Weak support system yield woes for farmers

ECONOMIC SURVEY 2006-07

AGRICULTURE: Early February rain may just ease the plight of the tiller banking on rabi harvest.

Reckoning the agriculture sector growth in 2006-07 at mere 2.7 per cent, below the past six years' average annual growth of 3 per cent, the Economic Survey holds structural weaknesses responsible for the poor performance of this sector. The share of agriculture in the country's gross domestic product (GDP) has dropped down to 18.5 per cent.

However, the agriculture's allied sectors, notably livestock and fisheries, have been growing steadily and are now contributing 27 per cent to the gross agriculture sector GDP. The share of fisheries alone has risen to 5.3 per cent.

The reasons listed in the Survey for low agricultural growth include low level of public investment, exhaustion of the yield potential of new high-yielding varieties of wheat and rice, unbalanced fertiliser use, low seeds replacement rate, inadequate incentives and insufficient post-harvest value-addition of farm products.

The share of the agriculture sector's capital formation in the country's total GDP has declined from 2.2 per cent in the late 1990s to 1.9 per cent in 2005-06. "This disturbing decline was partly due to the stagnation or fall in public investment in irrigation, particularly since the mid-1990s", the Survey maintains.

But it also points to an indication of a reversal of this trend with the public sector investment in agriculture accelerating marginally since 2002-03. The share of public investment in gross investment in agriculture increased by 6.5 percentage points from 1999-2000 to reach 24.2 per cent in 2005-06.

Anticipating good rabi harvest, the Survey maintains that the short-term outlook for the agriculture sector appeared bright. With the welcome rain early February, prospects of wheat and other rabi crops have brightened.

The output of cotton, sugarcane and jute and mesta may set a new record this year. But the production of oilseeds is expected to decline by 15.7 per cent.

The Survey has expressed the hope that farmers' income may rise this year, thanks to surge in domestic and global prices of farm products. The World Bank's commodity price index for agriculture (with 1999 as base) has risen from 104.7 in January 2004 to 133.7 in January 2007.

In the domestic market, the wholesale prices of most agricultural products remained firm in the current fiscal. "Together with better crop prospects, this augurs well for farm income", the Survey maintains.

The consumption of fertiliser (in terms of nutrients) is estimated to have spurted by 10.6 per cent to 20.34 million tonnes in 2005-06. In the current year, about 10 million tonnes of nutrients has been consumed between April and September. Nitrogenous fertilisers accounted for over 60 per cent of the total consumption, reflecting the imbalance in nutrient use.

The flow of agricultural credit has exceeded the target since 2004, the Survey indicates. The goal of 30 per cent growth in credit in 2004-05 was surpassed with the actual growth being 44 per cent.

The total credit disbursement by all agencies was Rs 1,25,309 crore in that year. In 2005-06 too the enhanced credit flow target of Rs 1,41,000 crore was exceeded with the actual disbursement being around Rs 1,80,486 crore.

The target for 2006-07 has been fixed at Rs 1,75,000 crore. Of this, about 85 per cent (Rs 1,49,343 crore) was already disbursed till December 31 last, the Survey points out.