Rural prosperity is the key

Boost rural incomes to spur economic recovery

Both Prime Minister Atal Bihari Vajpayee and finance minister Yashwant Sinha have rightly recognised rural prosperity to be a key variable for achieving economic recovery. There is an irrevocable relationship between agriculture and gross domestic product. In the period between 1994-95 and 1996-97, GDP grew by seven per cent plus largely on account of strong agricultural growth. Conversely, the decline of GDP growth to 4.8 per cent in 1997-98 was, in part, due to the 2.4 per cent contraction of agriculture growth. In 2000-01, an agriculture growth rate of 0.2 per cent pulled GDP growth down to 5.2 per cent. Fortunately, this year the economy is expected to grow at 6 per cent plus riding on a 6.5 per cent agriculture growth rate. However, the trend in public investment in agriculture so far has been disappointing. The share of investment in agriculture in GDP has contracted marginally from 1.6 per cent in 1993-94 to 1.5 per cent in 1999-00. The share of investment in agriculture in current expenditure has fallen more sharply, from 3.4 per cent to 1.4 per cent, as has that of public investment in agriculture, from 33 per cent to 25 per cent in the same period.

Clearly, the declining share of public investment in agriculture is not exactly the best way to attain an eight per cent GDP growth. A good way out would be to implement measures to boost rural incomes, such as the stepping up of public investment in rural infrastructure. By boosting demand for relevant industrial goods, economic recovery will be aided. Needless to say, there is greater need for public-private partnership to achieve rural growth. But that need not be a surrogate for the neglect of agriculture in the second phase of reforms. Such partnerships have a limited impact and can hardly be engines of growth. At best, the private sector can help by way of providing marketing and managerial inputs to rural institutions such as the khadi and village industries commission, krishi vigyan kendras and the village cooperatives. There is no substitute for vigorous public investment in agriculture as a powerful engine of economic recovery and growth.