FM's lip service

Neglect of farm sector

Agriculture sector has always remained the least of priorities for successive governments, even though almost every finance minister spares no words to claim that agriculture is on their priority list. The Union Budget 2009-10 is no exception. The agriculture and allied sector has received the least attention while projecting a target of four per cent growth rate. The finance minister is totally silent on how he hopes to achieve it and with what tools.

The agriculture sector continues to play an important role in the Indian economy despite the hype of globalisation. The share of agriculture in overall GDP has declined to 17.8 per cent in 2007-08 and the sector employs 52 per cent of India’s labour force. It is customary to report in the Economic Survey that the growth rate of the economy is pulled down due to the failure of monsoon and drop in agriculture output. There have been fluctuations in the growth rates and at times the budgetary policies have helped the sector to record respectable growth.

But, during 2008-09 the farm sector has grown only at 1.6 per cent as per the third revised estimates — the growth rate well below the population growth. The foodgrains production has fallen short of the targets for 2008-09 as well, recording less than 230.8 million tonnes achieved in 2007-08. Meanwhile, the Planning Commission aims to achieve an annual growth of four per cent in the farm sector during the Eleventh Plan and it appears to be too ambitious under the present circumstances.

There are several factors that merit the attention of policy makers. According to 2007 steering committee report of the Planning Commission, the growth in important factors that contributed to splendid performance of farm sector during 1980s has decelerated during 1990s and 2000s.

During 1996-97 to 2005-06, while technology (measured as yield potential of new crop varieties) registered zero growth, the total cropped area, net sown area and terms of trade recorded negative growth rate. Public and private sector investment has also decelerated drastically.

Farm subsidies have done more harm than helping the sector to grow. Overuse of water and fertilisers has resulted in soil salinity and affected marginal productivity of soil over time. Economic Survey 2008-09 also echoes similar concerns on accelerating productivity, investment in irrigation and modern management and development of market infrastructure.

So, what was in store for farm sector in the Union Budget? The finance minister has increased the Central plan outlay for agriculture and allied sector only by Rs 660 crore over previous budget. Interest subvention scheme, extension of debt waiver and debt relief scheme till December 2009, increased allocation for Rashtriya Krishi Vikas Yojana and investment linked tax exemptions to setting up of cold chain and warehousing facilities, are no doubt, welcome measures.

But, the budget has not taken into account agriculture in a holistic manner and has missed important areas such as rainfed agriculture which require immediate intervention. The National Rainfed Area Authority has remained only a paper institution.

First, it is worrying to note that area under irrigation has not increased considerably over time in spite of spending crores of rupees on creating irrigation potential. According to the Economic Survey, out of total irrigation potential of 102.1 million hectares only 87.2 million hectares have actually been utilised in 2006-07.

Second, the so called sunrise sub-sectors of agriculture such as animal husbandry, horticulture and fishing have slowed down in their growth during recent years. As the domestic consumption basket is shifting towards high value commodities, some measures to revive these sectors would have been welcome.

Third, the country requires a technological break through in improving productivity through advanced biotechnological means. The research investment so far made in the conventional breeding led to produce varieties that use intensively chemical fertilisers and water. The budgetary allocation for research and development for farm biotechnology and incentives for attracting private investment in this sector is imperative.
Fourth, various research studies indicate a gap in potential yield and what is achieved in farmers’ field with best practices. It is important to strengthen extension machinery which is almost defunct in several states. Finally, development of agro-processing industries as a means of generating non-farm employment should have got the attention of the finance minister.

Though the Economic Survey has clearly brought out the problems confronted by the agricultural sector, the finance minister thought of giving only verbal tributes to the farmers and reserved the allocations for other sectors. Such partial outlook will not solve India’s food and nutrition security. Policy interventions will be needed across all sub-sectors to achieve the targeted growth rate of four per cent per annum. The finance minister hardly took any step towards that goal.

(The writer is an associate professor at the Institute for Social and Economic Change, Bangalore)