so on) as long as a fair severance
benefit is paid to retrenched employees. This
severance benefit should be higher than what is
currently mandated—and the value should be
arrived at through tripartite dialogue between
Government, employers’ associations and
employees’ associations.
• In order to ensure that there is sufficient liquid-
ity to pay the severance benefit to the retrenched
employees, a mandatory loss-of-job insurance
programme could be put in place. This will espe-
cially be useful in situations where the retrench-
ment is due to bankruptcy or exit of the employer
and will reduce the justification for requiring
prior permission to shut down businesses.
70 Twelfth Five Year Plan
• The threshold level of employment for the
Chapter VB of the Industrial Disputes Act and
the threshold for applicability of the Factories Act
should be raised to at least 300 which was the level
in 1983.
• The process of engaging contract labour should be
reformed—employers should be allowed freer use
of contract labour while ensuring that the rights of
contract workers are protected, which is not the
case at present.
Cost of Complying with Labour Regulations
13.82. The traditional enforcement approach which
is based on inspection—prosecution—conviction
creates incentives for rent-seeking behaviour, espe-
cially if the laws are complex or have provisions that
are contradictory. The complexity of compliance
impacts smaller enterprises much more. They can-
not bear the high administrative costs.
13.83. Recommendations to improve compliance
and also contain the cost of complying with labour
regulations are:
• Simplification of labour laws: The implications of
labour laws should be detailed through a series of
ready reckoners that are easily available and regu-
larly updated so that inspectors and employers
have a common set of rules to look at.
• Improvement of administration: Higher invest-
ment should be made in the training of inspectors
to ensure that they are able to efficiently identify
incidences of actual non-compliance rather than
harass employers.
• Facilitating easier filing: Filing of reports should
be made a once a year activity with an online
option. As far as possible, the interface between
enterprises and Government should be comput-
erised to increase transparency and efficiency and
remove scope for rent seeking.
• Developing a self-certification model: While
ensuring that regulations governing labour wel-
fare must be complied with, a self-certification
model should be developed where appropriate.
• Additionally, fiscal incentives to encourage per-
manent job creation should also be considered,
after evaluating their implications and potential
impact. For example, skill building and train-
ing costs of permanent employees can be con-
sidered for accelerated tax benefits (subject to a
ceiling on percentage of salary paid to permanent
employees).
Developing a Supply of Qualified Human
Resources to Meet Demand from Additional
Job Creation
13.84. The manufacturing sector may need more
than 90 million people by 2022. However, the cur-
rent capacity for skill development is ill equipped to
meet this demand.
13.85. Role of industry: To enable the industry to play
its role in defining the requirement of manpower
both in terms of quality and quantity, Sector Skills
Councils envisaged in the National Skills Policy are
being set up. These councils will identify skill devel-
opment needs in their sector, evaluate the gaps,
create plans for skill development and improve the
quality of the training system. The councils are also
expected to establish sector specific Labour Market
Information Systems (LMIS) to assist in planning
and delivery of training.
13.86. Private sector participation in skill develop-
ment: For the private sector to play a role in aug-
menting the skill-development capacity in the
country, effective PPP models are needed. Existing
ITIs should be clustered together in projects with
total training capacity of at least 1,00,000 each to
allow private sector service providers to leverage
scale benefits leading to long term financial sustain-
ability. For inducing the private sector to partici-
pate in creation of additional capacity, scalable and
sustainable business models with direct linkages to
employment should be deployed. The NSDC has
created such models. They should be implemented
across 20–30 projects specific to manufacturing in
partnership with industry associations and from
funding through NSDF.
13.87. Improving ITIs: We need to improve private-
sector involvement in upgrading existing ITIs and
also improve their curriculum and content through
the sector-skills councils.
Industry 71
13.88. Attracting students: As a long-term strategy, it
is important to make acquisition and improvement
of skills an aspiration for people, especially youth.
