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Resource centre on India's rural distress
 
 

Budget 2012: Introduce VAT on farm produce, says government report
-PTI

With agriculture share in GDP halving to 15 per cent in the last two decades, a government report card today called for major reforms, from marketing to investment, and new technologies for accelerating farm growth. 

The report on 'State of Indian Agriculture 2011-12', tabled in the Lok Sabha said, "Achieving an 8-9 per cent rate of growth in overall gross domestic produce (GDP) may not deliver much in terms of poverty reduction unless agricultural growth accelerates." 

Agriculture has to be kept at the centre of any reform agenda or planning process to alleviate poverty and malnutrition, and to ensure food security, the report said. 

"Agriculture sector calls for major reforms from marketing to investment and institutional change especially in water management, new technologies, land markets and creation of efficient value chains," the report, prepared by the Agriculture Ministry, said. 

Stating that price rise has become a major concern, it said the solution to it lies in increasing productivity, production and in decreasing market imperfections. 

"In India, the recent food inflation is largely due to inadequate supply response to increase in demand, aggravated by various other logistic and market related constrains. Inflation affects the poor disproportionately and adversely impacts achievement of removal of poverty," the report said. 

The pre-budget document called for introduction of VAT on farm produce in place of varied state taxes, besides stressing on creation of vibrant land lease and credit market. 

The report strongly advocated public-private partnership in the farm sector and said that the government needs to raise public investment besides playing a more proactive role to attract private investment. 

The report also projected that the average farm growth in the 11th Five Year Plan (2007-2012) is expected to be higher at 3.3-3.5 per cent per year against a target of 4 per cent. 

In the 10th Five year Plan (2002-2007) the agricultural growth stood at 2.4 per cent. 

Pointing out that non-agriculture sectors are receiving higher investment as compared to the farm sector, the report said there is a need for substantial increase in the investment and favoured investment option instead of providing subsidies for long-term growth. 

"There is always a trade-off between allocating money through subsidies or by increasing investments. The investment option is much better than subsidies for sustaining long-term growth in agricultural production and also to reduce poverty faster," the report said. 

Noting that about 80 per cent of farm investment comes from the private sector, it observed that the private sector responds "much better and faster to the incentive structures in agriculture". 

As a result, the report card suggested that there is need for bringing in reforms in the incentive structure along with bringing greater public investment in agriculture particularly in research. 

"Future breakthrough technologies in agriculture will come increasingly from the private sector. ....For areas where the private sector has not shown much interest such as rainfed areas, pulses, millets, the role of public research system would continue to be critical," it stated. 

The report suggested that the government needs to extend the price support mechanism effectively across the country and invest in building market infrastructure in view of surplus production in several states like Bihar, eastern Uttar Pradesh among others.