Policy watch September 2007
  • Agriculture still dictates economy: RBI annual report
  • Farmer suicides continue in Vidarbha
  • India’s wheat import triggers price rise
  • Forest dwellers demand more rights over forests
  • Alert for guar gum exporters
  • Communities oppose nuclear power plant
  • Government buying rescues coir board from losses
  • Government will continue to acquire land on behalf of industries
  • Panchayati raj minister demands jurisdiction over municipalities
  • 1 per cent of GDP for panchayats
  • Globalisation makes poverty acute
    Agriculture still dictates economy: RBI annual report

    The Reserve Bank of India’s (RBI’s) much awaited annual report (2006-07) says that India is witnessing an all time high economic growth rate. However, this could have been higher had agriculture fared well. The annual report is considered the most credible assessment of the economy. Here are some highlights:

    • RBI expects India’s economy to grow around 8.5 per cent till March 31, close to the average 8.6 per cent expansion in the past four years, the fastest since the country gained independence in 1947
    • Manufacturing sector: Manufacturing output rose 11.9 per cent in the last quarter from 2005-06. Farm production was up 3.8 per cent and construction grew 10.7 per cent.
    • Rising incomes: The Union ministry of finance estimates that rising incomes and an estimated addition of 150 million people to the labour force in the next 10 years will contribute to the average economic growth of 8 per cent until 2020
    • Agriculture: Increases in global food prices reflected a shortfall in global production and the rising demand for non-food uses such as biofuels. Reflecting the sustained up trend in major food prices, the food price index (compiled by the International Monetary Fund) reached a 26-year high in June 2007 -- the highest since early 1981. Against the backdrop of these hardening trends in global food prices, there is an urgent need to take measures to accelerate the growth in Indian agriculture, especially food crops.
    • Although the share of agriculture in overall gross domestic product (GDP) has declined from around 40 per cent in 1980-81 to below a fifth in 2006-07, it continues to play an important role in the Indian economy. Since the mid-1990s, however, the growth of the agricultural sector has been low as well as volatile; the growth decelerated from an annual average of 4.7 per cent per annum during the 1980s to 3.1 per cent during the 1990s and further to 2.2 per cent during the Tenth Plan period. Volatility in agricultural production has not only implications for overall growth but also, as the experience of 2006-07 amply demonstrated, for maintaining low and stable inflation. Enhanced growth of the agricultural sector is vital for ensuring food security, poverty alleviation, price stability, overall inclusive growth and sustainability of growth of the overall economy.

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    Farmer suicides continue in Vidarbha

    As Prime Minister Manmohan Singh reviewed the special package for farmers in the Vidarbha region, the state government claimed that the overall suicide rate in Maharashtra’s six districts -- Akola, Amravati, Buldana, Washim, Yavatmal and Wardha -- has come down from 760 in the first seven months of 2006 to 664 in the same period in 2007. This means a dip of 13 per cent.

    Of these, “agrarian” suicides -- due to indebtedness and crop failure -- are also down. Of the 1,448 suicides last year, 332 (between January and June) were classified as agrarian. This year, the number until June was only 90. Although these are “dynamic” figures -- revised upward after official scrutiny of each case -- the total number, officials say, will be significantly lower than that of last year.

    Incidentally, the government’s tally is drawn from police records and is higher than the number released by the Vidarbha Jan Andolan Samiti, an NGO which regularly releases suicide figures to the media. The Samiti’s figures for the same period are 605 for the 11 districts of Vidarbha.

    The government’s data is as per “suicide eligibility” norms recommended by Mumbai’s Indira Gandhi Institute for Development Research (IGIDR). Significantly, it’s not necessary for a farmer to have committed suicide for his family to be considered for the special package: anyone in the family could have taken the step. So confident is the Maharashtra government of the accuracy of its data that it has asked IGIDR to independently validate it.

