A Note on Some Aspects of the Planning Commission's Approach Paper to the Eleventh Plan
- B Sivaraman
The Planning Commission has released its Approach Paper to the Eleventh Five-Year Plan, dated June 14, 2006, in the middle of July 2006 and this paper, the brainchild of Montek Singh Ahluwalia, the blue-eyed boy of Brettonwoods twins, has evoked good amount of controversy. In this short commentary we will deal with only three points about the Approach paper – agriculture, employment and poverty eradication – and reserve our detailed scrutiny of the XI Plan till the publication of the full Plan document after its presentation before the National Development Council.
AGRICULTURE
The Approach Paper admits that actual growth of agricultural GDP, including forestry and fishing, was only 1% per annum in the first three years of 10th Plan and adds, “even the most rosy projections for 2005-06 and 2006-07 would limit this below 2% for the full five year period”. In fact, this is not a recent phenomenon but a general trend observable for the entire period of liberalisation. The annual trend rate of growth for food and non-food products combined in agriculture (excluding allied activities like fishing and dairying) works out to a mere 0.1% between 1994-95 and 2003-04. After giving projections for different hypothetical scenarios for over all GDP growth rates at 7%, 8% and 9%, the Approach Paper sets a target of 8.5% for the XI Plan with a sectoral growth target of 4% for agriculture for the XI Plan period without however offering any analysis why the same target for the X Plan and IX Plan failed. Even the New Agricultural Policy declared by the Vajpayee Government in 2000 had proclaimed a target of 4% agricultural growth, which is nowhere in sight during successive years. The Approach Paper proposes several demand-side measures and supply-side measures to achieve this 4% target.
Demand-side Measures: On the demand-side, the Approach Paper lists NREGA, public provision of health and education – which would reduce households' expenditure on these items and hence increase expenditure on food – and Bharat Nirman as measures that would stimulate demand for agricultural goods. The UPA Government is already reneging on right to primary education and right to health didn't even come up in its CMP. The Paper also emphasises agricultural exports. Jairam Ramesh himself recently admitted that 60 agri-export zones (AEZs) remain on paper and have not exported anything and they are nothing but corporate devices for grabbing of valuable land for real estate and tax-evasion opportunities for them. Additionally, on the demand-side, the Approach Paper adds exports and the currently fashionable mantra of crop diversification and emphasises the role of private corporate sector in the latter.
Firstly, demand stimulation for agriculture can really take place only if the rural incomes go up. The Approach Paper maintains a stony silence on declining rural incomes, especially farm incomes in all size classes, leading to heavy indebtedness and waves of suicides among farmers and starvation deaths among the rural poor. A record, 8% GDP growth for three successive years is mainly fuelled by non-agricultural growth whose contribution to employment growth is virtually negligible. Hence the demand stimulation for food should come mainly from the rural areas.
Secondly, the prices of all inputs are escalating and the terms of trade has long since turned against agriculture since early 1990s. The post-WTO AoA regime has depressed output prices sharply. Without reversing these trends how agricultural growth can be doubled? The need for a price stabilisation fund for agricultural products and the need to raise tariffs have been advocated by many experts but the Approach Papers ignores all these vital areas.
Thirdly, Bharat Nirman is a big humbug. Chidambaram's allocation for irrigation in the 2006-07 Union Budget was Rs.7,121 crore only and he himself mentioned in his budget that only 6 lakh hectares would be irrigated this year. At this rate of fund allocation, it would take at least 17 years to achieve Bharat Nirman target of 1 crore hectares of additional irrigation instead of its proclaimed target of 4 years. The Approach Paper keeps mum on how the necessary funds would be mobilised for achieving this Bharat Nirman target, which falls within the Eleventh Plan period. As the Approach Paper comes out strongly against provision of free or subsidised power to farmers, much irrigation expansion cannot take place through private investment either.
Supply-side Measures : On the supply side, the Approach Paper, begins with admitting that, “there is no dramatic technological breakthrough comparable to the green revolution presently in sight”. However, the Genetic Engineering Approval Committee (GEAC) of the GoI, at the behest of MNCs like Monsanto, has been lauding Bt.Cotton seeds as yielding dramatically higher productivity contrary to all field evidence, and has over-enthusiastically approved 59 varieties of Bt.Cotton seeds for cultivation and 121 varieties for field trials, though many studies have established a clear link between the failure of Monsanto's Bt.Cotton seeds and Vidarbha suicides. This is a clear example of the UPA Government speaking in two voices through two of its agencies.
