New Delhi (PTI): There is an urgent need for remedial steps to turn around the poor performance of the agriculture sector and move towards a positive growth, according to a farmers' body.

"The slow growth will definitely continue unless urgent remedial steps are initiated. It will have serious consequence for national food security, over all economy and rural unemployment and other related issues," Consortium of Indian Farmers Associations (CIFA) Secretary General P Chengal Reddy said in a statement.

The agriculture sector needs massive budget allocation to improve research and development efforts and soil conserving efforts to improve yields, Reddy said.

The Indian economy grew by 5.3 per cent in the third quarter, the slowest quarterly growth this fiscal, pulled down by contraction in manufacturing and farm production even as some services showed robust expansion.

The farm sector, believed to be de-coupled from the global financial meltdown, also succumbed to the pressure of the slowing economy and fell by 2.2 per cent in October- December, 2008-09, against the growth of 6.9 per cent a year ago. http://www.thehindu.com/holnus/015200903011211.htm- 010309

Dear Dr. Montek Singh Ahluwalia,

*Please see paper titled “FARMERS PRAISED AS HEROES, BUT INCREASE IN FUNDS ALLOTED FOR FARM SECTOR-ZERO” in the section ‘our Latest” of our website   http://www.indianfarmers.org/

Yours Sincerely

P. Chengal Reddy
Secretary General

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While clamouring for India’s resilience on economic growth, a sharp fall in gross domestic product (GDP) growth is a major concern. The third quarter GDP growth for the current financial year slowed to 5.3 per cent year-on-year as compared to 7.6 per cent year-on-year in the previous quarter, belying all market expectations.

“This was lower than the market consensus of 6.1 per cent year-on-year and our estimate of 5.6 per cent,” says, Pranjul Bhandari, economic analyst, Goldman Sachs. The third quarter GDP data was unveiled by the Central Statistical Organisation (CSO) on Friday last.

Industrial growth slowed to 0.8 per cent year-on-year from 4.7 per cent year-on-year in the previous quarter as foretold by the slowdown in the index of industrial production (IIP).

Services sector growth remained flat at 9.5 per cent versus 9.6 per cent in the previous quarter as falling growth in construction, trade and hotels, which was evened out by rapid increase in community and social services. Community, social and personal services posted a robust 17.3 per cent growth in the third quarter against 5.5 per cent in the same period a year ago. Financing, insurance, real estate and business services also grew by 9.5 per cent as against 11.9 per cent. On a seasonal basis, the GDP fell 0.4 per cent quarter-on-quarter as compared to a 1.3 per cent rise in the previous quarter.

Investment growth slumped while government consumption grew rapidly. Fixed investment demand growth slumped to 5.3 per cent year-on-year from 15.1 per cent year-on-year in the previous quarter. Private consumption growth weakened to 5.4 per cent versus 6.9 per cent.
However, government consumption growth ballooned to 24.6 per cent from 7.9 per cent in the second quarter. Exports growth increased to 11.4 per cent from 10.6 per cent in the second quarter as the impact of a weakening rupee kicked in. The growth in imports weakened due to falling domestic demand. Fiscal deficit is estimated at 10% of GDP. Thehindu-2-3-09

Two important sectors of the economy actually declined during the quarter. Agriculture experienced a sharp drop of 2.2 per cent, understandable against the almost 7 per cent surge of a year ago. This takes the growth rate for the April-December 2008 period to a mere 0.6 per cent. The pattern actually bodes well for growth rates next year if agriculture comes back to normal. Manufacturing also declined, by 0.2 per cent over the third quarter of 2007-08. The growth rate for the April-December 2008 period is, consequently, a rather modest 3.4 per cent, reminiscent of the sluggish 1998-2003 period. Recovery in this sector depends critically on the combined impact of the monetary and fiscal measures taken during the past few months. However, the negative tendency appears to be rather strong and is therefore likely to persist. One surprise is the buoyancy of the Finance, Real Estate, Insurance and Business Services segment, which grew by 9.5 per cent during the quarter. This appears to be at odds with conditions on the ground in most of these activities, the exception being bank credit which continued to grow during the quarter. BS 020309

