India: Is Agriculture 'Shining' in India? - Structural Issues Left Unaddressed


Dr D Tripati Rao

The People's verdict clearly reflected in the results of the May 2004 general elections indicated that the erstwhile ruling party, the BJP, could not piggyback on the 'feel good factor' that they sought to make mileage of in their 'India Shining' campaign. A political backlash was inevitable, since in its penchant for savvy, outward-looking economy, the BJP alienated people at the grassroots from the ambit of economic progress. Notwithstanding its aggressive media campaign portraying the agricultural farmer beaming with a smile on the highway towards growth, the rural masses earning their livelihood from traditional occupations-mainly agriculture-were not convinced that they had reaped any significant benefits during the BJP's tenure. Indeed, Indian agriculture has been ailing throughout the 1990s.

Agriculture registered an abysmal, historic post-independence low decadal growth of 1.9 per cent in 1990s, in spite of twelve consecutive good monsoon years. Moreover, agricultural production remained highly volatile compared to the 1980s. Real annual rates of gross capital formation declined sharply from 5.4 to 1.5 per cent between the early and late 90s. The share of public investment fell from 33 to 22 per cent. Cumulatively, sharply pruned public investment in agriculture, a structural shift in the allocation of credit, as well as dwindling rural credit disbursements from institutional lenders are the proximate causes for the fall in farm employment and the casualisation of farm labour. There was the expectation that the clichéd 'reforms with a human face' would entail provision of a new deal for agriculture and rural development. The newly elected Congress Party joined the Left and some other small parties in a rather awkward coalition and proposed the National Common Minimum Programme (NCMP). According to the explicit assurance given by Prime Minister Manmohan Singh in a televised address just before the budget presentation, the NCMP was intended to reflect the wishes and aspirations of the Bharat-the 'real India' comprising the vulnerable, lower middle and poorer classes of which farmers constitute a sizeable portion.

The 2004 Budget has been described as a budget with a focus on agriculture and rural development. But a close reading of the numbers suggests otherwise. Reflecting a weary 'fiscal conservatism', the budget makes meagre allocations to many novel agricultural and rural oriented programmes. The fine print also indicates that it doesn't explicitly spell out the modalities of implementation; the realization of many of the programmes squarely depends on the efficacy of state machinery and willingness of state officials; and, crucial expenditure decisions have been put under the 'exhaustive review' of the Planning Commission. The latter has been instructed to 'evaluate the implications of the NCMP approach and to elaborate it into specific and feasible policies and initiatives which can be built into development plans and programmes'. Most importantly, the Budget leaves many structural issues unaddressed.

However, Finance Minister, P. Chidambaram, did address the two most crucial issues ailing Indian agriculture-irrigation and rural credit. He promised to restructure the Accelerated Irrigation Benefit Programme, stressing water harvesting and a massive scheme to restore of some 500,000 water bodies. The stress on the latter has in a way highlighted the work done by NGOs such as Rajendra Singh's Tarun Bharat Sangh and Sunita Narain's Center For Science and Environment in championing a 'Participatory Irrigation Management' (PIM) approach. In accordance with the NCMP, which gives priority to rural credit, the supply of credit to agriculture is to be doubled in the next three years. The Finance Minister announced the building up of a corpus fund of Rs.8000 Crores [a unit in the traditional Indian number system, 1 crore = 10 million], in the form of the Rural Infrastructure Development Fund under the auspices of the National Bank for Agriculture and Rural Development (NABARD). The budget has entrusted the implementation of this fund to public sector, Regional Rural and Co-operative banks. The other areas of budgetary focus have been agri-business, diversification of agricultural produce, risk mitigation (agri-insurance) and flood control.

But many of the increased allocations-Rs.2247 Cr for rural housing, Rs.2160 Cr for water supply, Rs.2800 Cr for irrigation and Rs.1000 Cr for agricultural research-are not a quantum jump in comparison with what the previous Finance Minister Jaswant Singh, announced in February 2004. Also, a meagre amount has been allocated to more needy programmes, Rs.325 Cr to Sarva Siksha Abhiyan (Every Child In School) scheme and Rs.300 Cr to the National Midday Meal programme (to provide a free midday meal to all students in government primary schools). Even discounting the obvious fact that many of the proposed programmes will take time to implement and they first have to pass the critical litmus test of the 'exhaustive review' by the Planning Commission, how do you make institutional lenders, including the banks, channel credit to the agricultural and rural sector? For a long time they have been trying to downplay statistics showing a progressive reduction in the proportion of bank credit to agriculture as compared to total bank credit, which has gone from 18 per cent in the 1980s to 10 per cent in 2003. Not only has the quantum of direct, as well as indirect, credit flows from institutional lenders worsened, but also there has been a noticeable structural shift with small borrowers taking agricultural loans declining in numbers. Against this continued apathy, what does the government propose to do? Will it try to force banks to supply loans at lower rates of interest? Further, as there has been a decline in the absolute number of banks in rural areas, what institutional mechanism will be used to ensure the supply of credit? These are the stark structural realities confronting people at the ground level.

WATCHPOINT: Many regions have been hit by uneven and delayed monsoons, which will pull down agricultural growth. Together with rising inflation, this will compound the difficulties for the rural poor.


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