Issue 45 Vol II, August 15, 2007

A N A L Y S I S

Haryana: more you grow, more you suffer
Gobind Thukral

IT is worrisome even for a casual observer of Haryana and more so for a seasoned and sensitive politician like the Agriculture Minister Harmohinder Singh Chatha.  He has been a minister or speaker for 28 long years since 1972 and is disturbed over the perceptible decline on the farm front. It is not keeping pace with the advancement in manufacturing and service sectors. Haryana despite significant achievements is still predominantly an agriculture state. Nearly two third populations still depends upon it for survival.

Mr Chatha admits, “Green Revolution is clearly petering out. We have no new high yielding varieties of seeds. There is an excessive use of fertilizer, insecticides and pesticides and much water is being drawn from underground sources and also from canals.” And he adds, “When we started sowing paddy, we had motors to draw water at just three to four feet in Kurukshetra and Karnal districts. Each year, we bored deeper to drawn more and more water to irrigate the paddy that virtually guzzled water. Now it is anywhere beyond 80 feet. At many places water is deeper that beyond 120 feet.”

It costs hell of money and at times precious lives are lost while digging deep to install tubewells. Bless the Green Revolution indeed. Soil is every year losing precious ingredients and minerals and water is becoming scarce and costly input. What is more each farmer gets lesser for producing more? It is true that Haryana farmers have not committed suicides like their counterparts in Punjab or Vidharbha in Maharashtra, but their conditions are no less appalling. There are deep in debt, a part of which is because of social spending. But farming is increasingly becoming less remunerative and fragmentation of land holdings is turning many into paupers.  No one denies these observations, but very few have the answers.

A state government survey admits, “The cropping intensity in Haryana has enhanced from 139 percent in 1970-71 to 182.14 percent during 2004-05. The agriculture scene in the State is dominated by paddy- wheat rotation, causing degradation in soil fertility and further fall in the under ground water level.”

To meet such dire situation when water is falling each season by several feet, Haryana like its neighbour badly needs those varieties of seeds what ripen between 90 and 100 days. “We have been urging scientists at the Haryana Agriculture University at Hissar to provide us something like that. But nothing has happened.” Mr Chatha rues and is worried about the present level of research at the HAU.

Haryana produced 44.98 lakh tonnes of food grains during kharif 2006, which is 11.4 percent higher than that of the previous year. The productivity of cotton was 582 kilograms per hectare (Lint) during Kharif 2006. The Government has not only procured each grain of wheat, paddy and mustard but also procured bajra at a minimum support price of Rs. 540 per quintal. Haryana ranks first in the country in export of basmati rice.

The contribution of area under wheat and paddy crops to the total gross area sown in the State has increased from 28.2 percent during 1970-71 to 51.27 percent during 2006-07. Though, the efforts have been made to break the dominance of the wheat- paddy rotation, yet there is no significant achievement in this regard so far. The area under wheat has been continuously increasing since 1966-67. The area under the crop was 23.04 lakh hectares in 2005-06 and 23.65 lakh hectares in 2006-07 showing a slight increase of 2.6 percent over 2005-06. The area under paddy has decreased from 10.52 lakh hectares in 2005-06 to 10.41 lakh hectares in

2006-07.The area under commercial crops like sugarcane, cotton and oilseeds fluctuates every year. There has been an increase of 10.2 percent under sugarcane and decrease of 8.6 percent under cotton during the year 2006-07 over 2005-06 whereas the area under oilseeds has decreased by 7.8 percent during 2006-07 over 2005-06 due to deficient rains.

A remarkable increase in food grains production is visible in Haryana since

1970-71. Production of total food grains is likely to increase from 47.71 lakh tonnes in 1970-71 to 144.43 lakh tonnes in 2006-07 showing an increase of 202.70 percent. The wheat and paddy crops have played a major role in pushing up the agricultural production. The production of paddy which was 4.60 lakh tonnes in 1970-71 is now 33.71 lakh tonnes in 2006-07 thereby showing the remarkable increase of 632.80 percent. Similarly, the production of wheat which was 23.42 lakh tonnes in 1970-71 was 96.97 lakh tonnes during 2006-07 reflecting an increase of 314.00 percent.

The average yield per hectare of wheat and paddy during 2006-07 in Haryana is estimated at 4100 and 3238 kilograms per hectare respectively. The average yield per hectare in respect of wheat and paddy at all India during 2004-05 was 2718 and 2026 kilograms, respectively, whereas in Haryana it was 3901and 2939 respectively.