3* Minus pay hike, GDP GROWTH IS ONLY 4.2%

Comments:  What the growth of 17% in Community, Social and Personal services segment represents in terms of income growth? It is  the implementation of the Sixth Pay Commission’s report, benefiting 8.3 million central government employees and pensioners. This caused the Community, Social and Personal Services segment, which accounts for about 12 per cent of GDP, to surge by 17.3 per cent over the corresponding quarter of 2007-08, a sharp jump from the approximately 8 per cent growth during pervious quarters. Without the surge, overall GDP growth during the quarter would have been only 4.2%. Compared to last year, this category will continue to show high growth, as state governments implement their own salary hikes. Growth in the salaries and perks of Government employees thanks to liberal revision of pay unconnected with improvement in public service and unconnected with increase in output of work and Government spending in social sectors such as NREGS and welfare measures where leakages are nearly by 50% and inefficiencies are legendary. The growth in this segment is less real value addition but more cost addition.

The growth in per capita income in agri sector, where from 60% households derive their income, is not going to be 5.6%, estimated as the overall average per capita GDP by CSO. The per capita growth in agri sector will be just about a megre 1% when we take into account agri GDP growth of 2.6%. As for those dependent for their income from industrial sector, per capita growth in income is 3.3% when we take growth in industrial GDP at 4.8%. And for those who derive their income from services, there is a whopping increase in per capita income at 8%, taking services GDP growth of 9.6% into account.

So, while farmers per capita income grows just by a mere 1%, the per capita income of those in services increases  eight times more to 8%.On what basis and logic these kinds of inequities and disparities in comes can be justified.  Service sector is supposed to be support to primary and secondary sectors. But now it looks as if these two sectors are serving the service sector!!! Can any one justify with facts and figures that services of persons in service sector are eight times more valuable than the produce of farmers who provide the people of the nation with life sustaining food and essential raw materials for Agro Industries?

The country’s sugar sector has by now become a classic example of how unwarranted, untimely or delayed Government intervention can distort the market rather than bring order. Concerned over a sharp decline in sugar output during the ongoing 2008-09 season, the Centre has imposed storage limits , and has allowed import of raw sugar. Why did the Government take these precipitate steps at this point of time, when the state of 2008-09 cane acreage and crop conditions were clearly known as far back as September/October 2008? The Government merrily allowed exports until late 2008 despite early signals of an output decline.
The Government is the problem, rather than being part of the solution. Estimate of sugar production that was first placed at 22 million tonnes (mt) gradually shrunk to 20 mt and then to 18 mt by January 2009. Now, the Government is talking about a further decline to about 16.5 mt. This represents a clear failure of commercial intelligence on the part of policymakers. Given the long crop cycle, cane gives advance signals about the crop size. The competence of the government to estimate cane yields and output is suspect. At the State level, the cane commissioners are not sufficiently qualified to undertake crop survey and come up with output estimate of any reasonable accuracy. They often depend on trade and other sources.
India is entering the world sugar market as an importer exactly at a time when global output is set to decline by over 10 mt and stocks would invariably be drawn down.  The world market has already taken cognisance of India’s import needs and has perked up by about 25 per cent in recent weeks.
Among various major agricultural crops traded in the world market, sugar has perhaps the most attractive upside potential on current reckoning.
With a weak rupee, and no immediate prospect of a recovery, imported raw sugar when refined and sold in the domestic market would be about Rs 22,000 a tonne. In addition, restrictions on sale of imported sugar are sure to add to tightness in supplies and defeat the purpose of imports. Domestic prices that are currently at about Rs 2,100 a quintal run a strong upside risk, with a spurt of at least 10 per cent from the current levels.

Storage restrictions and turnover restrictions are sure to create unhealthy market conditions, add to the uncertainty and revive the infamous inspector raj. Blending of cane-based ethanol is all but forgotten. No one in the policy circles is talking about structural issues of the industry such as consolidation of fragmented capacities, modernisation of mills, reducing the cyclical nature of cane output, quality related pricing for cane, and many more. G.Chandra Sekhar-BL 020309