India: Basic Information

India Briefing Room Basic Information Trade Policy Issues and Analysis

Agriculture Sector
Macroeconomy and Reforms
More Information

Key Statistics
Map

With a population of just over 1 billion, India is the world’s largest democracy and its second most populous nation, after China. Since 1980, real Gross Domestic Product (GDP) has grown 5.7 percent annually, making it the second fastest growing economy in the world during that period (after China). India’s economy, as measured by GDP, is Asia's third largest, after Japan and China. Although economic growth has led to significant reductions in the incidence of poverty, per capita GDP of about $450 continues to rank India among the world’s low-income countries.

India's current population growth rate of 1.7 percent per year has declined significantly from about 2.2 percent in the 1980s, but India is still expected to overtake China as the world’s most populous country in the coming decades. Although 72 percent of India’s population remains rural and 60-70 percent of the population relies primarily on agriculture for income and employment, there is a clear trend towards urbanization. Middle class households, accounting for about 200 million consumers, are the fastest growing segment of the population and are having an increasing impact on the growth and diversification of food demand. With about 55 percent of household expenditures, on average, devoted to food, consumer demand is highly responsive to both rising incomes and changing relative prices.

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Agricultural Sector

India has a large and diverse agricultural sector, accounting for about 25 percent of GDP and 14 percent of export earnings. Arable land area is the second largest in the world (after the United States), and irrigated crop area is the largest in the world. India is among the top three global producers of a broad range of crops, including wheat, rice, pulses (chickpeas, pigeon peas, lentils, dry peas, etc.), cotton, peanuts, fruits, and vegetables. India has the world’s largest herds of buffalo and cattle, is the largest producer of milk, and has one of its largest and fastest growing poultry sectors.

India: Area, yield, and production of major crops (1999/00-2001/02 average)

A strong agricultural resource base has allowed India to achieve annual growth in farm output of about 3 percent since the early 1980s, substantially faster than population growth. Gains in wheat and rice output have been particularly strong, allowing India to achieve its key policy goal of self-reliance in cereals during the 1990s.

However, gains in farm output have slowed in the last decade, even as the rest of the economy has strengthened. Yields of most major crops remain well below world standards, as the development and spread of high-yielding varieties, irrigation, and modern inputs have been slow to spread beyond wheat and rice production. Despite gains in irrigated area, nearly two-thirds of India’s cropland remains dependent on seasonal monsoon rainfall. Major farm policies—including price supports, input subsidies, and public sector research—have focused on the wheat and rice sectors and have been slow to adjust to meet the needs of a stronger and more diverse domestic market, as well as a competitive global market.

The combination of higher incomes, sluggish domestic production, and more liberal import policies led to rapid growth in India’s imports of pulses and edible oils in the 1990s. India is now the world’s largest importer of pulses and, along with China, one of the top edible oil importers. Despite slowing growth in farm output, India remains a substantial net agricultural exporter. About half of exports consist of traditional items—including tea, coffee, spices, fruits and nuts, and tobacco—but nontraditional items—including fish and meat products, rice, and soybean meal—account for the near doubling of farm exports during the 1990s. See the trade chapter of this briefing room for more information on India’s agricultural imports and exports.

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Macroeconomy and Reforms

From independence in 1947 until the late 1980s and early 1990s, India’s economy was characterized by extensive central planning and regulation of economic activity, including quantitative controls on imports and exports that made India one of the most closed economies in the world. Although private firms and markets existed in most areas of the economy, public sector enterprises dominated many sectors. Under this system, the economy registered relatively slow growth, accumulated large fiscal deficits, and operated with a chronically weak balance of payments stemming from uncompetitive domestic industries. Although agriculture showed healthy growth during the 1970s, when high-yielding cereals were introduced during the “Green Revolution,” the farm sector has grown more slowly than other sectors and accounts for a large, but declining, share of the overall economy.

In 1991-93, India introduced major reforms to industrial, trade, and exchange-rate policy that led to India’s emergence as one of the fastest growing economies. Since 1990, annual GDP growth has averaged 5.6 percent and consumer price inflation has averaged just 8 percent. In more recent years, growth and price stability have been even stronger, contributing to a significant decline in the share of the population in poverty.

The balance of payments—the balance of trade and capital flows with the rest of the world—were previously a chronic weakness of the Indian economy, but have become robust. Trade liberalization measures have included the near elimination of quantitative import restrictions and state trading—a process completed in 2001. Tariff reductions have been significant, although India retains relatively high bound and applied tariffs on many sensitive goods. Finally, the Indian rupee was put under a managed float system and made fully convertible on the current (or trade) account in 1991, leading to about 20 percent depreciation of the rupee since the early 1990s. With less-restricted trade, less domestic regulation, and rupee depreciation, Indian goods and services industries have become more competitive, leading to rapid expansion of two-way trade from under $50 billion in the early 1990s to over $100 billion in the early 2000s. Foreign exchange reserves have climbed from under $6 billion to more than $100 billion in the same time period.

Reflecting more market-oriented domestic and trade policies, the inflow of foreign direct and portfolio investment to India has also increased. Inflows from international investors, including nonresident Indians, climbed from negligible levels in the early 1990s to almost $6 billion annually in the early 2000s.

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More Information

Additional information on Indian economy and agricultural sector are available from a number of sources:

• See the Government of India’s Economic Survey for the latest economic data, including statistics on agriculture.
• See the Government of India’s Ministry of Agriculture, Department of Agriculture and Cooperation website for information on agricultural programs and policies and agricultural statistics.
• See USDA's Production, Supply, and Distribution database for official USDA data on production, supply, and distribution of field crop (grains, oilseeds) and livestock products produced in India.
• See USDA Foreign Agricultural Service’s agricultural Attaché Reports for current and historical reports on India’s markets for major agricultural commodities.
• See the United Nations, Food and Agriculture Organization, FAOSTAT for agricultural production and trade statistics and food balances.
• See the Central Intelligence Agency's World Fact Book for data on population, income, income distribution, structure of the economy, and the role of agricultural in the economy.