Elusive Inclusive Growth
Gap in Per Capita income ratios between Agricultural and non-agri workers going to increase further during XI Plan period which aims at inclusive growth!
The Central Government has taken credit for growth in Agricultural GDP at 4.5% during 2007-08.One swallow does not make a summer. If we take long term growth trend as revealed by the data provided by the RBI in their Annual Report 2007-08, the position that emerges is different. Average Agri GDP growth rate during the decade of 1990-91 to 1999-2000 was 3.2%; growth rates for Industrial and Service sectors were 5.7% and 7.1% respectively. During the eight year period ending 2007-08 Agri GDP growth is only 2.9%. During the same period, growth rates of Industry and Services sectors were 7.1% and 9% respectively. Agri GDP growth during X Plan period (2002-03 to 2006-07) was only 2.5%, where as the growth rates of Industrial and Service sectors were 8.0% and 9.7% respectively. The forecast made by the PMEAC for 2008-09 is a growth of only 2%.
These trends clearly show that growth in Agri GDP is stagnating and continuously lagging behind GDPs of Industrial and service sectors. But the population dependant on Agriculture at 60% is almost the same. Planning commission, in their study revealed that the gap in per -capita income ratios between agri and non-agri sector workers have widened from to 1:2.8 in the period 1978-79 to 1983-84 to a whopping 1:5.2 in 1998-99 to 2003-04.
The per capita availability of cereals and pulses has also declined. The per capita consumption of cereals declined from a peak of 468 grams per day in 1990-91 to 412 grams per day in 2005-06, while that of pulses declined from 42 grams per day to 33 grams per day during the same period. Between 1996 and 2004 there was almost zero growth in food grains.There has been stagnation in yields of cereals and pulses. Stagnation in yield emanated from limited release of new variety seeds, decline in agricultural investment and almost non-existent extension services. Furthermore, as noted by the Steering Committee on Agriculture for the Eleventh Five Year Plan, a number of factors such as land degradation, scarcity of water and slow progress in public and private investment in rural infrastructure (including irrigation) have also contributed to stagnation in the agriculture, especially since the 1990s, which coincides with starting of economic reforms. While much of agricultural growth has originated from the expansion of irrigation and increased productivity of irrigated land, rain-fed agricultural productivity has been more or less stagnant. Moreover, as noted by a recent research study conducted by the R B I, the slower growth in public expenditure in agriculture inhibited the development of adequate research and extension system for supporting farming. Productivity increase in agriculture is dependant on enhanced capital formation both from the public and private sectors. Investment in agriculture as a proportion of overall GDP remained stagnant in recent years. It is stagnating around 2% since 1990s.
All these trends and factors firmly confirm the projections made by the Centre for Development Economics that, “whereas agricultural sectoral GDP stood at nearly Rs.3,000 billion in 2002-03, it will rise to no more than a whisker under Rs.4,000 billion a decade later in 2011-12 at the agricultural growth rate forecast for the Eleventh Plan. Meanwhile, the combined manufacturing and services sectors would have soared from Rs. 9,000 billion to around Rs. 20,000 billion, widening the gap between the relatively stagnant sectors of the economy and the boom sectors from Rs.6,000 billion to Rs.16,000 billion”, are going to be a certainty. This means that the gap is going to be further widened to an intolerable extent and the objective of inclusive growth is not going to be realized during XI Five Year Plan. Now a doubt arises, WHAT FOR ARE THESE PLANS MADE AT HUGE COSTS BY THE PLANNING COMMISSION MANDARINS? Will it not be better to do away with the Planning Commission and have bottom up plans starting from the districts and the centre funding these development programmes in the ratio of population in the rural and urban areas?
30/08/08
29/08/08
Continued neglect of farm credit during 2007-08 also
The RBI has today released its Annual Report for the year 2007-08.From the data provided therein, it is observed that additional credit extended to agriculture during 2007-08 ,declined to Rs43,260crore compared to a growth of Rs56,426crore during the previous year. The agricultural sector was given only 11 per cent of the incremental non-food bank credit expansion as compared with 14 per cent in the previous year where as a whopping 43 per
Cent of incremental non-food credit (y-o-y) was given to industry as compared with 37 per cent in the previous year. Credit was obviously directed to industrial sector diverting from agricultural sector. It is unfortunate that credit to essential sector like farm sector is continuously decreasing and no effective measures are taken by the RBI and the Government to ensure that banks extend credit to the mandated extent of 18% of net bank credit. The figure is hovering around 12% to 15% for more than a decade; and continues to be below 18% even after the government declared in 2004 that Agriculture credit is their priority. Lending to agriculture by banks, both in the public and private sectors, continued to fall short of the stipulated target of 18 per cent. Had credit been extended up to the stipulated norm of 18%, farm credit would have been Rs 50,000 crore more than the actual increase of only Rs43,260 crore and additional loaning would have been Rs 93,260 crore , by March 2008. If the trend of rural credit deposit ratio in rural areas is the same as last year i.e.; 56%, then large amount of deposits collected from rural areas would have continued to be diverted to metro areas thus depriving of benefit required credit to rural areas.
