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Efforts to raise share of farm sector in economic growth

Special Correspondent

Investment in irrigation, water management technologies

NEW DELHI: Even as India's economic growth, envisaged at over seven per cent this fiscal, has demonstrated significant resilience to the vagaries of the monsoon, the fact remains that a slightly higher growth rate in the farm sector can go a long way in catapulting the overall growth to double digits.

According to the Mid-Term Review, this resilience, which concealed a lot of shadows that monsoon-related uncertainties cast on the country's economic performance, was owing to the relatively low share of agriculture in the gross domestic product (GDP). It was due to this low share that GDP growth forecasts for the current fiscal were perked up by only about 0.5-1.0 percentage point when the fears of a delayed and inadequate monsoon receded.

The review has noted that the low share of agriculture in the GDP, at about 21 per cent, "grossly understates the extent (56.7 per cent of the total workforce) to which the population of India depend on the sector for earning a livelihood."

For increasing the farm sector's annual growth rate to four per cent and improving its robustness with regard to the monsoon, the review has advocated substantial investment in irrigation and water management technologies along with diversification and higher productivity of various crops. While the renovation and restoration of water bodies was a bold and correct step, the emphasis in irrigation should be on the completion of last-mile projects and free additional acreage from the dependence on monsoon.

Apart from these, "a revamp of food and fertiliser subsidies, with better targeting and more efficient delivery mechanisms, will benefit agriculture by not only increasing the farmers' share of the benefits of such subsidies but also opening up fiscal space for enhanced outlays on irrigation and rural infrastructure," the review said.

The review has underscored the need for a vigorous revival of commodity futures markets. Such a step, it said, would help in reducing price uncertainties in acreage allocation to alternative crops, without the "compulsory need for costly government intervention in terms of Minimum Support Prices (MSP)."

"Large increases in MSP of principal cereals, resulting in their market prices being below or equal to the MSP, tend to put open market trade in these cereals under severe strain. Too high a MSP for a particular crop leads to an excess build up of stocks of that cereal, a high subsidy bill because of the carrying costs, and an excessive concentration on production of this crop," the review said.

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