Neglecting Farm Sector Led To Slump: Assocham

The Associated Chambers of Commerce and Industry of India (Assocham) believes the economy has not been able to sustain growth in the post-liberalisation era because of the exclusion of agriculture from the reform process.

Most liberalisation measures introduced in the last seven years have been directed at reforming the industrial and financial sectors. Agriculture has virtually been left untouched.

According to Assocham president L Lakshman, agriculture accounts for over 25 per cent of the national income, about two-thirds of the labour force and one-sixth of the real stock employed.

"Assocham believes that unless new strategies are evolved urgently for removing constraints and for accelerating development of agriculture, sustained growth of the economy at the desired level of 7 to 8 per cent per annum will continue to elude us," Lakshman said.

 

A document entitled "Strategic Plan for the Indian Agricultural Sector", brought out by the Assocham, sees industrial recovery in terms of trade- driven growth of the rural market. Considerable real purchasing power has now come into the hands of farmers. "Growth of rural markets provides ample opportunities to industry," the document states.

"Increasing forward linkages for several crops suggests that inter-dependence and inter-linking between agriculture and the rest of the economy is improving," it adds.

It maintains that the policy of minimum support prices played an important role in determining the growth and diversification of agriculture.

"While the post-1985 period was marked by general improvement in the terms-of-trade for agriculture, the degree of corrective action has been more pronounced for non-food crops", it says.

There has been a major shift in the cropping pattern from foodgrains to non-foodgrains. There has also been a significant slowdown in the growth of foodgrain and non-foodgrain yields, though foodgrains have maintained a higher productivity growth. While the increase in foodgrain production in the 1990s is entirely due to yield improvement, the growth in non-foodgrains is more on account of area expansion than productivity hike.

"It is evident that a significant acceleration in the growth of the Indian economy cannot be achieved without upgrading and using the growth potential of agriculture", the study concludes.

It feels that Indian agriculture is economically viable regardless of subsidies. The average net subsidy is only 1.7 per cent of the gross value of farm output. It calls for continuation of the mechanism of regularly revised support prices for farm goods, at least till the agricultural markets are made more efficient by reducing the spread between harvest prices and average wholesale prices of crops.

Stressing the need for wide-ranging reforms in the farm sector, the Assocham study suggests removal of quantitative restrictions as well as taxes and tariffs on inter-state movements of agricultural commodities. Quantitative curbs on the imports and exports of farm goods, too, should be lifted.

It calls for greater involvement of the corporate sector in the cultivation of high-value, capital and technology intensive crops by encouraging contract farming and modifying existing land legislation.