Agricultural growth and National Income

 

At dawn of Independence, share of agriculture was around 50 percent of the national income and around 90 percent of work force was engaged in primary sector. In the last six decades, share of agriculture reduced to less than one fifth.

 

 In 2011-12, share of agriculture was 13.9 percent. In the post independence years, agriculture production has increased manifolds and India has attained self-sufficiency in food grain productions. However, agriculture growth was relatively lower than the growth of industrial and service sector resulting in consistent decline in the share of agriculture income in total national income.

 

 

Still there is no denying of the fact the agriculture production has stagnated in the country and its growth depends on the vagaries of the monsoon. In the post second five year plans also, public investment in primary sector is declined. Moreover, productivity in India is much less than most of the developed countries despite the fact that India is characterized by one of the most fertile tracts of the world.

 

Major reasons for low productivity include weak framework for sustainable water management and irrigation, traditional methods of production, small land holding, inadequate infrastructure and services in rural areas, over-regulation of domestic agricultural trade, rural poor have little access to credit etc.

 

Numerous sector specific government interventions like low administered prices for food grains, ostensibly for food security reasons, also discriminated against agriculture. Product prices were kept so low that, despite large input subsidies on fertilizers, credit, irrigation, power etc, the agricultural sector remained net taxed. 

 

 

Simultaneously, excessive input subsidies led to inefficiencies, resource misallocation, and contributed to environmental degradation. The adverse terms of trade for agriculture resulted in a lack of incentive to producers to invest in output raising technologies. 

 

In addition, a major proportion of the costs of inefficient functioning of organizations like the Food Corporation of India were borne by the farmers. Large subsidies given on agricultural inputs also led to resource misallocation and placed an unsustainable burden on state and central finances and reduced the capacity of government to undertake large investments. 

 

However, these subsidies failed to compensate the farmers for the negative impact of lower administered price paid on outputs, higher input prices due to excessive protection given to industry. The net effect is that agriculture had negative protection and discriminated. 

 

 

Food and Agriculture Organization has suggested few measures to increase the productivity of Indian agriculture-

 

•The farmers should be provided with a stable price for their agricultural products at a remunerative level. 

•There should be an expansion of adequate marketing facilities to sell the agricultural product.

•The land tenure system should be changed in favour of the cultivator.

•There should be a provision of cheap credit on reasonable terms especially to small farmers for better techniques of production.

•The modern inputs like fertilizers, pesticides and improved seeds should be made available to the farmers at reasonable prices.

•There should be provisions of education, research and extension of agro-economic services to spread the knowledge of improved methods of farming.

•The State should make provision for the development of resources which are not possible in the part of individual farmers e.g. large scale irrigation, land reclamation or resettlement projects.

•There should be an extension of land used and intensification and utilisation of land already in use through improved and scientific implements.

 

Agriculture productivity must also be increased as livelihood of more than 50 percent of population depends upon growth of agriculture. Apart from above mentioned measures, other reforms should also be undertaken like allowing FDI in agriculture, improving distribution infrastructure etc. 

 

 

Moreover, forward and backward linkages should be strengthened and rural infrastructure should be increased as a whole. Pooling of many land holdings may yield better results for which land laws for leasing with sufficient safeguards in place should be considered. Addressing infrastructure requirements in the agriculture sector, especially storage, communication, roads and market should be priority.

 

The policy makers ought to devise appropriate region specific policy packages for reversing the trend of deceleration in agricultural growth registered in the post-reform period with a view to making a large proportion of workforce in agriculture share the benefits of high growth achieved by the economy after economic liberalisation and make the growth process more inclusive. This can only be done through according higher priority to agriculture and undertaking large public and private investments in rural infrastructure like power, roads and communications and above all in research and extension. 

 

In this manner, agriculture sector should be dovetailed with the rest of the sector of the economy which will help in aligning the agriculture growth with the growth of national income. Consequently, it will reduce the vast rural-urban inequalities as well as increase in agriculture returns will increase the income of country’s 50 percent households. 

 

Needs for improvement in agriculture sector is second to none and once Pt. Jawaharlal Nehru has rightly said that in an economy, everything else can wait but not agriculture. 

 

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