This could be achieved by recognising high-skill per-
sons at the national and State levels along with rec-
ognition of other worthy citizens. For example, an
unsecured loan scheme should be created for those
who aspire to undertake vocational training. Large
enterprises could also provide special incentives and
recognition for acquisition of high skills.
13.89. Overall coordination: A number of initiatives
have already been taken by various Government min-
istries to tackle issues related to skill development
both at the Central and the State level. Coordination
between these initiatives should be improved. The role
and performance of the National Skill Development
Coordination Board should be assessed. To ensure
that skill-development activities are aimed towards
areas of maximum impact, it is important to put in
place an information system that provides data on
availability and requirement of skilled resources.
Enhancing Skill Levels of Current Workforce to
Improve Productivity
13.90. Training and skill building of the existing
workforce is an important element of the strategy
for increasing productivity of manufacturing in
India. Training of employees can be incentivised by
allowing tax deductions for expenditure incurred on
training. Currently, skill building is predominantly
achieved by in-house training of workers by each
enterprise. However, clusters and NIMZs provide
opportunities for shared infrastructure to provide
training for skilled and semi-skilled workers.
13.91. A number of existing initiatives are focused
on setting up tool rooms which are necessary for
SMEs. These tool rooms can be made more effective
by periodic performance audits by independent agen-
cies and also by operating them on a PPP model in
collaboration with industry associations. Just as tax
incentives are provided for investments in critically
required infrastructure assets, fiscal measures includ-
ing tax benefits on training expenditure may also be
considered for investment in critical human assets.
MSME Sector alone needs to skill 42 lakh persons in
the Twelfth Plan period, thus, requires to increase its
current training capacity from 4 lakh person per year
to at least 17 lakh persons per year by 2017.
13.92. Apprenticeships can be an effective way of
ensuring that entry-level workers have the skills
required to join the formal workforce. While there
should be no obligation to employ apprentices, the
current apprenticeship model needs to be reformed
by simplifying workflow for engagement of appren-
tices by employers, inclusion of new trades and
recording compliance through e-filing, removing
NOC requirement for out-of-region candidates.
Further, it is proposed to make all graduates eligi-
ble for apprenticeships and the duration of courses
should be reduced to a minimum of three months
and should be converged with MES. Outdated cur-
riculum needs to be updated and outsourcing of
classroom trainings should be allowed.
13.93. Changes in the Apprenticeship Act may have
to be made. In the meantime, a new model of in-
company training should be deployed. In this model,
companies should be allowed to take trainees for a
period of up to six months.
Improving the State of Manufacturing
Management in the Country
13.94. There were a total of approximately 5 million
managers in the manufacturing sector in 2008. If the
manufacturing sector grows at the targeted 12–13
per cent, 8 million more managers will be needed by
2025. Well-trained managers are extremely impor-
tant for improving the productivity of manufacturing
enterprises and maintaining harmonious industrial
relations. Currently, only a very small portion of
graduates from engineering and management insti-
tutes take up careers in manufacturing. Consequently,
there is a significant gap between supply and demand.
13.95. The quantity and the quality of management
in the manufacturing sector can be improved by the
following initiatives:
• Increasing collaboration between manufactur-
ing companies and engineering/management
institutes for joint projects in which staff and
72 Twelfth Five Year Plan
students of the institutes can get some hands-on
experience.
• Encouraging enterprises (especially larger ones)
to run good graduate engineering programmes
which can be a source of management talent for
themselves as well as the manufacturing sector
generally.
• Scaling up programmes such as Visionary
Leadership for Manufacturing (VLFM) at the
national level.
• Setting up centres of excellence for manufactur-
ing management through MoUs between insti-
tutes, government bodies and industry partners.
Business schools that focus only on manufactur-
ing management should also be encouraged.
• Creating a PPP model for engineering and man-
agement colleges with partnership with industry
associations and employers with focus on manu-
facturing management.
