Making an initial estimate of economic growth at 8.2 per cent in 2010-11 and nine per cent in 2011-12, the Prime Minister’s Economic Advisory Council (PMEAC) has listed a host of farm sector measures that need to be put in place for a bounce-back in agricultural GDP and avert the cascading effect of the current food price spiral on overall inflation during the new fiscal.

The overall growth projections, however, are based on certain basic assumptions. In its ‘Review of the Economy 2009-10’ released here on Friday, the Council said that the growth assessments of both these years assume a normal South West monsoon and absence of any major calamity or setback at the international level, continuation of strong expansion in industrial and service sector activity during the period, along with the implementation of the government’s priorities and initiatives in the creation of infrastructure with private sector participation along desired lines.

Moreover, these growth estimates are based on the expectation that farm sector growth would bounce back from the current fiscal’s projected decline of 0.2 per cent. “The Council expects a bounce back in agricultural GDP in the next year and maintenance of the desired trend growth of four per cent in 2011-12,” the review said.

To achieve the projected farm growth target, the PMEAC has prescribed a number of measures that need to be implemented over a period.

For the short term, while noting that the authorities should be alert in pre-empting a food inflation spill-over to headline inflation through the manufacturing sector during the coming months, the PMEAC said: “The RBI’s monetary policy must remain alive to the danger that a significant transfer of food price inflation to the general price level may occur in 2010-11.”

It also pointed towards the potential of commodities prices rising globally owing to a revival in developing countries and the current unsettled financial conditions.

“The danger of food inflation spreading to other commodities certainly exists, especially in the backdrop of the strong economic recovery…India and China as well as several other developing countries are showing strong signs of growth, and their elevated domestic demand in combination with unsettled financial condition has the potential of causing commodity prices to rise further,” the review said.

While calling for better farm practices, soil research, irrigation and increased productivity through the supply of quality high-yielding seeds to farmers during the medium term, the PMEAC suggested urgent imports of sugar to the extent of three to five million tonnes to bridge the demand-supply gap during the new fiscal.

“The expected output of sugar, including processed raw sugar...is unlikely to be much more than 14 million tonnes,” it said, and cautioned that even if there was some reduction in demand owing to high prices, the stock position would rapidly come close to the nil level before the festival season began (from September 2010).

The PMEAC also urged the Centre to consider rice imports to build stocks if procurement falls below 27 million tonnes in the current season.

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