New Delhi: When finance minister P. Chidambaram presents the Budget on 28 February, he is certain to target the agriculture sector with sops of various hues. The Centre has little power to do anything else for the sector, which comes under the purview of the states.
The minister is sure to be aware, however, that the numbers are stacked against him. Since 2001, the sector has grown only every alternate year. In 2001-02, it grew by 6.5%; the following year, it declined by 8.1%. Since then it has grown by 10.9%, declined by 0.2%, and grown by 6.3%. To keep that trend going, the sector would have to decline in 2006-07, and according to prevailing symptoms, that may well be the case. Over the past five years, average rate of agriculture growth has been 4.7%.
If wholesale price inflation was 6.73% for the week ended 3 February, it is largely because supply in certain agricultural commodities has been unable to keep pace with demand. In agriculture, the supply problem has to do with inadequate production for a variety of reasons. It is these that need to be addressed, and according to experts such as V. S. Vyas from the Institute of Development Studies at Jaipur, “the problem has been building up for over a decade.”
Three months ago, the government appointed a six-member committee to draft a policy report on agriculture. The committee, headed by C.H. Hanumantha Rao will submit its report by the end of March, but Vyas, one of the members says, “There is no quick-fix solution; a series of long-term measures have to be taken.”
These range from better usage of land and water, to the adoption of the latest technology to increase yields. Vyas, previously a member of the Prime Minister’s advisory council in the National Domestic Alliance government, says there is work to be done in areas such as credit and technology. “There has been a 30 % increase in agricultural lending, but it has not reached small and marginal farmers, many of whom are driven to suicide. There are technology bottlenecks in the production of high yielding seeds, which are affecting productivity.”
Budget 2007 could focus on some of these areas. The Confederation of Indian Industry (CII) has suggested that the tax incentives on research and development spend for certain industries be extended to agriculture as well. That may be needed if India is to meet the foodgrain requirement of 400 million tonnes by 2025, as projected by the agricultural ministry. “It is necessary to increase agricultural land, cropping intensity, and production,” they said in a note to a parliamentary committee.
The per-capita availability of agricultural land has declined from 0.525 hectares in 1950-51 to 0.177 hectares in 2003-04. Of India’s total geographical area of 328.60 million hectares, around 146.82 million hectares suffer from soil degradation. The government has launched various schemes to reclaim degraded land for farming. But this is an expensive and laborious procedure. Officials in the department of land resources say 125 million hectares of degraded land are yet to be treated. Reclamation will cost around Rs15,000 crore annually for the next 15 years.
In states such as Punjab and Haryana, which were at the forefront of the Green Revolution that increased productivity and ensured the country’s food security, the land is turning barren, thanks to over-cultivation and excessive pesticide use. The water table is also declining by as much as three feet a year. “The focus has to shift to maximising yields in Bihar, Eastern Uttar Pradesh (UP), Chhattisgarh, West Bengal and Assam where the soil is still fertile and there is a plentiful supply of water,” says agriculture commissioner N. B. Singh.
“There has been a systematic neglect of the agriculture sector, and a bleeding of talent and capital from rural areas to urban areas. Over the years, rural areas have been deprived of power to feed urban areas,” says Jaideep Singh, a farmer from UP. Ramesh Chand, director at National Council for Applied Economic Research, says the farmers are partly to blame. “We have not seen any capital formation in agriculture. Even though the growth rate of agricultural credit has been very high, farmers have used most of the money for non-agricultural purposes.”
And while input costs have risen, terms of trade have remained adverse for farmers. Ashok Gulati, India director of the International Food Policy Research Institute, has a simple wishlist for the Budget, “Contain subsidies and raise investments in agriculture, free it from all controls, and eliminate all taxes on primary agricultural commodities.”