A setback to the farm growth rate and the emergence of double-digit food inflation have been singled out in the Economic Survey of 2009-10 as major areas of concern.
Pointing to an estimated minus 0.2 per cent growth rate in 2009-10 over 2008-09 in agriculture and allied sectors, and food management policies that led to sustained high food inflation, the Survey, tabled in Parliament on Thursday, advised the government to take serious policy initiatives to contain inflation and prevent it from spilling over to generalised inflation.
It categorically observed that rising food prices, spurred by expectations of shortfall in food production, had brought the issues of food security, food stocks management and the need for improving food production and productivity to the forefront of national strategy.
It pointed out that “the excessive hype about Kharif crop failure, not taking into account the comfortable situation in respect of food crop and the possibility of an improved rabi crop, may have exacerbated inflationary expectations encouraging hoarding and resulting in higher inflation in food items.
“In the case of sugar, delay in market release of imported raw sugar may have contributed to the overall uncertainty, thereby allowing prices to rise to unacceptably high levels in recent months. “A significant part of this inflation can be explained by supply-side bottlenecks in some of the essential commodities, precipitated by the delayed and sub-normal south-west monsoon.” the survey observed.
As the result of a 23 per cent shortfall in monsoon rainfall, the first advance estimates of the 2009-10 kharif production which was hit by the drought, declined by 18.51 million tonnes over 2008-09, including the output of rice, coarse cereals and oilseeds.
Significantly, the kharif season also saw a decline of 6.5 per cent or 46.18 lakh hectares in the area covered under foodgrains, including pulses and oilseeds. However, some of this decline was made up for by an increase in rabi acreage in wheat, pulses and groundnut.
The survey noted that on the one hand enhanced minimum support price for foodgrains signalled the floor price for the produce, which in turn has the potential of increasing prices. On the other hand, the inability of a large number of small and marginal farmers to directly access agri-markets put a question mark on whether such increases benefitted them.
While acknowledging that record procurement of wheat and rice had helped in building up a buffer stock, the survey emphasised that a huge food subsidy was involved in the process. “This puts a lot of stress on the fiscal system. The issue of efficient food stocks management and offloading of stocks in time needs urgent attention,” it said.
The survey recommended that the challenges in the farm sector be met by improving production and productivity, better utilisation of farm inputs, proper marketing support, stepping up of investment in agriculture and by efficient food management.
The agriculture sector, including allied activities, accounted for 15.7 per cent of the GDP (at constant 2004-05 prices) in 2008-09 compared to 18.9 per cent in 2004-05, and contributed approximately 10.2 per cent of the total exports in 2008-09. The sector provides employment to around 52 per cent of the workforce.