Saturday, 19 August 2006

Gyan Pathak

The wrong priorities of development and ad-hoc treatment to the agriculture and its related sectors has created such a situation that even a little shortfall or excess of monsoon threatens not only the very growth rate of our economy. Despite this situation we have been continuing with our follies and ad-hocism not only in our short term but also in our long term strategies.

It is precisely due to this reason that a little delayed and merely two per cent below normal monsoon has dampened not only the prospect of agricultural growth this year but also threatened overall growth rate of the country. This is causing great concern to the PMO at the time the Prime Minister Manmohan Singh is trying to focus on agricultural reform. Apart from the shortfall in monsoon rains, the floods in several states in unprecedented dimension this year, especially in Gujrat, Maharashtra, Madhya Pradesh, Karnataka and Andhra Pradesh, is also likely to adversely affect Kharif production this year. The causes of these floods have been attributed to the mismanagement of the dams.

Economic Advisory Council (EAC) of the Prime Minister has already lowered the anticipated growth rate to 7.9 percent of the GDP for the year 2006-07, which was announced at 8.1 per cent by the Finance Minister P Chidambaram in his budget speech while the Prime Minister had raised this target to 10 per cent.

How much concern is attached to this development can be gauged with the fact that the growth rate of agriculture in 2005-06 was bounced back to 2.3 per cent, as per the advanced estimate of the CSO, while the EAC has anticipated a growth rate of only 1.5 per cent for the year 2006-07.

It means that India cannot even touch the level of the advance estimate of foodgrains production made by the Ministry of Agriculture on July 15, because the erratic monsoon situation was considered only up to that date. The latest estimate of the EAC has been done as on the situation up to August 9.

Even the earlier fourth advance estimate of the Ministry of Agriculture had projected a shortfall of about 7 million tonnes of the original target of 215 million tonnes. However, it had projected an increase by five percent from 198.4 million tonnes in 2004-05 to 208.4 million tonnes in 2005-6. It may be mentioned here that in the budget for the current year it was estimated 209.3 million tonnes, while the actual production in the year 2003-04 was 213.5 million tonnes.

EAC has clearly pointed out to the PMO in its recent report that any adverse weather condition in the following months will hamper the Rabi crops also. It says that if growth in agriculture declines by one per cent the overall growth rate of our economy will further go down to 7.8 per cent.

What does it mean for the economy, the government and the common man?

As for the economy of the country is concerned, this development may push the overall growth rate down. Any reduction in agriculture production reduces the income in the rural community and subsequently their purchasing power of the goods that are produced by the industries for their consumption. The lack of demand further hampers the industrial and related sectors' growth rate.

As for the common man, fall in agricultural production will push the prices up which is already hurting the common man. Coupled with the rising trend in the prices of petroleum it may create havoc among people.

As for the government, it needs to take various steps. There is already a demand of stopping the forward trading of the agricultural products that the PMO is not inclined to accept at the moment. Instead, there is a proposal seriously under consideration is a flexible procurement and pricing policy along with imports of agricultural goods, especially wheat, spread over several years to come. To maintain the overall economic growth, the government is considering sectoral approaches for various sectors of our economy.#