• Launching a campaign focused on attracting man-
agement talent to the manufacturing sector.
• A large source of potential managerial/super-
visory staff is the current workforce. Support
should be provided to enable deserving members
of the workforce to be promoted to management
positions.
13.96. Recent reviews with many sectors of industry
reveal a crying need for better supervisors and fore-
men—the first and second levels of supervision—
who are the backbone of productive and harmonious
manufacturing enterprises. Development of super-
visors and foremen, through suitable programmes,
collaboratively designed and managed by industry
and educational and training institutions must be
ensured along with the emphasis on development of
skilled workmen and good managers.
Providing Social Protection to Low-income
Workforce
13.97. Formal sector workers can leverage collec-
tive bargaining to obtain social security; however,
the informal workforce is dependent on govern-
ment actions to improve social protection for them.
A number of social security schemes have been
launched in the recent past. However, the existing
coverage represents a very low percentage of the
total number of workers in the manufacturing sec-
tor. For example, the New Pension Scheme (NPS)
that was launched in May 2009 to increase pension
coverage, particularly to the informal sector, has less
than 2,00,000 voluntary subscribers—this is far less
than the total intended coverage for such a scheme.
Limited access to social security is exacerbated for
those with low or uncertain incomes.
13.98. Unemployment benefits: Low income work-
ers in transitional phases of unemployment are
particularly vulnerable as they are unlikely to have
significant savings. To help overcome the problems
associated with social protection for temporarily
unemployed workers, which include contract work-
ers at the end of their contracts, a solution could be
for these workers to be part of a ‘sump’ as permanent
employees of contract agencies that are provided with
Government support to ensure skill upgradation of
these workers. The focus should be on creating a
pool of workers who can be available to employers
and ensuring that those that are unemployed have
avenues for training as well as financial assistance.
For example, the Automotive Mission Plan has
recommended the formation of a Supplementary
Unemployment Benefits Fund to be created by auto-
motive companies for providing compensation to
laid-off workers. Such funds in other sectors too can
be utilised to finance the creations and sustenance of
the ‘sumps’ that could be the ‘win-win’ solution out
of the ‘fairness–flexibility’ dilemma.
13.99. Increasing penetration of existing schemes: To
ensure that existing schemes reach the entire work-
force, it is important to increase awareness of these
schemes through communication programmes. The
distribution channels for these schemes should be
evaluated and measured regularly and private sector
participation should be encouraged too. Financial lit-
eracy of the workers in the informal sector should also
be improved so that they make better informed deci-
sions about participating in social-security schemes.
Improving Industry Workforce Relationships
13.100. Strong and effective industry relations
can enable managements of enterprises and their
Industry 73
workers to collaborate in increasing the produc-
tivity and competitiveness of the manufacturing
sector. Unions have a critical role to play in ensur-
ing inclusive growth of the manufacturing sector,
especially by working towards social protection for
the workforce. They can also play valuable roles in
other areas such as skill development. The National
Skill Development Policy has recommended that
trade unions contribute in areas such as developing
competency standards, course design, improving
awareness of and promoting participation in skill
development among the workforce. To ensure that
unions can play a broader and more effective role,
it is important to invest in capacity development of
unions through training of their leadership.
13.101. The multiplicity of unions in the same enter-
prise for the same type of workers can lead to inter-
union rivalries and can weaken collective bargaining.
Therefore, legislation that enables one union per
enterprise is strongly recommended. The union
leadership should also be held accountable for any
illegal behaviour by union members during nego-
tiations. The practice of withholding recognition of
unions should be discouraged. Strong gain-sharing
systems can help to improve productivity.
13.102. The Government has a crucial role in
enabling good industrial relations by providing
platforms for the industry and the workforce to par-
ticipate in policy development and implementation.
