Demographic Dividend

This article deals with ‘Demographic Dividend.’ This article is part of our series on ‘Economics’ which is an important pillar of the GS-3. For more articles, you can click here.


A country is said to be in the Demographic dividend phase WHEN

  • The majority of its population is in the working-age group.
  • The dependency ratio is minimum, i.e. very few people below 15 & above 64.
  • The age pyramid shows a bulge in the middle.
Demographic Dividend
  • As East Asian countries in the past, and Ireland today, India is supposed to benefit from a ‘demographic dividend.’ This dividend results from large working-age people with a relatively small percentage of older people to support.
  • As of 2024, the median age of Indian is  28 years old, compared with 43 in China and the 38 in the United States and 48 in Japan. It implies a large and growing labour force, which can deliver unexpected benefits in terms of growth and prosperity.

  • But to reap the Demographic Dividend, the government have to
    • Invest in education & skill development of the young generation.
    • Produce enough good jobs to absorb them in employment (78.5 lakh non-farm jobs needs to be created annually until 2030).

Otherwise, this huge population would become burden onerous to handle instead of becoming an asset.

What to do to achieve Demographic Dividend?

Gig Economy (in India)

This article deals with ‘Gig Economy (in India) – UPSC Notes.’ This article is part of our series on ‘Economics’ which is an important pillar of the GS-3. For more articles, you can click here.


Gig Economy is the economy in which organizations work with independent workers for a short duration. Companies like Uber, Ola etc., don’t treat the workers as employees of the company. Instead, they are treated as freelance contractors, and traditional employee rights like minimum wages, pension, provident fund, insurance etc., aren’t given to them by the company.


  • Gig Economy has two sets of agents (i.e. Buyer and Seller), which interact through intermediaries or aggregators.
  • Gig Worker is not an employee on the company’s payroll. Instead, they are treated as Independent Service Contractors. 
  • They are paid in terms of ‘piece rate’ (depend on gigs completed) and ‘rewards’ (dependent on the rating given). The company doesn’t pay them a fixed salary.
  • Gig Workers (or contractors) aren’t eligible for social security incentives such as provident fund, insurance, pension etc., provided by the company. 
Gig Economy (in India)

  • Uber: It is the most famous company that employs the gig economy. It has re-defined the gig economy. 
UBER case study (working)
  • Udemy: In Udemy, instructors develop courses and sell them on the platform to those who want to learn that skill. Udemy is just the host of the content and pays the instructors according to the sale of their courses after cutting their share.
Udemy case study (working)
  • Airbnb: Airbnb provides a platform to the house owners with extra space to rent their space to the travellers. Airbnb provides the platform to connect buyers and sellers and take the commission in return for services. 
AirBnB case study (working)

Status of Gig Economy in India

  • Widespread Access to the Internet: The gig economy has boomed due to affordable data plans and digital connectivity, even in remote and rural areas.
  • Government Initiatives: Rapid increase in the Start-Up ecosystem in India owing to various government initiatives (like Start-Up India). 
  • Changing Work approach: Remote and flexible employment is becoming mainstream post-Covid, attracting youth and professionals to gig platforms like Upwork and UrbanClap.
  • Rise in demand for Contractual Employees: Sectors like e-commerce and logistics prefer contractual gig workers to meet seasonal demand (e.g., Amazon and Flipkart hiring during festive seasons).
  • Cost Optimization by Businesses: Companies increasingly outsource tasks to gig workers to reduce operational costs.
  • Women Empowerment: Gig work offers flexibility, encouraging women in rural and urban areas to join the workforce (e.g., Meesho for home-based entrepreneurs).

  • Job Creation: The gig economy generates a large number of jobs.
  • Flexibility: The gig economy provides flexibility in terms of working hours.
  • Independence: Gig workers operate as independent contractors and aren’t answerable to any boss (because they are their boss)
  • Lower Cost of Service: The gig companies can provide the same service at a lower cost due to economies of scale and efficient use of resources.
  • Quality of Service: The quality of service is higher as the Aggregator companies ensure quality of service and compliance.
  • Optimization of Resource Utilization: It provides an easy way to monetize resources like vacant spaces in homes (Airbnb) and ordinary vehicles (Uber and Ola).
  • Cost Efficiency: It guards companies against fluctuations in demand as they don’t have to pay workers if there is a lack of demand.

  • The gig workers don’t have the cover of social security such as provident fund, pension etc.
  • There is no security of a job in the gig economy.
  • The income of the gig workers is not fixed, and companies enjoy large powers vis-a-vis workers enabling them to exploit workers. 
  • The gig economy is not adequately regulated and gives a lot of opportunity to the companies to evade taxes and harass workers.
  • Stress on the gig-workers due to pressure from algorithmic management practices and performance evaluation on the basis of ratings. E.g., monitoring of Ola and Uber employees. 
  • Limited opportunities for skill up-gradation and career progression that are attached to traditional jobs.
  • Potential exploitation of workers due to the individualistic nature of gig work, gig workers cannot form unions and bargain collectively.

  1. Budget 2021-22: The Government has announced that the law on minimum wages act and Employee State Insurance Corporation will apply to all firms. 
  2. Regulation: Central Government has announced that Taxi-hailing apps can’t charge more than 20% commission from driving contractors. Along with that, contractors cant work more than 12 hours per day.
  3. Rajasthan Government’s Initiative: The Rajasthan government has formed the Tripartite Board to automatically register gig workers upon joining a platform. The registered gig worker will be eligible to
    • Medical and accident support
    • Educational aid for workers’ children.
    • Access to other welfare schemes.

