Food grain demand in India will reach 355 million tonnes in 2030
The Indian economy remains heavily dependent on agriculture, while lagging far behind other major economies in terms of mechanised farming, as revealed by new research from Grant Thornton. On the bright side, the research shows a jump of over 200 million tonnes in food grain production over the last five decades.
According to a new report from professional services firm Grant Thornton in collaboration with FICCI, food production in India has increased by more than five times over the last five decades, increasing from more than 50 million tonnes in 1950-51, to 272 million tonnes in 2016-17. The consulting firm predicts even stronger growth in the coming decade, which would be cause for relief in light of the predicted spike in demand for food grains to 355 million tonnes by 2030.
In terms of GDP, the Indian economy is projected to display a substantial increase in years to come, ranking amongst the highest in the world. According to Big Four professional services firm PwC, India will become the second largest economy in the world by 2050, while Big Four rival Deloitte has predicted that India will drive growth for all of Asia over the next half a century.
Nevertheless, the composition of the Indian economy is strongly indicative of a country that is far from being considered developed. A key indicator of a developed economy is a shift away from dependence on the agricultural sector, both in terms of contribution to GDP as well as in the sector's generation of employment.
In the United States, for instance, the contribution of the agricultural sector to the GDP stands at 1.1%. Similarly, the figures for developed countries in Europe such as the UK and Germany stand at 0.6% each, while France stands at 1.5%. Meanwhile, China’s agricultural contribution to the GDP stands at 8.6%.
In India, the contribution of the agricultural sector is substantially higher than all of the above at 17.4%, placing it in the company of other developing countries such as Vietnam at 18.1%, and Nigeria at 21.2%.
A significantly stronger contrast can be observed between the generation of employment in the agricultural sector of India and that of other major economies. A staggering 48.9% of the total employment in India lies in the agricultural sector. The figure is considerably higher than regional counterparts such as Vietnam, at 42.6%, and China at 28.3%, and is remarkably higher than those of the US (1.6%) and the UK (2.8%).
Improvement and mechanisation
Despite being relatively dependent on the agricultural sector for revenues as well as employment compared to other economies, the employment ratio of the sector has been on the decline over the last two decades. The share of agricultural labour in the total workforce has fallen from 59.1% in 1991 to its current level of 48.9%.
A major reason for the continued engagement in agriculture for a large portion of the population is the relatively low rate of mechanical permeation in the activities of the sector. When compared to other major economies, the rate of mechanisation in India is particularly insufficient.
Mechanisation rates in the US stand at 97%, while the same figure for Western Europe stands at 95%. Brazil, a fellow developing economy, has also managed an impressive mechanisation rate of 75%. In India, the rate currently stands way behind the others at 40%.
Nevertheless, the report suggests that this scenario is also on the mend. The farm equipment market in India, which is currently valued at $8.8 billion, is due to grow substantially to $12.5 billion by 2022, particularly in light of a boom in the tractor market over the last decade.
Commenting on the current agricultural scenario, Vinay Mathur, Deputy Secretary General of FICCI said; “I strongly believe the next phase of agricultural growth will be achieved through innovation and development of the farm mechanisation sector. The use of modern machinery is currently being promoted by the private and public sector both.”
Meanwhile, Rahul Kapur, Partner at Grant Thornton India said, “While approximately 86 per cent of all farm land holdings belong to small and marginal farmers, machine penetration seems to be limited. Going forward, this must be an area of focus to promote overall growth within the industry at a time when agricultural labourers are moving to other sectors for better opportunities.”