Since labour figures in the concurrent list in India,
both the Central and State Government’s role in
such platforms should be that of an impartial facilita-
tor focused on creating consensus amongst employ-
ers and employees around solutions. In especially
contentious areas such as changes in labour laws,
the Government should enable the development of
consensus positions between the various interested
parties. The ‘backbone organisation’ described in the
Way Forward Chapter should have the capabilities
to effectively assist in such a process of consensus
creation.
BUSINESS REGULATORY FRAMEWORK
13.103. Countries that have performed better than
the others in terms of thriving business have, to a
great extent, done so on account of the quality of the
business regulatory environment, which is an impor-
tant factor distinguishing better performing coun-
tries from others. The key objectives of streamlining
of business activities through the regulatory frame-
work should be:
• Low compliance cost for doing business in India
• Simple regulatory environment, saving time and
energy for the businesses; and
• Ensuring fair competition
13.104. The country must improve regulations and
implementation in many subjects to make India gen-
erally a more attractive country for doing business.
These include land and environmental regulations,
labour laws and their administration and so on. It
should be noted that, in the context of India’s federal
structure, the ability to mandate specific reforms to
the regulatory framework from any centralised apex
body is fairly constrained. Therefore, while nodal
agencies may be set up to focus attention on matters
that must be attended to across the country, and this
section and others mention some, it is imperative that
the role of such agencies in the process of making
improvements across the country fits the country’s
federal and decentralised political structure. Such
agencies cannot and must not usurp local authority.
Status and Key Challenges
13.105. The present regulatory environment is seri-
ously deficient for the reasons enumerated below:
• Weak institutional architecture for business regu-
lations in the country
– Despite that high priority of the business regu-
latory reform agenda in the country, there is no
dedicated authority that can guide the whole
process of reform in a structured, planned,
cogent and systematic manner, which could
mandate the respective departments of the
Union, State and Local Governments to comply
in a timely, result oriented and predictable way.
• Ambiguous nature and vast scope of business
regulations: there are vast numbers of business
regulations at different levels of Government in
existence in the country. There are instances of
74 Twelfth Five Year Plan
contradictory as well as overlapping business
regulations on account of these being admin-
istered by the different tiers as well as layers of
Government.
• Absence of national repository of business regu-
lations: despite the advancements in Information
and Communication Technology (ICT) and its
ever-growing applications and usage, there is no
dedicated online repository to track all the busi-
ness regulations and procedures.
• Lack of coherence in business regulatory gover-
nance across country; business facilitation is often
mentioned as part of the agenda at the national as
well as State levels. But there is lack of coherence
in all such efforts. There are wide variations in
Government-business transactions taking place in
different locations of the country. It has also been
found that there is a lack of predictability and
standardisation in terms of timelines as well as
process adopted by different State Governments
when it comes to facilitating business.
• Lack of defined mechanism for consultation
between Government and industry: the interface
between Government and the industry is also not
well defined. There are periodic consultations
among various industry collectives and specific
Government departments located at different
levels, but such consultations are not structured
enough to be guided by a well-defined and out-
come-oriented process.
• Inherent limitations of regulatory system in coun-
try: lack of periodic-review clauses in regulations
and Lack of Regulatory Impact Analysis (RIA).
• There have been recommendations for regulatory
reforms earlier as well, but due to absence of any
one dedicated agency accountable for the reforms,
they could not be implemented.
Strategy and Key Recommendations
Follow-up Over Previous Administrative and
Regulatory Reform Endeavours
13.106. Lack of implementation of earlier recom-
mendations on regulatory reforms has contrib-
uted to the current situation of business-regulatory
framework in the country, both at the Central and
State level. All these recommendations need to be
reviewed and a repository of all these documents
needs to be created. After this an enquiry can be
taken up to check the extent to which these recom-
mendations have been implemented or are pending
by the public authority or department.
13.107. There is a need for a process for responding
to the existing recommendations. In such a system
once a certain expert group or commission of enquiry
has submitted its report, the respective departments
are required to prepare a response. That response is
put up in the public domain along with the original
recommendations. This makes it easier for various
stakeholders to understand the extent to which the
recommendations have been accepted along with the
reasons for non-acceptance, if any.
