MP, Andhra Pradesh show how states can grow by leveraging farm strengths

There is near unanimity that states will play a pivotal role in India’s future economic growth. For accelerated growth, it’s widely accepted that states will have to push their manufacturing and services sectors by undertaking factor-market reforms — reducing the price of land, ushering in flexible labour laws, among others — and strengthening cities, since agriculture is assumed to be inherently slower-growing.  

The performance of fast-growing states like Gujarat and Karnataka, which have grown their real gross domestic product (GDP) in excess of 8 per cent per annum in the last decade, driven by manufacturing and services, further reaffirms this growth paradigm. But this growth template poses a conundrum for the agrarian states: Must they abandon their agricultural strengths and try to create industries and services ecosystems from scratch to grow faster? 

This question is even more relevant today, as global trade is more uncertain, making it harder to follow the classic manufacturing-led growth path. Thankfully, multiple growth models exist, at least in the medium term. States like Madhya Pradesh (MP) and the bifurcated state of Andhra Pradesh (AP) have leveraged their agricultural strengths to achieve high growth. Agriculture accounts for 30 per cent of GDP in both states, and grew by 6 per cent and 7.5 per cent, respectively, between 2015 and 2025, with the corresponding GDP growing at 6.2 per cent and 6.7 per cent during the same period. The argument is not that these states do not need any manufacturing and/or services ever, but that their current mainstay, agriculture, can power growth as they gear up to non-agrarian industries over time.     

AP’s success story is rooted in its transformation into a globally competitive hub for fisheries, particularly the frozen shrimp industry. India became the world’s second-largest shrimp exporter in 2024 with $4.5 billion in exports, and AP accounted for 78 per cent of shrimp production and 30 per cent of total seafood output. Fisheries in AP have grown 16 per cent annually for a decade. If this growth continues for the next five years, fisheries could comprise nearly a quarter of AP’s GDP and add 1.2 per cent to growth.  

The rise of the fisheries industry is a blend of opportune timing and strategic execution. The outbreak of Early Mortality Syndrome (EMS) in shrimp farms in Thailand and other Southeast Asian countries created a massive vacuum in the global market in 2009. AP seized this opportunity, aided by the timely adoption of Pacific white shrimp, a more disease-resistant, affordable, and faster-growing species.  

The widespread adoption of this new species in AP was aided by robust support mechanisms. The Marine Products Export Development Authority (MPEDA) played a crucial role by offering frequent training programmes at minimal or no cost. Complementing this, in 2015, the state government released its Fishery Policy. Under this policy, it provided capital subsidies of up to 50 per cent for setting up shrimp farms and significantly reduced power tariffs, decreasing costs for farmers and fostering an environment for growth. 

Though Trump tariffs pose a significant — hopefully short-term challenge — to the industry, it is a strong testimony to how economic growth is driven by productivity advances led by comparative advantage.   

Madhya Pradesh’s success is rooted in productivity improvements and diversification. Real agricultural growth was just 3 per cent annually between 1995 and 2005, but accelerated significantly after the late-2000s reforms, as mentioned above. Irrigated area jumped from 24 per cent to 67 per cent, doubling foodgrain yields between 2006 and 2022, compared to a national increase of only 50 per cent, for both Kharif and Rabi crops. As a result, the state now accounts for 21 per cent of the country’s wheat production and 42 per cent of soybean production.  

Furthermore, to mitigate post-harvest losses, the state tripled its foodgrain storage capacity between 2013 and 2023, while national storage capacity remained largely stagnant. The state’s focus on diversification away from water-guzzling crops is also evident, given that 14 per cent and 10 per cent of total crop production come from oilseed and pulses, respectively, a stark contrast to Punjab, where pulses and oilseed together account for less than 1 per cent of total crop output.  

MP also diversified into dairy farming, with milk production increasing fourfold between 2002 and 2024, outpacing the national increase of 2.8 times. This was aided by initiatives like the Acharya Vidyasagar Gau Samvardhan Yojana, which subsidised bank credit for setting up dairy farms and specifically promoted indigenous cow breeds. Since the majority of land has been brought under irrigation, further impetus to agricultural growth needs to come from moving to higher-value crops and pushing harder on livestock farming. Such a move will leverage the state’s strengths and will also be more environmentally and fiscally sustainable.   

The economic journeys of MP and AP demonstrate that states can achieve significant success by identifying and leveraging their existing strengths. By investing in sector-specific training, providing targeted subsidies, promoting technological adoption, and improving market access and infrastructure, these states have turned agriculture, traditionally perceived as a low-productivity sector, into a powerful catalyst for inclusive and sustained economic growth. 

 

The authors are, respectively, senior fellow and associate fellow at the Centre for Social and Economic Progress. The views are personal