Wealth: agriculture plus services
By Gopal K Agarwal,
RACHEL Carson, in her R landmark landmark book Silent Spring, has stated that the power of an idea can be greater than political power. In the economic development of country, there are two factors at the creation of wealth and its distribution. Distribution is without doubt very important but unless we create wealth, distribution has no significance.
At present there are a lot of discussions on the direction India's economy should take. We have so far failed to develop a model suited to our needs. The Nehruvian model emphasised development through centralised planning. The emphasis was on industrialisation, to the relative neglect of agriculture, This process was continued by subsequent Congress governments. There was an over-emphasis on socialism culminating in the 1969 bank nationalisation. This opposition to capital and private ownership led to situation where we started sharing and distributing poverty. The country has to provide work opportunities to everybody but not jobs. Providing job security may only breed lethargy and inefficiency. The government's responsibility is not in the distribution of the acquired wealth of some individuals but equality of opportunities and distribution of resources.
Economic activities are generally
classified into three categories: the primary, secondary and
tertiary sectors. India's developmental module should emphasise the primary and
tertiary sectors. This is because 70 per cent of our population live in villages
and depend on the primary sector. Agricultural produce accounts for a major
portion of our GDP. The overall economic development depends on the purchasing
power of our people, which in turn relates to agricultural production. In other
words, the demand push developmental model depends on agricultural production.
We know that the backbone of our economy is agriculture. The standard of living
of people here has to be uplifted. It is agriculture alone which
can provide employment to millions of rural youth and help arrest rural-urban
migration.
At the national level, rural infrastructure has to be developed by the government, which includes a
functioning road network, organised markets, cold storage and warehousing
facilities, the availability of capital at low interest rates, and so on. The
time has also come to end the subsidies on fertilisers and encourage organic
farming practices. This may result in a reduction in yields but research has
shown that over a period of four years yields from organic farming increases while
that from the use of chemical fertilisers and pesticides decrease. This switch
will save subsidies of approximately Rs 1,72,000 crore every year.
In the international arena, we need
to protect our agriculture, retail trade and small-scale sector from the
onslaught of international manufacturers. With growing food production, burgeoning food stocks, the poor storage facilities along with the demand for increasing
minimum support prices, if we are also forced to remove tariff barriers in
agriculture we could find ourselves in a spot. Our negotiators should,
therefore, insist on a minimum import quota based on GDP as prescribed under
the Agreement on Agriculture earlier. Reduction in tariff and non-tariff
barriers has to be linked to reduction in trade-distorting subsidies by the
developed countries.
Where India does have a comparative
advantage is in the tertiary, or services sector. India has a cost-cum-competence
advantage in professions like law, accountancy, design, engineering,
tax consultancy, financial and IT services. Doctors, MBAS, chartered
accountants, nurses, lawyers and many other professionals are available in
India at a much lower cost than elsewhere in the world. This is a major
strength. Many multinationals are setting up their R&D centers, business
process outsourcing facilities and product development centres in India. Indian
IT firms can provide world-class services at one-tenth the cost that an US
company, for instance, would incur. At the international level, we have to
push for the opening up of services sector under Mode 3 and Mode 4, ie, there
should be free mobility of manpower across countries and complete reciprocity
with developed nations. Mutual recognition agreements should be put in place so
that our professionals get recognition and opportunities in those
countries.
What about the manufacturing sector?
Building the infrastructure required entails capital expenditure and is
risk-ridden in a world where technologies get obsolete very quickly. Take the
case of BSNL, which has the world's most extensive networks of copper wire. But
this may no longer be an advantage since people are switching rapidly to
wireless telephony. It makes sense, then, to concentrate on developing the
agriculture and services sector.
(The writer is member, Central Economic Cell, BJP)
