Four pronged strategy – to promote farm growth and enhance rural income

K.R. Sudhaman**

Agriculture forms the backbone of Indian economy as 60% of over one billion Indian population still depends on the farm sector. Agriculture’s share in GDP is falling but it continues to be the largest employer.

A four per cent annual agriculture growth envisaged in the eleventh plan period ending 2012 is important for ensuring food security and enabling India to move on high growth path of 9% on a sustained basis. With farm sector not achieving the desired level of four per cent growth in the last couple of years, agriculture has been brought to the centre-stage by the Finance Minister, Shri Pranab Mukherjee in the 2010-11 Budget. It has assumed significance considering the fact that the farm sector is likely to register a negative growth in the current financial year 2009-10 due to poor monsoon badly affecting Kharif production.

The Finance Minister announced a four-pronged strategy in the budget to spur farm growth. The strategy aims at increasing farm production, reducing wastage of produce, better credit support to farmers and a thrust to food procession sector.

The plan expenditure to agriculture has been stepped up by nearly 50 % to Rs 15,042 crore in 2010-11 budget from Rs 10,765 crore revised estimate for 2009-10.

As the Minister said in his budget speech, the first element of the strategy is to increase farm productivity. Green Revolution witnessed in Punjab, Haryana and now in Maharashtra and Southern states has not taken roots in Eastern India. Farm productivity in these states is still low and in many parts it is virtually half of the productivity in states like Punjab and Haryana.

The Rs 400 crore initiatives proposed in the budget would bring about a sea-change in rural economy of states like Bihar Chattisgarh, Jharkhand, Eastern Uttar Pradesh, West Bengal and Orissa where farm productivity is still low. This initiative does not involve any rocket science. All one has to do is to involve gram sabhas and farming families to replicate the example of Punjab and Haryana, through agriculture extension programmes.

The initiative also involves evolving schemes to bridge the gap in agriculture in the Eastern States. new sub components will be designed by the States in consultation with the Government.

This would form part of the Rashtriya Krishi Vikas Yojna, a state plan scheme introduced in the eleventh plan to incentivise States through additional resources for agriculture. The amount is to bridge the critical gaps. District plans will be formulated and based on that, state plans will be made for agriculture and allied sectors keeping agro-climatic conditions of each region in mind.

The 2010-11 budget provides Rs 6722 crore for Rashtriya Krishi Vikas Yojana. The Yojana also includes special initiative for pulses and oilseeds development in selected oilseeds and pulses growing villages.

A sum of Rs 300 crore has been provided in the budget for organising 60,000 “pulses and oilseeds villages” in rain-fed areas of the country in 2010-11. An integrated intervention would be made in these villages for water harvesting, watershed management and soil health in a bid to enhance productivity of dry land farming areas.

The Finance Minister, has also provided Rs 200 crore for launching climate resilient agriculture initiative to sustain the gains already made in green revolution areas through conservation farming. This involves special attention to soil health, water conservation and preservation of biodiversity.

These measures would help in fulfilling government’s commitment to achieve 4% annual growth in the farm sector. Through small investments to bridge critical gaps, a substantial increasing in farm productivity could be achieved and that’s what the budget has precisely attempted.

The second element of the strategy, is to reduce wastage in storage significantly, as well as in the operations of existing food supply chain in the country. This will help in bringing down the considerable difference in farm gate prices, wholesale prices and retail prices.

For example, 1000 quintals of food grain released to one distributor will have a different impact on prices than releasing one quintal each to 1000 outlets in different parts of the country.

Chief Economic Advisor Kaushik Basu citing this example said that releasing food grain in small quantities to more outlets since January this year has helped in bringing down food prices.

Due to acute shortage of storage facility with Food Corporation of India, there is wastage of food grain procured for buffer stocks and public distribution system in the country. To overcome this problem, the Finance Minister has extended an ongoing scheme of hiring private godowns by FCI to seven years from 5 years for augmenting storage facility for food grains. This will bring down substantially the wastage due to lack of storage facilities in FCI.

Elaborating on the third element of the strategy of farm credit flow, the Minister has raised farm credit target in the budget to Rs 3,75, 000 crore in 2010-11 from Rs 3,25,000 crore in the current financial year.

Debt waiver and Debt relief scheme for farmers is a major initiative taken by the Government to alleviate the sufferings of particularly poor farmers in drought hit areas. The Government has waived off about Rs 71,000 crore of farm laons bringing in huge relief to poor farmers in the last few years. In the Budget, the period for repayment of the loan amount by farmers has been extended by six months, from December 31, 2009 to June 30, 2010. This will provide big relief to farmers hit by drought in the Kharif season. The ongoing Rabi season is expected to be good and the extension would be helpful to farmers.

The additional one per cent interest subvention provided in 2009-10 Budget as an incentive to those farmers who repay their short-term crop loans as per schedule has been raised to 2 per cent for 2010-11. The Finance Minister said as a result of this measure, the effective rate of interest for such farmers will now be 5%. The necessary provision for this interest subvention has been made in 2010-11 budget, he said.

To boost cultivation of fruits, vegetables, flowers, spices, a National Horticulture Mission has been launched to double the production. The goal is to make available horticulture produce, improve economic condition of the farmers by sustaining golden revolution and to increase exports.

The last element of the four-pronged strategy in the Budget to boost agriculture, is to step up food processing sector development by providing state-of-the art infrastructure.

The Finance Minister announced that five more mega food parks would be set up in the country taking the total to 15. He also allowed external commercial borrowing for setting up cold storage facility for agri-produce including farm level pre-cooling.

Nearly Rs 40,000 crore worth of fruits and vegetables gets wasted due to lack of cold storage facility and inadequate development of food processing industry in the country. These initiatives would go a long way in stepping up farm income and lowering wastage and providing food security to the poor people besides employment, as all these sectors are labour-intensive.

**Economic Affairs Editor, Ticker Plant News

Disclaimer : The views expressed by the author in this feature are entirely his own and do not necessarily reflect the views of INVC