  • In 2021, the UK Supreme Court ruled that Uber drivers should be considered workers and not freelance contractors, making them eligible for all employment-related benefits such as minimum wage, annual leaves, and insurance.

Skilling People in India

This article deals with ‘Skilling People in India – UPSC Notes.’ This article is part of our series on ‘Economics’ which is an important pillar of the GS-3. For more articles, you can click here.


The answer to this question lies in analysing the percentage share of GDP & employment of various sectors of the economy.

  • 49% of people engaged in Agriculture contribute to only 18.7% of GDP. Shifting these people to the manufacturing & service sector by skilling them will significantly increase the economy’s overall productivity. For example,  a farmer in Bihar with 1 hectare of land earns ₹50,000 annually, while a factory worker in Chennai or Pune with basic technical skills earns ₹3–4 lakh/year.
  • Skilling the workforce will help reduce disguised unemployment as workers can be employed in productive sectors.  For example,
  • It will also help in land consolidation because marginal farmers will go to the service & manufacturing sectors. They can sell their lands or lease them to those who want to keep working in agriculture. 
  • With over 65% of the population below 35 years, India has a narrow window of opportunity to capitalize on its demographic advantage by skilling the people.
Skilling People in India
  • Companies coming from abroad will need a skilled workforce. Skilling the workforce will make India attractive for MNCs to set up production houses. For instance, Samsung’s Noida plant employs 70,000 workers but imports technicians from South Korea due to local skill shortages.

  • Education: The education system heavily relies on producing the clerical rather than the skilled workforce. 
  • Rapidly changing Technology: There is always a mismatch between the speed of technological change due to advancements in AI, automation, blockchain, and robotics and the rate of changing skill sets.
  • Social Acceptance: Our society gives lesser recognition to vocationally trained people (such as carpentry, plumbing, and tailoring). In contrast, countries like Germany and Switzerland have robust vocational education models where skill-based jobs are highly respected and well-paid.
  • Pending Labour Reforms: Employers generally prefer automation and contract labour to save themselves from labour laws and, as a result, don’t invest in skilling the workers.
  • Poor Infrastructure and Quality in Skill Training Centres: Industrial Training Institutes (ITIs) and Skill Development Centres lack proper infrastructure, experienced faculty, and industry partnerships.


Skill India Mission

  • It was created as a separate ministry in 2014.
  • Objective: Address India’s manpower needs and equip youth with industry-relevant skills.
  • Key Functions of the Ministry include
    • Policy Framing: Develop policies like the National Skill Development Policy.
    • Scheme Implementation: Implement schemes like Pradhan Mantri Kaushal Vikas Yojana (PMKVY), UDAAN, a Special Industry Initiative for J&K, etc.
    • Industry Partnerships: Promotes PPPs and CSR funding for skill development.

  • The scheme works under the Skill Ministry.
  • Objectives: Enable a large number of Indian youth to skill them with industry-relevant skills through training, thus helping them secure a better livelihood.
  • Primary Target Group: 10th or 12th-grade dropouts, migrant workers, rural youth, and women.
  • PMKVY has two training components: Short-Term Training and Recognition of Prior Learning. 
  • Under the provisions of the scheme
    • It is a certification scheme under which certification of completion, along with ₹8,000, is given to those who successfully pass the program.
    • After completion, a person can also apply for a loan worth Rs. 20,000 to 1.5 lakh to start a venture.
    • Soft skill & computer course is also provided. 
    • The main focus of the scheme is 10 or +2 dropouts. 
  • The scheme is presently in its third phase. Several new initiatives, like the Upskilling for Weavers and Artisans in Traditional Crafts in Nagaland and Kashmir, digital marketing etc., were launched under PMKVY 3.0.

  • The scheme was announced in the Budget for 2024-25.
  • Nodal Ministry: Ministry of Corporate Affairs
  • Aim: To provide internships to 1 crore youth in top-500 companies (like Tata, ICICI, Zomato, Flipkart, etc.) over the five years.
  • Age Eligibility: Youth in the 21-24 age group. Selection will be based on academic performance, skill assessment tests, and industry demand.
  • Under the scheme,
    • The Government of India pays a Monthly Stipend of ₹4,500 per month. Additionally, ₹500 per month is contributed by the company (which can be adjusted in its CSR budget).
    • The Government also provides an additional ₹6,000 to each candidate to cover miscellaneous expenses (travel, food, training materials, etc.).

  • The scheme aims to encourage industrial establishments to undertake apprenticeship programs by providing financial incentives.
  • Under the scheme, the Government reimburses 25% of the stipend (up to ₹1,500 per apprentice per month).

  • The scheme was launched in 2014 with the Ministry of Rural Development (MoRD) as the nodal agency.
  • It is a component of the National Rural Livelihoods Mission (NRLM).
  • Main Features of the scheme include
    • The scheme follows the Placement-Linked Approach.
    • Target beneficiaries include rural youth between  15-35 years.
    • Training is provided by accredited agencies, known as Project Implementing Agencies (PIAs), selected through a rigorous screening process.

