INDIA: THE GREEN REVOLUTION AND INDUSTRIAL CROP PRODUCTION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001700020049-5
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 14
• Document Creation Date: December 22, 2016
• Document Release Date: April 12, 2010
• Sequence Number: 49
• Publication Date: October 1, 1971
• Content Type: IM

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Confidential
Intelligence Memorandum
India: The Green Revolution And Industrial Crop P'roducti'on
Confidential
ER IM 71-195
October .971.
Copy N06
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GROUP 1
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downgrading and
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WARNING,
This document contains information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 and 794, of the US Code, as amended.
Its transmission or revelation of its contents to or re-
ceipt by an unauthorized person is prohibited by law.
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
October 1971
INDIA:
THE GREEN REVOLUTION
AND INDUSTRIAL CROP PRODUCTION
Introduction
1. Since the 1964/65 crop year, India's cotton and jute production
has declined and oilseed production has stagnated.(1) The resulting shortages
and higher raw material prices have slowed industrial growth and contributed
to generally rising prices throughout the economy. New Delhi's drive toward
self-sufficiency in foodgrains apparently has diverted some better irrigated
land away from these industrial crops. This memorandum reviews recent
government policies on industrial crops and foodgrains, and analyzes the
impact on industrial growth and the balance of payments. It also assesses
short-term production prospects for industrial crops.(2)
Discussion
Production Trends
2. Despite four consecutive years of favorable weather, India's
industrial crop production has been. disappointing. Cotton and jute
production have both declined and oilseed production in 1970/71 was equal
to 1964/65 output, the pre-drought bumper crop. The area planted b
cotton and jute also declined, and yields fell also. Oilseed yields declined
1. The crop year begins on 1 July of the first year and cnds on 30 June
of the following year. The major Indian oilseeds are peanuts, sesame, rape
and mustard, linseed, and castor seeds. Peanuts account for about half of
oilseed acreage and two-thirds of production.
25X1
Note: This memorandum was prepared by the Office of Economic Research
and coordinated within the Directorate of Intelligence.
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as acreage increased slightly (see Table 1). Yields of these crops in India
remain among the lowest in the world.(3)
3. In contrast, India's foodgrain production (rice, wheat, coarse
grains, and pulses) reached a record of almost 108 million metric tons in
the crop year ending 30 June 1971, 21% higher than the 1964/65 bumper
crop. These increases were achieved by a combination of increased acreage
(6%) and higher yields (14%).
Influence of Government Agricultural Policy
4. The diverse trends in foodgrains and industriai crops coincided
with government efforts to achieve foodgrain self-sufficiency. During the
1950s and early 1960s, New Delhi kept foodgrain prices relatively low and
heavily emphasized industrial development. The food crisis in the mid- I960s,
resulting from a combination of prolonged investment neglect in agriculture
and severe droughts in 1965 and 1966, brought a sharp change in
government policy. Beginning in 1966, taxes on agriculture were reduced,
modern agricultural inputs were made available either free or at subsidized
prices, foodgrain procurement prices were raised, and investment in
agriculture and irrigation was stepped up. In addition, efforts were increased
to develop and adapt high-yielding variety (HYV) seeds to Indian conditions.
Package programs of modern inputs were made available in selected districts
and farmers were encouraged and instructed in their use.t4I
5. These government efforts were concentrated on foodgrains,
however, and industrial crops were generally neglected. Such crops were
included only to a li!ri~.s9 extent in New Delhi's efforts to develop new
HYV seeds and to popularize them. Moreover, government policies in some
states actually discourage industrial crop production. For example, Andhra
Pradesh levies penalties on cultivators who use irrigation water for growing
peanuts in areas included in paddy programs; and, in Bihar, irrigation water
for jute costs more than it does for rice.
6. To accelerate expanding irrigation the government designated
certain major projects already under construction to be completed rapidly
and gave increased attention to minor irrigation projects that could be
completed quickly. New Delhi continued to drill public tubewells and, more
importantly, encouraged private tubewell construction with credits and
3. Sugarcane is excluded from this memorandum because its performance
has not paralleled that of the other three major industrial crops. With
government encouragement, sugarcane production and yields have been on
the rise.
