India is one of the fastest growing economies in the world today and among the world's leading agricultural producers and yet its trade flows are relatively small compared with other main players.
However, given the size of Indian agriculture, even small changes in its trade have a potentially large impact on world markets. That is one of the conclusions of the latest MAP (Monitoring Agri-trade Policy), published by the Commission's Directorate-General for Agriculture and Rural Development.
India has a large and diverse agriculture and is also a major consumer, with an expanding population to feed. The average size of holding is just 1.4 hectares and 60% of the workforce depends on agriculture for a living. The latest MAP looks at India's trade patterns with the EU and globally. It also examines India's agriculture and trade policy and attempts to shed light on the impact of these policies on trade.
India is the third largest economy in Asia after Japan and China, as measured in terms of its Gross Domestic Product (GDP) and it is continuing to grow rapidly.
The Indian economy has seen high growth rates of more than 8% since 2003. In 2005 and 2006 GDP grew at a rate of over 9%. Globally India’s growth is surpassed only by that of China. This is expected to continue with growth just under 7% by 2015. Graph 1 compares GDP growth in India, China and Brazil, where growth has been much slower.
High growth rates have significantly reduced poverty in India. However it’s GDP per head is still very low. However it’s GDP per head is still very low (estimated at US$ 820 in 2006), so it remains classified by the World Bank as a low income country. The World Bank's The World Development Report 2008 states that over one third of the population of India was living below the poverty line in 2004-2005, managing on less than $1 a day.
Cereals are the staple food in India, providing over half the calories consumed, while pulses are the main protein supplement in the diet. Rising incomes and the influence of globalisation have contributed to changes in the diet with a slight decrease in cereals consumption and an increase in pulses, edible oils, fruits and vegetables, milk and meat, which is growing from a low base. In the case of edible oils, the fall in prices after the liberalisation of imports further stimulated consumption. However although diets are diversifying, India still lags behind Brazil and China in terms of daily calorie intake per capita.
Agriculture plays an important, though declining role in the economy. Its share in overall GDP fell from 30% in the early nineties, to below 17.5% in 2006 (graph 2 above). This is high compared to China and Brazil, at 12% and 5% respectively. Over this period the share of industry has stayed relatively constant, reaching nearly 28% in 2006.
Meanwhile the services sector has grown rapidly (accounting for about 65% of total GDP growth from 2000-2005), to almost 55% of GDP in 2006. The World Bank predicts that the shift towards the service sector will continue at the expense of agriculture, whose share could decline by 30% by 2030.
Despite India’s economic development, over 70% of the population still live in rural areas. Agriculture is the key employer with around 60% of the labour force, down from 70% in the early nineties. This compares with 44% in China (2002) and 21 % in Brazil (2004).
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