The structural composition of economy has witnessed significant changes since the formation of Haryana in November 1966. Agriculture still continues to occupy a significant position of the economy, although the share of this sector in the Gross State Domestic Product is continuously declining. The predominance of agriculture is also responsible for instability in the growth rate of economy due to fluctuations in agricultural production. Natural calamities and fluctuation in rainfall often cause substantial loss in crop production which eventually results in fluctuation and instability in the growth rate of economy. Moreover, rapidly increasing share of services sector is also responsible for decline in the share of agriculture sector. The composition of Gross State Domestic Product at constant (1999-2000) prices reveals that the share of Agriculture and Allied Sectors has declined from 31.9 percent during 1999-2000 to 23.3 percent during 2005 -06.

Despite this decline about two third population of the State still depends upon agriculture for livelihood. The total area of the State under cultivation has already reached at a saturation level and thus there is hardly any scope to bring more area under cultivation. The agriculture production can only be increased through enhanced cropping intensity, change in cropping pattern, and improvement in seeds of high yielding varieties, better cultivation practices and development of post harvest technology. There is an urgent need to reorient agriculture through various policy measures. The adverse market conditions where farmers are at the mercy of the government and the private trade has to go.

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Beijing Olympics, One Year to Asia’s Century
Dr Swaraj Singh

A year from today, the most important Olympics will start in Beijing, China. This will not just be the start of the Olympics, but will be the dawn of a new century, Asia’s century. The economic and political power has already shifted to the east; the Olympics are going to formalize this reality. The twenty-first century is destined to be Asia’s century. The two centuries old, western-dominated unipolar world is ready to change into a multipolar world. China is bound to emerge as the leading country in the new world order.

China has already become the manufacturing center of the world. Now it wants to assert itself and wants to show the world its economic might. China has spent more on the Olympics than any other country has ever spent. The main Olympic stadium, the “Bird’s Nest,” is a masterpiece in itself. Many other stadiums and sports facilities are being built in Beijing and other cities.

In Athens, Greece, China won 32 gold medals and America won 35 gold medals. Some people feel that if China wanted to, it could have won three more gold medals. China did not send its best athletes to the Athens Olympics. Why did China not want to win more gold medals in Athens? China could not have given America a decisive defeat. It is very likely that China is going to win a considerable number of more gold medals than America in Beijing. This decisive victory will be before more than a billion enthusiastic Chinese people and with the world media focused on this historical event.

China’s victory will not only be for the Olympics alone, but it will be a symbolic change of the leading country and region in the world. China is going to be the new leading country and Asia is going to be the new leading region of the world. The whole world will be watching the shift of power in the world.

Jacques Rogge, President of the Olympic Committee, was very impressed by the Olympic preparations in China. He said that he has never seen such preparations. China has mobilized its people for the Olympics unlike any other country. Thousands of volunteers are taking care of all of the aspects related to these Olympics. Most of the tickets for the events have already been sold. Most of the hotels in Beijing have already been booked solid for the Olympics. The Chinese athletes are training with the dedication, hard work, and long hours never seen before. Some of the athletes have not gone to their homes in years.

China is facing some problems during the Olympics. Some human rights activists are raising the issues of Tibet and Darfur. China can handle these issues without a major complication. The other potential problem is the environment. The traffic problem and pollution of the air with the growing number of cars may create problems for some of the events. The Chinese people are becoming more conscious of the environmental damage. Many steps are being considered to address the environmental issues. China is likely to overcome all of the obstacles and make the Olympics a great success.

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Labour Absorption:  Strength of the Informal Sector in India-1
Vinod Anand

THE end objective of a nation, notwithstanding its economic, political, and social scenarios and the accompanying constraints, is the “well-being” of its people. The multi-faceted connotation of "well-being" is captured by what is termed in Economics as development with its focus both on growth and distribution. The important issue is whether the link runs from growth to distribution or the other way round. Since the 1950s much of the focus has been on the link running from growth to distribution. During that era countries depended solely on the growth process to attain the objectives of employment-creation and social justice in terms of desirable income distribution.

The generally accepted hypothesis was that inequality in income distribution would rise in the initial stages of development and then fall. But this was not supported by the experience of the third world counties and the generally accepted hypothesis of the fifties lost its force, and the new literature has turned the earlier thesis on its head and focuses on how the social objectives of employment, income distribution, and poverty alleviation influence growth through their effect on a number of variables like political stability and fiscal policy. Extreme unemployment, poverty, and income inequality adversely affect growth not only via social unrest and political instability, but also through other means. The higher is the intensity of these variables, the greater is the incentive to engage in illegal and illegitimate activities. This poses a threat to property rights. Markets will not work well, and investment will be poor, which will eventually result in low growth.

