Farm sector decline to hurt growth

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The Economic Survey 2007-08 has expressed serious concerns over the deceleration in the agriculture sector and has called for appropriate reforms, including proper channelisation of food and fertiliser subsidies.

Agriculture, forestry and fishery together are expected to grow at 2.6% in 2007-08 as against the previous year’s growth of 3.8% due to the lower production of winter crops. During 1950-2007, foodgrain output increased at an average annual rate of 2.5% compared with the population growth, which averaged 2.1% during the period. But in 1990-2007, foodgrain output growth rate decelerated to 1.2%, lower than the annual population growth rate averaging 1.9%.

“Any deceleration in the growth rate of this sector is translated into a lower overall GDP growth rate. Acceleration of growth of this sector will not only push the overall GDP growth upwards, it would also make the growth more inclusive and biased in favour of women. Increasing farm incomes is also necessary for an equitable growth,” the Survey said.

The overall GDP growth in 2007-08 is expected at 8.7%. “Raising growth to double digit will therefore require additional reforms,” the Survey said.

It expressed concerns over the global warming and climate change and also noted that climate variability caused by erratic rainfall pattern and increase in the severity of droughts, floods and cyclones and rising temperatures have been the causes of uncertainty and risks resulting in huge losses in agricultural production and livestock population. “A gradual degradation of natural resources through overuse and inappropriate use chemical fertilisers have affected the soil quality resulting in stagnation in the yield levels,” it said.

As part of the suggestion for reforms, the Survey called for better channelisation of food and fertiliser subsidies to optimise resource allocation and better returns. It noted that a large portion of fertiliser subsidy goes to the companies and has allowed inefficient units to persist. The current fertiliser pricing mechanism has encouraged nutrient imbalance — excessive use of urea and a bias against micronutrients.

The Survey also called for long-term policy framework focused on improving inter and intra sectoral linkages and outcome-oriented perspective in public sector programmes in irrigation, development and use of high-yielding seeds, extension services and for facilitating market access. It categorised rural electrification, construction of dams, canals, rural telephony as “quasi-public good” requiring right policy framework and regulators that encourage competition in expanding supply at low cost. It also called for the rule of law, all-weather road connectivity, knowledge and information on appropriate technologies, farming practices and marketing, inter-basin water transfers, recharging of ground water table and active participation of beneficiaries through water users associations and appropriate water pricing.