    The Maharashtra government has informed the PM that 48 per cent of the special rehabilitation package announced by him during his visit to Vidarbha last year has been implemented. Going by the official figure almost half of the relief package of Rs 3,750 crore had been implemented so far.

    The state government claims that by June this year, an additional 45,860 hectares of irrigation potential were created in the region. It also says that 3,000 check dams were taken up for construction. Out of these, 2,608 have been completed. This is being cited as the reason for a low farmer suicide rate.

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    India’s wheat import triggers price rise

    A call for more supplies from the Centre sent the price of wheat soaring to record levels on commodity exchanges in the last week of August, as grain traders reacted to urgent tenders from grain importers and the lowest global stock levels in 25 years.

    India is the world’s second-largest wheat producer after China, but orders from Delhi to build up buffer stocks sent the price of a bushel climbing 30 cents to $7.88 a bushel on the Chicago Board of Trade, a record.

    Droughts, floods, production shortfalls, burgeoning demand and dwindling stocks have created a harvest season panic that has buoyed the price of wheat ever higher. Since April, it has risen 75 per cent on both sides of the Atlantic after recent tenders from Egypt and India, where governments are taking precautionary action to boost stockpiles.

    The International Grains Council expects India to import more than three million tonnes this year, despite an improved harvest. Analysts believe that there is growing anxiety that the country had benefited from a succession of good monsoons.

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    Forest dwellers demand more rights over forests

    After the passage of the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act 2006, many tribal and forest rights organisations and activists have demanded changes in the rules notified by the Union ministry of tribal affairs.

    In a meeting in August in Delhi, the groups demanded implementation of the law after the changes they wanted -- mainly formation of empowered and representative committees in every village. Since most villages located inside forests are very small, panchayats take in a large number of villagers. In effect, this means that most villagers are not able to attend panchayat meetings and argue for their rights.

    The activists have demanded that gram sabhas -- committees that decide on the rights of individuals -- be constituted at the village and hamlet levels. The group was also upset because the June 19 notification takes away from the gram sabha the right to decide if a government agency or a private firm can exploit forest resources. The activists demanded that the ‘power to protect its forests’ be given back to the gram sabha and that the ‘consent of the community be required’ before there was any ‘interference’ in a forest.

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    Alert for guar gum exporters

    The European Union Rapid Alert System for Food and Feed (RTASFF) has informed all member states that in certain batches of guar gum from India, dioxins and Pentachlorophenol levels are very high. The alert has created a panic among the guar gum traders.

    The department of commerce held a meeting of all stakeholders in the sector to discuss the issue. During September 2007, there will be widespread testing of samples for contaminants. Many traders say that the contaminants come from waste wood, soil and water. So the sampling for the test will be done for the entire cycle of the guar gum trade.

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    Communities oppose nuclear power plant

    Even though the Orissa government is yet to give its consent to the public sector Nuclear Power Corporation of India Ltd for setting up its proposed mega plant at Patisonapur in the state’s Ganjam district, people of the area have started raising their voices against the project.

    Recently several people from Patisonapur protested the project fearing large-scale displacement. Many fear that the area around Patisonapur would be polluted by radiation if the proposed nuclear power plant is allowed to come up. They urged the Union ministry of environment and forests not to give the project environment clearance. The state government has clarified that it is yet to give its consent for the project.

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    Government buying rescues coir board from loss

    Coir Board-run sales showrooms have reduced losses drastically, and will make profit during the current fiscal. Driven by increased buying from Central government departments and institutions, the board showrooms have decreased losses by Rs 30-40 lakh current fiscal -- down from Rs 1.24 crore in the previous year.

    According to a press release, the board expects to double its current annual sale of Rs 1,000 crore within the next few years. Imported Chinese synthetic blended goods had a major impact on the Coir Board’s sale.

    The Coir Board has also submitted a Rs 1,644 crore comprehensive proposal for the 11th Five Year Plan, pending Planning Commission approval, to provide subsidies to weavers, undertake modernisation programmes and enhance exports. A substantial amount is envisaged for research and development activities to produce high-value products, diversify the product range and exploit high potential areas like Northeastern India and Andaman and Nicobar Islands.

