New Delhi: With economic growth expected to slow to around 6% this year, from the near 9% pace of the past few years, the Planning Commission, India’s apex planning body, is set to discuss ways to boost agriculture, infrastructure and private sector investment at a meeting scheduled for Tuesday.
Farm output has been hurt by deficient rainfall, and parts of the country are facing the spectre of drought.
“The Planning Commission has worked out that the kharif, or summer crop production will fall by 14%. This will have a major impact on the growth of the agriculture sector,” said a Planning Commission official who didn’t want to be identified. “The Planning Commission is expecting the sector to have a negative growth of minus 2.5%, whereas industry is expected to grow by 7.8% and services by 8.2%,” this official added.
In 2008-09, growth in agriculture declined to 1.6%, from 4.9% in 2007-08 and 4.0% in 2006-07.
The official also said the Planning Commission does not expect India’s gross domestic product (GDP) to grow by at least 7% in the current fiscal. The country’s economic growth in 2008-09 decelerated by 2.1 percentage points to 6.7% from average growth rate of 8.8% in the previous five years.
Tuesday’s meeting will be presided over by Prime Minister Manmohan Singh. Finance minister Pranab Mukherjee, agriculture minister Sharad Pawar, home minister P. Chidambaram and C. Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, are expected to attend the meeting.
Deceleration of India’s economic growth, and of the agriculture sector in particular, has become a concern for policymakers. Last week, Mukherjee said 6%-plus economic growth would be possible in 2009-10. He had earlier said kharif production was expected to decline by 20%.
“The issues of improving the lot of the agricultural sector as also a focused approach towards boosting infrastructure and economy are going to be the major points of discussion at the meeting,” the Planning Commission official mentioned earlier said.
The issue of investment by the private sector is also likely to be discussed.
With budgetary resources going mainly into social programmes, fixed asset creation has to be driven by the corporate sector. Besides, it has to be funded from internal generation, financial institutions and the capital markets, both domestic and global, the commission says in a presentation prepared for the meeting.
It also notes that the biggest acceleration has come in the past from private corporate investment, which grew more slowly at 13% in 2007-08 and was likely to be in single digits in 2008-09.
S.L. Rao, former director general of the National Council of Applied Economic Research, says 6-7% economic growth would not be difficult to achieve because revival has begun, but the growth would be misleading.
“The Planning Commission talks of inclusive growth but it denies the poor an opportunity to grow,” Rao said. “Agriculture sector has remained neglected because while the government gave higher minimum support prices (for foodgrain procurement), it did not create dams and canals; while it spent Rs65,000 crore on the loan waiver for farmers, it did not initiate the programme of rain water harvesting, check dams, etc., and farmers are suffering because of the drought.”