What India’s Farms Produce Beyond Food, and Why It Matters for Policy
A valuation of ecosystem services across six interventions reveals where private incentives align with public environmental gains, and where they do not
View as PDF
Kiran Kumara T M: Indian Council of Agricultural Research-National Institute of Agricultural Economics and Policy (ICAR-NIAP)
Pratap Singh Birthal: Indian Council of Agricultural Research-National Institute of Agricultural Economics and Policy (ICAR-NIAP)
Dinesh Chand Meena: Indian Council of Agricultural Research-National Institute of Agricultural Economics and Policy (ICAR-NIAP)
Anjani Kumar: International Food Policy Research Institute (IFPRI)
SDG 2: Zero Hunger | SDG 13: Climate Action | SDG 15: Life on Land
Ministry of Agriculture & Farmers’ Welfare | Ministry of Environment, Forest and Climate Change
Agriculture in India is still judged mainly by how much food it produces. That metric matters. But it is incomplete. Farms also generate large, measurable environmental services – storing carbon, conserving water, fixing nitrogen and preventing erosion – that underpin long-run productivity yet rarely enter economic accounts or farm-level incentives. When these ecosystem services are valued alongside crop output, a different picture of agricultural performance emerges. Which practices spread, which stall, and why adoption remains uneven begin to make far more sense.
A synthesis of more than a thousand agronomic observations across six widely promoted interventions shows that adoption hinges less on environmental merit than on whether private returns align with public gains. In many cases, the largest benefits flow to society, while the costs fall on individual farmers. Where that gap is narrow, practices diffuse quickly. Where it is wide, progress slows – regardless of rhetorical commitment to sustainability.
When Environmental Gains Carry Private Costs
Direct seeded rice (DSR) captures this central tension most starkly. Sowing rice directly, rather than transplanting seedlings, typically lowers yields by about a tenth. But it sharply reduces water use, improves soil nutrient profiles and increases carbon retention. The bulk of its value – roughly ₹13,000 per hectare each year – comes from these non-market services, not from marketed output. Scaled to current adoption, this translates into well over ₹100 billion annually in environmental benefits. Yet those gains accrue broadly, while the yield penalty is borne privately. Without addressing that imbalance, uptake is unlikely to rise, even in water-stressed regions where the public payoff is greatest.
Agroforestry reinforces the same incentive mismatch. Integrating trees with crops dramatically reduces erosion and raises carbon stocks, generating non-market benefits valued at just under ₹8,000 per hectare. These gains coincide with average yield declines of around 12 percent as trees compete for light, water and nutrients. Environmental returns are high; private costs are immediate. Unsurprisingly, adoption remains limited without compensatory support.
When Incentives Align, Adoption Follows
By contrast, no-till wheat shows what happens when incentives align. Reducing repeated soil disturbance modestly raises yields while improving carbon storage and lowering water demand. Around four-fifths of the total value comes from non-tradable ecosystem services, amounting to roughly ₹7,700 per hectare. Because productivity and environmental gains move together, adoption faces few structural barriers. Nationally, the value of associated ecosystem services is estimated at ₹40–50 billion a year – not because farmers are altruistic, but because the practice pays.
Legume-based systems present the strongest case for agricultural multifunctionality. Through biological nitrogen fixation, legumes add roughly 70 kilograms of nitrogen per hectare that farmers would otherwise purchase as fertiliser. Yields rise by nearly a quarter. Soil carbon and nutrient balances improve. The combined ecosystem value exceeds ₹30,000 per hectare, and across India’s pulse-growing area the resulting non-market benefits amount to well over ₹600 billion annually. Here, lower input dependence, higher returns and environmental gains reinforce each other at scale.
Why Design Matters More Than Ideology
Not every ecologically attractive practice clears the economic bar. Farmyard manure (FYM) improves organic carbon and nutrient retention but releases nutrients slowly, often leading to yield losses of around 6 percent. This reduces marketed revenue by about ₹6,247 per hectare, while the associated ecological gains – valued at roughly ₹4,245 per hectare – do not fully offset the loss, leaving a net economic shortfall of around ₹2,000 per hectare when FYM is applied on its own. The lesson is not that organic inputs lack value, but that ecological improvement does not automatically translate into viable incentives.
Integrated nutrient management (INM) shows why design matters more than ideology. By combining organic amendments with chemical fertilisers, it delivers both readily available and slow-release nutrients. Yields typically rise by about 16 percent, alongside meaningful improvements in soil carbon and nutrient reserves. Ecosystem services are substantial – over ₹23,000 per hectare – while private returns remain positive. The practice works not because it is purer or greener, but because it narrows the gap between social and private value.
What Valuing Ecosystem Services Changes for Policy
Taken together, the six interventions fall into three incentive regimes. No-till wheat, legumes and INM broadly align farmer returns with ecosystem services, lowering the barriers to adoption through existing market and extension channels. DSR and agroforestry generate large public environmental gains but impose private costs that slow diffusion unless additional support mechanisms offset the imbalance. FYM sits at the boundary, illustrating that ecological improvements alone do not guarantee viable on-farm incentives.
This ranking matters for policy. Where incentives already align, the task is acceleration. Where environmental value is high but farm-level returns fall, persuasion and demonstration will not suffice; compensation or redesigned support is required. Valuing ecosystem services does more than enrich accounting frameworks. It clarifies which practices markets can carry on their own, and where public intervention is unavoidable if India expects its farms to deliver productivity, resilience and environmental stability at the same time.
View as PDF
Authors:
The discussion in this article is based on the authors’ working paper on the subject. Views are personal.