The Causes of Low Agricultural Productivity

Group two: institutional causes

6. Small size of holdings. The average Indian holding is small and shrinking. A small holding cannot justify a tractor, a tubewell, a storage shed or a transport hire, so the per unit cost of every input is higher and mechanisation is uneconomic.

7. Fragmentation. Inheritance divides land at every generation, and the division is by quality, so each heir receives a piece of every kind of field. The result is one holding in several scattered plots. Time is lost moving between them, boundaries waste land, irrigation cannot be organised plot by plot, and supervision is impossible. Consolidation of holdings has been attempted by legislation in most States and has succeeded in some, chiefly Punjab and Haryana.

8. Insecure tenure and unrecorded tenancy. A cultivator who is not the recorded owner has no incentive to improve land he may lose, and cannot use the land as security. Because much tenancy is informal, the tenant is invisible to the credit system, to crop insurance and to most schemes, while the absentee owner collects the benefits. This is the institutional cause with the largest hidden effect, and it is why land record digitisation matters more than it sounds.

9. Inadequate and costly credit. A crop needs money months before it earns any. Where institutional credit does not reach, the moneylender does, at rates that absorb the margin and, in a bad year, the land. Indebtedness is both a cause and a consequence of low productivity.

10. Defective marketing. A small surplus cannot bear the cost of reaching a regulated market, so it is sold at the village at whatever the trader offers. Add to that the absence of storage, which forces sale at harvest when prices are lowest, poor grading, and long chains of intermediaries. Inadequate marketing and storage infrastructure is in the Survey's own list.

11. Weak farmer organisation. An individual small farmer has no bargaining power against a trader, no ability to buy inputs in bulk and no capacity to add value. This is precisely the gap that farmer producer organisations are meant to fill.

Group three: technological causes

12. Inadequate irrigation. Gross irrigated area rose from 41.7 per cent of gross cropped area in 2001-02 to 55.8 per cent in 2022-23, so almost half is still rainfed. The coverage is also skewed: about 67 per cent for rice, about 26 per cent for pulses, under 15 per cent for millets. Without assured water no other input works reliably, because fertiliser applied to a crop that then fails is money burned.

13. Traditional and low quality seed. Certified and improved seed reaches only part of the cropped area, and the replacement rate for self pollinated crops is low because farmers save their own seed. The Survey records the consequence: maize yield rose from about 2.56 tonnes per hectare in FY16 to about 3.78 by FY25 where better varieties were adopted, while soybean, sunflower, rapeseed, groundnut and millet yields stagnated or declined.

14. Imbalanced and inefficient input use. Fertiliser use is heavily weighted towards urea because it is the most subsidised, which distorts the nitrogen, phosphorus and potassium ratio and damages soil over time. Pesticide use is either too little or, in some pockets, too much.

15. Low mechanisation and low investment. Named in the Survey's own list. Small holdings cannot justify machinery, and custom hiring is not available everywhere.

16. Weak extension. The link between the agricultural research system and the individual farmer is thin. A variety released in a research station reaches a farmer years later, if at all.

The causes ranked, which is what a good answer does

An examiner rewards a candidate who does not merely list. Three ranked observations.

The binding constraint differs by region. In eastern India the binding constraint is usually credit and marketing rather than water; in parts of the west and south it is water; in the irrigated north west it is soil health and the cropping pattern. A national list conceals this.

They are not independent. Small holdings make credit uneconomic; without credit there is no irrigation investment; without irrigation the improved seed does not pay; without a surplus there is no reason to reach a market. Relieving one constraint alone often produces nothing, which is why single instrument policies disappoint.

Some causes are about output per hectare and some about output per worker. Irrigation, seed and fertiliser raise yield per hectare. Only the movement of workers out of agriculture, or the growth of allied activities that do not need land, raises output per worker much. Saying which of the two a cause acts on is worth marks.