It is another matter that a major portion increase in agri loans is on account of disproportionate increase in indirect loans and big loans of Rs one crore and above. Referring to the growth rate in agricultural credit in the last few years (after 2000) Prof.M.S.Swaminathan recently said at Chennai on the 26th Aug that "it originated primarily from a growth in indirect finance to agriculture i.e. credit given to institutions and organisations that contribute to agriculture but not the credit given directly to agriculturists.""Between 2001 and 2006, direct finance to agriculture grew at 17.4 per cent but indirect finance grew by 33 per cent, he said. Even in the case of direct finance, the major rise in direct advances happened where the credit limit was more than Rs 1 crore."
He underscored the critical importance of agriculture, stating “we can’t live happily as islands in a sea of misery”. Calling farmers the guardians of national food security, he said that it was their efforts that had enabled the country to have a buffer of about 25 million tonnes of wheat and 30 million tonnes of rice. He also reiterated that "the minimum support price offered by the Government to farmers must cover their costs and offer at least 50 per cent more as against the current levels of 15 per cent above cost price"We urge upon the RBI and the Government to ensure that credit is extended to essential farm sector to the extent of 18% of total credit and Agri prices are fixed as recommended by the NCF headed by Prof.M.S.Swaminathan.Continued neglect of credit and underpricing of agri produce is not in the interests of the nation's food security and the farmers.
The RBI has today released its Annual Report for the year 2007-08.From the data provided therein, it is observed that additional credit extended to agriculture during 2007-08 ,declined to Rs43,260crore compared to a growth of Rs56,426crore during the previous year. The agricultural sector was given only 11 per cent of the incremental non-food bank credit expansion as compared with 14 per cent in the previous year where as a whopping 43 per
Cent of incremental non-food credit (y-o-y) was given to industry as compared with 37 per cent in the previous year. Credit was obviously directed to industrial sector diverting from agricultural sector. It is unfortunate that credit to essential sector like farm sector is continuously decreasing and no effective measures are taken by the RBI and the Government to ensure that banks extend credit to the mandated extent of 18% of net bank credit. The figure is hovering around 12% to 15% for more than a decade; and continues to be below 18% even after the government declared in 2004 that Agriculture credit is their priority. Lending to agriculture by banks, both in the public and private sectors, continued to fall short of the stipulated target of 18 per cent. Had credit been extended up to the stipulated norm of 18%, farm credit would have been Rs 50,000 crore more than the actual increase of only Rs43,260 crore and additional loaning would have been Rs 93,260 crore , by March 2008. If the trend of rural credit deposit ratio in rural areas is the same as last year i.e.; 56%, then large amount of deposits collected from rural areas would have continued to be diverted to metro areas thus depriving of benefit required credit to rural areas.
It is another matter that a major portion increase in agri loans is on account of disproportionate increase in indirect loans and big loans of Rs one crore and above. Referring to the growth rate in agricultural credit in the last few years (after 2000) Prof.M.S.Swaminathan recently said at Chennai on the 26th Aug that "it originated primarily from a growth in indirect finance to agriculture i.e. credit given to institutions and organisations that contribute to agriculture but not the credit given directly to agriculturists.""Between 2001 and 2006, direct finance to agriculture grew at 17.4 per cent but indirect finance grew by 33 per cent, he said. Even in the case of direct finance, the major rise in direct advances happened where the credit limit was more than Rs 1 crore."
He underscored the critical importance of agriculture, stating “we can’t live happily as islands in a sea of misery”. Calling farmers the guardians of national food security, he said that it was their efforts that had enabled the country to have a buffer of about 25 million tonnes of wheat and 30 million tonnes of rice. He also reiterated that "the minimum support price offered by the Government to farmers must cover their costs and offer at least 50 per cent more as against the current levels of 15 per cent above cost price"We urge upon the RBI and the Government to ensure that credit is extended to essential farm sector to the extent of 18% of total credit and Agri prices are fixed as recommended by the NCF headed by Prof.M.S.Swaminathan.Continued neglect of credit and underpricing of agri produce is not in the interests of the nation's food security and the farmers.
