GD capsule 6

Theme: Agriculture
News: This quarter, GDP grew at 8.1%-manufacturing-8.9%, services 11.3%, agriculture-2% making India the second fastest growing economy, next only to china. Agriculture once again proved a drag on GDP growth
Background:
Agriculture employs around 60% of the workforce but contributes only a fifth to the GDP (Indian GDP figure is around 600 billion dollars) whereas the corresponding contribution from services is more than 50%. The successive governments have largely ignored agriculture after the green revolution of 60s. More than investment, the country needs focus.

For example, we have one of the worst storage and transportation facilities in the world. We lose almost 40% of the produce in godowns. Plus lack of storage means farmers are forced to sell their produce at lower than market rates. Let commodity markets and e-choupal expand!

Also, the perverse government subsidies on wheat and rice have caused a glut in foodgrains. The policy dates back to 60s when there was a shortage, but it has outlived its usefulness. The government can continue subsidies, if it changes the crops to cash crops suitable for exports. Any one responds to incentives.

Agriculture needs a new focus because, not only a slow growth drags down GDP, but also a sufficient growth in agriculture means increased demand for other products as well. For example, FMCG and durables industry does well whenever there is a good monsoon.