IMPERATIVE TASK: Many economists believe that investment in agriculture can quickly boost the economy (Pic by Subhabrata Das)

Agriculture presents a unique opportunity because any gains here will have a multiplier effect. First, because India’s food grain production is falling behind its requirements, any boost in this area will automatically reduce the country’s dependence on imports of costly food grains, which then need to be sold at subsidised prices to the rural poor. More importantly, with so much of the country’s population still dependent on agriculture and rural work — over 68 per cent of India’s population is rural — even a slight improvement in this area will help in improving rural consumption, which in itself will give a big boost to the economy.

The issues holding back agricultural growth are fairly well known. First is the problem of rural credit — or lack of it — which is a bane for poor farmers. Loan waivers announced time and again have failed to stop farmer suicides or improve production. What is needed is a comprehensive look at financing the farmer in a way that actually helps.

More important is the question of rural infrastructure — proper roads, irrigation, access to markets in a quicker fashion, better support in terms of soil testing and fertilisers. Many of those are sought to be tackled by one government programme or the other. The big reason for none of them yielding any desired result is the execution and the lack of Centre-state coordination.

The one big scheme the government should focus on is Rashtriya Krishi Vikas Yojana (RKVY), says a senior agriculture ministry official. “This needs to be taken forward and upscaled.” This is important since it gives freedom to the states to plan agriculture to suit requirements at the district level. This could go a long way in helping remove the mismatch between what the Centre is focusing on and what is needed in the states. Currently, under RKVY an outlay of Rs 25,000 crore been made. States have spent only about Rs 3,000 crore till March 2008. “Minor changes in the allocation system is needed, since most of the work has to be undertaken by the state governments to suit their needs, the onus is on the states,” says a senior agriculture ministry official.

The second thing that needs to be fixed is food security and the broken public distribution system (PDS). In its earlier stint, UPA had adopted the National Food Security Mission (NFSM) in 2008. However, it could not push it forward then, now it has to unfurl a full-fledged scheme to implement the same. Food security was critical in 2006-07 and continues to be so; hence NFSM needs to be continued with more thrust on sub-programmes such as nutrition. Considering that the markets and industry have shown a positive signal to the government that has been voted back, growth rates will be high and demand for food would go up.

CALLING ATTENTION: Episodes such as Nandigram underline that land reforms are urgently needed (ABP)

One way to achieve it is by dovetailing the National Rural Employment Guarantee Act (NREGA) with NFSM, particularly the nutritional part. “It is a complex task but has to be thought over by the new government. It can be done without spending additional money, it is a matter of innovating. This can be done without ballooning the food subsidy,” says the senior agriculture ministry official.

The Economic Survey 2009-10 highlights disconnect between poverty and food subsidy. The states that are poor are the ones that are not picking up from PDS system — states such as Bihar, Chhattisgarh and Orissa. “There is a kind of lopsided policy. Food distribution is going on in one direction and the poverty is going in another — it has to be rectified urgently,” says the senior official.

Land And Other Procedural Reforms
Come up with a bright idea in India and you can trust the administrative procedures and regulations to slowly strangle it. Consider the Special Economic Zone (SEZ) fiascos and the other land-related problems that became a flashpoint in state after state last year. In theory, the SEZs are a step ahead towards greater industrialisation. If India has failed to fix infrastructure for the whole country, SEZs was one way of assuring world-class infrastructure to those whose presence can give economy a major boost. But as the land acquisition problems showed, unless the policy was properly thought out to the last detail, nothing much could move forward. In most of the cases, hamhanded and arbitrary methods adopted to acquire land became the burning issue in places ranging from Nandigram in West Bengal to Raigad in Maharashtra.

It is not just land. The administration itself has broken down for years — one reason why despite two decades of reforms, India is still a pretty difficult country to do business in. A World Bank report in 2007 ranked India at 134 out of 175 countries in terms of ease of doing business. The report took into account 10 criteria to make its assessment, such as the ease in starting a business, receiving credit, enforcing contracts and ease of exit. India fares poorly on the last two counts in particular. The report ranks China 93rd in terms of the ease of doing business, Brazil at 121 and Russia at 96. Those at the top of the heap are Singapore, New Zealand and the US.

Setting up any kind of enterprise and seeking legal recourse remain tougher to do in India than most countries in South Asia. Acquisition of land has been a huge hurdle in many new foreign investment projects. Things have improved on this front since 1991 (when licences ruled the day), but many point out that it may be easy to get FDI approval (FIPB has made the process easier), it is tackling the rest that can be a task. “The Posco example is a case in point,” says a government official. He recently met someone who wanted to open a new business near railway stations in India and that required a total of 19 clearances from 19 different agencies. “If the bureaucracy is trimmed as are procedures, investment will flow — both foreign and Indian,” he says.

As we have mentioned earlier, the broad policies are not the problem at the moment. What the government needs to do now is to get the details right — and then execute them properly. Not a very easy task. But not very difficult either for a government that has got the kind of mandate this one has.

With inputs from Raghu Mohan and Kandula Subramaniam

m dot rajendran at abp dot in

(Businessworld Issue Dated 26 May-01 June 2009)