A worked example: why the fertiliser did not work

The facts. Namdev cultivates 0.9 hectares in three plots in a rainfed district. An input dealer persuades him to apply a full recommended dose of urea to his kharif jowar. He borrows 9,000 rupees at three per cent a month to pay for it.

What happens. The monsoon breaks late and stops early. The crop germinates, receives the nitrogen and then runs out of water at the grain filling stage. His yield is a little above last year's and well below what the dose assumed.

Reading the causes off the example.

• Inadequate irrigation is the binding constraint. Fertiliser raises yield only if water is assured; applied to a moisture stressed crop it is largely wasted.
• Small and fragmented holding means he cannot spread the risk across a larger area, and cannot afford the borewell that would have made the dose worth applying.
• Costly credit at three per cent a month, that is over forty per cent a year, means the small yield gain is entirely absorbed by interest.
• Weak extension means nobody told him that the dose assumed assured irrigation. The advice came from the person selling the fertiliser.
• Marketing means the small extra quantity is sold at the village anyway.

The lesson to state. Namdev did the modern thing and was worse off for it. Low productivity is not a failure of willingness; it is a failure of the conditions in which a willing farmer operates. That is why the measures in the next chapter come in packages and not one at a time.

What beginners get wrong

"Low productivity means low production." Production has risen a great deal: foodgrains reached 3,577.3 lakh metric tonnes in AY 2024-25. Productivity is output per hectare or per worker, and it is that ratio which is low.

"Farmers are conservative and will not adopt new methods." Farmers adopt readily where the new method is profitable and the risk of failure is survivable. Maize adoption is the Survey's own example. Where they do not adopt, look for the missing condition.

"Fragmentation and small size are the same thing." They are not. Size is how much land a holding has; fragmentation is how many separate pieces it is in. A holding can be large and fragmented, or small and consolidated, and the remedies differ: ceiling and tenancy law for the first, consolidation for the second.

"Subsidised fertiliser must raise yields." A subsidy concentrated on one nutrient distorts the balance of nutrients and damages the soil over time, so a subsidy can lower yields in the long run while raising them in the short.

Limits and criticism

The classical list is old. Several items on it, most obviously the absence of high yielding varieties, are much less true than they were in 1970, and an answer that presents the 1970 list unchanged is dated.

It treats agriculture as one sector. Livestock and fisheries, which now grow fastest, face quite different constraints: fodder cost, animal health and cold chains rather than seed and irrigation.

It says little about the price side. A farmer's income depends on the price as much as on the yield, and the arithmetic in [Income Elasticity, Cross Elasticity and What Elasticity Is For] shows that a larger crop can mean less money. Productivity policy and price policy have to be discussed together.

Quick revision

1. General causes: pressure of population on land; disguised unemployment, where the marginal product of the extra worker is near zero; the social environment, including literacy, risk aversion and ceremonial expenditure; uncertain rainfall and climate; and soil exhaustion and degradation.
2. Institutional causes: small holdings; fragmentation, which is a different defect from small size; insecure and unrecorded tenancy; inadequate and costly credit; defective marketing and the absence of storage; and weak farmer organisation.
3. Technological causes: inadequate irrigation, only 55.8 per cent of gross cropped area in 2022-23; traditional or unreplaced seed; imbalanced fertiliser use weighted to urea; low mechanisation and investment; and weak extension.
4. The Economic Survey 2025-26's own list: fragmented landholdings, limited access to irrigation and quality inputs, low mechanisation and investment, stagnating yields, and inadequate marketing and storage.
5. The causes reinforce one another, so relieving one alone often produces nothing.
6. The binding constraint differs by region: credit and marketing in the east, water in much of the west and south, soil health and cropping pattern in the irrigated north west.
7. Yield per hectare and output per worker are different problems. Inputs raise the first; only movement out of agriculture, or growth of allied activities, raises the second.

