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Agriculture: Efficiency to be stepped up - Views on News from Equitymaster
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  • Feb 28, 2001

    Agriculture: Efficiency to be stepped up

    Though the share of agriculture as a percentage of GDP has been reducing, considering that it still accounts for 29% of GDP and 65% of the total workforce, it is an important sector from the point of view of the budget. There has been an urgent need to increase the productivity of this sector as the land area brought under cultivation every year is nearing its saturation point.

    For the first time this year the government has announced a National Policy in Agriculture so as to highlight its importance in our economy. The move is to speed up agricultural sector reforms so as to increase the efficiency in this sector. The proposed measure to increase the flow of credit to the agricultural sector by 24% in 2001-2002, by way of reduction of interest rates to 10.5% is a move in the right direction.

    The move to extend credit for storage of perishable commodities is now being extended to cover rural godowns too. These loans will carry an adequate long-term repayment period and would enable individuals, cooperative societies and others to build godowns by availing of loans from cooperative and commercial banks and RRBs. NABARD will reduce its rate of interest for funding storage of crops, from 10% to 8.5%. The move to set up storage facilities will benefit both marginal and small farmers as it will give them holding power, so that they can sell their produce at higher prices. This in turn will help in reducing the incidence of bad debts in this sector as well as give a spurt to rural incomes and demand. This would have a spiral effect on consumer demand for two-wheelers, tractors, automobiles and consumer products.

    As mentioned earlier on, our agriculture sector needs to be made more efficient and keep up with the latest technology efforts. As a result the budget has recommended the setting up of additional support and extension services for agriculture. For this purpose, a scheme for setting up Agriclinics and Agribusiness Centres to provide soil and input testing facilities and offer other consultancy services. These will enhance the technology efforts and also provide self-employment opportunities to technically trained persons. Loans for setting up these centres will be provided by banks with refinance from NABARD.

    To further improve the performance of this sector it has been proposed to reduce some of the constraints surrounding it. As state governments currently have issued many control orders under the Essential Commodities Act, 1955 this has resulted in undue restrictions on movement and stocking of food grains and agricultural produce. This in turn has acted as a disincentive for farmers. To do away with some of these restrictions the government has proposed to review the Essential Commodities Act, 1955 and remove some restrictions on free inter-State movement of food grains and agricultural produce and also on the storage and stocking of such commodities. The purview of commodities brought under this is to be further reduced so as to provide more freedom to farmers.

    On the whole the above reforms aim to enhance productivity of the agricultural sector and improve the prospects of industries dependant on it. However these reforms still do not address the important issues of lack of irrigation facilities and consolidation of fragmented holdings which need urgent attention. Nevertheless a start has been made.



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