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Saturday, May 22, 2004

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Farm sector needs focus

ELATED BY THE unexpected success of his party at the hustings, but weighed down by the rhetoric of Left parties with whose support the new government at the Centre is being formed, the Prime Minister-designate Dr Manmohan Singh, champion of economic reforms, has made politically correct statements, promising to focus on the poor, the rural and the agricultural sectors. Why not? He cannot be blamed for believing that the overall satisfactory economic growth in recent years has not brought tangible benefits to large parts of rural India. From 1997-98 till 2002-03, the growth rate of agriculture and allied sectors averaged less than one per cent. In other words, incomes in the hands of over 70 per cent of the population dependent on farm-related activities increased by a pittance. Only in fiscal 2003-04 did agriculture showed a robust rebound of nearly 10 per cent; but even then, an aberrant monsoon left large tracts in Maharashtra, Karnataka, Tamil Nadu, and elsewhere moisture-stressed, and farmers there financially stretched.

The development of agriculture is critical not only to sustain a high rate of economic growth, but also to raise the living standards in the rural areas and eradicating poverty of a large proportion of population directly dependent on farm-related activities. Farm reforms have so far been confined to pricing, while structural issues — fragmented landholding, dependence on monsoon, low level of input usage, poor marketing infrastructure and so on — that stymie sustained growth remain unaddressed. Importantly, the trend of declining public investment in agriculture needs to be reversed and policies to encourage private sector participation, including building lasting assets in the rural areas, have to be put in place. Dr Singh's promise to grant primacy to agriculture should get the policy-makers to focus on issues impacting growth, incomes, production, quality and marketing. Specifically, he has gone on record against free power supply to farmers (even while making an exception in case of Andhra Pradesh for special reasons). Appropriate pricing of such inputs as power and water (the use of which becomes excessive because of heavy subsidy) would release resources for improved public investment in existing and new projects. While subsidies per se are not undesirable, their better targeting is certainly called for.

The National Agriculture Policy announced in July 2000 could be a good starting point for the new government. The NAP is an excellent statement of lofty intentions. The policy, which has remained on paper for four years, needs to be implemented with a strategic action plan after an assessment of the financial, technological and human resources required to ensure a four per cent per annum growth in agriculture. State governments have to be taken into confidence and must play an important role in farm revival as agriculture is a State subject. If Dr Singh's promise gets translated into performance over the next five years, he would go down in history as the architect of a resurgent India.

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