  • NSDC is owned by the Ministry of Skill Development & Entrepreneurship (MSDE) and the private sector in a 49:51 ratio.
  • Key Function: Fund and support vocational training institutions to promote skill development.

  • It is a World Bank loan-assisted program.
  • Objective: To decentralize skill development and align it with local needs and youth aspirations.

  • IBPS works under the supervision of the Ministry of Electronics and IT.
  • The scheme incentivizes the establishment of BPOs and their extension to Tier 2 and Tier 3 cities with financial support in the form of Viability Gap Funding.

  • PM  laid the foundation stone of the instruction in 2017.
  • “Indian Institute of Skills” is inspired by the Singapore training model. 
  • The institute would adopt various best practices from the country.  

  • To attract dedicated young and talented administrators for skill development, the Government has established ISDS, whose first batch was inducted in 2019.

  • The scheme aims to improve the employability of youth by equipping them with essential digital skills.

  • The government has signed MoUs with  China, the UK, Australia, and Germany for Skill Development in India.

  • Ustaad scheme aims to skill minority artisans.
  • The main emphasis of the scheme is on 
Kashmiri EmbroidaryMuslims of Kashmir
JardosiBengali Muslims
PhulkariPunjabi Sikhs
Thangka PaintingBuddhists
  • Hunar Haats are organized under the Ustaad scheme, thus providing platforms for marketing artisans’ products belonging to minority communities
  • The scheme works under the Ministry of Minority Affairs. 
  • Under the scheme, the person belonging to the Minority Community can get computer knowledge, tailoring skills, etc., from the Private Institution. The Government later reimburses that institution. 
  • MANAS = Maulana Azad National Academy for Skill
  • It is an innovative scheme and works on the principle of ‘Giving back to the Community’ under which the leading celebrities in various skill sets are used as the driving force behind the skill development projects in their respective fields.

  • There is no standard definition of skill in India. Hence, there is no way to measure whether the skill is imparted or not.
  • The availability of good quality teachers to impart skills is not adequate. 
  • The industry does not value the certificates that these programs give.
  • The curriculum is not updated at the regular interval.
  • There is duplication of efforts in these schemes. Instead of many schemes, there should be one universal scheme. 
  • There is a need for constant up-gradation of skills. These programs don’t recognise this. 

R&D in Agriculture

R&D in Agriculture

This article deals with ‘R&D in Agriculture.’ This is part of our series on ‘Economics’ which is an important pillar of the GS-3 syllabus. For more articles, you can click here.


  • Return on Investment: The Economic Survey (2021-22) explicitly highlighted the correlation between spending on agri-R&D and agricultural growth. Every rupee spent on agri-R&D yields much better returns (11.2), compared to returns on every rupee spent on fertilizer subsidy (0.88), power subsidy (0.79), etc.
  • Food Security: R&D helps in the development of high-yielding crops and thus achieve food security.
  • Climate Smart Crops: R&D can help create climate-smart crops that can survive extreme climate. 
  • Help Small Farmers: R&D is helpful in the Indian context as it can help to create new technologies designed to help small and marginal farmers.

  • Indian Council of Agricultural Research (ICAR): ICAR is an autonomous organization for co-ordinating and guiding research & education in agriculture, including animal sciences, horticulture and fisheries in the country.
  • State Agricultural Universities (like Punjab Agricultural University) are dedicated to the development of agricultural technologies.

KVKs are the institutions at the district level aimed at

  1. On-farm testing to assess the adaptability of new agricultural technologies
  2. Frontline Demonstrations of the latest agricultural technologies to the farmers
  3. Provide Advisory Services on various aspects like cropping patterns, pest control, post-harvest technology, etc.
  4. Production of good quality seeds & planting materials for distribution to the farmers.

R&D in Agriculture is facing problems in India because

  • The private sector doesn’t contribute much investment in agriculture research, and government funding for R&D is decreasing considerably. This funding needs to be increased. 
  • Allocation for agri-R&D in Budget 2021 was just Rs 8,514 crore. It is even lower than that of a single private global company like Bayer, whose annual spending on agri-R&D is almost Rs 20,000 crore.
  • The problem with ICAR is that a single body plays several roles, from education to research to extension. Hence, it has become the jack of all trades but the master of none.  
  • The agriculture universities have been plagued & not able to do much because of
    • Resource crunch
    • Difficulty in attracting talented faculty
    • Limited linkages and collaborations with international counterparts
    • Weakening of the lab-to-land connect
    • Lack of innovation
  • The R&D sector is suffering from ‘technology fatigue’, i.e., no innovative invention has been done by the scientific community in the previous two decades.
  • Indian agriculture research has become too much ‘cereal-centric’. Instead, Indian farmers must focus on pulses, oilseeds, horticulture and animal husbandry.        

  1. Increase expenditure on R&D in Agriculture by the Government sector. 
  2. Kremer’s HIV Vaccine Idea / Government Pull System of Research: Private research in crops grown at a small scale can be boosted by offering the winner proportionately large cash, but the IPR for that innovation is transferred to the government.
  3. Address the regulatory lacunae in GM Crops technology: Pass the BRAI Act (Biotechnology Regulatory Authority of India) to remove the issues associated with the present regulatory framework under the aegis of the Genetic Engineering Appraisal Committee (GEAC).