Establishing Enabling Institutional Architecture
• Formulating national policy on business develop-
ment and regulation
– The policy should also provide the principles
of optimal business regulatory governance. It
is recognised that there will be a special role of
the Prime Minister and Chief Ministers in the
aforementioned policy making process because
in the final analysis, the actual adoption of the
policy will entirely be dependent on the politi-
cal leadership.
• Drafting and enacting ‘National Business
Development and Regulation Bill’.
• Building institutional architecture for looking
after the business-regulatory reforms in the coun-
try: a dedicated institution can be set up for this
purpose. The institution should be set up at the
national level as well as at State level.
• Enabling institutional architecture for ensuring
competitiveness in manufacturing. The same is
required in both, Central as well as State level.
– At the Central level the National Manufacturing
Competitiveness Council (NMCC) has been
entrusted with this responsibility.
– Similar institutions may be set up at State level;
to be called State Council on Manufacturing
Competitiveness and Competition Reforms.
• In June 2011, the Ministry of Corporate Affairs
has set up a Committee to draft National
Industry 75
Competition Policy (NCP). In February 2012, the
Drafting Committee submitted a Draft National
Competition Policy and comments of all stake-
holders have been invited. Once this policy is
approved by the Union Cabinet, further steps are
required:
– Building consensus on the policy
– Creating institutional framework for opera-
tionalising the policy, as recommended by the
Committee
– Creating incentive and disincentive mecha-
nisms for States to implement NCP
• Operationalisation of National Manufacturing
Policy and development of State manufacturing
plans in line with National Manufacturing Plan.
Systematisation of Business Regulatory Governance
• Mapping and classification of all existing busi-
ness regulations and procedures and providing
an online one-stop shop—‘National Business
Facilitation Grid’ for all information related to
business regulations and procedures in India.
Design principles of this on line portal can be
finalised through a consultative process. The
Department of Industrial Policy and Promotion is
the nodal agency for the NBFG repository.
• A system of mandatory reviews of existing regu-
lations at periodic intervals should be established
and operationalised. This will achieve the desired
goal of making the regulatory system intrinsically
strong and up to date.
• A decentralised Single Window System should be
established with appropriate geographical spread.
The Single Window System, governed by a com-
mon minimum standard, should, rather than being
a coordination office, be endowed with access to
relevant information and sufficient delegation of
powers from all concerned regulators, including
Central, State, Local and Sector regulators. This
would help reduce the start-up time for businesses
by providing all requisite approvals and licenses, if
any, through the Single Window System.
– Recognising the wide variations with business
procedures at the country level, it is recom-
mended to benchmark the execution timelines
and processes that are undertaken by different
Government entities to facilitate business
requirements.
– A team of Business Facilitiation Officers
(BFOs), in each of the partcipating regula-
tory authorities, may be asked to aid the Single
Window System, and the BFOs could be made
accountable for defaults or deviations result-
ing in aggravated costs of compliance to busi-
nesses. The desirability and feasibility of such
a Single Window System should be determined
through a consultative process.
eBiz Mission Mode Project
13.108. The eBiz Mission Mode Project, under the
National e-Governance Plan, aims to create a busi-
ness and investor-friendly ecosystem in India by
making all business and investment related regula-
tory services across Central, State and Local govern-
ments available on a single portal, obviating the need
for the investors or the business to visit multiple
offices or a plethora of websites. It in envisaged that
the services offered on eBiz will eventually cover the
entire life cycle of a business—right from its estab-
lishment, through its ongoing operations, to even
its possible closure. Once operational, this project
will also create a platform for multiple Government
agencies to cross validate their information.
