Produce or perish

Yoginder K Alagh | Updated on June 10, 2019 Published on June 10, 2019

Farm, industry could do with strategic planning

Now that the elections are over, the compulsion to show high GDP growth is likely to ebb. NITI Aayog’s meddling with statistics will hopefully stop. It’s good if the country’s GDP grows at 6 per cent (in constant prices), but no society can prosper with income growth alone.

Thanks to rising productivity, income can grow even with physical output staying stagnant. Companies make a killing with dividends rising but workers keep on looking for jobs. For job opportunities to rise, there’s a need to produce more in the agriculture and manufacturing sectors. Rahul Gandhi might have had a point when he said that Prime Minister Modi should have consulted Manmohan Singh on demonetisation, which affected both these sectors.

This millennium, the Indian economy has been steered by the Manmohan-Modi model, which has kept interest rates high to attract foreign financial flows. Foreign funds did flow in and services exports prospered — thanks to the country’s skill base which has grown on the foundations of Nehruvian institutions — but agricultural and industrial production has stagnated.

The recent election debates effectively exposed the intellectual bankruptcy of the underlying model.

Agriculture production has to be rooted in sustainable land and water policies, and buttressed by widespread use of new technologies. For broad-based manufacturing growth, strategic policies will need to be designed and implemented. As the devil is in the details, at least a framework has to be set so that constructive debates can start in right earnest.

The agriculture sector has been going through a tough time since 2014. Annual growth rates of around 2 per cent are hidden by the so-called good performance in foodgrains — that too, largely in paddy. Pulses, with high income elasticity of demand, are doing badly with ill-timed imports from countries which give huge subsidies for older produce to meet India’s insatiable demand.

The farmer will be making sowing decisions in June for the kharif season. Delayed rainfall is predicted due to the effects of El Nino. Therefore, seeds for pulses and kharif oilseeds must be arranged on an emergency basis. Tariff protection has to be announced in advance. And, States have to be given the funds to cover the last mile in projects listed in Arvind Panagriya’s three-year vision.

The manufacturing sector is going through its own production crisis. National accounts from any perspective may show value-added growth, as the corporate sector raises investment in productivity-raising innovation processes. But employment comes from high output growth. Gujarat, for example, has shown that 10 per cent plus industrial output growth leads to structural change, with the share of the non-agricultural sector rising in the workforce. That kind of growth, really leading to more jobs, is no longer on the policy agenda. To be fair to him, Panagriya talked of it, before bowing out from the NITI Aayog.

All of this means we need an agency which works on some kind of a strategic plan. But such institutions have been either abolished or sidelined. They are required, whether one likes the name (read Planning Commission) or not. The Finance Ministry does not have a strategic mindset. A meeting of the political council of the NITI Aayog is fine, aimed at involving chief ministers in the action. But it can be no substitute for strategic thinking for the July 5 Budget.

The writer is a former Union minister

Published on June 10, 2019

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