Tuesday, March 11, 2008

Indian economy cannot grow without agriculture

AMIDST ALL the software and the IT boom, the one sector that has been most ignored is the agriculture sector. What used to form the backbone of the Indian Economy is not being given enough privileges by the government now. The sensex and certain sectors of the economy have seen unprecedented growth, but yet the most important sector to the country has been lagging behind. And with more than half the population in the country still associated with agriculture, urgent reforms need to be made so that this sector in itself can grow rapidly. Contributing to almost one fourth of the nation’s gross domestic product (GDP), it provides employment to millions of people living in the rural areas.

P Chidambaram’s latest Rs 60,000 crore debt waiver to the farmers having less than five acres of land comes as a sigh of relief to most of the farmers all over the country. But yet this scheme is not applicable to all the farmers. Chidambaram could have played a masterstroke through this scheme, but from an economic point of view, it is a disastrous one. The same banks and financial institutions that used to give away loans to all farmers will have to think twice before doing that, as it may not be such a profitable decision after all.

The agriculture sector has seen a growth of about one per cent in the past few years as against the anticipated growth of four per cent. The main problem affecting agriculture is that farmers themselves don’t see it as a profitable option today. With the tremendous increase in population, the land holdings of farmers have shrunk to abysmal levels. The farmers themselves have become grossly indebted and if the rains are not on their side and the crop fails, then they are often staring at unemployment and mere survival.

International trade could play a major role in the rejuvenation and the transformation of this sector. The forward contract Regulation Act, which was having adverse effects in the production of wheat, has now been amended to cater to the problems of the farmers and to help achieve a single common market across the length and breadth of the country.

Public private partnership could augur well for the development of this sector and private investment could get rid of the problem of poor infrastructure. The market as well as the state should work hand in hand to ensure higher returns to farmers and better services to consumers. The private sector would both encourage cooperation and competition and would offer better value for money. The APMC act should be amended by all states and the Mandi taxes could be removed to allow for sustainable results for the farmers.

The Essential Commodities act has already been modified to permit the storage, marketing and movement of agricultural commodities. A unified or an integrated food law should be formulated to bring convergence in the food laws and to encourage the food processing industry. The tax on processes food could easily be lowered further. India is currently a medium sized agricultural exporter, but it could well become the main food supplier to the rest of the world if the agriculture sector could grow rapidly. Foreign buyers who prefer Indian food could be targeted to enhance the exports of such products.

Coming back to the budget, though it may be one of the most popular budgets designed to fetch votes in the upcoming elections next year, but at least it offered incentives to the farmers. If the right measures are taken now, the Indian agricultural industry has the potential to make India the leading agro economy of the world. We need to be able to compete on a global platform with respect to both cost as well as quality. A holistic and integrated approach is the need of the hour to attain sustainable development and growth in this sector.

By Shishir Srivastava

Source: http://www.merinews.com/catFull.jsp?articleID=130896



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