Govt plans hike in farm sector funding

The Planning Commission is considering a hike in public sector investment in the farm sector to 4 per cent of agricultural gross domestic product towards the end of the 11th Plan (2007-12).

This implies the government will have to allocate around Rs 26,000 crore (Rs 260 billion) every year for the sector towards the end of the 11th Plan. The government has allocated Rs 8,558 crore (Rs 85.58 billion) for agriculture and allied services for financial year (2007-08).

A hike in public spending on the farm sector is significant as the contribution of agriculture production to GDP has been declining since the 1950s - from over 50 per cent of GDP then to around 18 per cent in 2006-07.

The government is targeting 4 per cent agricultural growth in the current Plan period, up from the present level of 2.7 per cent. It recently announced Rs 25,000 crore (Rs 250 billion) additional central assistance for states to formulate area-specific agricultural strategies to revive the sector.

A 4 per cent farm growth is deemed crucial for achieving and maintaining a double-digit GDP growth rate.

The Planning Commission is considering the issue after the recommendations of a steering committee for formulating the 11th five-year Plan headed by CH Hanumantha Rao, chairman, Centre for Economic and Social Studies.

"We are looking into the recommendations of the committee. A final decision is yet to be taken," a Planning Commission official said.

Another official said it was difficult to achieve the target during the Plan period. "Plan allocation for agriculture will be around Rs 4,000 crore (Rs 40 billion) during the Plan period," he said.

Investment in agriculture declined from 1.6 per cent of GDP in 1993-94 to 1.3 per cent in 1998-99. This was due to a fall in public investment from Rs 4,467 crore (Rs 44.67 billion) in 1993-94 to Rs 3,869 crore (Rs 38.69 billion) in 1998-99.

There has been a continuous decline in public investment in agriculture from 1995-96 till 1998-99.

Although the trend was halted in 1999-2000, with public sector capital formation rising to Rs. 4,122 crore (Rs 41.22 billion) from Rs 3,869 crore (Rs 38.69 billion) in the preceding year, there has not been any improvement in the share of investment in agriculture GDP from the preceding year's level of 1.3 per cent.