The Tribune, Chandigarh, India

Gloomy projections for farm sector
Tribune News Service

New Delhi, February 23
With just a month left for the opening of the agriculture sector under the WTO regime, the Economic Survey has projected a gloomy future for the sector, including a sharp fall of about 10 million tonnes in foodgrain production.

While calling for the removal of all restrictions on agriculture-related products, inputs and services, including SSI reservations, the survey has stated that agricultural production will decline by 4.7 per cent during the current fiscal year.

The total foodgrain production in 2000-01, the survey said, was likely to be a low of 199 million tonnes compared to 208.9 tonnes in the preceding year.

“The effect of this large decline is not worrysome as the country sits on a very large public food stock of over 43 million tonnes,” the pre-Budget report said.

“After further opening up of the trade regime under the WTO from April, 2001, it is all the more necessary that farmers look not only to the domestic market but also seize opportunities in the global market for improved value added realisation and diversification,” the survey said.

“Export of processed agri-products will be the key to improved export realisation, which is possible only if domestic policies allow unrestricted movement, storage and liberal trade regime,” it added.

The survey’s export advice comes at a time when the agri-export has shown a considerable decline. The agri-export in relation to the country’s total export has declined from 18.1 per cent in 1998-99 to 14.6 per cent in 1999-2000, about 25 per cent decline compared to the previous year.

India’s agri-exports face certain constraints that arise from conflicting domestic policies relating to production, storage, distribution, food security and pricing concern.

Higher domestic prices in comparison to international prices of products of bulk exports make our exports commercially less competitive, the survey said.

The pre-Budget document said that despite reforms since 1991, the general impression was that “agriculture in India operates amidst restraints and controls and that farmers do not receive the benefits of free trade as compared to other sectors.”

A pre-reform and post-reform growth in the agriculture sector indicates a decline of 0.3 per cent. In the period 1980-81 to 1991-92, the growth in agriculture was 3.9 per cent and it has come down to 3.9 per cent in 1992-92 to 1999-2000.

For the rabi crop prospects, the survey said “they do not appear to be satisfactory.”

However, the good news for the region was that Punjab and Haryana might reap normal wheat crop because of assured irrigation, decline in production would be mainly in UP, Rajasthan, MP and Gujarat.

Agriculture and allied sector, it said, was anticipated to grow by about 0.9 per cent in 2000-01, which was marginally better than 0.7 per cent growth in the preceding year.

Stating that 130 million hectares were under foodgrain area, the survey said the country had reached a plateau in so far as the area devoted to foodgrain production was concerned.

“Any increase in foodgrain production in the country has to come through increase in productivity,” the survey said, adding that the pricing policy for urea units, only fertiliser under price, distribution and movement control, would also aim at uniformity and transparency in disbursement of subsidy to urea manufacturers and encourage measures to encourage units to undertake cost reduction measures.

