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India
GREENFIELD VENTURES
14-December-2006 The Times of India
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India is ticking along nicely at 9 per cent, even with agriculture growing at less than 2 per cent. Enough reason, then, to believe that the country can run up a sustainable double-digit growth rate, if agriculture were to grow at 4-5 per cent per annum.

It is strange that agriculture, which should be India's vanguard due to advantages of soil and climate, should be a laggard, while manufacturing and services lead the growth surge.

Since the Green Revolution, there has been no concerted policy focus on agriculture. The post-1991 impetus bypassed agriculture. In fact, food markets were opened up without adequately preparing the sector for the transition.

This is in contrast to the government's better thought out policies for services and industry, which address supply side problems.

Even as industry argues that internal liberalisation has not proceeded at a pace that puts it on an even keel with the rest of the world, there can be no denying that the government has addressed some of its concerns over the years.

Services received tax breaks and export incentives. Foreign direct investment (FDI) has played a role in powering industry and services into double-digit growth rates. Why should agriculture be left out of this party?

The Eleventh Plan advocates a second green revolution driven by biotechnology, in order to enhance farm productivity.

The government should instead extend its industry and services approach to agriculture. To begin with, productivity concerns can be met with infusion of FDI.

FDI can lead India's second productivity leap in wheat. Annual wheat output has stagnated at about 75 million tonnes, necessitating imports of five million tonnes or more each year at exorbitant prices.

Meanwhile, wheat demand is set to increase as the urban middle class expands and alters its dietary preferences.

While many traditional rice-eaters have one chapati-based meal a day, the young patronise baked products, such as biscuits, pizzas and cakes.

The rise of diabetes as a major disease will contribute to a shift away from rice to wheat. Wheat acreage needs to expand beyond Punjab and Haryana, which are now in the grip of diminishing returns.

The government should usher food retail and agriculture giants to grow wheat in the northern regions of Uttar Pradesh and Bihar, where the soil is fertile but yields are low due to fragmented land holdings and a feudal socio-economic environment.

An agriculture revival will also lead to a more rational allocation of land from agriculture to industry, an issue that lies at the root of the controversy over sell-outs in Singur and special economic zones.

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