The Agro-Development And The Budget 2008

It has been nearly sixty years since Independence, and agriculture continues to be the backbone of the Indian economy and the image reflection of India. Although the Green Revolution in the 60s brought about an immense and self-sustainable positive change in the agricultural sector of India, but the need to suit this to the changing times in the national and global scenario is what the annual budget must aim to achieve.

The Economic Survey, 2007, highlighted the problems of the agriculture sector as low level of public investment, exhaustion of the yield potential of new high yielding varieties of wheat and rice, unbalanced fertilizer use, low seeds replacement rate, an inadequate incentive system and post harvest value addition. Also, the inadequate infrastructure facilities, a problem which plagues all other segments of the Indian economy, has not spared agriculture either, with the lack of proper storage and transportation facilities causes huge losses of produced crops. These factors have resulted in a slow growth rate of 2.7% during the year 2006-2007 (although the National Agricultural Policy, 2000 targeted a growth rate of over 4%). Thus, the annual budget for the year 2008-2009 faces some grave challenges and expectations which need to be met.

Firstly, there are the pre-harvest challenges which mainly emphasize on two main issues, namely inadequate irrigation facilities and lack of pesticides. A majority of Indian farmers are still at the mercy of the monsoons for their output, despite the various rural irrigation programmes announced and provision of tax holiday for water supply projects, water treatment systems and irrigation projects. Thus, the real issue which needs to be addressed in the budget is to encourage PPP model to improve the irrigation system of the country and reduce dependence on the monsoon.

In mid-2007, it was estimated that 30% of crops valuing Rs 148,000 crore per annum were being lost on account of pests, insects, plant diseases and weeds. The need of the hour is therefore, to encourage greater investment in manufacturing pesticides and other chemicals, and also to facilitate their availability and use among farmers. Thus, FM can look at giving more incentives to these sectors. As recommended by the National Conference on Rabi campaign, 2007-2008, the FM can also help the farmers by removing customs duty on soluble fertilizers.

Secondly, in post-harvest stages, there is an urgent need for development of essential agri-infrastructure, which would involve efficient integrated system of storage of harvested crops, their transportation to end-use customers, transit insurance, marketing of goods etc. A 100% tax holiday could be considered for a period of 10 consecutive years out of the 15 years beginning with the year in which the undertaking commences operations.

Thirdly, the food processing sector that links agriculture and industry has been estimated to grow over US$ 310 billion by 2015. Although, such estimates can only be bowed into reality if these goals are worked upon as these highly impressive figures are comparatively lower than the developed countries. Further encouragement to this sector will help the farmers in fetching good price for their produce. The encouragement can be in the form of granting duty exemption for all finished products which are made by processing fruits, vegetables, meat and dairy products, spices etc, exemption on all inputs and raw materials used for food processing, exemption/ credit for service tax for services rendered in connection with manufacture of processed foods, non-levy of Value Added Tax i.e. VAT on perishable goods and VAT of 4% on non-perishable processed foods.

Fourthly, worldwide global warming has lead to the development of an alternative energy sources in the form of bio-fuels which are generated from crops. Manufacture and export of bio-fuels could play a key role in generating employment and in increasing foreign reserves. Recognition of this segment in the upcoming Budget could lead to the generation of a whole new income stream for Indian farmers with a great potential of growth in the future.

Lastly, there is also an urgent need to improve the penetration and effectiveness of the rural banking system. To this issue, several strategies are there such as reducing transaction costs by eliminating all wastes and inefficiencies in the banking system, a pro-active delivery system which responds to the needs of the farmers as and when required, and making crop insurance accessible and affordable by all classes of farmers. The banks need to be given more incentives as well in order to reach out to the farmers.

The Indian economy is booming, and with over half of the Indian population being agrarian, the targeted growth rate of over 4% unachieved in 2006-2007 cannot be far behind if the measures above are implemented which are concerned with doubling India’s share in the world agricultural trade within five years, focusing on generation of additional employment in rural areas, increasing farm income and promoting rural development.

Tania Gupta