Scope of agri sector bringing prosperity limited: Panagariya

NITI Aayog Vice Chairman Arvind Panagariya today said the potential of farm sector to bring prosperity to a vast population in the long-run is limited and the country needs to focus on creating more jobs in the industrial and services sectors.

"...In countries experiencing growth rates of 6 per cent or more over long periods... industry and services have grown substantially faster than agriculture... In this context that the creation of good jobs in industry and services is critically important," he said in his first blog post published on newly launched website of NITI Aayog.

Panagariya said with the share of agriculture in the GDP at about 15 per cent now, workforce engaged in this sector is significantly poorer than the other half employed in industry and services.

"But in the longer run, the potential of agriculture to bring prosperity to a vast population remains limited," Panagariya said.

He underlined the importance of job creation in industry and services for overall prosperity of the nation.

"...agricultural growth and the expansion of good jobs in industry and services can go hand-in-hand to bring rapid elimination of poverty and shared prosperity for all," Panagariya said.

He said unless workers have the opportunity to migrate to better paid jobs in these sectors, they will be unable to fully share in the prosperity experienced by a fast-growing economy.

The NITI Aayog Vice Chairman cited the example of South Korea and Taiwan where prosperity was widely shared during the 1960s and 1970s because workers in agriculture could migrate to good jobs in industry and services.

Indian farmers and their children recognise the superior prospects that faster-growing industry and services can potentially offer, Panagariya said.

According to a recent survey conducted by NGO Lokniti, 62 per cent of all farmers say that they would quit farming if they could get a job in the city.  As for their children, 76 per cent say that they would like to take a profession other than farming.

He said that the Make in India campaign has provided the umbrella for many of the government's initiatives in this context.

He thinks that using the instrumentality of cooperative federalism, the government has encouraged states to undertake labor law reforms that would help stimulate jobs.

States of Rajasthan and Madhya Pradesh have taken lead in this area, Panagariya said in his blog.

The Centre intends to consolidate the 44 central labor laws into five while simultaneously introducing important employment-friendly reforms, it said.

Panagariya added that the government has also greatly cut the inspector raj by introducing a portal that allows small and medium firms to comply with 16 central labour laws through self-certification.

He said, "A common fear aired in the media is that the expansion of industry and services would divert land away from agriculture thereby undermining food security. But these views are aired without attention to the some key facts on the pattern of land use."

Panagariya said in the blog, "The area under non-agricultural use, which includes housing, industry, offices, roads, railways and other similar items, was only 8 per cent in 2011-12, the latest year for which data are available. Fifteen years earlier, in 1997-98, this proportion was 7 per cent."

Accelerated growth over these fifteen years facilitated by the 1 percentage point increase in non-agricultural use of land has produced more gains in per-capita income and poverty reduction than what had been achieved over the entire fifty preceding years, he said.

"Of course, even this 1 percentage point increase did not come at the expense of agriculture," he said.

As per the data, the increased multiple cropping allowed the gross area sown to rise from 57.8 to 59.4 percent of the total land area between 1997-98 and 2011-12 and productivity increases allowed agricultural output to rise proportionately much more.

"There remains much scope for further output increase through the extension of the Green Revolution to eastern states and rain-fed regions, as emphasised by the Prime Minister," Panagariya added.