13.109. The project is being implemented as a
10-year PPP with M/S Infosys. The first-year pilot
includes 8 Central Departments and States (Andhra
Pradesh, Haryana, Maharashtra, Tamil Nadu and
Delhi) covering 29 core services. Five more states
(Punjab, Uttar Pradesh, Odisha, West Bengal and
Rajasthan) and 21 more services will be added during
the next two years of the pilot phase. An end-to-end
solution providing the services under the Andhra
Pradesh Single Window Act will also be provisioned
on the eBiz platform by September 2013 along with
the payment solution gateway.
Adopting Regulatory Impact Assessment (RIA)
• Tool of RIA should be developed for Indian
context through a consultative process and due
research reflecting upon global experiences with
its adoption and usage.
76 Twelfth Five Year Plan
– The parameters of RIA should be clearly spelt
out for evaluation (which should gradually be
expanded to include the following eight ele-
ments: policy coherence; cost of doing business;
competition; innovation; SMEs; consumers;
labour; environment and commons).
• Process of doing RIA should involve a wide stake-
holder consultation.
• RIA has be to be mandated in the country in ex
ante as well as ex post manner.
• It is recommended that Policy Coherence Units
(PCUs), for conducting RIA, be established under
the respective State Planning Boards and at the
national level. Such policy analysis functions can
be connected with the capabilities of the proposed
backbone organisation.
Making Businesses More Responsible Towards
Society
• Considering the importance of the subject, ‘busi-
ness responsibility’ should be included as a sepa-
rate subject under the Government of India
(Allocation of Business) Rules 1961, and Ministry
of Corporate Affairs can be entrusted with the
responsibility of carrying out these activities.
• Redefining the contract of business and society
and developing new rules of the game for corpo-
rate conduct.
– Needs to be done through a widespread consul-
tative process.
• Stronger role of business associations in respon-
sible business.
– Business associations should be encouraged to
develop and impose rules of conduct on their
own members.
– Business associations should be entrusted with
the responsibility of overseeing the compliance
to rules of corporate conduct.
– Such associations should provide their mem-
bers a process for debating and agreeing on
voluntary imposed norms, assistance to mem-
bers to develop capabilities to conform to
these norms and, very necessarily for such
associations to become trusted by stakehold-
ers as effective institutions for self-governance,
internal governance that disciplines errant
members.
• Disclosures on the adoption of ‘National
Voluntary Guidelines on Social, Environmental
and Economic Responsibilities on Business’
(NVG) principles should be made mandatory for
businesses. Adoption of NVG principles can be
made mandatory for all public–private partner-
ship projects by the relevant authority at the time
of project inception. This will help in mainstream-
ing these principles.
• Establishing the required institutional architec-
ture for facilitating adoption of NVG principles.
Awareness and implementation of NVG prin-
ciples is currently the responsibility of the Indian
Institute of Corporate Affairs. The IICA’s abilities
in this respect should be further strengthened.
Developing an Ongoing Process of Stakeholder
Consultation
13.110. For achieving the objectives of a stakeholder
consultation, it is imperative to have capacity, build-
ing both ends: at the Government side as well as at
the industries. A process of productive consultations,
and the roles of representative institutions of employ-
ers and unions in these consultations, in improving
the productivity of the country’s manufacturing eco-
system, and its sustainable competitiveness, cannot
be overemphasised. The competitiveness of German
and Japanese manufacturing industries, in spite of
high-wage costs and expensive currencies, in contrast
to the relative decline of US and UK manufactur-
ing industries, is attributed to the better collabora-
tive processes in the former countries. The following
actions must be taken to achieve this objective:
• Passing a legislation mandating stakeholder con-
sultation and also defining the process that needs
to be followed.
• Measures to strengthen industry associations and
their structure to enable them to convey the view
of industry in a constructive manner.
• Similar capacity building for stakeholders, such as
labour unions.
13.111. Developing a Business Regulatory Governance
Mechanism to choose appropriate regulatory alterna-
tives among self-regulation, co-regulation and public
regulation.