Extension Services (Agricultural Inputs)

Extension Services (Agricultural Inputs)

This article deals with ‘Extension Services (Agricultural Inputs).’ This is part of our series on ‘Economics’ which is an important pillar of the GS-3 syllabus. For more articles, you can click here.


Extension Services are expert services provided to the farmers that can help improve productivity by delivering timely advisory services to farmers to adopt best practices, technology, meet with contingencies, market information etc.

  1. In India, there is 1 Extension worker per 800-1000 farmers.
  2. 60% of farmers don’t get any service from Extension workers, according to the NSSO survey.
  3. Farmers depend on the progressive farmer of their area or marketing agent of some company for advice on the product they should use. But the problem is they will suggest only those products which give maximum profits.
  4. There is no lab to farm connectivity.

Steps taken by the Government for Extension Services

These include

  • mKisan
  • PUSA Krishi App

  • Government can’t send the person to each village, but each village has TVs. Hence, the Government of India started Kisan TV in 2015.

  • PMKSK works under the Ministry of Chemicals and Fertilizers (announced in 2022)
  • The program aims to convert existing Fertilizer shops into Pradhan Mantri Kisan Samridhi Kendra that will act as a “One Stop Shop” for all agriculture-related inputs (like fertilizers, seeds, insecticides, pesticides, etc.) and other agricultural services.

  • Agriculture Graduates set these up to provide paid advice to farmers on various issues. The Agriculture Ministry and NABARD support this scheme.

  • Krishi Vigyan Kendras are set up by the Indian Council of Agricultural Research (ICAR) and Agricultural Universities for frontline demonstration of agriculture technologies on the field, updating farmers about modern agriculture technologies and providing advisories to farmers using ICT.

  1. Kisan Call Centre schemes
  2. SMS portal for farmers

  • Under this scheme, the village students are given Agro education.

  • Fairs organized by ICAR to demonstrate new agricultural technologies to farmers.

Farm Insurance

Farm Insurance

This article deals with ‘Farm Insurance.’ This is part of our series on ‘Economics’ which is an important pillar of the GS-3 syllabus. For more articles, you can click here.


  1. Low Penetration: Only 22% of agricultural land was covered under crop insurance in 2014.  
  2. Low Sums Insured (SI): The sums insured (SI) were low. It was based on the cost of inputs rather than prospective income. 
  3. High Premium: Huge premium was charged. It was as high as 10% of the sums insured.  
  4. Delayed claims settlement: Claims used to lie unclaimed till six months & beyond.
  5. Low Literacy: Farmers don’t know about these schemes and their benefits.
  6. Inadequate Infrastructure: Absence of infra to measure data accurately at farm level.


PMFBY has been formulated according to the One Nation–One Scheme theme. It replaced the existing two schemes (i.e. NAIS (National Agricultural Insurance Scheme and Modified NAIS) by removing their inherent drawbacks and incorporating the best features of all previous schemes.


Features of Pradhan Mantri Fasal Bima Yojana (PMFBY)
  1. Target: To bring at least 50% cropped area under Insurance Cover.
  2. PMFBY removes any artificial capping of the Sums Insured(SI). The SI will be calculated by multiplying the MSP of a crop by the average seven-year yield for the particular village panchayat area where it is grown.
  3. Uniform premium: Farmers will pay a uniform premium of
    • 2 per cent for all Kharif crops
    • 1.5 per cent for all Rabi crops
    • 5 per cent for annual horticultural and commercial crops.
  4. Governments to fully meet the gap between the actuarial premiums and the rates payable by farmers at Union and State levels. 
  5. Use of technology: Government will encourage the use of technology, especially mobiles and remote sensing, for quick estimation and early settlement of losses. 
  6. The scheme is extended to cover post-harvest losses as well.
  7. In 2018, the Centre allowed States to set up their own insurance companies for implementing Pradhan Mantri Fasal Bima Yojana (PMFBY). The move comes after several requests from states.

