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Agriculture: Who’s bothered? - Views on News from Equitymaster
 
 
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  • Feb 27, 2001

    Agriculture: Who’s bothered?

    India, until recently, was referred to as an agrarian economy. In some ways it still is given the fact that approximately 65% of the work force is employed in this segment (but it contributes only 29% of GDP). However, rather surprisingly, much of the reform process has left this sector untouched.

    In effect the government has been ignoring 650 million people to focus on activities like information technology, which presently account for just over a percent of the country's GDP and employ an even smaller percentage of the workforce. No one is denying that information technology is important. But the disproportionate time and resources allocated by the government to such activities has clearly resulted in the agricultural sector being left in the cold. As a result of this, problems pertaining to fragmented holdings and irrigation, to name just two, have not been dealt with in an urgent manner.

  • Agriculture: Over the years

  • For a more detailed analysis of the Indian Economy click here

    Consider the importance of the primary sector. Given the high weightage this sector enjoys in the economy (29%), even a marginal up tick in growth benefits overall growth. Indeed, the benefit is magnified as better incomes at the rural level have a multiplier effect on demand (it employs a large chunk of the population). To underscore this, we just need to look at the present situation, which actually is adverse. A spatially distributed monsoon has hit agricultural production. As a result agriculturally dependent industries (tractors for example) and consumer products companies have been hit by a slowdown in demand. The slowdown in agricultural growth has hit industrial production. Together, they have contributed to a slowdown in the economy. Yet, the government has failed to respond in an appropriate manner.

    What does the government need to do? The list is pretty long, but some key structural issues are highlighted below:

    • Focus on providing irrigation facilities thereby reducing dependence on monsoons
    • Improving the support infrastructure i.e. storage facilities, wholesale markets etc.
    • Consolidation of fragmented holdings

    The government has been faced with these issues for several decades now. Yet these problems persist. Going by the interest being shown by the government, it is likely that these ills will continue to plague the sector for many more years to come. In such a situation, to anticipate a dramatic improvement in living standards would be unjustifiably optimistic.

     

     

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