25X1
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Table 1
India:
Production and Acreage of Foodgrains, cottont Jute, and Oilseeds
Foodgrains (million metric-tons)
89.4 107.8 21
Wheat
23.4 90
Rice
39.3 42.4 8
Other
37.8 42.0 11
Cotton (million bales)
6.0 5.4 -10
Jute (million bales)
7.7 6.0 -22
Oilseeds imillion metric tons)
8.6 8.6
Million Acres
291.9 310.0
33.2 42.0
90.5 93.9
20.4 19.1
3.0 2.5
37.7 38.1
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equipment such as drills and pumpsets. The government also embarked on
an ambitious program to provide electric power for irrigation. The policy
of encouraging private initiative was important in spreading irrigation to
about 3 million acres annually during 1966-69, compared with an average
of 2 million acres annually during 1951-65. Nevertheless, in line with New
Delhi's foodgrain policies, it was mainly in the wheat-growing areas that
farmers received the most encouragement and incentives to add irrigation.
'1. The government's procurement price policies have favored
foodgrains over industrial crops. Since the mid-1960s, New Delhi has offered
farmers a guarantee to purchase all the foodgrains offered at a specific
procurement price that is announced at the start of the harvest season.
Each year the government has fixed this price high enough to ensure farmers
a good profit. The government also fixes support prices for cotton and
jute, but these generally are far below market prices. Because the
government does not stockpile industrial crops, there are no procurement
prices. There is no support price for oilseeds.
8. While foodgrain prices have been relatively stable, most industrial
crop prices have fluctuated sharply. Wheat and rice prices, after increasing
sharply during the mid- I960s, have registered only minor fluctuations (see
Table 2). The price of cotton, on the other. hand, has risen steadily in
response to increasing domestic shortages. Even so, higher cotton prices
have not yet been a sufficient incentive to expand acreage or increase yields.
It is likely that wheat is still more profitable than cotton in some areas,
despite the increases in cotton prices. Farmers also may fear that a sharp
decline in cotton prices would accompany a crop increase, given the
government's low support price. Jute prices have displayed wide annual
variations in response to similar fluctuations in crop size, and the price
of peanuts - the major oilseed - also has fluctuated.
9. The prospects of higher profits, strong government encouragement
to use the package of new inputs that improved foodgrain yields, and
opportunities for double cropping that is not possible with cotton resulted
in, apparently, some shifting of land from cotton to wheat. Such a shift
probably occurred in India's northern states, including the important
wheat-growing area of the Punjab (see the map). Over 80% of the
cotton-growing area in these states was irrigated in 1966/67, making possible
the profitable switch to the new HYV wheat seeds. Cotton acreage in these
states declined steadily from 2.4 million acres in 1967/68 to an estimated
2.1 million acres in 1970/71. At the same time, wheat acreage in these
states increased by more than 7 million acres.
10. Government procurement policies may have similarly induced
some jute farmers to switch to rice. Jute is produced mainly in West Bengal,
Bihar, and Assam, all important rice-producing states. The erratic trends
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India:
Indexes of Wholesale Prices
of Selected Commodities
1966/67 = 100
Crop
Year
Wheat
Rice
Cotton
Jute
Oilseeds a/
1966/67
100
100
100
100
100
1967/68
120
118
112
71
88
1968/69
115
116
122
106
79
1969/70
121
116
135
92
106
1970/71
117
119
165
93
114
a. Peanuts onl
in jute prices and the relative stability of rice prices, coinciding with the
release of HYV rice seeds that are suitable for sowing at the same time
as jute, may account for some of the recent decline in jute acreage and
increase in rice acreage.
11. Oilseeds are grown throughout India and compete for land with
a variety of other crops. It is likely that production has been influenced
by forces similar to those that affected cotton. In Gujarat, for example,
the recent decline in peanut acreage reportedly reflects a shifting of land
to foodgrains. In any event, the relative lack of government support most
certainly has contributed to the stagnant production and declining yields
of oilseeds.
