Farm view: Pricing policies stunting growth

ECONOMIC SURVEY 2005-06\ AGRICULTURE

Growth of agriculture and allied sectors declining, projected at 2.3%.

The Economic Survey has expressed concerns over the declining share of agriculture sector's capital formation in the total gross domestic product (GDP) but has expressed hope that the trend may reverse, thanks to increase in public investment.

It has blamed flawed agricultural pricing policies, biased in favour of grains, for distorting the cropping pattern and input use. These policies may require correction, the Survey has stated.

"A shift from the current minimum support price and public procurement system, and developing alternative product markets are essential for crop diversification and broad-based agricultural development," the Survey asserts.

Projecting the growth of agriculture and allied sectors in 2005-06 at 2.3 per cent, the Survey points out that sectors like horticulture, fisheries, poultry and animal husbandry are likely to clock a higher growth rate of around 6 per cent.

But it describes the recent trend in agricultural growth as "low and volatile". The average annual growth of value added in this sector declined from 4.7 per cent in the Eighth Plan to 2.1 per cent in the Ninth Plan.

In the current Plan, it varied from negative 6.9 per cent in 2002-03 to an impressive 10 per cent in 2003-04 and again to meagre 0.7 per cent in 2004-05.

The Survey reveals the share of agricultural sector's capital formation in the GDP had declined from 2.2 per cent in the late 1990s to 1.7 per cent in 2004-05. This was mainly due to the stagnation or fall in public investment in irrigation, particularly since the mid-1990s.

"However, there is indication of a reversal of this trend with public sector investment in agriculture reaching its highest level of Rs 12,591 crore in 2005-06 since the early 1990s," the Survey says.

The share of public investment in gross investment increased by over 11 percentage points to reach 29.2 per cent in 2004-05 compared to 1999-2000.

It has also indicated that the flow of private investment in agriculture may increase, thanks to the improved availability of credit for agriculture and liberalised trade for farm products.

Regarding foreign trade of agri-products, the Survey points out that the proportion of agri-exports to total exports dropped from 11.9 per cent in 2003-04 to 10.2 per cent in 2004-05. For April to October period 2005-06, this share was 9.6 per cent, against 9.9 per cent in the corresponding period of the previous year.

On the other hand, the import of agricultural and allied products in 2004-05 were estimated at $ 3811 million, marginally higher than $ 3708.2 million in the previous year.

However, the proportion of agri-imports to total imports fell from 4.7 per cent in 2003-04 to 3.5 per cent in 2004-05. The major imported products included vegetable oils, raw cashew, pulses and sugar.

The Survey indicates that the target of disbursing loans worth Rs 1,05,000 crore for 2004-05 was actually exceeded by 10 per cent with actual aggregate disbursement of Rs 1,15,243 crores. This was 32 per cent higher than previous year's credit flow.

The Survey appears upbeat about the growth potential of emerging areas in agriculture, such as horticulture, floriculture, organic farming, genetic engineering, food processing, branding and packaging and futures trading.

"Development of rural infrastructure, rural extension services and agro-based and food processing industries are essential for harnessing this potential," it adds. It observes that the sector suffers from low yields per hectare and volatility in production.