	Poor yet to get basic necessities Tribune News Service New Delhi, February 23 Despite the much improved growth rate, the poor continue to be deprived of accessing the basic necessities of life. The Economic Survey 2000-2001 points out that a veritable ICE revolution — information, communication and entertainment — together with globalisation of trade has caused awareness amongst the poor of how deprived and disadvantaged they have been. The survey says that fulfillment of the basic needs and adequate income distribution will become feasible with higher rates of economic growth. It emphasises that the role of government is vital for meeting basic needs. “For more affluent people, access to private schools, high-tech hospitals, transport and communication, piped water and uninterrupted power supply may appear normal features of modern day living. For the poor, the basic necessities of life have a different connotation. Their needs are initially for simple necessities — free and easily accessible schools for children, mid-day meals at schools, public health services, cheap public transport, basic sanitation and water supply facilities,’’ the Survey says, while admitting that rural habitation and urban slums have only a limited supply of such facilities. The Survey notes that India’s infant mortality rate (IMR) and child mortality rate (CMR) were very high in comparison to many developing countries. It says that the maternal mortality rate (MMR) of 408, which translates to one maternal death in every 200 pregnancies, paints a disturbing picture of maternal healthcare. The survey draws attention to the problem of ‘missing women’ in India, where, like other countries of South Asia, the ratio of women to men is abnormally low. The Survey says that National Population Policy-2000 recognises that population stabilisation is as much a function of making reproductive healthcare affordable, as of improving services such as primary and secondary education. The NPP, it says, has immediate, medium and long-term objectives. The immediate objective is to address the unmet needs of contraception and health infrastructure, the medium-term objective is to bring total fertility rates to replacement levels by 2010. The long-term objective is to achieve population stabilisation by 2045. Noting that recovery of user costs is an essential ingredient of economic reforms, the Survey, however, cautions against privatisation reducing access to health services for the poor. It cites example of eastern European countries where reforms and privatisation had resulted in reduction in access to health services for the poor. The Survey says that Plan and non-Plan expenditure of the Central government on various components of social sectors has increased from Rs 9,608 crore in 1992-93 to Rs 36,270 crore in 2000-01, an increase of about four times in eight years. Regarding the availability of drinking water, the Survey says that the per capita supply in Class I cities (population of above 1 lakh) is around 140 litres per capita per day, while in other classes of towns, the supply was far from satisfactory. The unaccounted for water ranges between 20 per cent and 40 per cent which implies that a substantial quantity of precious water is being lost through leakages.
	Power growth rate down, telecom up S. Satyanarayanan Tribune News Service New Delhi, February 23 Despite significant reforms, the growth rates of infrastructure sectors were mixed during 2000-2001, with power and cement production witnessing a significant deceleration and the telecommunications sector continuing its rapid growth. The average growth rate of six core and infrastructure industries (electricity, crude oil, refinery, coal, steel and cement), having a weight of 26.7 per cent in the overall Index of Industrial Production (IIP) at 7.7 per cent in April-December 2000 is lower than that of 9.1 per cent achieved in April-December 1999, according to Economic Survey 2000-2001 tabled in Parliament today. While there is a significant deceleration of the growth rate in electricity generation, among the other infrastructure sectors, there is a deceleration of the growth rate for cargo handled at major ports, from 9.2 per cent in April-December 1999 to 3.9 per cent in April-December 2000 and for revenue earning goods traffic on Railways from 8 per cent in last year to 5.2 per cent this year. However, the growth rate of new telephone connections increased significantly from 29.8 per cent last year to 33.4 per cent this year. The telecom network has 28.4 million working connections comprising 28,936 telephone exchanges in the country as on October 31, 2000. The number of cellular subscribers has almost doubled during the preceding year i.e. from 1.4 million as on September 30, 2000 to 2.6 million as on September 30, 2000. Petro-refinery production has improved its growth rate from 22 per cent in April-December 1999 to 25.9 per cent in April-December 2000, the steel and coal sectors have also performed marginally well in the current year. As for the power sector, the Economic Survey points out that despite significant reforms in the power sector, such as the setting up of a regulatory authority and opening power generation to private investment, the performance of the sector has been disappointing. The private investors in the sector are deterred by high risks of non-payment by financially weak state electricity boards (SEBs) which are the sole buyers. The large investment flows may not materialise unless the important issue of commercial viability of SEBs is properly addressed and re-structuring of SEBs, unbundling of risks initiated by several states, are expedited. There has been a phenomenal growth in the telecom sector in the last two decades. During April-December 2000 there was a growth of 29.8 per cent in terms of new connections provided during the current year. The existing modal mix of traffic between railways and roads with the predominant share of roads is non-optimal. As railways are less energy intensive and more environment friendly there is need for railways to regain its share in traffic through capacity augmentation aided by corrective pricing policies and organisational charges, the Survey says.
	‘Bring services in tax net’ Tribune News Service New Delhi, February 23 The forthcoming Union Budget may incorporate some changes in the existing tax structure with more segments of the services sector expected to come under the tax net. The Economic Survey for 2001-02, placed in Parliament today, spoke in favour of bringing the services sector under the tax net even as the government report card on the economy was critical of the various exemptions in the current regime. The country’s tax structure continues be beset by exemptions, allowances, deductions and incentives, the Survey said. “The rates remain saddled with numerous exemptions which affect the efficacy of tax administration”, the survey says adding that reduction of duty rates notwithstanding, the tax base continues to be “narrow and porous”. Tax revenue as a percentage of GDP stands at 9.2 per cent, and to raise the tax-GDP ratio, the Economic Survey has underlined the need for widening the scope of the service taxes. “The service sector has been one of the fastest growing sectors of the national economy, but largely remains untaxed”, the Survey said. Terming the introduction of a full-fledged Value Added Taxation (VAT) regime as a “challenge”, the Economic Survey says that the progress of VAT has to be harmonised among states to avoid inter-state disputes. Expressing concern about the rising government expenditure, the Survey observes that the expenditure restructuring is constrained by interest payments, pensions, wages and salaries, and statutory transfers to states. The upward trend in the combined (Centre and states) fiscal deficit has led to the accumulation of public debt leading to high interest rates which adversely affects interest rates. This has serious consequences towards public investment and social expenditure, the Survey said. Moreover, subsidies need to be better targeted, even though in recent years, efforts have been made to reign in the burgeoning subsidy bill. “Subsidies need to be better targeted, transparent, for finite duration and should serve strict economic objectives”, the Survey cautions.
	Domestic policies affecting export growth Tribune News Service New Delhi, February 23 Infrastructure constraints, high transaction costs, reservations for the small-scale sector, inflexible labour laws, quantitative ceilings on agri-exports and constraints in attracting foreign direct investment are among the various domestic factors affecting the growth of exports in India, according to the Economic Survey 2000-01. Making a pointed reference towards the reservation policy of the small-scale sector, the Economic Survey said a significant number of products in which India enjoys a comparative advantage are reserved for the small-scale sector. “It is difficult for Indian exporters of items such as toys, clothing, shoes, transistor, radios, and leather goods to upgrade their quality and attain economies of scale”, the Survey said. Besides, emerging protectionist sentiments in the guise of technical standards and environmental and social concerns have affected market access for exports from developing countries. After maintaining a declining trend for the second successive year, aggregate annual inflows of foreign direct investment (FDI), however, has shown some sign of improvement during 2000-01, with the inflows during April to December standing at $ 1,916 million — higher than the comparable figure of the corresponding period of the previous year. Regarding the Special Economic Zones (SEZs), which were set up to qualitatively transform the traditional export processing zones, the survey says that domestic policies will critically determine the performance of SEZs. “The extent of the success of SEZs in India would crucially depend upon the degree to which domestic regulations, restrictions and infrastructure inadequacies are eliminated in these zones”, the Survey observed. Regarding the overall global scenario, the Economic Survey has cautioned that the encouraging outlook in the external environment is fraught with risks and uncertainties, with many individual developing countries facing the scare of a deteriorating trade balance. With many oil producers close to capacity and stocks relatively low, there may be upside risks to global oil prices, which will have direct impact on global activity and inflation.