Looking at the economic history of nations, and also their public policy in perspective, it becomes very clear that the central concern, in smaller or greater degree, has always been not in the goods produced, but in providing employment for all who seek to produce them. The goods are not missed, but the employment is sorely wanted. This concern has become more serious in recent times. We quite often raise a question: why is it impossible in the modern economy to find useful employment for so many people who are willing to work? It is not easy to categorically answer this because, along with this and other similar questions relating to public policy, there goes a consideration of the institutions that are involved in economic activity in the production and pricing of goods and services and the distribution of the proceeds. In this context the role of the business enterprises of all sizes also becomes important, and so are the banks and other financial institutions, and also international trade and commerce. In this kind of a backdrop, this Paper briefly looks at the distribution and equity scenario as it has existed in India in recent decades, and then it focuses on the objective of employment generation, and justifies it as a policy priority for the country both during the pre-reform and the post-reform periods. It also dwells on the small-scale segment of the informal sector as a way out to generate sufficient employment opportunities for the rising labour force.

The problems of employment-creation, income-distribution and poverty-alleviation are common to most low and middle-income countries. India is no exception.  Despite a paradigm shift in the whole macro-economic management in 1990-91, the social indicators of absolute poverty line, Gini-Lorenz ratio, and unemployment rates present a mixed scenario. Attempts to deal with poverty are hampered significantly by the limited availability of formal sector employment. The combination of a rapidly growing labour force with declining employment opportunities in the country is compounding significantly the employment, income distribution and poverty alleviation issues. As a result, employment creation continues to be a policy priority.

An additional factor is the limited, out-of-reach, expensive, and competitive educational opportunities for formal schooling available within the country, especially in remote rural areas. As a result, the labour force has a disproportionate number of relatively unskilled labourers. Therefore, the immediate challenge is providing employment for low-skill labour, given a distinct managerial constraint. The government seeks to reduce its role as the primary employer, which is the basis for its interest in assessing whether non-formal micro-enterprises can serve as primary source of employment creation.

India has now entered the second phase of Reforms. The economic impact has been encouraging (though slowly) especially on the industrial front through various policies including the policy of

• complete delicensing leading to lesser hassles for the industrialists;

• ease of entry of foreign investors, leading to more foreign direct investment, especially in consumer goods and durables; and

• trade liberalisation, leading, amongst other things, to liberal imports in the country, and also to export competitiveness.

Coupled with all these is the development of the information technology sector, which is, perhaps, more because of the technological boom in the United States, and India’s subsidized system of higher education in that sphere, and less because of economic reforms. Despite these shifts, it is rather unfortunate that the country is experiencing the lowest industrial growth and low profit growth, because of an acute slowdown in the manufacturing sector. This has led to the process of restructuring and downsizing, and, hence, to the reduction in the existing employment opportunities because of recently introduced voluntary retirement schemes (VRS) and retirement policies. All this has resulted into a severe lack of job security, and has further added to the gloomy employment scenario in the country.

The economic impact on the agricultural front has not been satisfactory too. In fact, there has been a prolonged stagnation in agriculture in recent years, which has led to a slack of demand for industrial goods. There is, therefore, an urgent need of egalitarian economic reforms, and effective food security system. The social impact of the reforms process has almost been negligible in terms of poverty alleviation, employment creation, and income equalities, basically because of poor governance and ineffective implementation of laws. In fact, it appears that the social sector reforms have not yet begun.

In this kind of a gloomy backdrop, the Government had unveiled a 14-point reform agenda in the September of 2001 to reverse the economic slowdown. This agenda had focused on the following:

• Both the Centre and States would have to take hard and unpopular decisions to achieve a growth rate of eight per cent in the Tenth Plan (2002-2007);

• The Centre would focus on downsizing, power, labour, financial reforms, agricultural, industrial, and services sectors;

• The Tenth Plan would have a strong pro-poor focus;

• Executive accountability would be re-oriented towards results by stressing on implementation and making the Tenth Plan a people’s plan;

• The quick solution to the country’s economic problems would entail difficult decisions, both by the Centre and the States;

• Unproductive and unnecessary expenditure would have to be pruned;

• Living on borrowed money and borrowed capital would never be a mark of good governance.

As usual in our political set-up, this agenda is nothing else except the rhetoric of the political entrepreneurs, and has so far not taken us anywhere, and there is no hope that it will help the country in any way in the future also.

[The author is presently placed at the National University of Lesotho in Southern Africa as Professor of Economics.]

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