While presenting the country’s mid-year report card to the parliament, Finance Minister Pranab Mukherjee slashed the country’s growth forecast in the second week of December, stating, “The sharply deteriorating global economic environment has had a dampening effect on India. Compounded with some domestic factors, the global situation has led to a clear slowdown in the growth rate of the Indian economy...” It was almost like accepting the bitter truth in hindsight, because by then, almost everyone who kept a track of the country’s economy had realised this very fact. For that matter, the FM’s new growth forecast of 7.5% sounded a lot more optimistic; some have even started forecasting that the GDP growth will be limited to 6.5-7%. But can we blame it all on the global economic environment, or is it the effect of the ongoing domestic troubles including inflation, trade deficit and current account crises? Well, certainly not!
As I see it, the current imbroglio is the negative impact of years of imbalanced growth in the economy in which we are living now. Over the past decade and a half, the country’s rapid economic growth has been driven by the services sector, and increasingly by high value added manufacturing. But what about the agriculture sector? It has been left out as an underdeveloped child despite the fact that 58.2% of the country’s population still works in this sector. Horrendously, while the country has been growing at a healthy rate, the sector has recorded growth rates like –0.1% in 2008-09 and 0.4% in 2009-10. Though the advance estimates given in Economic Survey 2010-11 suggest 4.7% growth for the sector, we know that no miracle has happened during the year to suggest the same. In reality, that’s the period when India’s food inflation started to shoot up to record highs. So, it’s just a matter of time as the revised figures to be presented in February 2012 will again confirm a growth of just around 1%.
As a matter of fact, post the green revolution in the 1960s, the country and the policy makers have just taken this sector for granted. And the sector, which employs the lion’s share of the population, barely manages to contribute about 14% of the country’s GDP. As a result, India, which had not imported wheat for decades, was forced to go for it as domestic production had not increased over the past many years. But that is like a crime, because this is one sector where the country was self-sufficient since time immemorial. And at a time when high imports (and thus the trade deficit) are emerging as far more daunting problems, an import bill from a sector that can still be self-sufficient is truly not understandable. But the reason for the same is simple enough. While all other sectors are receiving huge investments, lack of investment in agriculture is frighteningly low. Additionally, lack of appropriate support is seeing farmers leaving their lands for development of real estate, hence reducing India’s total cultivable land. And this will end up dampening the sector’s growth forecasts very soon.
India has always been a land of agriculture and the country’s economy still has it as its base. For that reason, to manage a smooth growth in the economy, the government needs to push this sector and give it its due credit. And if it cannot do so, then it should better be prepared to shift 58.2% of India’s population to an alternative job opportunity, so that they can contribute in a better manner rather than being disguised unemployment for the country.
As I see it, the current imbroglio is the negative impact of years of imbalanced growth in the economy in which we are living now. Over the past decade and a half, the country’s rapid economic growth has been driven by the services sector, and increasingly by high value added manufacturing. But what about the agriculture sector? It has been left out as an underdeveloped child despite the fact that 58.2% of the country’s population still works in this sector. Horrendously, while the country has been growing at a healthy rate, the sector has recorded growth rates like –0.1% in 2008-09 and 0.4% in 2009-10. Though the advance estimates given in Economic Survey 2010-11 suggest 4.7% growth for the sector, we know that no miracle has happened during the year to suggest the same. In reality, that’s the period when India’s food inflation started to shoot up to record highs. So, it’s just a matter of time as the revised figures to be presented in February 2012 will again confirm a growth of just around 1%.
As a matter of fact, post the green revolution in the 1960s, the country and the policy makers have just taken this sector for granted. And the sector, which employs the lion’s share of the population, barely manages to contribute about 14% of the country’s GDP. As a result, India, which had not imported wheat for decades, was forced to go for it as domestic production had not increased over the past many years. But that is like a crime, because this is one sector where the country was self-sufficient since time immemorial. And at a time when high imports (and thus the trade deficit) are emerging as far more daunting problems, an import bill from a sector that can still be self-sufficient is truly not understandable. But the reason for the same is simple enough. While all other sectors are receiving huge investments, lack of investment in agriculture is frighteningly low. Additionally, lack of appropriate support is seeing farmers leaving their lands for development of real estate, hence reducing India’s total cultivable land. And this will end up dampening the sector’s growth forecasts very soon.
India has always been a land of agriculture and the country’s economy still has it as its base. For that reason, to manage a smooth growth in the economy, the government needs to push this sector and give it its due credit. And if it cannot do so, then it should better be prepared to shift 58.2% of India’s population to an alternative job opportunity, so that they can contribute in a better manner rather than being disguised unemployment for the country.
