Agricultural Bias in Development Policies: Impact on Fragile Ecosystems and Rural Poverty

India’s development story has a persistent blind spot – agriculture. Despite being the backbone of rural livelihoods, farming has been systematically disadvantaged by economic policies, pricing failures, and a lack of investment in natural resource conservation. The result? Fragile ecosystems under stress, millions trapped in rural poverty, and a food production system barely keeping up with demand. Understanding this “bias against agriculture” is essential for anyone studying ecological economics, because it reveals how policy choices directly shape environmental outcomes and human well-being.

Agricultural growth vs. population pressure: a tight race 🔗

India’s food production has historically struggled to stay ahead of its growing population. While population growth declined from about 2.22% per year during 1971-1981 to roughly 1.41% during 2001-2011, food grain production growth also slowed down – hovering around 1.6% annually by 2010. Research on food grain trends in India confirms that production increased at roughly 1.73% per annum over two decades, driven primarily by marginal yield improvements rather than expansion of cultivable area.

This means food security gains have been incremental, not transformational. According to the World Bank, cereal yields in India grew by only about 1.4% per annum during the 2000s – far below what countries like China and Vietnam achieved in the same period. India’s rice yields, for instance, remain roughly one-third of China’s and about half of Vietnam’s and Indonesia’s.

The pressure is compounded by the sheer scale of dependence on agriculture. A large share of India’s geographical area – close to 48% – is devoted to crop production. This proportion is significantly higher than in most developed countries. When over half the population relies on farming for livelihood, and the available land is already stretched thin, every percentage point of production growth matters enormously.

Land utilisation challenges: when expansion replaces intensification 🔗

One of the core issues in Indian agriculture is how land is used. With about 56% of the population historically dependent on farming, and without adequate access to land-augmenting technologies – such as improved seed varieties, precision farming tools, or efficient irrigation systems – farmers have relied on bringing more and more land under the plough.

This approach, known as extensive agriculture, has come at a steep ecological cost. Expanding farmland encroaches on forests, wetlands, grasslands, and other natural habitats. It shrinks the natural resource base that supports long-term agricultural productivity. Research published in Earth’s Future has highlighted trade-offs between food provision, climate change mitigation, and biodiversity preservation in India – arguing that further agricultural intensification, not expansion, is necessary to protect ecosystems.

Average crop yields in India remain low compared to global benchmarks. Indian wheat farms, for example, produce about one-third of the output per hectare that French farms achieve. PRS India’s analysis of agricultural data notes that while yield per hectare has increased over fourfold since the 1950s, it remains considerably lower than in other major producing nations.

The irrigation paradox 🔗

Irrigation is meant to boost productivity, but in many parts of India, it has created new problems. Over-pumping of groundwater – often encouraged by subsidised electricity for farm use – has led to alarming declines in aquifer levels across states like Punjab, Haryana, and Rajasthan. Conversely, in canal-irrigated areas, waterlogging and the build-up of soil salinity have degraded fertile land. This is a well-documented phenomenon in ecological literature: poorly managed irrigation can cause secondary salinisation, rendering farmland unproductive over time.

The World Bank has identified this as a critical challenge, noting that water resources are limited and irrigation water must contend with growing industrial and urban demand. Finding ways to get more output per drop of water – through drip irrigation, micro-sprinklers, and better on-farm water management – has become an urgent priority.

Insufficient investment in natural resource restoration 🔗

As agriculture has expanded, it has consumed forests, tree cover on hilltops, vegetative buffers along rivers, and natural water bodies. These natural resources are not just scenic features – they are functional components of the agricultural system. Trees on hilltops reduce soil erosion and regulate water flow. Vegetative cover protects watersheds. Water bodies recharge groundwater. Without them, the very foundation of sustainable agriculture collapses.

Yet, investment in restoring these natural assets has been minimal. Government spending on agriculture has been disproportionately directed towards subsidies for fertilisers, power, and irrigation – which now consume roughly four times the amount spent on capital investment in the sector. The OECD’s assessment of Indian agricultural policies found that market and trade interventions often depress farm prices, while input subsidies encourage overuse of resources like water and chemical fertilisers. This creates a vicious cycle: subsidies promote overexploitation, which degrades the resource base, which in turn demands more subsidies to maintain output.

A 2025 study in Discover Sustainability noted that budget allocation for programmes like the National Mission for Sustainable Agriculture remains negligible – roughly 0.8% of the Agriculture Ministry’s total spending. The disconnect between agricultural policy and environmental governance in India is structural: agricultural laws focus on maximising production, while environmental laws focus on pollution control, leaving a governance vacuum in between.

Economic policies that discriminate against agriculture 🔗

The bias against agriculture is not just about neglect – it is embedded in India’s economic policy architecture. For decades, agricultural and rural production faced a set of policies that systematically tilted the playing field against farmers.

Overvalued exchange rates 🔗

Prior to the 1991 economic reforms, India’s rupee was significantly overvalued, which priced Indian goods out of world markets and kept exports at barely 5% of GDP. For agriculture, this was particularly damaging. An overvalued currency makes agricultural exports artificially expensive on international markets while making industrial imports relatively cheap. The net effect is a transfer of income away from farming communities towards urban consumers and industrial sectors.

The FAO has documented how indirect taxation of agricultural exports through overvalued exchange rates was a common phenomenon across developing countries, depressing farm prices and profitability, and reducing incentives for investment in the agricultural sector.

Price controls and unfavourable terms of trade 🔗

Governments in India have long regulated the prices of essential agricultural commodities – foodgrains, sugar, edible oils, and more – through mechanisms like procurement prices, fair price shops, and export restrictions. While the intent was to keep food affordable for consumers, the consequence was to keep farm incomes artificially low.