Industry 77
• Currently there is no structured modality explor-
ing various alternatives for achieving regulatory
objectives.
• Detailed analysis should be undertaken to deter-
mine which alternatives to regulations are feasible
as well as beneficial for Indian context.
• As each form of regulation has merits and demer-
its, a desirable combination of all three regulatory
alternatives may be evolved gradually.
• Such mechanism will serve as a ready reference
one-stop shop for the policymakers as well as the
business community while arriving at the choice
of appropriate mode of regulation.
Capacity Building for Carrying Out Regulatory
Reforms
13.112. Since carrying out the aforementioned regu-
latory reforms requires a tremendous effort, capacity
needs to be built in order to implement them. The
capacity-building framework needs to incorporate
the following:
• Developing resources such as modules, guide-
lines, methodologies, reference manuals, check-
lists, case studies and so on as reference material
for regulators.
– These resources should also be available
through an online-knowledge portal.
• Training programmes for regulators need to be
arranged.
• A review may be initiated to determine the fea-
sibility of expanding the roles of institutions
functioning under the aegis of the Ministry of
Corporate Affairs, namely, Indian Institute of
Corporate Affairs, Competition Commission
of India, Institute of Chartered Accountants of
India, Institute of Company Secretaries of India
and Institute of Cost Accountants of India.
ENSURING ENVIRONMENTAL SUSTAINABILITY
WITH INDUSTRIAL GROWTH
13.113. The rise in growth in the resource intensive
manufacturing sector is enabled and facilitated by an
ever-increasing rate of material use leading to mani-
fold impacts to the environment. The contribution
of the manufacturing sector to environmental degra-
dation primarily occurs during the following stages:
• Procurement and use of natural resources
• Industrial processes and activities
• Product use and disposal
13.114. The air, water and land are affected through
the environmental impacts created through the
operations of manufacturing units.
Key Objectives
13.115. Rapid ecologically sustainable industrial
growth with focus on
• Mainstreaming and promoting green business:
an environment has to be created wherein being
green is not viewed as just an obligatory expecta-
tion of a company, but as an area of primary focus
for the company to develop further and be recog-
nised as a leader.
• Protecting natural resources: natural resources
have to be prolonged to their fullest use to main-
tain the aim for continual economic growth and
lessen environmental impacts.
• Addressing funding issues: which act as a con-
straint for movement towards a more sustainable
industrial model.
Status and Key Challenges
13.116. The Central Pollution Control Board has
identified 17 highly polluting industries, the major-
ity of which are manufacturing industries. MSMEs,
in particular, can have a significant impact on the
environment as they are generally liable to be
equipped with obsolete, inefficient and polluting
technologies and processes. Seventy per cent of the
total industrial pollution load of India is attributed
to MSMEs.
13.117. New technologies leading to cleaner pro-
cesses and operations are not being developed at a
fast enough pace to address the urgent need for envi-
ronmental protection.
13.118. The current ecosystem does not encourage
and facilitate the mainstreaming and scaling up of
new technologies for widespread use, mainly due to a
lack of financial support, resources and Government
assistance.
78 Twelfth Five Year Plan
13.119. The waste management and recycling indus-
try in India is currently vast but largely unorganised.
In this space, it is necessary to mainstream the industry
and ensure that the livelihoods of all people depend-
ant on this industry are supported and upgraded.
Strategy and Key Recommendations
Organised Waste Management and Recycling
• Development of a National Waste Management
and Recycling Programme
– This is an overarching framework to create and
mainstream the organised waste management
and recycling industry.
– Structured frameworks and guidelines for recy-
cling industry to be developed to integrate it
with the existing waste management rules and
guidelines.
– Development of industry and sector specific
recycling standards.
• Promotion of PPP model for waste management
and recycling
– Establish facilities for reuse, recycling and
reprocessing of wastes from various sectors
should be encouraged by providing incentives
and ensuring the process for setting up PPP
facilities.
