The study stated that for the year 2000-01, an expansion of 1.5 per cent in real agricultural incomes, in addition to 8.5 per cent growth in non-agricultural GDP should see a 6.6 per cent growth in aggregate GDP. The large quarter-to-quarter fluctuations in agricultural GDP tend to mask the trend in the rest of the economy. Foodgrains output and procurement have both hit a new record of 205.91 million tonnes in 1999-2000, while the PDS offtake has declined sharply in 2000-01.

The study stated that the public distribution system (PDS) for foodgrains is of course a truly wondrous instance of perverse nomenclature. The MSP system ratchets grain prices up every year and in the procurement system the government has to procure foodgrains without fixing any target. In this context, the concept of an `economic price' for the PDS system is veritable anti-thesis of the normal economic paradigm of cost minimisation. The `food subsidy' is most objectionable for it implicitly seeks to place the moral burden on the country's poor.

It is a compensation for the losses piled up by the system through large physical losses, huge inventories and the unbelievable pursuit of more inventory.

The Expenditure Reforms Committee has apparently decided to reduce the `economic price' and to that extent lower the issue prices of grains by 8 per cent for wheat and 4 per cent for rice. However, how the reduction of the `economic price' will cut the embedded losses in the system, except to the extent of saving in wastage on goods that might now be sold is unclear.

In the current marketing year, up to June 5, wheat procurement had reached 15.7 million tonnes being 11 per cent more than last year. Rice procurement in 1999-2000 had reached 15.6 million tonnes being 44 per cent more than the previous year. The marketing year is likely to close with rice procurement of 17 million tonnes as compared to a PDS offtake of 12.1 million tonnes.

Foodgrains offtake has risen only slightly since the beginning of the 90s. The offtake has slumped in 2000-01, following changes made in the issue prices, particularly for above the poverty line (APL) families. In April this year the offtake of rice has fallen to 0.62 million tonnes as against 0.83 million tonnes in 1999. The fall is steeper for wheat with April, 2000 figures being 0.22 million tonnes as against 0.4 million tonnes last year.

At constant prices, agriculture and allied activities currently account for 25.5 per cent of GDP and non-agriculture, that is, industry and services together the balance of 74.5 per cent. Thus, if the non-agricultural part of the Indian economy grows at 8 per cent, aggregate GDP will expand at 6 per cent even if agricultural incomes remain stagnant. For every 0.5 per cent growth in agricultural GDP, the growth rate of aggregate GDP will increase by 0.1275 per cent.

With monsoons looking good, an expansion of 1.5 per cent in real agricultural incomes, in addition to the expected 8.25 per cent growth in non-agricultural GDP should see a 6.6 per cent growth in aggregate GDP. The outlook for the current kharif crops is good particularly that of groundnut, coarse cereals, pulses and cotton.