labels: economy - general, economic survey 2007
Bright outlook in the short-term for agri sectornews
27 February 2007

After an annual average of 3.0 per cent in the first five years of the new millennium starting 2001-02, growth of agriculture at only 2.7 per cent in 2006-07, on a base of 6.0 per cent growth in the previous year, is a cause of concern.

Low investment, imbalance in fertilizer use, low seeds replacement rate, a distorted incentive system and low post-harvest value addition continued to be a drag on the sector''s performance. Given its low share, a mechanical calculation of the adverse impact of low growth in agriculture on overall GDP can be misleading. With more than half the population directly depending on this sector, low agricultural growth has serious implications for the ''inclusiveness'' of growth.

Furthermore, poor agricultural performance, as the current year has demonstrated, can complicate maintenance of price stability with supply-side problems in essential commodities of day-to-day consumption.

The recent spurt of activity in food processing and integration of the supply chain from the farm gate to the consumer''s plate has the potential of redressing some of the root causes such as low investment, poor quality seeds, and little post-harvest processing.

The government, in its economic survey and analysis tabled in Parliament today, has said that the concern of higher inflation is likely to remain this year. Inflation is likely to stay unless the supply of staple commodities is improved.

With a shortfall in domestic production vis-à-vis domestic demand and hardening of international prices, prices of primary commodities, mainly food, have been on the rise in 2006-07 so far. Wheat, pulses, edible oils, fruits and vegetables, and condiments and spices have been the major contributors to the higher inflation rate of primary articles.

As much as 39.4 per cent of the overall inflation in WPI on February 3, 2007 came from the primary group of commodities. Within the primary group, the mineral subgroup recorded the highest year-on-year inflation at 18.2 per cent, followed by food articles at 12.2 per cent and non-food articles at 12.0 per cent.

Food articles have a high weight of 15.4 per cent in the WPI basket. Including manufactured products such as sugar and edible oils, food articles contributed as much as 27.2 per cent to overall inflation of 6.7 per cent on February 3, 2007.

The short-term outlook for agricultural sector appears bright. With a welcome rainfall in early February, prospects of wheat and other rabi crops have brightened. The production of cotton, sugarcane and jute and mesta would set a new record in the current year.

However, the production of oilseeds is expected to witness a decline of 15.7 per cent. There has been a sharp increase in the area under wheat with high domestic and international prices providing incentives to the farmers.

World Bank''s commodity price index for agriculture with 1990 = 100, which was 104.7 in January-December, 2004 reached 133.7 in January 2007. Wholesale prices of most agricultural products were also firm in 2006-07. Together with better crop prospects, this augurs well for farm income, said the survey.

In the medium-term, the prospects for agriculture will be determined by the pace and quality of reforms in this sector; the ability to increase investment in surface irrigation, ground water recharge of aquifers, and restoration of water bodies; and developing high-yielding varieties of non cereal food and cash crops.

The urgent need for taking agriculture to a higher trajectory of 4 per cent annual growth can be met only with improvement in the scale as well as quality of agricultural reforms undertaken by the various States and agencies at the various levels.

These reforms must aim at efficient use of resources and conservation of soil, water and ecology on a sustainable basis, and in a holistic framework. Such a holistic framework must incorporate financing of rural infrastructure such as water, roads and power.

The Approach Paper to the Eleventh Five Year Plan has aptly highlighted such a holistic framework and suggested the following strategy to raise agricultural output:

(a) doubling the rate of growth of irrigated area; (b) improving water management, rain water harvesting and watershed development; (c) reclaiming degraded land and focusing on soil quality; (d) bridging the knowledge gap through effective extension; (e) diversifying into high value outputs, fruits, vegetables, flowers, herbs and spices, medicinal plants, bamboo, bio-diesel, but with adequate measures to ensure food security; (f) promoting animal husbandry and fishery; (g) providing easy access to credit at affordable rates; (g) improving the incentive structure and functioning of markets; and (h) refocusing on land reforms issues. National Commission on

Farmers has already laid the foundation for such a framework. Programme formulation as well as their implementation in the States must be based on unique regional contexts incorporating agro-climatic conditions; and availability of appropriate research and development (R&D) backed by timely and adequate extension and finance.

Varietal break-through has been a major constrant in achieving higher level of productivity in pulses. These are genetically low yielding and less input responsive as compared to cereals and their cultivation has continued to be done on marginal and submarginal lands under rainfed conditions. With the limited availability of pulses overseas, dovelopment of hybrid varieties becomes a prerequisite for increasing domestic production, said the survey.

The survey said that R&D expenditure on agriculture in India is low by international standards despite its high social return.

evelopment of area specific seeds and their application, particularly in water abundant estern belt can increase the yeild levels in these areas. Increased R&D expenditure backed by modern technologies and compatible institutions must be focused in the coming years.

According to the survey, R&D has to focus on areas such as rainfed, and drought-prone; crops such as drought-resistant and amenable to biotechnological applications; and biotechnology which has growth as well as export potential. With proper implementation, the National Agricultural Innovation Project initiated in July, 2006 for enhancing livelihood security in partnership mode with farmers'' groups, panchayati raj institutions and private sector would go a long way in strengthening basic and strategic research in frontier agricultural sciences.

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Bright outlook in the short-term for agri sector