Agriculture and Employment Ignored Once Again
by Ashwani Mahajan on 06 Mar 2010 0 Comment

During the 1990s, 8 to 10 percent of planned expenditure was allotted to agriculture. But for the past decade or so, this has reached to a low 2.5 percent. In every budget, the government pays lip service to agriculture. Last year, the UPA waxed eloquent about agriculture and invested a meagre Rs 10,123/- crores on agriculture, which was just 2.37 percent of Plan expenditure and barely one percent of the total expenditure of the Central budget, as per revised estimates.


In the Budget 2010-11, this figure amounts to 2.34 percent of planned expenditure. The much hyped provisions for programmes on oilseeds and pulses are an eyewash; as a proportion of total Plan expenditure, the expenditure on agriculture has actually declined, though marginally. When the country is passing through a crisis of agriculture, this depicts the utter insensitivity of the regime towards agriculture and agrarian economy.


A really funny concern was shown in this budget about the agricultural sector, and the solution provided was equally funny. The budget said the major problem in agriculture is the wastage of agri-produce. The Finance Minister reiterated the Prime Minister's earlier proposal that this problem could be handled more efficiently by foreign retailers, and announced the opening of the retail sector for foreign retailers.


The Finance Minister’s argument was that these international retailers have an efficient supply chain, which can help reduce wastage. As the government does not have any study proving this point, this move is premature, devoid of logic, and an attempt to wash its hands off from providing a meaningful solution by way of an efficient warehousing system. Such of utterances by Government once again demonstrate the UPA’s insensitivity to agriculture and a mindset that the solution to all problems facing the Indian economy is foreign investment.


Another problem is the fiscal deficit, which touched a high 6.8 percent in the last budget. Since high oil prices in the international market compelled government to subsidise the domestic market, such a high fiscal deficit was understandable. But given the present level of oil prices, the proposed 5.5 percent fiscal deficit is certainly very high.


More disturbing is the fact that despite such a high fiscal deficit, there is no significant increase in capital expenditure in the budget. What keeps the fiscal deficit lower than the previous year is also the hope that government will be able to collect more taxes in the next fiscal 2010-11.


Unemployment is another major issue. While unemployment is rising, even according to government statistics, the Finance Minister has chosen to keep mum on the issue. Perhaps the government thinks its duty is over by allocating funds for the much-hyped NREGA. No doubt it NREGA does provide some employment, but it is only a temporary reprieve. It is imperative to find a sustainable solution to the problem of unemployment by creating avenues for permanent employment. This can be ensured by adopting labour intensive techniques, wherever possible. Indeed, we can say that the budget lacks concern about the burning problem of unemployment.


Economic development in any country and the improvement in the quality of life of its citizens depend largely upon its infrastructure development. Power generation capacity, road construction, airports, means of communication, etc. are important ingredients of our infrastructure needs.


Unfortunately, India’s infrastructure is not up to the required standards of developed countries. For so many years, targets to increase power generation capacity are not even half met. In road construction, the government itself has conceded it has not kept a pace of even 4 kilometers per day in highways road construction. When the UPA assumed the reins of power from the NDA in 2004, 6200 kilometers of national highway roads were under construction, and between 2001-02 and 2004-05, 6300 kilometer national highways including the Golden Quadrilateral were actually constructed. In fact, national highways construction has virtually stopped during the UPA regime. Even rural roads projects are almost halted due to paucity of funds.

Two things have been happening simultaneously. One, the government has been shying away from its duty to build infrastructure itself and was trying to involve the private sector in building infrastructure under the public-private partnership. Two, capital formation in infrastructure has been coming down despite the increasing contribution from the private sector.


Whereas in 1993-94 nearly 6 percent of GDP was going into infrastructure, in recent years it has come down to nearly 5 percent. Though infrastructure development is primarily the responsibility of the government, there is no harm if the private sector is involved in infrastructure development owing to paucity of funds. But despite a large number of private-public sector partnership projects in infrastructure, only infrastructure capital formation to the tune of merely 5 percent of GDP is really unfortunate.


In the present budget, the government has set a target of building 20 kilometers roads per day on national highways and has made better allocations for infrastructure projects, including railways’ expansion and modernisation, which is a welcome step. If the government spends efficiently in accordance with budgetary allocations, and focuses upon power generation, roads and railway construction, and other types of infrastructure development, it may give a huge fillip to infrastructure development.


As for the inflation front, there does not seem to be any reprieve in the budget, for three reasons. The first is that the basic cause of inflation – the neglect of agriculture and thus the shortage of food items – has not been corrected. Second, the high level of deficit and the expectations that this deficit will rise higher, continue unabated. Third, ill-timed moves like the hike in petroleum prices.


It seems that the government, instead of tackling the problem of inflation, has found it easier to surrender before it.


Dr Mahajan teaches Economics in the University of Delhi, Delhi 

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