  1. Increase in Insured Area: The area insured has reached 610 lakh ha (2023-24), insuring 5.5 crore farmers. PMFBY has become the largest crop insurance scheme in the world in terms of farmer enrolments and the third largest in terms of insurance premiums. It fares well in this regard.
  2. Methodology of Risk Assessment: Earlier, risk assessment was done at the district level, which was later changed to the block level. The Sum Insured (SI) is now measured at the Village level, which is closer to reality.
  3. During the arduous seasons of 2017, 2018 and 2019 marred by weather extremities, the scheme proved to be a decisive factor in securing the livelihoods of farmers, wherein the claims paid ratio in several states averaged more than 100 per cent against the gross premium collected. For example, the States of Chhattisgarh (2017), Odisha (2017), Tamil Nadu (2018), and Jharkhand (2019) received 384 per cent, 222 per cent, 163 per cent and 159 per cent of claims ratio against a gross premium.
  4. To improve the efficacy, the government has started various initiatives under PMFBY. These include
    1. DigiClaim: All the claims are worked out through the National Crop Insurance Portal (NCIP).
    2. CROPIC i.e. Collection of Real-Time Observations and Photo of Crops:  Collect periodic photographs of crops during their life cycle. These photographs validate sown crops and assess crop damage.
    3. Yield Estimation Based on Technology (YES-Tech): It is a technology-based yield estimation mechanism.
    4. Weather Information and Network Data Systems (WINDS): It aims to develop hyper-local weather data by setting intense network of Automatic Weather Stations (AWS) at the block level and Automatic Rain Gauges (ARGs) at the Panchayat level.
  5. Government has also approved the creation of the Fund for Innovation and Technology (FIAT) with the corpus of Rs. 824 crore to fund the technological innovations like YES-TECH, WINDS  etc. and other research and development activities.
  1. The critical factor of analyzing the efficacy of an insurance scheme is the ability to settle its claims quickly. PMFBY failed in this aspect as it took several months to pay compensation to the farmers.
  2. There are allegations of profiteering by Insurance Companies.
  3. It is alleged that most of the increase in insured areas is due to mandatory insurance for loanee farmers. According to the Public Account Committee Report (2023), the percentage of non-loanee farmers is negligible. Additionally, there is poor awareness of the scheme among small and marginal farmers.
  4. PMFBY does not cover tenant farmers.
  5. No governance reforms have been initiated. This scheme is also implemented with the help of rusted old machinery consisting of Patwaris and revenue officers.
  6. Lack of farmer awareness: According to the CAG, out of 5,993 farmers surveyed, only 37% were aware of the schemes.
  7. One-size fits all approach: All the farmers in the country have been treated as similar without any option to choose an insurance that meets the specific needs of their region.
  8. No provision for competitive pricing: As per the scheme guidelines, every cluster has a specific insurance company selling insurances, creating infrastructure and manpower for three years. Lack of competition creates a monopoly over the scheme. 

Due to the above issues, various states are replacing PMFBY with their own insurance schemes. E.g., Jharkhand has started its own insurance scheme (in 2021) called Kisan Fasal Rahat Yojana, which will be implemented by Jharkhand’s Department of Agriculture, Animal Husbandry and Co-operative. Gram Sabha has been assigned a major role in accessing crop loss.


The Beed is drought prone district in Maharashtra. The private insurance companies hesitate to do agricultural insurance in the district because many times the insurance claims paid is more than premium collected.

The government has come up with novel solution under which Maharashtra Government has roped in Agriculture Insurance Corporation (AIC) under which the private insurance company will insurance claims upto 110% of premium. On the other hand, if the insurance claims are lesser than 80% of premium, the private insurance company will share part of its profit with AIC.

Agro-Credit

Agro-Credit

This article deals with ‘Agro-Credit.’ This is part of our series on ‘Economics’ which is an important pillar of the GS-3 syllabus. For more articles, you can click here.


Agri credit is an essential input for agriculture to improve productivity. Access to institutional credit enables the farmer to enhance productivity by investing in machinery, purchasing variable inputs like fertilizers, quality seeds, and manure, and providing funds until the farmer receives payment from the sale of produce.

Every 1% increase in agricultural credit produces 0.29% increase in agricultural GDP and consequently aiding in increased income of farmers.


  • The predominance of informal sources44 % of agro finance comes from money lenders. These money lenders are highly exploitative and charge exorbitant rates.
Agro-Credit from Formal and Informal Sector
  • Although Short Term Loan quantity has increased, Long Term Investment in agro infrastructure has decreased both by private & public sectors.  
  • Regional Disparity: The coverage is meagre in the north-eastern and eastern regions of the country. 
  • Agri credit / Agricultural loans are not used for the stated purpose. Primarily, they are used for marriage & consumption purposes by the farmer.
  • Credit for Small Farmers: Small and marginal farmers are not covered by banks and other institutional creditors.
  • Banks indulge in coercive actions for repayment, which leads to increased instances of farmer suicides.

Steps taken by government in giving loans to farmers easily
  • Banks are mandated to give 10% of their loans to Agriculture & Allied Sector, and 8% of their loans should be explicitly given to Marginal and Small Farmers.
  • Target for 2023-24 is Rs. 20 lakh crore.
  • Under this, loans up to ₹ 3Lakh are given to the farmer at an interest rate of 7% & if his credit history is good, then 5% additional subvention is provided by the government, making the effective interest rate of 2% 
  • KCC is a smart debit cum credit card for farmers. The farmer can later pay credit at a very low rate of interest.
  • It was started in 2012. In 2018, the facility was also extended to farmers involved in fisheries and animal husbandry.
  • The scheme aims to reduce farmers’ dependence on the informal banking sector for credit, which can be very expensive and suck them into a debt spiral.
  • Recent reports suggest high default rates on KCCs, which are becoming a significant source of non-performing assets (NPAs) for banks despite its various benefits.
  • As of 2024, banks have issued 7.5 KCCs.
  • Under this scheme, the farmer can deposit his produce in a warehouse & get a warehouse receipt in return. The farmer can “mortgage” this warehouse receipt to a banker to get loans or trade at Commodity exchange.
  • Hence, these Negotiable Warehouse Receipt helps the farmer get a loan for the next cropping season on receipt & sell his produce at a later date when he receives a favourable price of his product.  
  • Various state governments are giving loan waivers to the farmers. 
  • But the efficacy of such loan waivers and their impacts on the government’s finances is highly debated.
  • NABARD has started various initiatives for the farm sector like
    1. NABARD refinances Agro Loans. 
    2. NABARD operates Rural Infrastructure Development Fund.
  • The Agriculture Ministry runs this scheme.
  • Under this, income support of ₹6,000 / annum is given to all farmers in three instalments of ₹ 2,000 each.

