The recent past has been quite glorious and fruitful to Indian Economy.Decent run with high GDP growth with an average of about 9% (8.8%) has leveraged a confidence in investors.But what about the future.The growth as projected by the optimistic RBI and the ministry of finance is 8-8.5% and JP Morgan has projected a lower growth of about 7%.
A new attempt by ICRIER (Indian Council for Research on International Economic Relations) forecast GDP growth for 2008-09 by using a composite index of leading economics indicator(LEIs) for Indian economy,which is used to predict the future economic behavior is worth commendable. ICRIER was correct while projecting India's growth at 9.2% for 2007,while many others restricted themselves to 8.5%.
The Index is constructed by considering various indicators are considered :
1) Production of machinery and equipment. 2) Sales of heavy commercial vehicles 3) Non-food credit 4) Railway freight traffic 5) Cement sales 6) Sales of corporate sector 7) Fuel and metal prices 8) Real rate of interest.
By experimenting different lag levels between GDP growth it is found that a 5-quarter lagged index of LEIs forecasts GDP growth most accurately.Projections are carried out on a quaterly basis in this model. These quarterly projections work out to a GDP growth of 7.8% for 2008-09 compared to the actuak GDP growth of 9% for 2007-08.Though this is not sharp slowdown for the economy of a country but this diwntrend in the LEI is to continue. It is imperative that the Indian economy has been stretched to its limit and it is unlikely that it will sustain the 9% growth in the near future. Rising inflation, hike in interest rate,widening trade balance and falling industrial growth are the real indicator that the industry is pushing against its its potential growth limits.
So the next concern arises about the way forward. Well to say the least Acceleration of reforms in various areas is the only way to raise the economy's potential rate if growth in output. While government has been talking about a second round of reforms ever since its assumption of office in 2004,reforms efforts have received a serious setback in the past few years. Unless Govt. vigorously pushes forward with reforms in areas ranging from agriculture,infrastructure,education,business,climate,public services delivery to retail trade, we will not see the return of high rates of growth on a more sustained basis as in China.
N.B: Excerpts taken from a article in a leading Indian Daily.
Tuesday, July 22, 2008
Monday, July 21, 2008
Agricultural Productivity - a concern - so adress it.
The fundamental malaise behind the current global food crisis is that, the world over, the yield of agricultural crops has been nearly flat for over a decade. (See the accompanying table.)
Let us consider the productivity of wheat in India. It was 2.71 tonnes per hectare in 2002. It fell a few notches to 2.63 tonnes per hectare in 2007. India’s productivity in rice was 3.14 tonnes per hectare in 2002. This has moved up marginally to 3.18 tonnes per hectare in 2007. The productivity of wheat in America has inched down from 2.7 tonnes per hectare in 2002 to 2.6 tonnes per hectare in 2007. Even Brazil’s sugarcane productivity has merely climbed up from 70 to 71.10 tonnes per hectare in the same five year span.
If we scan the accompanying tables, we can see that there has been practically no tangible increase in the yield of wheat, rice, corn, soyabean or sugarcane in any part of the world over the last 10 years. Agricultural productivity has stagnated internationally, while the consumption of agricultural products has steadily increased with the increase in income levels and population growth.
Let us come closer home. India’s average rice yield today is 2.9 tonnes per hectare. By comparison, China’s average rice yield, at 6.3 tonnes per hectare, is more than double that of India. South Korea has achieved an even higher rice yield, i.e., 6.8 tonnes per hectare.
What is the reason for India’s consistently low agricultural productivity? In traditional agricultural practice, the productivity of foodgrains has averaged around one tonne per hectare, according to Prof Jeffrey D Sachs, professor of economics and director of the Earth Institute at Columbia University. Traditional agriculture is patterned on a single annual crop and a single harvest, i.e., only one planting season in a year. The average yield of foodgrains has gone up to two tonnes per hectare, and in some cases, even up to three tonnes per hectare, after the Green Revolution. The Green Revolution triggered a quantum jump in productivity by creating high yielding varieties of seeds and by enabling the optimal use of fertilisers and pesticides.
But agricultural productivity has again stagnated after the Green Revolution. Agricultural yields are now languishing around the world. But even here, what causes concern is that India’s agricultural productivity is even lower than that of many other countries. India has 170 million hectares under foodgrain cultivation, producing 220 million tonnes of foodgrains in a year. China has only 60% of this arable land area. But it is able to harvest twice the quantity of foodgrains that India produces.
According to the government of India’s Economic Survey, the rate of growth in India’s food production is 1.2% a year, significantly less than the population growth rate of 1.9%. The creation of additional irrigation potential in Indian
agriculture was 3% a year in the 1990s. It has declined to 1.8% in 2007.
