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Neglect of Rural Sector


Neglect of Rural Sector

t was hoped that the union budget 2006-07 would address the various critical issues in rural India, especially rural employment generation. The elasticity of employment in agriculture is almost zero. Massive resources are needed to finance activities like soil and water conservation, watershed development, etc. This will not only provide employment to the vastly underemployed rural labour force but raise agricultural production and productivity. Total expenditure on water resources, both on revenue and capital account, was Rs 748 crore during 2005-06 (RE). This has been raised to Rs 961 crore in 2006-07. State governments are short of funds and cannot provide the substantial additional amount required. But, as usual, expenditure on irrigation and flood control in the central budget does not form even 0.2 per cent of the total expenditure. The net irrigated area in the country, after reaching a level of 56.5 million hectares in 1998-99, registered a declining trend and was 54.7 million hectares in 2000-01.

The central plan allocation for crop husbandry in 2006-07 is slated at less than Rs 4,000 crore. For soil and water conservation it is as low as Rs 21 crore, this for a country of continental size. It was expected that such expenditure would get top priority, but it is beyond our comprehension why, despite danger signals (the water table is steadily falling and in some areas it has assumed dangerous proportions), there is no realisation of the impending disaster. The rural employment programmes can be geared to soil and water conservation and watershed development as nothing is more productive and more labour intensive than this.

Rural unemployment is on the rise as the process of rural diversification has slowed down. According to the NSS 60th round (January-June 2004) the unemployment rate for rural males increased from 5.6 per cent in 50th round to 9 per cent in the 60th round. The Economic Survey 2005-06 has noted that there is a high degree of intermittent unemployment on account of the absence of regular employment for many workers. All this calls for a very massive increase in public investment in rural employment programmes. Besides providing a remunerative job to millions, it will contribute to expanding the market for various industrial goods. The most disappointing feature is that plan outlay on rural employment is Rs 12,870 crore, only Rs 1,170 crore higher than the revised estimate of 2005-06. This accounts for only 5 per cent of the total plan outlay. The total plan outlay has been raised by about Rs 50,000 crore, but the allocation for rural employment has been raised only by a mere Rs 1,000 crore. It shows that the priorities are different. In contrast, defence expenditure has been raised to Rs 89,000 crore, witnessing an increase of more than Rs 13,000 crore over the estimates of 2005-06.

The central plan allocation for agriculture and allied activities at Rs 7,385 crore is less than 3 per cent of the total plan allocation. The allocation for irrigation is Rs 586 crore only. Private investment in agriculture is witnessing a declining trend, falling from Rs 38,215 crore in 2002-03 to Rs 30,532 crore in 2004-05.

Agricultural markets are completely controlled by private traders who determine the price to their advantage. Had there been a well organised network of cooperative marketing societies the farmers could have been liberated from the shackles of private traders. Over the years, almost nothing has been done to develop a sound cooperative marketing organisation. An allocation of Rs 138 crore towards the entire gamut of cooperatives tells its own story.

In the absence of widespread crop insurance schemes farmers are put to

(Continued on p 1396)




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(Continued from p 1298)

great distress and farmer suicides have become a recurring feature. Despite an increase in bank credit to the farming sector, the fact remains that credit needs are largely not met by institutional sources and moneylenders continue to rule the roost. Rather than diverting the savings of the fast growing non-agriculture sector to the lagging agricultural sector, the banks in fact, as noted by a standing committee of Parliament, are instrumental in the reverse flow of rural savings to the urban and metropolitan centres. As per the Reserve Bank of India’s Banking Statistics, March 2003, aggregate deposits of rural branches of the scheduled commercial banks stood at Rs 1.95 lakh crore, but gross bank credit in rural areas was only Rs 85,244 crore. In other words, more than Rs 1 lakh crore is siphoned off from rural areas to urban/metropolitan centres. A similar amount is siphoned off from semi-urban centres. Thus, rural savings are being utilised to finance urban development. This should be reversed, as the bulk of the population is still rural and steeped in poverty. The small rural producer cannot avail of bank credit because he/she has no collateral or a guarantor. The banks will have no problem in financing them if the government takes on the guarantee for such loans. The budget has no such initiative to offer the poor in this respect.

Agriculture is now the slowest growing sector of the Indian economy on account of a meagre investment all through the years. The absolute number of persons depending directly on agriculture is increasing (the number of agricultural workers increased from 185 million in 1991 to 234 million in 2001) although its share in national income has now come down to 20 per cent. In 2000-01, per capita income in the agricultural sector was slightly more than Rs 6,000 per annum. The bulk of the rural population continues to be below the poverty line. A massive flow of public resources to the rural sector along with private resources can improve the situation. Unfortunately, the union budget 2006-07 does not hold any promise on this score.



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