Agriculture has been the backbone of the Indian economy since the achievement of political liberation from the British Empire. It has always supported more people than any other sector, and was given due priority and attention in the form of land reforms, improved varieties of seeds, new mechanical devices and price support measures. Overhauling conditions of this sector were seen as a way to improve the economic lot of the rural population and meet the nutritional requirements of a growing population. And indeed, a series of successful measures brought about a significant improvement in farm productivity and production. The productivity per hectare of rice and maize nearly tripled and that of wheat rose four times from 1950-51 to 2000-01.
The output at factor cost of agriculture and allied activities, which was Rs 83,154 crore in 1950-51 at 1993-94 prices, rose to Rs 314,252 crore in 1999-2000—approximately 3.8 times. Then, it almost stagnated, crawling ahead from Rs 495,655 crore in 1999-2000 to Rs 549,945 crore in 2004-05. While income from agriculture and allied activities has gone up in absolute terms, in relative terms, this sector has been left far behind—and farmers are acutely aware of it. It cannot be brushed aside.
The proportional rise in incomes has been declining from time span to time span. As the rest of the economy’s sectors record increasing incomes at an increasing rate, agriculture reports increasing income at a decreasing rate. This has severe implications, so long as farm dependency stays high. According to an RBI report on Currency and Finance, 2000-01, India holds the world’s top position in case of wheat and rice in terms of area under cultivation, but ranks 52nd and 38th on these two crops, respectively, in terms of per-hectare productivity. Our productivity figures are much lower than in countries like France, China, the US and Japan. In other words, it is not as if farms are already performing at the top of their potential.
It is more a story of neglect. During the 1990s and after, conditions in the farm sector deteriorated sharply due to falling net returns and increasing debt burdens, pushing many poor farmers to take the extreme step of committing suicide. Whatever improvement in quality-of-life that is apparent seems to be more on account of urbanisation—or immediate peer pressure to keep up appearances—rather than any genuine income rise. The distress may be hidden behind a brave front, but it is there.
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| Agriculture’s average annual rate of gross capital formation was just 0.77% from 2000-01 to 2004-05. In contrast, the figure for the entire Indian economy was 26% |
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Due to lower agricultural growth, even the share of agricultural exports in the country’s total export basket has declined—from 18.11% in 1993-94 to 9.6% during 2005-06. As some economists argue, there is a danger of resource diversion away from the farm sector because other export sectors are doing so well, which could worsen farm stagnation. It is evident that the plight of agriculture has grown acute mainly in the post-reforms period.
Even if the sector appears not to be “fit” enough for survival under a strict market regime, we miss the irony of India turning into an importer of food from the US and EU, which subsidise agriculture. A drift away from agriculture could spell dependency in a vital area. Yet, public investment in the sector has declined from Rs 4,668 crore in 1996-97 to Rs 4,007 crore (at 1993-94 prices) in 2000-01. A negligible rise of Rs 1,030 crore (that is, from Rs 11,508 crore to Rs 12,538 crore) in private investment in the corresponding years has not been sufficient to make a significant addition to the total investment figure. The average annual rate of gross capital formation in agriculture remained at a low 1.72% during this period. But worse was to come. That period of disengagement was followed by utter neglect—as seen in a negligible rise of 0.77% from 2000-01 to 2004-05. In contrast, the average annual rate of gross capital formation for the entire Indian economy was 26%.
The poor state of rural infrastructure is making the crisis worse. Road conditions remain inferior, while power supply is irregular and inadequate. According to National Transport Policy Committee, only 55% of India’s villages have been connected by roads so far, and that too, only by the fair weather roads. In any case, road building has such a large scope for cheating on quality through use of cheap materials that it is seen as an indicator of public awareness and accountability of governance. On power, while 86% of our villages have been electrified, the simple installation of poles without any electricity to carry is more a matter of consolation rather than satisfaction.
Erratic power remains a major constraint in raising agricultural productivity, which in the case of crops like wheat, rice and cotton, can at least be doubled just by taking care of basic provisions. The lapses have been many, and it is encouraging that the Prime Minister is taking a relook at the sector, and the rudiments of a new plan have also been announced. The National Development Council has earmarked Rs 25,000 crore over four years for the sector. What we need is a big push, and not piecemeal efforts. Will the PM’s efforts do the needful?
—Kewal Raj Dawer is a senior faculty at ICFAI Business School, Chandigarh. These are his personal views
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