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Increase investment in agriculture, says chamber

The new agriculture policy to be announced by the government should aim at enhanced public investment in this sector with emphasis on infrastructure of irrigation and power, says the Punjab, Haryana, and Delhi Chambers of Commerce and Industry.

Priority should also be given to public investment in soil and ground water conservation, forest denudation, and wasteland development.

There has been a marked decline in public investment in agriculture due to diversion of scarce resources from investment to current expenditure in the form of increased subsidies for food, fertilisers, electricity, irrigation, credit, and other agricultural inputs rather than on the creation of assets.

Detailing the priority areas in the new agriculture policy in a paper on 'Agricultural Development for the 21st Century,' the chamber sought direct enhancing of the stock of capital employed in the agriculture sector. The report also asked for public capital formation in agriculture, which was known to stimulate the farmers's investments in business, resulting in a further enlargement of capital stock of agriculture.

The strategy to increase capital formation in agriculture should include an increased plan outlay, increased proportion for development of infrastructure, more efficient use of resources to raise productivity and ensuring remunerative prices to farmers to enable them to use own savings for higher investment, the PHDCCI suggested.

The investment or gross formation in agriculture by public and private sector together shows an increase trend during 1970s and 1980s despite yearly fluctuations. The rising trend in private investment may be due to the improved trade policy regime for agriculture vis-a-vis industry in the post-reform period.

The PHDCCI attributed the decline in public investment to the diversion of resources from investment to current expenditure in the form of increased subsidies for food, fertilisers, electricity, irrigation, credit, and other agricultural inputs rather than on creation of assets.

Other reasons cited for slow growth in public investment in agricultre are large expenditure on maintenance of existing projects, relatively lower allocation for irrigation, rural infrastructure and research, more emphasis on food security, lack of effective credit support and credit infrastructure in rural area.

The bulk of the public investment in agriculture takes place on account of the state under whose exclusive purview comes agriclture (including irrigation) as per the Indian Constitution. Net borrowings from the market plus surplus on revenue account together determine the total availability of investment funds with the state governments. The absolute reduction in fund availability between 1980-81 and 1992-93 amounted to Rs 9.34 billion.

In the same period, the reduction in public investment in agriculture amounted to Rs 7.31 billion. Thus, the brunt of investment fund scarcity with the state governments in recent year appears to have been borne by the agriculture sector.

Agriculture, including irrigation, was probably the single most important investment head in state budgets. Still, it has to compete with other investment heads like roads, education, electricity generation and distribution, and rural electrification.

The new agriculture policy should also aim at stepping up agriculture credit specially for small and marginal farmers. Despite the significant increase in overall agricultural credit, there has been a serious problem of overdues and their non-payment. With the objective of reducing the problem of bad debts, overdues, losses and writeoffs, the cooperative banks need to be made to abide by prudential norms and allowed to function freely as voluntary institutions of the farmers. They should have the freedom to decide upon their deposit and lending rates depending upon the overall market conditions in the economy, the PHDCCI suggested.

Another area that needs focussed attention was research and development for the agriculture sector. "It is essential to invest in agriculture R&D if we want to be internationally competitive in the next century. Greater emphasis needs to be laid on creation of new technologies that would be suitable for enhancing productivity in India's agri-climatic zones," the chamber said.

Development of appropriate post-harvest technologies was very crucial at this juncture. Continuous and smooth flow of information from laboratories to the farms and the reverse feedback could be ensured through farmer co-operatives. The area of agriculture management cannot be ignored in today's world of science and technology, it stated.

UNI