2014 : Why not to attach top priority to farm sector?

Dr B K Mukhopadhyay *

Why not to attach top priority to farm sector?

What the latest statistics reveal? Some 57 percent of the developing world's rural population lives in lower middle- income countries, and 15 percent lives in the least-developed countries. Even though historical trends show that agriculture's share diminishes over time [in US it is around 2 percent as compared to India's around 18 percent of GDP] and the share of population in rural areas declines, there will still be more poor people in rural areas than in cities for at least a generation.

The fact remains that though most successful developing countries have not relied on agriculture for export expansion and growth, yet growth in agriculture has a disproportionate effect on poverty because more than half of the populations in developing countries reside in rural areas and poverty is much higher in rural areas than in urban areas.

It is better not forgotten that around 15 percent of the world population remain below the poverty [line of $1.25 per day [around 18 percent of population below the poverty line of $2 per day lived even in China!]. India's situation has not been good too on this score. Distribution of income between the people is –point to see. Inequality [measured with the help of Gini coefficient – which has a value of one when all the income in an economy accrues to one person and zero when every person in an economy has the same, equal income] combating cannot be there if the micro-factors are not taken care of.

In India the fault not only lies with the planning process [politics overriding the economic considerations], but also with very poor implementation process / project delays and the like. Even where the plan had been a good one and implementation done well, the post follow up remained far from being satisfactory as a result of which continuous assets generation got terribly blocked.

In spite of the fact that the farm front scenario has been changing, it must be admitted that the reality leaves much to be desired. Not only India has backlog but the same is true globally! High and volatile commodity prices and their implications for food insecurity remain clearly among the most important issues facing Governments today.

So far economies like India are concerned is it not a fact that the gains from green revolution has been steadily fading away? Judging by the ongoing facts and circumstances population growth is not going to retard especially in the developing block, while food grains out put would not be able to register commensurate growth - such a situation needs immediate tackling.

And here lies the biggest challenge – farm development. It is clear that the developing nation's GDP growth has been mainly hinging upon the industrial sector [read corporate] backed by the services sector. It would have been more attractive and at the same time immensely useful had there been equal growth in the farm sector. That was not there. Problems galore in spite of the fact that the plan allocations have been stepped up and a number of measures have been taken by both – at the Centre and at the state levels.

So come 2014 - the "Sense of Urgency" has to be taken with all degree of seriousness. A number of examples could be cited which could prove effective optional utilization of resources had not been there. Pulses output in India hovers around 16 to 18 million tones right from the 60's, it being the top supplier of protein to non-vegetarians.

World market has been tremendous too for agri products. But till now our share has not been able to capture even 1 per cent! Even Bangladesh, Venezuela, have emerged meaningfully to be tough competitors in mango market. A number of developing countries are still largely dependent upon imports of cooking oils we have still less wheat and rice per capita than in the 80's.

Vast favourable agro-climatic conditions could have given good returns by now for commodities like grapes, guava, pineapple, etc. No denial of the fact: there has been a significant rise in the quantum of farm credit in the last decade in particular. It is a fact that credit flow to the farm sector has been witnessing steady rise over time. Banks have considerable exposure to Priority Sector lending and more particularly in various sectors of Agricultural lending.

The need is, thus, there to formulate a credit policy especially for the small and marginal farmers. Actually, the expectations are higher and thus the formulation of a credit policy exclusively for the small and marginal farmers could go a long way in channelizing the resources in a planned and directed manner. It is good that the private sector banks are also coming forward.

In the recent years the Banks have been focusing on rural credit and the working with micro-finance groups has attracted attention. Banks have also been exploring the possibilities to further extend works with the Co-operative societies so as to expedite flow of credit in the rural sector as till date Banks are not allowed to work directly with the Co-operative societies for lending to this sector.

There is no doubt that lending is still skewed in favour of a few industrial houses. Naturally the Clarion call is there to increase the lending speed to the farm sector. Banks are to focus on the bottom of the pyramid by giving loans to tenant-farmers, small and medium enterprises and extending micro-credits in villages. It has rightly been observed that for the PSBs, private Banks, foreign Banks, RRBs and Co-operatives farm lending would be the key area in the days to come. Over urbanization dominates the scene and increasing trend in the matter of incidence of urban poverty galore resulting in further depreciation of healthy living in metro-cities.

Rural savings generated continue to be used for metropolitan/urban development and migration of fund continues if the current trends are of any indication in as much as the top 100 centres which account for 65% of deposits are able to grab 73% of credit so far as banking business indicators are concerned and thus furthering the incidence of regional imbalance. Truly, institutional finance alone could not change the scenario in the very absence of other infrastructure and allied supports. Simply asking the banks to double credit flow/utilization in next three years is not enough. The roots must be taken into account.

In fact, agriculture sector does not require money flow alone – more important is to have the infrastructure development at the earliest. Dependence on rain god adds to the woes. And then floods and droughts becoming a annual ritual. Productivity gets a blow in the absence of quality seeds and other inputs supplies, a slow modernization process.

Consistent decline in the share of private- sector investment in the agriculture sector is a matter of concern. This trend needs to be reversed through creation of a favourable policy environment and availability of credit at reasonable rates on time for the private sector to invest in agriculture.

That is why the crucial requirement is there to beef up coordination among different sections involved in the process of farm sector's development. There is no short cut formula on this score and it is to be especially seen by all concerned that repayment culture is not distorted. Recycling of farm still poses the biggest menace. Huge provision for loan waiver cannot and should not be the escape route though politically attractive. Assets generation over space and time is badly required at this juncture. Practical support to the farmers stay at the top if ultimately a changed picture is aimed at, especially when potentiality galore.

Agricultural development, in fact the whole process of rural development, requires a shot in the arm. Reforms should not be stopped since once we have entered into the tunnel every effort must be made to come out of the tunnel, the process being very very difficult and complex too, simply because of the fact that the steps taken till now as well as the very implementation process is full of gaps which should have been bridged during last 60 years of planning. Piece meal measures do not have the capability to register growth and development in a continuous and spontaneous manner.

That is why the time is for actions so that the gaps are taken care of in a bigger and speedier way keeping in view the global trend. Especially for food grains a lot depends on this part of the world [India, China where half of the world population live in]. The global factor has to be essentially kept in view as many of the countries are speedily opening up and want to have a good niche in the market plus the responsibility is also there with the betters to see development taking place in Mali, or Ethiopia, Myanmar and the like!