Test yourself

1. Classify and explain the causes of low agricultural productivity in India. They fall into three groups. General causes: the pressure of a growing population on a nearly constant cultivated area; disguised unemployment, where more workers are engaged than the holding needs and the marginal product of the additional worker approaches zero; a social environment of low literacy, restricted access to land and acute risk aversion; uncertain and increasingly erratic rainfall; and soil exhaustion from continuous cropping and imbalanced fertiliser use. Institutional causes: small holdings that cannot justify machinery or a tubewell; fragmentation into scattered plots; insecure and largely unrecorded tenancy, which removes both the incentive and the ability to invest; inadequate institutional credit, which drives cultivators to moneylenders; defective marketing and inadequate storage; and the absence of farmer organisation. Technological causes: inadequate irrigation, since only 55.8 per cent of the gross cropped area was irrigated in 2022-23; traditional or unreplaced seed; imbalanced input use; low mechanisation and investment; and weak agricultural extension.

2. Distinguish the small size of holdings from fragmentation, and give the remedy for each. Small size refers to the total area a cultivator holds, and it makes machinery, a tubewell and storage uneconomic and gives the household too small a marketable surplus to justify reaching a regulated market. Fragmentation refers to that area being split into several scattered pieces, which arises because inheritance divides land by quality so that every heir receives a share of each type of field; it wastes time in movement, wastes land in boundaries, prevents plot level irrigation and makes supervision impossible. The remedy for small size lies in tenancy reform, leasing and cooperative or collective cultivation, and ultimately in moving workers out of agriculture; the remedy for fragmentation is consolidation of holdings, which has been legislated in most States and carried through with success chiefly in Punjab and Haryana.

3. What is disguised unemployment, and why does it depress productivity? Disguised unemployment is the situation in which more persons are engaged in an activity than are needed for it, so that the marginal product of the additional workers is negligible: if some of them were withdrawn, output would not fall appreciably. In Indian agriculture it arises because a growing rural workforce has nowhere else to go, so surplus family labour remains on the holding. It depresses productivity measured as output per worker, since the same output is divided among more workers, even where output per hectare is respectable, and it is the reason why productivity per worker cannot be raised by inputs alone but requires the creation of non farm employment.

4. Why is insecure tenancy such a serious cause, and why is it hard to see in the data? Because a cultivator who does not own the land and may lose it at short notice has no reason to invest in levelling, bunding, wells or soil improvement, since the benefit will accrue to somebody else, and has no title against which to borrow. It is hard to see in the data because much tenancy in India is informal and unrecorded, often to avoid tenancy protection legislation. The tenant therefore does not appear as a cultivator in the records, so institutional credit, crop insurance and most government schemes reach the recorded owner rather than the person actually farming, and the statistics understate the extent of tenancy entirely.

5. "Modern inputs will raise Indian yields." Discuss. Only where the conditions for them exist. Fertiliser applied to a crop that later runs short of water is largely wasted, so an input package without assured irrigation can leave the cultivator worse off after paying for it, particularly at moneylender rates of interest. Improved seed raises yields where it suits local conditions and is replaced regularly, as the rise in maize yield from about 2.56 to about 3.78 tonnes per hectare between FY16 and FY25 shows, but yields for soybean, sunflower, rapeseed, groundnut and millets stagnated or fell over the same period. And a subsidy concentrated on urea distorts the balance of nutrients and damages the soil over time. The correct statement is that modern inputs raise yields when delivered as a package with water, credit, extension and a market, and disappoint when delivered singly.

6. Do the causes of low productivity differ across India? Yes, and a national list conceals it. In eastern India, where rainfall is adequate, the binding constraints are usually credit, marketing and storage rather than water. In much of the west and the south, where rainfall is erratic, water is the binding constraint. In the irrigated north west, where yields are already high, the constraints are soil health, a falling water table and a cropping pattern locked into rice and wheat by assured procurement and cheap power. Because the constraints differ, a uniform national programme is bound to be partly wasted, which is the argument for State specific and district specific packages.