The measures have reduced the share of non institutional credit from 90 per cent in 1950 to 23.40 per cent in 2021-22. As of 31 January 2024, the total credit disbursed to agriculture amounted to ₹ 22.84 lakh Crore

Farm Mechanization

Farm Mechanization

This article deals with ‘Farm Mechanization.’ This is part of our series on ‘Economics’ which is an important pillar of the GS-3 syllabus. For more articles, you can click here.


Farm mechanization refers to the development and use of machines that can take the place of human and animal power in agricultural processes.

Although India is one of the top countries in agricultural production, farm mechanization is just 40% ( & growing at a very slow pace of 5% per annum),  against more than 90% mechanization in the first world. Furthermore, 80% of the value contribution comes from tractors.

Farm Mechanization in India

  • Agricultural Mechanization removes the drudgery associated with agricultural labour, overcomes time and labour bottlenecks to perform tasks within optimum time windows and can influence the environmental footprint of agriculture, leading to sustainable outcomes.
  • Increased Productivity and Reduced Input Costs: The use of proper equipment can increase farm productivity by 30% and reduce the input cost by 20%.
  • Aid in Outward Migration of Educated Youth: Farm mechanization can also aid in the outward migration of educated youth from the farm sector and help them to contribute better in other sectors. 
  • Alternative to deal with increasing cost of labour: The cost of deploying labour for agriculture operations is increasing substantially. Farm mechanization is the only way to reduce labour costs and, thus, the cost of cultivation. 
  • Improved quality of crops: Mechanized equipment is designed to perform farming operations with precision and accuracy, leading to improved crop quality. 
  • Increased Yields: Machines can uniformly sow seeds, apply fertilizers and pesticides, and harvest crops optimally, leading to better-quality yields.
  • Sustainability: Farm mechanization can promote sustainable agriculture by reducing the amount of land, water, and energy required for farming operations. 


  • Soil, Terrain & Agro-Climatic Diversity: Machines used in Punjab can’t be used in North East. There is a need for Tailormade products. 
  • Small farmers with limited income can’t buy Tractors.
  • Low loan support by the banks to the agriculture sector compared to the Industrial sector.
  • Due to Small and fragmented Indian landholdings, it is uneconomical to buy individual machines.
  • Credit procedure: The procedure to avail agriculture term loan for various activities helping farm mechanization is very cumbersome. Also, the interest rate is higher for such loans than crop loans.

  • It is a sub-part of Umbrella Green Mission.
  • Aims: promote agricultural Mechanization among small and marginal farmers.

  • The government of Rajasthan has started a scheme under which small farmers (having land less than 2.5 acres) can use tractors and sowing machines without paying any rent.
  • Yantradoot Scheme of the State of MP provides farm machinery at concessional rates.

  • It was developed by Agriculture Ministry. It connects farmers and Custom Hiring Service Centres so that farmers can rent agricultural machinery.

  • Land Conservation Department offers subsidy of up to 90% to women establishments for purchasing the machines.

    • Higher Agricultural Mechanization has led to higher water usage, stubble burning, smoke from machines and soil erosion, thus impacting the environment negatively. 
    • Higher use of agriculture machines leads to displacement of unskilled labour from the rural areas. 
    • The agricultural tools in the market are not gender friendly. 
    • The agricultural tools are costly, and since the farms are small, they are not utilized to their full potential. 
    • Regional Disparities: Northern India has higher mechanization levels than other regions. (Rice and Wheat crops having the largest extent of mechanization).
    • Farm mechanization in India is marked by ‘tractorization’.  India’s farm equipment market is 7% of the global market, with more than 80% of the value contribution coming from tractors.

    • Companies and governments should invest in R&D for making machinery suitable for different terrains and agro-climatic regions of India.
    • Cooperative farming: The cooperative group can buy mechanical tools instead of individual farmers.
    • Rental Model: Like ZoomCar for Tractors, Reapers etc., can also be used.
    • Custom Hiring Centers (CHCs)
    • Invent cheap machines suited to Indian conditions. E.g., small farmers can use power tiller instead of tractor and power reaper instead of Combines as they are more affordable, have low operational cost and can be used in rugged topography. 
    • Kisan Drones: Budget 2022 has proposed Kisan Drones for spraying insecticides and pesticides, crop assessment and digitization of land records.

    Pesticides (Agricultural Inputs)

    This article deals with ‘Pesticides (Agricultural Inputs).’ This is part of our series on ‘Economics’ which is an important pillar of the GS-3 syllabus. For more articles, you can click here.


    • 15-25% of the crop in India is lost to weeds, pests, diseases and rodents. 

    Statistics of Pesticide Use in India

    • Total pesticide consumption is the highest in Maharashtra, followed by Uttar Pradesh, Punjab and Haryana. 
    • On the other hand, per hectare consumption of pesticides is the highest in Punjab.
    • Amongst the crops, paddy accounts for the maximum share of consumption (26-28%), followed by cotton (18-20%).

