Indian Budget has Little to Boost Farm Growth

By HARI RAMACHANDRAN

NEW DELHI: The Indian government stepped up its outlay on agriculture, abolished domestic controls on farm products and revived domestic futures on cotton but analysts said the measures were unlikely to spur growth.

"There is no special measures for capital formation in agriculture. All the emphasis is on rural development," Charan Wadhwa of the Center for Policy Research told Reuters.

"Overall market forces have prevailed," Wadhwa said. Finance Minister P Chidambaram in his 1997/98 (April-March) federal budget increased the central plan outlay for agriculture by 13 percent and enhanced the allocation for rural development by 15.4 percent.

He announced sharp increases in food and fertilizer subsidies and increased the credit flow to agriculture by 30 percent from 1996/97 levels.

Chidambaram removed certain restrictions on the movement of foodgrains and kept in abeyance orders on edible oil and cotton stock holding limits.

He also proposed futures trading in cotton and jute and announced the setting up of a castor oil futures exchange. "This budget is bolder than the previous two. But domestic liberalization like abolishing movement restrictions is a half-way measure," said Ashok Gulati of the National Council of Applied Economic Research.

Gulati said to boost agriculture and productivity the government ought to have addressed issues like the abolition of a levy system on rice.

Prime Minister HD Deve Gowda, a farmer turned politician, heads a fragile 15-party alliance of regional, centrist and left-wing parties.

Soon after assuming office in June 1996, Deve Gowda said as a peasant his priorities would be rural development and prominence to the agriculture sector.

Deve Gowda told Reuters soon after the presentation of the budget that it was not populist.

"This budget is not for political gain. It is a sincere effort to make the country economically strong," he said. Agriculture Minister Chaturanan Mishra, a member of the Communist Party of India (CPI) said there was not much to encourage agriculture in the budget. But he called the budget "realistic."

India had its ninth good monsoon in a row in 1996. Farming employs about two-thirds of India's workers and accounts for more than a third of its gross domestic product.

Chidambaram told state-run television that a large amount of money was going to the agriculture and rural sector.

"The agriculture orientation comes only by way of increasing subsidies. The whole approach is to give sops to the agriculture sector," said Wadhwa.

Trade officials said the decision to resume futures trading on cotton and jute would boost trade. Suresh Kotak, President of East India Cotton Association said it was a farmer-friendly budget and would help cotton growers. (Reuter)

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