A dedicated agri-budget for India?

Budget session this year starts 21^st February 2011. Our Finance Minister will present the annual budget on the last working day of February (on 28^th) and after being passed by the house it would come into effect on 1^st April, the start of the Indian financial year. The Railway Minister will present the rail budget three days prior to the finance budget on 25^th February. Our food inflation has stubbornly stayed above the 15% mark for the majority of last year. The Supreme Court has branded the food storage system in India a partial failure and has urged the government to decentralize the same. The 10^th Cricket ODI World Cup starts in less than two weeks and the President of the ICC wants to make it the most memorable one ever.

Now, there is a certain connection here I would like to discuss. Being the world’s 11^th largest economy in terms of GDP, we have a solid annual economic survey, a finance budget and a railway budget. But with food inflation at its peak, with a population growing faster than the rate of production of rice and wheat, with a deteriorating irrigation system, with frequent monsoon failures and with increasing farmer debts and suicides it certainly looks like we need to have a separate annual agriculture budget, much like the dedicated rail budget, to cater to the vast problems in the agricultural sector. If the need for a separate rail budget was because we are the fourth largest rail network in the world and the Indian Railways is the biggest public sector organization (by workforce) in the world, then we sure need a dedicated agriculture budget as we rank second worldwide in terms of farm output and agriculture and allied sectors account for a sixth of our GDP and employ more than half of our total workforce. Despite a steady decline of its share in the GDP, it is still the largest economic sector of our country.

So then, why is a single cabinet minister heading the Ministry of Agriculture & the Ministry of Consumer Affairs, Food and Public Distribution? And moreover, why is this person currently also the president of the ICC?

After the general elections in 2004, under the UPA, Mr. Sharad Pawar was made the Minister of Agriculture and the Minister of Consumer Affairs, Food and Public Distribution. In 2005 he became the president of the BCCI. In 2007, during the ICC presidential elections, neither David Morgan (then president of ECB) nor Mr. Pawar received a two-thirds majority and they struck a deal within themselves to share the seat. Mr. Pawar wanted the second half of the term as India would be hosting the WC in 2011. The ODI WC is a big international event and he has been pleading with the PM for almost a year now to reduce some of his burden. It was really surprising that the recent cabinet reshuffle did not relieve him of his domestic responsibilities being so busy with the preparation of the WC. What a pity that during such hard times a senior politician chose a sporting body & event over an important cabinet ministry (well, I should say ministries!) & moreover our PM still believes we don’t need a more dedicated minister for the job!

Do we really need to have a more able and dedicated person heading the Ministry of Agriculture? Is agriculture in India facing serious problems?

According to the World Bank, India's large agricultural subsidies are hampering productivity-enhancing investment. Overregulation of agriculture has increased costs, price risks and uncertainty. Government intervenes in labor, land, and credit markets. The allocation of water is inefficient and the irrigation infrastructure is deteriorating. Illiteracy, general socio-economic backwardness, slow progress in implementing land reforms and inadequate or inefficient finance and marketing services hamper farm produce.

The average size of land holdings is very small and is subject to fragmentation due to land ceiling acts, and in some cases, family disputes. Such small holdings are often over-manned, resulting in disguised unemployment and low productivity of labor. Adoption of modern agricultural practices and use of technology is inadequate or high-priced for small holdings.

Irrigation facilities are inadequate, as revealed by the fact that only half of the total land was irrigated in 2003–04, which result in farmers still being dependent on rainfall, specifically the Monsoon season. A good monsoon results in a robust growth for the economy as a whole, while a poor monsoon leads to a sluggish growth. Also, over pumping made possible by subsidized electric power is leading to an alarming drop in aquifer levels.

(Compiled from information on Wikipedia)

And why don’t we have a separate agri budget by now?

Finance Ministry officials have said that for the agricultural minister to present a separate agricultural budget in the parliament, we will have to go for a constitutional amendment. If in the last 60 years, there have been 94 amendments to the constitution, then why not a 95^th for a pretty serious issue? Agriculture is a priority sector and separating it from the general budget will help the government to focus on the sector effectively. For a start, the Karnataka state government has now promised to have a separate state agricultural budget for the FY 2011-12. It will be the first state in the country to have an exclusive budget for agriculture with a corpus fund of ` 5,000 crore per year. Well, the track record of the Karnataka govt. has been pretty poor in the current term, but I hope this works out and sets an example! 

2011 is going to be a tough year for UPA II. With the number of scams unearthing and the ever rising inflation, the onus is on them to deliver a good budget, which agriculture and industry have a lot of expectations from. With the opposition continuing to stall parliament due to the 2G scam, it needs to be seen how well the government has answered some of these questions and how well the budget will be debated in parliament in March. Inflation is at a peak and population BPL now stands at 37% while unemployment is at 9.4% and good solid reforms in agriculture and food storage & distribution can help reduce all these numbers. For a start, decentralization, privatization & foreign investment in these sectors will be a welcome move!