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Imperatives of ushering in a second Green Revolution

Stagnant agriculture sector a drag on overall economic growth

THE PLANNERS and the UPA Government have reason to be happy about the performance of the economy in the Tenth Plan period. The industrial and services sectors are buoyant as never before while the agriculture sector has put up a fairly satisfactory performance.

There has, of course, been no breakthrough in farm output. What is really noteworthy is the achievement of an average GDP growth of 8.2 per cent in the Current Plan period against 5.4 per cent in the Ninth Plan.

There has been a new trend in demand for various goods and services and production of all segments of the economy, except agriculture, thanks presumably to the inflow of FDI in automobile, telecommunication and consumer electronic sectors and the sustained growth of software exports.

In respect of food and cash crops too, in three out of five years, the yield has been above 200 million tonnes and even in 2004-05 the output was only slightly below that level.

Gratifying GDP growth

The growth in GDP, however, has been heartening. It was 7.5 per cent in 2004-05 and 9 per cent in 2005-06 against the estimate of 8.5 per cent. In 2006-07, it is placed at 9.2 per cent, though the contribution of the agriculture and allied activities will be lower at 2.7 per cent.

The sustained growth in exports and increased domestic demand for manufactured goods have not created any problems for the industry which raised its output by 10.8 per cent in April-December 2006 against 8 per cent comparably.

There are no signs of a slowdown in industrial production as concurrently modernisation, expansion and new schemes are being implemented by major industries. Even so, it may be necessary to ensure that the capacity gets augmented on a defined basis with a massive step up in outlays. The service sector, of course, is growing on a self-sustained basis.

Piquant food situation

A piquant situation, however, has arisen on the food front. Up to 2001-02 agricultural season, the problems related to procurement and build up of buffer stocks. Buffer stocks increased to a new peak of 63 million tonnes at the end of July 2002 despite sizable exports, while foodgrain output rose to 212.90 million tonnes in 2001-02.

The quantity procured was as much as 41.91 million tonnes against the offtake of 31.30 million tonnes.

In 2003-04, the yield of food and cash crops rose to 213.20 million tonnes.

With the Union Commerce Ministry keen to step up exports, which were already high at 12.46 million tonnes in 2003-04, and an intensified food-for-work programme, buffer stocks plunged to 29.90 million tonnes by July 2004. Consequently, exports had to be suspended.

In spite of an output of 208.30 million tonnes in 2005-06 season after two satisfactory years, shortages of primary products have emerged, particularly in wheat.

The Agriculture Ministry had to arrange for 5 million tonnes of wheat imports to avoid buffer stock falling below the minimum norm.

The persisting deficit in pulses and edible oils is sought to be bridged with imports. However, there is still a duty of 67.5 per cent at the reduced level of imports of edible oils in order to protect the interests of growers. Imports of pulses were for Rs.2,347 crore and edible oils for Rs.8,716 crore in 2005-06. The value of imports this year will be much larger, because of higher prices for pulses and import of wheat.

Rising inflation

But with a persisting deficit in domestic supplies of pulses and shortages in quite a few essential commodities, inflationary pressures have got heightened. The inflation rate rose to a recent peak of 6.73 per cent in the week ended February 3, 2007. This rate has declined marginally to 6.63 per cent in the subsequent week. It will be recognised that the inflationary pressures are of a new kind, as the index for primary products has risen in twelve months by 12.26 per cent, non-food articles by 12.03 per cent and manufactured goods by 6.3 per cent. On the other hand, the index for fuel, light, power and lubricants has increased by only 2.33 per cent. The increase in the inflation rate from below 5 per cent to 6.73 per cent is due mainly to the rise in prices for primary products in short supply, in spite of the efforts of the Government to minimise supply constraints with arrangements for cheaper imports by reducing or abolishing import duties.

Government initiatives

Also, for softening the impact of new inflationary pressures, the selling price for gasoline has been reduced by Rs.2 a litre and that of diesel by Re.1 a litre. This reduction has been facilitated by adjustment in duties and a fresh issue of oil bonds to the oil refining companies concerned. The monetary authorities too have adopted measures for tightening credit with a hike in repo rate by 50 basis points and curbs on fresh credit to overheated segments of the economy.The cash reserve ratio (CRR) also has been raised by 50 basis points in two instalments.

As the rabi wheat crop may be higher at 74 million tones, notwithstanding the damage caused to the standing crops in some regions, thanks to a larger area under the crop, the inflationary pressures may not be felt so acutely. However, it remains to be seen whether procurement from this bumper crop will be successful in April-May. In respect of pulses too, there may be a softening of prices for black gram particularly, as bumper crops are expected in Andhra Pradesh. But there will still be a deficit of nearly 2 million tonnes to be met through imports.

Need for new strategy

Developments in coming months may provide a clear indication about the new plans needed to boost agricultural production and establish allied processing industries and cold storage facilities. But what the country needs is a second Green Revolution, if a near doubling of output of food crops by 2020 is to be achieved.

The targets of 9 per cent growth in GDP in the Eleventh Plan and double digit growth in its terminal year will call for heavy doses of investment to raise agricultural productivity, strengthen infrastructure facilities in rainfed areas, promote processing industries and aid other industries as well to grow further in stature.

It is therefore expected that the Finance Minister will formulate his Budget proposals for 2007-08 on imaginative lines and provide the correct lead to the economy.

P. A. SESHAN

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