The Hindu Business Line : Investing in farm projects

While policymakers have, in recent years, paid a lot of lip service to the farm sector, the required action to induce growth is largely missing. No wonder, the government finds itself on the defensive over tardy growth in output, especially of essential food products, and shortfall-induced inflation. There is now a greater realisation that issues affecting rural India must be addressed with greater urgency to mitigate the political and economic downside. How much importance and, in turn, what level of financial outlays agriculture and related activities will receive in the forthcoming Budget is anybody's guess. But, going by the Finance Minister, Mr P. Chidambaram's statement at the Bharatiya Pravasi Diwas in New Delhi recently, there is hope. The Minister's conviction that large sums of money should be pumped into irrigation, water management, farm infrastructure, input supplies and pre- and post-harvest technologies is indeed heartening. He was confident that 9 per cent GDP growth could be achieved and high growth rates sustained. But, clearly, for that to happen without hiccups, the farm sector has to grow considerably faster than the current sub-2 per cent annually.

Admittedly, falling public investment in agriculture is not a positive signal for private investment. This needs to be reversed. A substantial step-up of investment in irrigation and water management can bring about a notable transformation in rural India as water is a critical input, low yields being largely a function of moisture-stress. The application of funds and implementation of schemes is equally important. There are enormous cost and time over-runs. Even today scores of irrigation projects — many last-mile in nature — are languishing for want of funds; and some of them date as far back as the Eighth Plan (1987-1992). Given the federal nature of polity, the State governments' active participation in completing projects is essential.

Mr Chidambaram also talked about huge opportunity for private enterprises in agriculture. Contract farming is a commercially prudent option that corporates with exposure to agricultural crops must seriously look into. For example, edible oil companies can encourage oilseeds and textile mills cotton cultivation. A scheme of incentives for a limited period to kick-start the process of backward integration for corporates may prove beneficial. There are several investment opportunities in the agri-business sector, such as input supplies, processing and value addition, infrastructure building (warehouses, cold chains) and logistics services (quality inspection, laboratory testing, and so on). What is lacking is investor confidence. It will grow only when the policymakers demonstrate commitment to ensure a decent rate of farm sector growth. The Budget will show if the Finance Minister is going to put the money where his mouth is.

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