Impact on the Economy
12. The slowdown in production. of cotton, jute,, and oilseeds has
caused serious shortages of raw materi
ls f
f '
Indi
a
or some o
as major industries
and has resulted in significant price rises, a squeeze on industrial profits
leading to business failures, shortages of consumer goods, and loss of
exports. Raw material shortages contributed to the failure of industrial
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India: Principal Industrial Crops
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production, which increased an average of only 5% during fiscal years 1969
and 1970(5) to meet a planned 9% growth rate.(6)
13. In particular, the cotton textile industry has stagnated since
recovering from the 1966-67 industrial recession. The low supply of
domestic cotton, combined with restrictive government policies, including
limiting imports of long-staple cotton needed by the larger textile factories,
has sharply raised raw cotton prices since 1966. The larger cotton mills
have not modernized and their total output has been on the decline since
the mid-1950s. This has led to a serious erosion of India's position as one
of the world's principal exporters of cotton textiles as well as to domestic
shortages of cotton textiles. New Delhi's deliberate expansion of smaller
textile mills increased requirements for short-staple cotton, which is
normally exported. Output of textiles has failed to meet domestic demand,
and per capita availability of cotton cloth in India has declined.(7)
14. The erratic domestic jute supply - combined with limits on raw
jute imports, export taxes, and restriction on investments in jute
manufacturing - has resulted in a sharp decline in India's share of the world
jute market. Fluctuations in the price and supply of jute manufactures has
induced foreign consumers to shift to other supply sources and to using
synthetic substitutes. Such fluctuations also caused disruptions in the
expanding internal market for jute manufactures.
15. The price of oilseeds and their products has risen about 50% since
mid-1968 and is one of the factors contributing to the overall increase of
prices in the Indian economy. The rise in oilseed prices reflects not only
lagging domestic production, but also increased domestic demand for edible
oils as incomes have risen, expansion of the manufacturing capacity for
vanaspati (hydrogenated vegetable oil), and government restrictions on
imports of soybean oil for the vanaspati industry and on credit for trade
in oilseeds. Oil imports, though small compared with total consumption,
have increased from 37,000 tons in 1964 to an estimated 150,000 tons
during 1971. Imports of oil substitutes such as tallow have also increased
and exports of certain oilseed products have been restricted. Nevertheless,
per capita consumption of edible oils is still at about the 1963/64 level.
16. The slowdown in industrial crop production has not, however,
seriously affected India's balance of payments, mainly because of
government import restrictions. Despite domestic shortages, imports of
The fiscal year begins on 1 April of the stated year.
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edible oils, cotton, and jute have declined since 1967/68 (see Table 3).
Moreover, a significant share of the vegetable oil and cotton imports has
consisted of US PL 480 goods on concessionary terms. Imports of PL 480
vegetable oils and tallow, for example, accounted for about three-fourths
of India's total imports of these commodities during 1965-70. India also
has received about 2.5 million bales of PL 480 cotton, valued at $350
million.
17. Import restrictions have compensated to a great extent for the
loss of export income from these commodities in raw and processed form.(8)
Between 1965/66 and 1969/70, exports of these commodities declined by
26%. In addition to supply problems, such as in the instance of cotton,
some of the decline in export revenues was due to adverse world market
conditions, particularly for some jute products. In any event, these exports
accounted for only 24% of India's total exports in 1969/70 compared with
34% in 1964/65.
Prospects
19. With all of India's arable land already under cultivation,
accelerated production of industrial crops can be achieved only by a reverse
shift of land from foodgrains or improved yields. Clearly, the latter is the
more promising option, as New Delhi is not likely to reduce significantly
its incentive programs for foodgrains. The key to higher yields, however,
will be adequate irrigation and the development of . more productive
techniques including IIYV seeds. In announcing the government's budget
in May 1971, the Minister of Finance designated higher yields for cotton,
jute, and oilseeds as a primary goal.
19. Oilseed production has been constrained by both the shortage
of irrigated land and the lack of improved varieties. Irrigation is available
to only about 5% of oilseed acreage. Government package programs for
peanut cultivation -? combining demonstrations of new methods with
subsidies for the necessary inputs - have been in operation since 1963/64,
but so far they cover only 15% of the peanut area. Apparently, yields have
not improved even in these areas, because of lack of irrigation and improved
seeds. In south India, there has been some progress in popularizing peanuts
as a second crop, made possible by a shorter growing season for the new
rice varieties. The government is also introducing and popularizing oilseeds
new to India, such as soybeans, and sunflower seeds. The US AID program
is assisting with research and processing equipment for soybeans, and the
8. India imports long-staple cotton and exports short staple and
poor-quality cotton. Processed fats and oils are imported to supplement
those produced domestically. Some of the oilcakes and meal produced while
processing the domestic oilseeds are exported.