    Even though per hectare pesticide is much lower in India (0.5 kg per ha) than other advanced economies like 7.0 kg per ha in the USA and 12 kg per ha in Japan. But there are some issues:- 

    1. The quality of the spray is substandard.
    2. Farmers use pesticides without following proper guidelines. 
    3. Use of broad-spectrum pesticides, which kills beneficial insects and pollinators as well.
    4. Residues of pesticides are found in fruits and veggies. It leads to a ban on their exports to first-world nations (especially the EU).
    5. When a pesticide is sprayed on crops, most of it bounces off the leaves, falling on the ground. It then mixes with soil and water, contaminating both, and entering the food chain leading to biomagnification. 
    6. 93 chemicals banned in most of the developed world are sold in India. 
    7. Carcinogenic pesticides like Monsanto’s Glyphosate (brand-named ‘Roundup’) are still sold in India despite the proven fact that it can cause cancer.  
    8. Pesticides like Endosulfan (used on Cashew Plantations in Kerala) have proven genotoxic.
    9. Rising usage: Warmer climate and growing population are expected to increase the use of pesticides to combat the possible rise in pest invasions and feed more people. 
    10. Pesticide poisoning: According to NCRB, in 2019, 6,962 deaths were reported out of 7,007 pesticide poisoning cases.
    11. Opaque and out of date regulatory framework: Pesticide Management Bill (PMB) has been discussed since 2008. The cabinet approved the latest draft in February 2020.
    12. The private sector monopoly: There is a private sector monopoly in pesticide trade whose decision is guided by the profit motive alone. 

    1. Move towards Organic Farming.
    2. Use narrow-spectrum pesticides.
    3. Using biocontrol agents and biopesticides: It is a method of controlling pests such as insects, mites, weeds and plant diseases using other organisms. 
    4. Adopt Integrated Pest Management approach, which encompasses a judicious mix of pest control methods like bio-pesticides, bio-control agents and pesticides. (Vietnam Case Study: In Vietnam, almost all the farmers of Mekong Delta adopted a policy of “no-spray for first 40 days”. They used predatory beetles that prey on rice pests.)
    5. Government should pass the Pesticide Management Bill, 2017, which aims to replace the Insecticide Act of 1968 with larger penalties and jail time for selling substandard or fake pesticides. 

    Note: India is a signatory to United Nations Environment Programme (UNEP) led Stockholm Convention for persistent organic pollutants and Rotterdam convention for export-import of pesticides.  

    Fertilizer (Agricultural Inputs)

    This article deals with ‘Fertilizer (Agricultural Inputs).’ This is part of our series on ‘Economics’ which is an important pillar of the GS-3 syllabus. For more articles, you can click here.


    Fertilizer (Agricultural Inputs)

    Plants require Nitrogen, Phosphorus and Potassium (NPK) for their balanced growth. If soil is deficient in these nutrients or if the farmer is using High Yielding Variety seeds that require more nutrients than any natural soil can supply, different fertilizers are used to boost nutrients in the soil.

    NutrientFertilizer used
    Nitrogen (N)Urea
    Urea is produced using Haber’s Process using LPG as raw material.
    It is the most widely consumed fertilizer in India. The Ministry of Chemical and Fertilizer gives subsidies to the Indian companies to manufacture and sell it at a lower price to farmers. 
    Phosphorus (P)Diammonium Phosphate (DAP)
    80% of its demand is met via imports.   
    Potassium (K)Muriate of Potash (MOP)
    It is not manufactured in India. Hence, 100% of its demand is met via imports.

    Fertilizers are provided to the farmers at subsidized rates. In 2020, Rs 71,000 crore was paid in fertilizer subsidies by the Union Government.

    • Nutrient Based Subsidy is used in the case of DAP & MOP
    • It was framed under Fertilizer (Control) Order, 1985 and issued under Essential. Commodities Act, 1955.
    • The government fixes per kilogram subsidy on DAP & MOP in this system. (Cost of Fertilizer for farmer = Market Price MINUS Fertilizer Subsidy)
    • But, imports of DAP & MOP aren’t controlled.

    The case of urea is very different. The government intervenes in the sector in five ways: 

    1. It sets the Maximum Retail Price (MRP).
    2. It provides a subsidy to 30 domestic producers on a cost-plus basis, meaning more inefficient producers get larger subsidies. 
    3. It provides a subsidy to importers.
    4. Imports are canalized—only three agencies can import Urea into India.
    5. Half of the movement of fertilizer is directed—that is, government tells manufacturers where to sell their urea.

    These distortions feed upon each other, leading to a series of adverse outcomes.


    • Urea is subsidized 75% of its price. 
    • Due to this, it is smuggled to
      1. Industry (Ammonia-based industry) 
      2. Across the border to Bangladesh and Nepal  
    • Additionally, larger—presumably richer— farmers consume subsidized urea. Ideally, subsidized urea should be given only to poor farmers
    • The regulation under canalization creates shortages. Under the provisions of canalization, the government orders specific companies to when to import, what quantities to import & where to sell. But estimating the demand is a difficult task & shortages can’t be addressed instantaneously (it takes 60 days at least).
    • Earlier, the main objective of the Indian government was self-sufficiency  & this led to Subsidy on Cost Plus Basis, where the subsidy a firm receives is based on its cost of production: greater the cost, the larger the subsidy. Consequently, inefficient firms with high production costs survive, and the incentive to lower costs is blunted.
    • Since Urea is cheaper than other Fertilizers, it creates a situation of urea overuse which is detrimental for the soil. Consequently, the soil’s N:P: K ratio is disturbed (Rajasthan – N:P: K = 25:12:1 instead of 4:2:1). 
    • The declining response ratio or marginal productivity of fertilizers since the 1970s is a pointer to their inefficient use in Indian agriculture.
    • Fertilizer use is leading to harmful effects on the human health such as respiratory diseases, cancer etc.

