3/16/13 Mrunal [Economic Survey Ch1] Agriculture challanges, tax to GDP, steps by Government (part 3 of 3) Print

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[Economic Survey Ch1] Agriculture challanges, tax to GDP, steps by
Government (part 3 of 3)
1. AGRO and Food Management
2. Agriculture: Problem areas?
3. #1: Land holding
4. #2: Nutritional security
5. #3: Supply Chain Management
6. Kelkar
7. Tax to GDP ratio?
8. Steps Taken by Government
AGRO and Food Management
Agro + allied industries Approx. number
Share in Indias GDP 14% (2011-12)
Share in total employment 58% (2001)
The declining share of the agriculture and allied sector in the countrys GDP=
this is characteristic of any fast growing economy
but that doesnt mean we should ignore agro and pay more attention to
manufacturing / service sector.
Because fast agricultural growth = vital for jobs, incomes, food security, +
curbing food inflation.
11
th
Five year plan has led to improvement in agricultural performance. Even
states that were traditionally not procuring sufficient foodgrains, e.g. Bihar,
Madhya Pradesh, Bihar, Chhattisgarh, and West Bengal have showed significant
increase.
Agriculture: Problem areas?
#1: Land holding
Indian agricultural sector is the domination of small farmers with small sized
landholdings. = they cannot afford sophisticated tractors, thrashers, irrigation
system etc. Therefore, per hectare Agricultural yields or productivity= very low
Government should carry out land reforms, land consolidation, promote
cooperative farming etc. to reduced these small sized farms.
3/16/13 Mrunal [Economic Survey Ch1] Agriculture challanges, tax to GDP, steps by Government (part 3 of 3) Print
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#2: Nutritional security
Food security =everybody should get food. But doesnt mean nutritional
security.
For example, you can feed a poor-child with cheap quality wheat / rice. But for
healthy growth of body and mind, you also need various vitamins, fruits,
vegetables, milk, protein, oil, etc. nutritional items. Malnutrition is a big
problem in India.
So we dont just need food security, we also need nutritional security.
For ensuring nutritional security, Government has to arrange the right amounts
of food items in the food basket of the common man.
So, Government must give a thrust on horticulture products and protein-rich
items, apart from the regular wheat, maize, rice and foodgrains.
+ invest more money in agricultural research.
#3: Supply Chain Management
Another critical issue is supply-chain management in agricultural marketing in
India.
Lot of agro-produce gets wasted due to infra problem (bad roads, no cold
storage, electricity etc.)
Government needs to link wholesale processing, logistics, and retailing with
farm-production activitie.
Recently the government allowed FDI in multi-retail, = Itll bring for investment
in new technology, storage, processing and marketing of agro produce.= less
spoilage, better prices for farmers.
Other problems:
soil erosion,
soil salinity,
waterlogging,
excessive use of fertilizers and pesticides
overexploitation of groundwater for irrigation.
Still dependent on the vagaries of monsoon.
Kelkar
The government appointed a committee headed by Dr Vijay Kelkar to chalk out a
roadmap for fiscal consolidation. We already discussed his recommendations in
detail. click me
Target: Reduce fiscal deficit to 3.0 per cent of GDP in 2016-17. But how?
Government will have to control the Expenditure on subsidies.
Government will need to increase the domestic prices of petrol, diesel, LPG as
per the prevailing in international markets.
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Government has capped the number of subsidized gas cylinders to nine.
^this will decrease the outgoing money for Government.
But that alone, cannot solve the fiscal deficit problem. Government also needs to
increase the incoming money.
Tax to GDP ratio?
As the name suggest: It is the Ratio of tax collection against the national gross
domestic product.
From Governments point of view, higher tax to GDP ratio= incoming money
is more.
Time Tax to GDP ratio%
2007-0811.9
2011-129.9
Therefore, if Government wants to achieve fiscal consolidation, it must raise the
tax-GDP ratio to above the 11 per cent level. But how?
Of course, one way is increase the tax rate like 75% income tax for rich people,
25% income tax for middle class. But then people will feel more compelled to
evade tax and / or relocate to some other country where tax rates are low.
So, instead of raising the taxes very much, better try to broaden the base and
improve the tax collection mechanism. There are two ways to do it 1)GST (for
indirect taxes) 2) Direct tax code (direct tax)
Steps Taken by Government
(list not exhaustive)
1. Government has setup CCI: Cabinet Committee on Investments. This
Committee is headed by Mohan. Itll fast-track projects more than Rs.1,000
crore.
2. Cabinet has cleared the Land Acquisition and Rehabilitation and Resettlement
(LARR) Bill. already discussed click me
3. Government has increased FDI in a number of areas including multibrand
retail, power exchanges, and civil aviation.
4. Government is increasing investment in irrigation, storage and cold storage
networks = less farm produce wasted during transport.
5. Government has passed The Banking Laws (Amendment) Act 2012. This will
strengthen RBI and make way for entry of new banks. (we already saw this in
detail. click me).
6. Financial Sector Legislative Reforms Commission is formed. This
Commission is examining the laws governing the financial sector and suggest
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ways of modernizing those laws.
7. Government introduced new External Commercial Borrowing (ECB)
scheme for companies in the manufacturing and infrastructure sector. So they
can get cheap loans from abroad.
HUMAN DEVELOPMENT
In 12
th
FYP>> social sector Expenditure, Government aims to spend lot of
money on education + health.
Nevertheless, Indias expenditure on health as a per cent of GDP is lower than in
many other emerging and developed countries.
Poverty removal
As per Tendulkar Committee, the percentage of people living below the poverty
line in the country has declined
Year Approx. population living BPL
2004 37%
2009-1029%
In the last few years public expenditure on social programmes increased
dramatically.
In the Eleventh Plan period nearly 7 lakh crore has been spent on the 15 major
flagship programmes.
To secure the rights of people, Government made many laws in recent years
Act Beneficiary?
Right to information Act Everybody.
Mahatma Gandhi National Rural Employment Guarantee Act
(MGNREGA)
Poor rural
households.
Forest rights act Tribals
Right to education act
Children (mostly
poor).
But the main problem is: Government money isnot reaching the targeted
beneficiaries. There is lot of corruption.
Government has come up with solution: Direct benefit transfer (DBT) with the
help of the Unique Identification (UID).
This concludes the gist of Chapter 1 of Economic Survey. Next chapter, next time.
For more articles on economy, visit the Archive @ Mrunal.org/economy
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