The Hindu Business Line : Rich harvest for economy

After two months of setbacks over the anti-quota stir, the tumble in the stock market, the flip-flops over the fuel price hike, surely the news that the economy has performed beyond all expectations in the 2006 first quarter (calendar) must have come as music for the Government. A 9.3 per cent GDP growth in January-March, fuelled by a 3.9 per cent growth in the farm sector, will emphatically give the Government the reform stamp. Last December, the Prime Minister, Dr Manmohan Singh, had called for a 10 per cent GDP growth over the next two years; the first quarter result seems like the wish coming true. All the more so, because 2005-06 will have a revised GDP growth rate of 8.4 per cent, a notch higher than the most optimistic of forecasts. Yet, there is no joy in the stock market though the Finance Minister is gamely assuring jittery investors that India will continue to attract foreign institutional investors, now in exit mode.

Regardless of the equity market's sentiment, that the most neglected, yet the most important driver of the economy — agriculture — has posted an impressive 3.9 per cent growth, against an estimate of 2.3 per cent, must restore a balance in the GDP indicators; for the last two years, manufacturing and, most of all, services have driven the growth story. While it is too early to conclude that the current fiscal will repeat the first quarter results for the farm sector, the policy implications are clear enough. On paper at least, three successive Budgets, especially the 2006-07 one, have emphasised special programmes for agriculture. It would be premature for the Government to claim sole authorship of the successful farm story because in key areas policy intervention has either been ineffective or absent. The Finance Minister himself has admitted to a stagnating Gross Capital Formation in the sector; he attributes the current growth to horticulture and non-cereal crops. But the jury is still out on the causes for the higher quarterly growth. The farm sector has traditionally been subject to nature's whims. So is the good news simply fortuitous? Dismal investments in irrigation and poor credit availability have eroded rural incomes, pushing the farm sector far behind manufacturing and services.

The latest GDP figures offer clues to immediate action; mining and electricity have fared poorly, comparatively. While metals can be imported, power cannot. The need for immediate action to boost power generation can hardly be overemphasised. The Ministries concerned must move from planning to concerted action in the farm and power sectors. Considering both are State subjects, it is not enough for New Delhi to merely fashion policies; their implementation at the grassroots level has to acquire an urgency that is now lacking. Till such time, incremental growth in these two vital areas will remain a matter of luck.