India’s adoption of its liberalisation, privatisation and globalisation (LPG) policy in 1991 is widely regarded as a momentous event in the history of this country. The objective was to effect a structural transformation of the economy to make it globally competitive. The results have been well documented. The gradual dismantling of regulatory mechanisms and increasing exposure of the economy to global market forces resulted in increasing capital inflows, trade volumes and foreign exchange reserves. A series of measures taken to attract MNCs and FDI, accompanied by foreign technology, resulted not only in an acceleration of economic activity, but also an attitudinal shift of rejuvenating criticality. With changing sectoral dynamics and new dimensions of growth, India?s economy has bounced back so strongly since then that it is now seen as a major player on the world stage.
In all this euphoria, however, it is important to emphasise that it must not go to our head. The boom has also meant a near criminal neglect of crucial sectors like agriculture and rural development, which remained in focus during the 1980s but were outglossed and overshadowed by the glamour of globalisation in the 1990s and 2000s. The Plan outlay for this sector was 23.5%, which was cut to 21.3% during the Eighth and Ninth Plan periods, and further reduced to 18% during the Tenth Plan. Had the Plan outlay been maintained at its 1980s? level, India?s economic expansion would have not just been more inclusive, but possibly even faster, thanks to a larger catch-up potential in rural India. Whatever the independent merits of globalisation, its gains have gone to the top 20% of the population. About 175,000 of India?s 627,000 villages still do not have access to drinking water supply. Rural India?s education system is deformed and debilitated, and rural parents can hardly afford to spend 2.5% of their total living expenditure on education. While shopping malls add on more and more glitz in the big cities, for our rural brethen, the ?trickle down effect? of growth has been much too long coming.
It is encouraging, therefore, that the Eleventh Plan has earmarked 23% of the total outlay?which itself has been raised vastly to Rs 14.2 lakh crore, up from Rs 8 lakh crore in the Tenth Plan?for agriculture and rural development. Such a large sum has never come the way of these sectors in India?s history, and it is to be hoped that the neglect shall stand reversed. But will it prove a forlorn hope?
Agriculture is such a sector that breaking a low growth jinx is very difficult, and increased outlays in themselves could mean very little, given the scale and depth of the challenges faced. For most of the post-reform period, the government has assigned the responsibility of growth acceleration to urban, organised sector entities. Their interests, like those of MNCs, have remained confined to the urban bracket of well-fed Indians.
To many observers, agriculture?s plight has been rediscovered only because of the adrenalin rush given by the prospect of rivalling China?s double-digit growth rates, and the calculation that this goal can be achieved only if agriculture also picks up and starts growing at 4% annually at least. All the same, the objective is to see the task done, and if this is the reasoning that leads to a strengthening of rural infrastructure and effective transmission of agricultural research to the farm sector, so be it.
Once again, a big part of the responsibility is being assigned to the urban private sector, with contract farming being looked upon as the big idea that could transform agriculture. Guidelines on such contracts have been proposed recently, and clarity on policy goals will determine whether this ends up as another chapter in the post-1991 story, with corporate entities gaining the most in terms of even larger market capitalisations, or whether it addresses rural India?s current woes, with the gains being shared amongst a much larger population.
What rural India has to offer is land and labour. For the efficient use of both, large numbers of people will have to be whisked off the land and into jobs in other sectors, such as services. This requires investment in rural skill formation and rapid rural industrialisation. Labour intensive units could, for example, be set up in rural industrial zones, each comprising 10-15 villages. This will help in the utilisation of surplus rural manpower on one hand, and, given the requisite infrastructure linkages (with ports, for example), help industry lower its costs.
Effecting an all-India cohesive plan on such a grand scale would be beyond the scope of the private sector, so clearly, promoting contract farming alone will not be nearly enough. Massive public investment is called for. The record here has been poor, given the decrepit state of the so-called delivery system on which the future of millions could turn. If globalisation does not become inclusive faster than mass disaffection can spread, cries for a reversal of the LPG policy could get the backing of large voter turnouts.
?The author is a senior faculty member at Icfai Business School, Chandigarh. These are his personal views