The total central plan spending on agricultural and allied activities, as a proportion of India’s gross domestic product (GDP), is projected to decline from 1.42% in 2007-08 to 1.30% in 2008-09. Clearly, there is need for a greater focus, on the part of both the central and state governments, on the growth of the agricultural sector. What is also needed is an institutional mechanism to bring into being effective public-private partnerships that can change the face of Indian agriculture.
But while India’s agricultural productivity has tended to stagnate, the country’s per capita foodgrain consumption has continued to spiral. India’s total foodgrain consumption is now growing at a rapid clip with the country’s fast burgeoning population.
There are an estimated 400 million poor people in India. These poor people are now beginning to consume staple foods which they were not able to afford earlier. Consequently the demand for staples is beginning to steeply rise in India, creating apprehensions of a possible food shortage.
Sixty years after Independence, India produces, on an average, only 14 kg of
rice and wheat per person per annum, just a little over one kilogram per person over a month. Over 60% of India’s net sown area still remains at the mercy of the monsoon. Most irrigation canals are choked with silt, garbage and sewage. About 60% of our farmers own only 0.4 hectares of land each. Another 20% of farmers hold an average of 1.4 hectares each. Therefore 80% of our farmers are small and marginal farmers.
Every second Indian farmer household is indebted. In 2003, out of the 89.33 million farmer households in India, 43.42 million households were indebted.
Nearly 87,000 farmers in India committed suicide between 2001 and 2005, a span of four years.
The per capita availability of foodgrains in India has declined from about 500 grams per day per person to less than 400 grams per day over the last two decades. Today the prospect of foodgrain imports is looming large.
To significantly enhance agricultural productivity, we must also become more open and receptive to the idea of experimenting with genetically modified (GM) crops like Bt cotton and Bt brinjal. Many countries have tackled food scarcity in the past with the introduction of conventionally bred, although gene-altered, highyielding crops. But this approach may not work in today’s situation. Scaling up the genetic production potential of a crop through traditional plant breeding techniques is a long drawn out process. The problems plaguing Indian agriculture call for quick solutions that only molecular breeding can bring about.
The fear that the bio-fuels programme is causing a food crisis in some parts of the world is unfounded. In countries like India and China, bio-fuels are not being manufactured from foodgrains. In India ethanol is made from an inedible sugarcane waste called molasses. Therefore abandoning the bio-fuels programme will not resolve the food crisis. We have to accept that there is a fundamental demand-supply gap in agricultural products in India, irrespective of the bio-fuels programme.
The enrichment of the soil and the enhancement of agricultural productivity require the balanced infusion of several nutrients. Excessive and exclusive dependence on nitrogenous and phosphatic fertilisers is very harmful to the soil. As a result, overall agricultural productivity is bound to decline.
Countries like Brazil have large swathes of land available for agriculture. However, in countries like India, China, Russia and America, the potential to get new cultivable land is very limited. The land area available for agriculture in India is shrinking fast because of urbanisation, industrialisation, the construction of Special Economic Zones (SEZs), the development of the real estate business, and the successive fragmentation of land holdings with the emergence of new generations.
What we really need to focus on, therefore, is improving agricultural productivity. We need to boost agricultural productivity on the size and scale that we have achieved in industry and services. Such a substantial enhancement of agricultural productivity is possible only through the introduction of large scale irrigation, increased and judicious use of genetically modified crops, multiple cropping, the deployment of combined harvesters and significant and widespread improvements in agricultural practices.
If, on the other hand, we continue to experiment with quick-fix and patchwork solutions, the food problem that we are experiencing today may abate for a while. But it is bound to explode with redoubled fury on our faces five to seven years down the line.
N.B: directly taken from a daily newspaper article.
Let us consider the productivity of wheat in India. It was 2.71 tonnes per hectare in 2002. It fell a few notches to 2.63 tonnes per hectare in 2007. India’s productivity in rice was 3.14 tonnes per hectare in 2002. This has moved up marginally to 3.18 tonnes per hectare in 2007. The productivity of wheat in America has inched down from 2.7 tonnes per hectare in 2002 to 2.6 tonnes per hectare in 2007. Even Brazil’s sugarcane productivity has merely climbed up from 70 to 71.10 tonnes per hectare in the same five year span.
If we scan the accompanying tables, we can see that there has been practically no tangible increase in the yield of wheat, rice, corn, soyabean or sugarcane in any part of the world over the last 10 years. Agricultural productivity has stagnated internationally, while the consumption of agricultural products has steadily increased with the increase in income levels and population growth.
Let us come closer home. India’s average rice yield today is 2.9 tonnes per hectare. By comparison, China’s average rice yield, at 6.3 tonnes per hectare, is more than double that of India. South Korea has achieved an even higher rice yield, i.e., 6.8 tonnes per hectare.