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    Government will continue to acquire land on behalf of industries

    A Group of Ministers (GoM) headed by agriculture minister Sharad Pawar, looking into the rehabilitation and resettlement (R&R) policy, has decided that states will have the power to acquire up to 30 per cent land required by a developer if the latter acquires 70 per cent upfront.

    Private entrepreneurs will have to provide evidence of majority acquisition to seek the state’s intervention. The policy on the sensitive issue comes after the Union ministry of commerce, harried by the spate of violence over acquisition in Nandigram and Singur, was asked to bar states from land acquisition for duty-free enclaves.

    The GoM’s recommendation on R&R, if made into a law as planned by the Union ministry of rural development, is expected to gain precedence over Special Economic Zone (SEZ) rules.

    In another major decision, the GoM has decided to double the “solatium amount” from 30 per cent to 60 per cent of the land price. The 60 per cent amount has to be paid over and above the land price given to the landowner as “compensation for the inconvenience caused to him”.

    The “solatium” amount would be 75 per cent in cases of emergency land acquisition. This category includes urgent acquisition for defence or important functions where the landowner is not given an opportunity to be heard. However, R&R compensation offered would be applicable only on the area acquired by the state.

    It also recommends that social impact studies should precede the displacement of 200 tribal families in desert development programme areas and 400 families in normal areas. Besides a compensation for land, the displaced landowners would receive Rs 10,000 per hectare for land development.

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    Panchayati Raj minister demands jurisdiction over municipalities

    Union minister for panchayati raj Mani Shankar Aiyar has asked Prime Minister Manmohan Singh to detach municipalities from the Union ministry of urban development and hand them to his ministry. “In the absence of a composite ministry of panchayats and nagarpalikas at the Centre, effective district planning to bridge the rural-urban divide and institutionalise processes of inclusive growth is not possible,” Aiyar said in a letter to the PM in July.

    The Prime Minister’s Office (PMO) has asked the urban development ministry and the Union ministry of urban employment and poverty alleviation to comment on Aiyar’s proposal.

    In 1992, Aiyar had persuaded Congress chief Sonia Gandhi to suggest to the then Prime Minister P V Narasimha Rao to create the composite ministry. However, the attempt failed to get any reaction from the urban development ministry. “But on the basis of developments since the formation of our government in May 2004, I am emboldened to suggest to the PM that the idea be revived,” Aiyar said, adding that the progress achieved in panchayati raj institutions had “left urban local bodies behind”.

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    1 per cent of GDP for panchayats

    In August, the Council of State Ministers of Panchayati Raj recommended the Planning Commission and the Union ministry of finance to allocate 1 per cent of all centrally sponsored schemes to the Union ministry of panchayati raj for capability building and mobilising technical support in local rural governments across the states. In the wake of the 13th Finance Commission, the council decided to constitute a sub committee of state ministers of panchayati raj for making submissions to the Finance Commission. The Panchayati Raj Ministers’ sub-committee will submit its report in January 2008.

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    Globalisation makes poverty acute

    An empirical study by the Rajiv Gandhi Chair for Panchayati Raj at the Gandhigram Rural University in Tamil Nadu has found that globalisation has further impoverished the poor and rendered several small and traditional occupations unviable.

    The study, spanning over two years, was conducted to map the effects of globalisation on the lives of poor farmers, handloom weavers, rural artisans and fisher folk. It focused on seven issues key to rural economies: handloom, water, agriculture, food security, tea and coffee plantations, rural artisans and fisheries.

    The study covered three major crops in Tamil Nadu -- paddy, cotton and sugarcane -- in three districts and showed a “significant deceleration in the growth of crop output and yields, affecting farmer profits”. The rising input costs compounded the problem, leading farmers into debt traps, or to cities and towns in search of employment. The government investment in agriculture has also dwindled over the years, the study has found.

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