Continued neglect of farm credit during 2007-08 also. The RBI has today released its Annual Report for the year 2007-08.From the data provided therein,it is observed that additional credit extended to agriculture during 2007-08 ,declined to Rs43,260crore compared to a growth of Rs56,426crore during the previous year.The growth in agri credit is less than even personal loans which are mainly for non-production purpose.It is unfortunate that credit to essential sector like farm sector is continuously decreasing and no effective measures are taken by the RBI and the Government to ensure that banks extend credit to the mandated extent of 18% of net bank credit.The figure is hovering around 15% since 2000,even after the government declared that Agriculture is their prime concern.It is another matter that a major portion increase in agri loans is on account of disproportionate increase in indirect loans and big loans of Rs one crore and above.Referring to the growth rate in agricultural credit in the last few years (after 2000) Prof.M.S.Swaminathan recently said at Chennai on the 26th Aug that "it originated primarily from a growth in indirect finance to agriculture i.e. credit given to institutions and organisations that contribute to agriculture but not the credit given directly to agriculturists.""Between 2001 and 2006, direct finance to agriculture grew at 17.4 per cent but indirect finance grew by 33 per cent, he said. Even in the case of direct finance, the major rise in direct advances happened where the credit limit was more than Rs 1 crore." He underscored the critical importance of agriculture, stating “we can’t live happily as islands in a sea of misery”. Calling farmers the guardians of national food security, he said that it was their efforts that had enabled the country to have a buffer of about 25 million tonnes of wheat and 30 million tonnes of rice.He also reiterated that "the minimum support price offered by the Government to farmers must cover their costs and offer at least 50 per cent more as against the current levels of 15 per cent above cost price"We urge upon the RBI and the Government to ensure that credit is extended to essential farm sector to the extent of 18% of total credit and Agri prices are fixed as recommended by the NCF headed by Prof.M.S.Swaminathan.Continued neglect of credit and underpricing of agri produce is not in the interests of the nation's food security.
Labels: Continued neglect of farm credit even during 2007-08
Neglect of Farm Credit during 2006-07
Posted by K.Ramasubbaredy
As per data published by the RBI, as on March 2007, Credit given out of deposits collected from rural and semi-Urban areas continues to be less than the percentage of credit deployed in metro areas, indicating continued diversion of deposits from rural and semi-urban areas for giving credit in Metro areas. Had credit been extended to the same extent as in Metros, instead of 56% of deposits received from people in rural and semi-urban areas, additional credit over Rs 1,00,000 crore could have been given in rural and semi-urban areas benefiting mostly farmers and artisans and tiny industries thereby increasing production and income of rural and semi urban people considerably. This benefit was diverted to metro people at the cost of rural and semi urban people. The C/D ratio of NE, Eastern, and Central states is low at 40%, resulting in flow of funds from these regions to western and southern regions. The share of agricultural credit, a productive purpose and essential food supply activity, continues to be low, where as the share of personal loans, consumption based non-productive activity, is twice that of agri credit. Agriculture segment would have got more credit to the extent of Rs 21,000 crore in addition to Rs56,426 crore disbursed, had 18% credit was extended to this segment. Thus lower credit deprived agriculture much needed production and investment loans to which would have helped in augmenting agricultural production.
Posted by K.Ramasubbaredy
As per data published by the RBI, as on March 2007, Credit given out of deposits collected from rural and semi-Urban areas continues to be less than the percentage of credit deployed in metro areas, indicating continued diversion of deposits from rural and semi-urban areas for giving credit in Metro areas. Had credit been extended to the same extent as in Metros, instead of 56% of deposits received from people in rural and semi-urban areas, additional credit over Rs 1,00,000 crore could have been given in rural and semi-urban areas benefiting mostly farmers and artisans and tiny industries thereby increasing production and income of rural and semi urban people considerably. This benefit was diverted to metro people at the cost of rural and semi urban people. The C/D ratio of NE, Eastern, and Central states is low at 40%, resulting in flow of funds from these regions to western and southern regions. The share of agricultural credit, a productive purpose and essential food supply activity, continues to be low, where as the share of personal loans, consumption based non-productive activity, is twice that of agri credit. Agriculture segment would have got more credit to the extent of Rs 21,000 crore in addition to Rs56,426 crore disbursed, had 18% credit was extended to this segment. Thus lower credit deprived agriculture much needed production and investment loans to which would have helped in augmenting agricultural production.
Paddy needs higer MSP
Paddy MSP is fixated at Rs 850 a quintal by the Govrnment, CACP recommended Rs 1000 per quintal taking into account increase in the cost of production. Even after commencement of Khariff season, MSPs as recommended by the CACP were unnecessarily referred to the members of EAC, who are no experts in determining agri prices. And the EAC came out with an astounding recommendation that Paddy does not require MSP of Rs1000 per quintal as the acreage under paddy has increased during this khariff season. Their recommendation has no reference to cost of production and risks involved in paddy cultivation. Hence sticking to MSP of Rs 850 is unreasonable and unfair to farmers as it does not even cover cost of cultivation.
28/08/08
Bengal C M is right in opposing bandhs
Bengal C.MBudhadeb has taken a bold decision opposing bandhs which subject ordinary people to untold sufferings.No party has a right to bandhs and the Supreme ccourt also ruled similarly.All of us should support Budhadeb for opposing bandhs and congratulate him on the bold stand taken much to the chagrin of his party men.
First thoughts
I wish to share my thoughts with other like minded people on current events pertaining to India mostly in the field of economic developments and discuss with others on other subjects too.
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