What is the reason for India’s consistently low agricultural productivity? In traditional agricultural practice, the productivity of foodgrains has averaged around one tonne per hectare, according to Prof Jeffrey D Sachs, professor of economics and director of the Earth Institute at Columbia University. Traditional agriculture is patterned on a single annual crop and a single harvest, i.e., only one planting season in a year. The average yield of foodgrains has gone up to two tonnes per hectare, and in some cases, even up to three tonnes per hectare, after the Green Revolution. The Green Revolution triggered a quantum jump in productivity by creating high yielding varieties of seeds and by enabling the optimal use of fertilisers and pesticides.
But agricultural productivity has again stagnated after the Green Revolution. Agricultural yields are now languishing around the world. But even here, what causes concern is that India’s agricultural productivity is even lower than that of many other countries. India has 170 million hectares under foodgrain cultivation, producing 220 million tonnes of foodgrains in a year. China has only 60% of this arable land area. But it is able to harvest twice the quantity of foodgrains that India produces.
According to the government of India’s Economic Survey, the rate of growth in India’s food production is 1.2% a year, significantly less than the population growth rate of 1.9%. The creation of additional irrigation potential in Indian
agriculture was 3% a year in the 1990s. It has declined to 1.8% in 2007.
The total central plan spending on agricultural and allied activities, as a proportion of India’s gross domestic product (GDP), is projected to decline from 1.42% in 2007-08 to 1.30% in 2008-09. Clearly, there is need for a greater focus, on the part of both the central and state governments, on the growth of the agricultural sector. What is also needed is an institutional mechanism to bring into being effective public-private partnerships that can change the face of Indian agriculture.
But while India’s agricultural productivity has tended to stagnate, the country’s per capita foodgrain consumption has continued to spiral. India’s total foodgrain consumption is now growing at a rapid clip with the country’s fast burgeoning population.
There are an estimated 400 million poor people in India. These poor people are now beginning to consume staple foods which they were not able to afford earlier. Consequently the demand for staples is beginning to steeply rise in India, creating apprehensions of a possible food shortage.
Sixty years after Independence, India produces, on an average, only 14 kg of
rice and wheat per person per annum, just a little over one kilogram per person over a month. Over 60% of India’s net sown area still remains at the mercy of the monsoon. Most irrigation canals are choked with silt, garbage and sewage. About 60% of our farmers own only 0.4 hectares of land each. Another 20% of farmers hold an average of 1.4 hectares each. Therefore 80% of our farmers are small and marginal farmers.
Every second Indian farmer household is indebted. In 2003, out of the 89.33 million farmer households in India, 43.42 million households were indebted.
Nearly 87,000 farmers in India committed suicide between 2001 and 2005, a span of four years.
The per capita availability of foodgrains in India has declined from about 500 grams per day per person to less than 400 grams per day over the last two decades. Today the prospect of foodgrain imports is looming large.
To significantly enhance agricultural productivity, we must also become more open and receptive to the idea of experimenting with genetically modified (GM) crops like Bt cotton and Bt brinjal. Many countries have tackled food scarcity in the past with the introduction of conventionally bred, although gene-altered, highyielding crops. But this approach may not work in today’s situation. Scaling up the genetic production potential of a crop through traditional plant breeding techniques is a long drawn out process. The problems plaguing Indian agriculture call for quick solutions that only molecular breeding can bring about.
The fear that the bio-fuels programme is causing a food crisis in some parts of the world is unfounded. In countries like India and China, bio-fuels are not being manufactured from foodgrains. In India ethanol is made from an inedible sugarcane waste called molasses. Therefore abandoning the bio-fuels programme will not resolve the food crisis. We have to accept that there is a fundamental demand-supply gap in agricultural products in India, irrespective of the bio-fuels programme.
The enrichment of the soil and the enhancement of agricultural productivity require the balanced infusion of several nutrients. Excessive and exclusive dependence on nitrogenous and phosphatic fertilisers is very harmful to the soil. As a result, overall agricultural productivity is bound to decline.
Countries like Brazil have large swathes of land available for agriculture. However, in countries like India, China, Russia and America, the potential to get new cultivable land is very limited. The land area available for agriculture in India is shrinking fast because of urbanisation, industrialisation, the construction of Special Economic Zones (SEZs), the development of the real estate business, and the successive fragmentation of land holdings with the emergence of new generations.
What we really need to focus on, therefore, is improving agricultural productivity. We need to boost agricultural productivity on the size and scale that we have achieved in industry and services. Such a substantial enhancement of agricultural productivity is possible only through the introduction of large scale irrigation, increased and judicious use of genetically modified crops, multiple cropping, the deployment of combined harvesters and significant and widespread improvements in agricultural practices.
If, on the other hand, we continue to experiment with quick-fix and patchwork solutions, the food problem that we are experiencing today may abate for a while. But it is bound to explode with redoubled fury on our faces five to seven years down the line.
N.B: directly taken from a daily newspaper article.
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