Controls on domestic trade, including restrictions on interstate movement of agricultural goods, compulsory procurement levies, licensing requirements, and stocking limits, all worked to suppress prices that farmers received. FAO analysis of India’s trade commitments has shown that various domestic and external trade controls consistently kept domestic prices of major crops below international prices – effectively taxing farmers rather than supporting them.

The terms of trade for agriculture remained unfavourable for much of the post-independence period. While industrial goods became more expensive due to protectionist tariffs, agricultural products were kept cheap through price ceilings and export bans. This meant that for every unit of farm produce sold, a farmer could buy fewer and fewer industrial goods over time – discouraging investment in farming and natural resource conservation.

Crowding out of productive investment 🔗

A related problem has been the composition of government spending on agriculture. Input subsidies on fertilisers, power, and water have grown to dominate budgets, leaving very little for productivity-enhancing investments such as agricultural research, extension services, rural infrastructure, and natural resource management. The World Bank has pointed out that these subsidies are now roughly four times larger than investment expenditure in the sector, effectively crowding out the spending that could drive long-term growth.

Underpricing of natural resources: the root of overexploitation 🔗

When environmental resources are priced below their true value – or not priced at all – they inevitably get overused. This is one of the most fundamental insights from ecological economics, and India provides a textbook example of what happens when it is ignored.

Water for irrigation is either free or heavily subsidised in most Indian states. Electricity for farm pumpsets is provided at negligible rates or for free in several states, encouraging farmers to extract groundwater far beyond sustainable levels. Forest resources, grazing lands, and river sand are routinely undervalued in government allocations, leading to depletion that far outpaces natural regeneration.

For a long time, natural resource pricing issues were largely absent from public policy debate in India. However, this changed in the early 2010s when high-profile controversies over the allocation of telecom spectrum, coal blocks, and iron ore mining leases brought the issue into sharp focus. The Supreme Court cancelled the allocation of 214 coal blocks in 2014, ruling that the process had been arbitrary and lacked transparency. This triggered a broader shift towards auction-based mechanisms for natural resource allocation – an important step towards reflecting the true economic value of these resources.

Similar debates have emerged around land acquisition, forest diversion for industrial purposes, and the pricing of sand and minor minerals. Industry analysts have argued that transparent auction-based policies for natural resources can create a more equitable system where the government, industry, and communities all benefit from fair pricing.

Despite this progress, the pricing of many agricultural inputs – water, electricity, soil nutrients – remains distorted. Farmers are not charged the true cost of groundwater extraction, nor do they face the full cost of soil degradation caused by excessive chemical fertiliser use. Until these pricing signals are corrected, overexploitation of the natural resource base will continue.

The vicious cycle: policy bias, ecosystem degradation, and rural poverty 🔗

The different strands of agricultural bias come together to form a self-reinforcing cycle. Depressed agricultural prices reduce farm incomes. Low incomes mean farmers cannot invest in soil conservation, water harvesting, or tree planting. Without these investments, the natural resource base degrades. Degraded land yields less, pushing farmers to cultivate even more marginal land – steep slopes, riverbanks, forest fringes – further damaging fragile ecosystems.

Meanwhile, the lack of viable livelihoods in agriculture pushes rural populations towards unsustainable extraction of forest products, overfishing, and encroachment on protected areas. The majority of India’s poor – about 70% – live in rural areas, and their poverty is both a cause and a consequence of environmental degradation.

Breaking this cycle requires a coordinated approach: getting prices right so that farmers receive fair returns and natural resources are not squandered; redirecting subsidies from input giveaways towards investment in research, infrastructure, and ecosystem restoration; and integrating agricultural and environmental governance so that policies in one domain do not undermine goals in the other.

Moving forward: correcting the bias 🔗

India has taken some steps towards correcting the policy bias against agriculture. The liberalisation of exchange rates in the early 1990s removed one major source of discrimination. Minimum Support Prices have been raised in recent years to ensure farmers receive at least 50% above the cost of production for major crops. Programmes like the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) provide direct income support to farming households.

On the environmental front, the National Mission for Sustainable Agriculture, the Pradhan Mantri Krishi Sinchayee Yojana (focused on micro-irrigation), and watershed development programmes represent steps in the right direction. But funding for these remains small relative to the scale of the challenge.

What is ultimately needed is a fundamental reorientation of policy – one that recognises agriculture not just as a source of cheap food for cities, but as the primary interface between human communities and natural ecosystems. Investing in natural capital – soil, water, forests, biodiversity – is not a luxury. It is the prerequisite for long-term agricultural productivity and rural prosperity.

What do you think? Can India’s agricultural policies be redesigned to simultaneously improve farmer incomes and restore degraded ecosystems, or will the pressure of feeding 1.4 billion people always come at an environmental cost? How might correcting the underpricing of natural resources – especially water and electricity for farming – change the way land is used in rural India?

References

1. https://ndpublisher.in/files/html/FoodgrainsProductioninIndiaTrendandDecompositionsAnalysis.html
2. https://www.worldbank.org/en/news/feature/2012/05/17/india-agriculture-issues-priorities
3. https://agupubs.onlinelibrary.wiley.com/doi/full/10.1029/2019ef001287
4. https://prsindia.org/policy/analytical-reports/state-agriculture-india
5. https://www.oecd.org/en/publications/agricultural-policies-in-india_9789264302334-en.html
6. https://link.springer.com/article/10.1007/s43621-025-01032-z
7. https://piie.com/blogs/trade-and-investment-policy-watch/indias-trade-reforms-30-years-later-great-start-stalling
8. https://www.fao.org/4/X2998E/X2998E.htm
9. https://www.fao.org/4/y4632e/y4632e0g.htm
10. https://www.businesstoday.in/magazine/features/story/india-mining-rules-problems-government-policies-43026-2013-12-05