• R&D funding
– Promoting new technologies and processes for
waste management and recycling.
– This should be aligned with the overall technol-
ogy fund as discussed earlier.
• Building institutional capacity
– Local institutional bodies must have their
capacity built on recycling and waste
management.
Creation of a Green Technology Fund
• For usage in three key areas: technology upgrada-
tion, promotion of green entrepreneurs and fund-
ing for R&D.
• This could be disbursed in the form of conces-
sional loans, grants and so on.
• This fund should be a part of the overall tech-
nology fund proposed for improving depth in
manufacturing and must ensure focus on com-
mercialisation of new technology areas.
Promotion of Green Products
• Development of a framework and guidelines for
promotion of green products
– Definition of the specifications
– Creation of/assignment of a new/existing entity
to perform this task on a regular basis
– Identification of top 100 green products (based
on assessment of maximum environmental
impact) and setting of standards for the same
• Promoting green public procurement through
price incentives on Government tenders
• Encourage and develop voluntary rating
programmes
• Creation of centres of excellence to promote green
products and processes
• Incentive programmes for creation of Life Cycle
Inventories
• Incentives for export of green products
Environmental Regulatory Reforms and Market
Based Instruments
• Strengthening regulatory institutions together
with bringing institutional reforms
– Moving towards load-based standards from
concentration based regime.
• Implementing polluters-pay principle, with spe-
cific pollution loads beyond a defined benchmark
should be priced and paid for by industry.
– Reforming the existing environmental clear-
ance process.
– Institutionalise the concept of cumulative
impact assessment of the region.
– Introducing technology assessment while
appraising new projects.
– Process for administering the clearances needs
to be streamlined—should include consider-
ations of decentralisation, requirements and
tenure of clearances.
• Establishing integrated chemical-management
policy and regulatory regime
– Set up a regulatory process to assess all chemi-
cals, register and phase-out toxic chemical
products and replace them with non-toxic/less-
toxic substitutes.
• Market-based instruments and emission trading
– Initial pilot Emissions Trading System to limit
particulate matter emissions.
Industry 79
– Scale up the emissions market to address addi-
tional pollution problems at the State and
national levels.
– Monitoring technology for all types of pol-
lutants be made as affordable as possible for
industry; waiving of applicable taxes and excise
duties, as well as direct subsidies to monitoring
technology wherever their installation is man-
dated by the State pollution boards.
Sustainable Environment Management in MSMEs
• Reconstitution of regulatory bodies
– Inclusion of stakeholders/associations.
– Sector-wise product sub-groups need to be
formed as part of PCBs.
– Grievance Redressal Mechanism should be
established at each PCB.
• Creation of common infrastructure for MSMEs in
clusters
– Central Grant Scheme for soft infrastructure,
unit level technology upgradation assistance,
portion of project cost for Common Effluent
Treatment Plants.
– State Grant Scheme with provision for arrang-
ing land for CETPs, time-bound speedy legal
clearances, provision for equity participation in
SPVs by SPCBs/State agencies.
Disclosure on Performance
• Short-term action to increase voluntary disclosure
of environmental sustainability performance.
– Development of reporting standard-based
on several existing sustainability reporting
initiatives.
– Incentives for voluntary disclosure.
• Long-term steps to compare environmental sus-
tainability performance of organisations with
industry-specific benchmarks.
Development of Environment Sustainability
Benchmark Index, Espeacially for Identified Highly
Polluting Sectors
Organised Waste Management and Recycling
• As covered in the chapter on Environment, the
development of a National Waste Management
and Recycling Programme and the promotion of
PPP model for waste management and recycling
are required.
WATER ISSUES
13.120. With its increasing population and industrial
activity, India is moving towards perennial water
shortages. The current per-capita water availability is
estimated at around 1,720.29 m3 per capita accord-
ing to data from the Central Water Commission
and as per the World Water Development Report—
one of the United Nations, India has been ranked