    Steps to rectify Fertilizer Usage
    • Earlier, the government used to give subsidies to the fertilizer company when fertilizer left the company’s godowns. 
    • This system has been changed. Now, Fertilizer companies are paid subsidies only after the retailer has sold the fertilizer to the farmer through a Point of Sale (PoS) device.
    • This system prevents the diversion of subsidized urea towards non-agricultural purposes and smuggling to Nepal and Bangladesh.

    • The scheme aims at marketing fertilizers in the country under ‘Bharat’ brand name.
    • The uniform design of bags across the country will now mention them as ‘Bharat Urea’, ‘Bharat DAP’, ‘Bharat MOP’, ‘Bharat NPK’.
    • Under the scheme
      • The new “Bharat” brand name and PMBJP logo will cover two-thirds of the front of the fertilizer packet.
      • The manufacturing brands can only display their name, logo, and other information on the remaining one-third space.

    • The government started this scheme in 2015.
    • Under this scheme, urea is coated with neem, which has the following benefits
      1. It stops diversion to industrial consumers as neem coated urea cant be used in Ammonia-based industry due to adverse reactions that neem can cause.
      2. It helps in slowing down the Nitrification of urea & increasing the efficacy of urea.
      3. Due to the pesticidal properties of neem, the amount of pesticides required is reduced.   

    • Soil Health Card Scheme is a component of NMSA (National Mission on Sustainable Agriculture).
    • In this, farmer’s land is tested for 12 parameters and given Soil Health Card (updated every 3 years).
    • The card also advises the farmer about the type of crops that can be grown and fertilizer requirements to achieve maximum yield for various crops.  

    Importance

    • Assist farmers in supplying proper fertilizer mix, which is currently dominated by urea. 
    • It will help the farmer to select the most appropriate crop pattern.
    • This will lead to a diverse crop pattern that currently revolves around wheat & rice.

    • In 2018, the size of the Urea Bag was reduced to 45 kg instead of earlier 50 kg.
    • Reason: Neem Coated Urea has increased the effectiveness of urea. Since farmers mainly assess the requirement of urea in terms of bags, the government has decided to reduce the size of the bag. 

    • Nano Urea is made by IFFCO.
    • It comes in liquid form and needs to be sprayed on the crop.
    • It is more efficient than normal urea. Nutrient Use Efficiency (NUE) of nano urea is over 80% against 30-50% of conventional granular urea. Hence, farmer can achieve the same efficiency by applying lower quantity, thus reducing the overall cost per hectare.
    • Nano Urea’s limitation is that, being a liquid fertiliser, it can only be sprayed after the crop has developed leaves.

    • PM PRANAM: PM Program for Restoration, Awareness Generation, Nourishment and Amelioration of Mother-Earth
    • Aim: To reduce the use of fertilizers in the farming
    • The scheme aims to encourage the state governments to reduce the consumption of fertilizers in their state. If state government is successful in reducing the consumption of fertilizers in their state, the Union government will transfer some percentage of the savings in the subsidy bill arising due to decrease in fertilizer consumption as grant.

    • To reduce the cost of imported urea, the Indian government is setting up Joint Ventures with companies of oil rich countries like Oman, where gas prices are low, resulting in cheaper production of fertilizers. 

    • Bringing urea under the NBS program would encourage fertilizer manufacturers to be efficient.

    • Use BAPU (Biometrically Authenticated Physical Uptake) Model for selling urea.
    • Under this model, the government sets the maximum limit on subsidized Urea Bags one can buy. Small farmers will still get all urea at a subsidized rate, but big farmers will have to buy more than the set limit at full price.

    • Use Soil Health Card to make Tailor-made fertilizer for a particular field.

    • Teach farmers about the Integrated Nutrient Management  which uses practices such as organic manures, plantation of legume crops, crop residue management etc.

    Organic Alternatives to Fertilizers

    Organic Alternatives to Fertilizers
    • Manure is a natural substance made by the decomposition of organic waste.
    • Apart from nutrients, it also provides humus to the soil.
    • But manure is less rich in nutrients compared to fertilizers.
    • The government is promoting the use of manure via schemes like
      1. Gobar Dhan Yojana: For converting cattle dung and solid waste from farms and fields to manure, biogas and Bio-CNG (India has 300 million cows generating 3 million tons of dung).
      2. City Compost Scheme: Fertilizer companies and marketing entities will also co-market City Compost with chemical fertilizers.

    • Vermicompost is a mixture of earthworms and decomposed foodleading to the breakdown of organic matter.
    • Benefits of Vermicompost:
      1. Increase in soil aeration by earthworms.
      2. Enriches soil with microorganisms.
      3. Water retention of soil capacity increases.
      4. Easy to produce at an affordable cost.

    Biofertilizer uses Micro-Organisms to produce impact similar to Fertilizers. Eg

    1. Rhizobium Bacteria for Nitrogen Fixation.
    2. Mycorrhiza Fungi for Phosphorus.