The Hindu Business Line : Paying proposition

After listening to the Prime Minister's Independence Day speech, delivered from the ramparts of Red Fort, had one wondered where the economist in Dr Manmohan Singh has gone, one can be pardoned. Apart from presenting to the nation a report card of his Government's performance over the last two years and its rather nebulous plans for the future, Dr Singh said little else to draw a definite roadmap for the country's economic progress. Agrarian crisis and steps to ameliorate rural distress formed an important part of the speech.

The economist in Dr Singh knows very well that the disparity in growth rates — between manufacturing and services, growing at close to double digits, on the one hand, and agriculture, growing at about 1.5 per cent (lower than even the population growth rate of 1.8 per cent) on the other — is the real issue that his Government must address. You don't need to be a rocket scientist to realise there is only one economically feasible, socially desirable and politically expedient solution: Raise agricultural growth to at least 4 per cent a year over the next decade, if unemployment is to be substantially reduced, if not eliminated, and rural decay and migration are to be stopped. Unless the policymakers take concrete steps to put incomes in the hands of approximately 60 per cent of the population eking out a living off agriculture and related activities, the ongoing distress cannot be ended. Nobody would grudge farmers a remunerative price. But it would be naïve to believe that an egalitarian society would emerge by merely ensuring higher incomes for farmers by taxing consumers with higher food prices. Surely, Dr Singh the economist knows well that rural income increases have to come from efficiencies and productivity gains in farming, rather than forcing consumers to pay more. Indeed, just about 30 per cent of the population currently engaged in the manufacturing and services sectors can afford to absorb food prices that are already high. Higher food prices will, in fact, hurt farmers because they are consumers too.

Under Indian conditions and particularly considering the internal and external challenges that agriculture faces, the supply response to prices is rather limited. In other words, there is no guarantee that higher farmgate prices will translate to higher production. The ineffectiveness of the Minimum Support Price system in raising output is well known. The key to delivering higher incomes to growers is efficiency gains and cost reductions. Strengthening input delivery system, rapidly expanding irrigation facilities, improving agronomy, and building rural infrastructure need focussed attention. Public investment in agriculture has to be raised substantially and irrigation projects monitored for timely completion. Generating non-farm employment is one of the biggest challenges. Neither in the current Plan nor in the Approach Paper to the Eleventh is there a clear strategy for ensuring sustained farm growth. The fact is there is little accountability in the Government for any failure.

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