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India:
Selected Imports and Exports
1965/66 1966/67
Imports
Raw cotton
Raw jute
Animal and vegetable oils
Raw cotton
Cotton fabric
Oil cakes and meal
Jute manufactures
19.7 45.9
120.2 110.4
12.4 1.4
25.7 39.5
122.4. 172.2 158.3 151.3
23.4 15.7
116.5 84.9
72.8 66.7
383.9 332.6
596.6 499.9
19.7 14.8 19.6
87.1 94.0 92.9
60.7 66.0 55.3
312.1 290.6 275.5
479.6 465.4 443.3
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75.3 110.6
11.7 27.4 15.7
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two crops could have considerable impact on the total oilseed supply by
1973. In the past year the government has also stepped up efforts to reduce
losses in oil extraction.
20. Improved seeds and practices also are available that could raise
cotton yields by up to 40% in irrigated areas, but programs to promote
their effective use have been lacking. Both private and government programs
have been announced from time to time but with little results. An ambitious
three-year development effort to raise production by about 50% in three
years was announced in August 1971 but adequate funds may not be
available to carry it out. Responsibility for such programs rests with the
Cotton Committee of the Indian Council of Agricultural Research. The
Committee has failed to coordinate research, education, qnd extension work
effectively. Less than 20% of the cotton acreage is irr,riated and, without
irrigation, farmers are reluctant to adopt the new package because losses
could exceed gains if rainfall were inadequate. A new high-yielding variety,
Hybrid-4, was first produced in Gujarat three years ago and has spread
to other states. This variety alone is supposed to increase cotton pr.)duction
10% by 1973/74. Also, long-staple varieties and varieties with shorter
growing periods are being developed, but the scope of this new technology
is limited and largely confined to irrigated cotton areas in the south and
west. Limited irrigation will continue .to be a major constraint on yields,
and, only if the price of cotton is stabilized at a high level for a sufficient
period will farmers have an incentive to develop their own irrigation sources.
21. Although increased efforts have been made to persuade jute
farmers to adopt practices that can raise yields 50%, grower acceptance
has been slow. The reasons are similar to those for cotton, but aggravated
in the case of jute by a shorter planting season, a greater sensitivity to
moisture conditions at planting time, and greater uncertainty about market
prices. The government has been considering taking over the trading in jute
in an attempt to stabilize prices, but has not yet acted.
Conclusions
22. Production of cotton, jute, and oilseeds has lagged seriously in
the past four years of favorable agricultural weather for two major reasons -
limited availability of irrigated land and inadequate government support.
As yet, there has been no push on industrial crops comparable to the
agricultural strategy of promoting a green revolution in foodgrain
production. Investment programs aimed at increasing agricultural production
and improving irrigation, the efforts of research scientists to breed new
varieties and to improve agronomic practices, administrative measures aimed
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(JUN r'Il)ENTIAL
at assisting farmers, and supplies of credit and maintenance of high farm
prices have all favored foodgrains. As foodgrain production became more
profitable, the total acreage devoted to industrial crops declined, with wheat
displacing cotton, newly developed HYV millets and other minor grains
encroaching on traditional oilseeds areas, and Jute farmers shifting to rice.
Yields of these industrial crops have declined since 1966/67, most likely
because the switch to foodgrains occurred on irrigated lands that are more
productive.
23. Shortages of oilseed-3, cotton, and jute have had a serious impact
on India's economy. Shortages of raw materials have contributed to the
slow growth in industrial production, exports of traditional commodities
have declined, and short supplies of consumer goods have brought rising
prices. A serious impact on the balance of payments has been avoided only
by stringent import controls, which result in greater domestic shortages.
24. New Delhi is now giving more attention to industrial crops, but
prospects for rapid improvement are not promising. Government resources
are limited and industrial crops must compete with a continuing priority
for foodgrains. Moreover, lacking adequate irrigation to make improved
seeds profitable, farmers are resisting adopting new varieties of cotton and
jute. A breakthrough in cotton and jute could be achieved in a few years
if farmers are given sufficient incentives to develop their own tubewells
or other sources of irrigation water and to increase their use of improved
seeds and other modem inputs.
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