Then the Approach Paper goes on to mechanically repeat the slogan of diversification, emphasising horticulture and floriculture, and advocates contract farming to promote this. True, horticulture contributes nearly 28% of GDP in agriculture and 54% of export share in agriculture from the cultivated area share of 8.5% only. But there is a limit to its expansion as field information suggests declining incomes of horticultural farmers in Nashik and near Bangalore . Even available macro-economic data confirm this – the growth rate of fruits and vegetables declined from a peak rate of 6.14% per annum during 1990-91 to 1996-99 to 4.55 between 1996-97 and 2001-02. Growth rate in output of horticultural crops kept increasing till 1998-99 after which slowdown set in,” says a new report by the Indian Council of Agricultural Research's (ICAR) economic and policy wing. Also, these are the crops which require very high investment in infrastructure like cold-storages and processing and face a tremendous risk of very high market volatility. Market adjustment costs are prohibitive for small and medium farmers and this is a sure prescription for increasing suicides. The 2005-06 Union Budget had allocated Rs.630 crore for the National Horticulture Mission but Chidambaram slashed it to Rs.150 crore in 2006-07 budget! And, mind you, this too is not to assist farmers growing horticultural crops but exclusively to establish cold-storage facilities at some airports through public-private partnership (PPP) to facilitate exports by private firms (read, Reliance). The Reliance Group is investing Rs.10,000 crore in establishing procurement, storage and processing network all over the country and has already entered into contract farming arrangements in many states including West Bengal, Maharashtra and Punjab . This appears to be the only “rationale” behind the Approach Paper's thrust on contract farming, diversification and PPP to overcome the agrarian crisis.
But, more importantly, the Approach Paper blindly ignores declining availability of food and endangered food security what with the renewed massive imports of wheat. While food production has increased from 51 million tonnes in 1951 to 212 million tonnes in 2001-02, the per capita availability of foodgrains increased from 395 gms per day in 1951 to only 417 gms per day in 2001 denoting a negligible growth of less than 0.6 per cent per annum. Even the Economic Survey 2001-02 admits that the per capita net availability of foodgrains per day declined from 510.1 grams in 1991 to 417 grams in 2001. The rain-fed dryland and semi-arid farming in the country accounts for 62% of the total cultivated area and the percentage of Gross Cropped Area under all cereal in semi-arid tropics had come down from 53.7% in 1968-70 to 47.4% in 1992-94. The highest incidences of suicides among farmers have been reported from these semi-arid areas where massive diversification, even by small and marginal farmers, into cotton, groundnut and pepper etc., had taken place after their incurring heavy debts. Lured by higher international prices of cotton and massive exports during the five years between 1991 and 1995, farmers diversified into cotton on a large scale but international prices crashed heavily from 1996 onwards and the cotton farmers, especially in Warangal and Vidarbha came to grief. Growing diversification even in wet areas and its disastrous impact, especially in Punjab where the MNCs are championing the breaking of the so-called ‘rice-wheat monocropping', is well known. In Punjab , farmers who had entered into contracts with PepsiCo were paid only 80 paise per kg of tomato when the market rate was Rs.2.00. But PepsiCo was collecting more money from the Punjab government as transport subsidy than it was paying the farmers. Paddy fields conversion in a food deficit state like Kerala is an explosive issue and diversification, in many cases, brings down employment and labour absorption. Floriculture farms in Anekal taluk near Bangalore and gherkin farms in Kolar district supplying to exporting business houses have suffered declining incomes despite all initial euphoria. They mostly employ young girls who are subjected to semi-bondage and vicious sexual exploitation. The Approach Paper wants to generalize such conditions to the whole of India . Further, the government invested Rs.137 crore in floriculture infrastructure to promote its export but earned a mere Rs.32 crore, according to Ms.Vandana Shiva.
The Approach Paper talks of greater risks for farmers associated with its proposals and broaches the subject of crop insurance as one possible method to mitigate these risks but in the same breath the Paper rules out a comprehensive crop insurance system as a Plan scheme saying, “the financial cost of existing and proposed crop insurance schemes is very considerable, and recurring, so that these are not appropriate as plan schemes.” This means that crop insurance would be left to private insurance companies making it unaffordable to ordinary farmers as public sector insurance companies are unwilling for a comprehensive crop insurance scheme covering all crops with a low premium for farmers as they feel the claims would be prohibitive even if the government underwrites the premium amount. Moreover, any crop insurance scheme can only address natural risks like crop loss due to drought and floods – or, at the most investment failure in borewell digging and seeds failure, which of course, are not being covered by any insurance scheme in India including the proposed one – and cannot address market risks imposed by sharp fluctuations in prices. A price stabilisation fund for cotton could have saved many farmers' lives in Vidarbha and Warangal . But the Approach Paper indirectly comes out against a government-backed crop insurance scheme. The Approach Paper recommends agro-climatic zone-specific strategies and packages. But the only packages we come across are suicide-relief packages, which have totally failed to halt the wave of suicides. Like those unfortunate farmers, these strategies are dead even before they are born!
One would expect an approach paper to a five-year plan to deal with the outline projections of public investment in agriculture. This is however totally absent in the Approach Paper. Public investment has fallen from 1.9% of GDP in the early 1990s to 1.3% in 2000-01 and has since stagnated around Rs.20,000 crore per annum. The broader category of rural development expenditures, including public investment in irrigation, anti-poverty an employment schemes etc., has declined from 13.2% of GDP during the Seventh Plan (1985-1990) to 7.8% of GDP by 1993 during liberalisation years and further to 5.9% by 2001 and never recovered from that level. Some estimates put the fall of rural expenditure in the last five years by a whopping Rs.30,000 crore per annum. Today's agrarian crisis is directly linked with the fact that capital expenditure per hectare of net sown area was declining at the rate of 11.16% per year at constant prices between 1974-75 and 1996-97 as academic Ramesh Chand has shown. The liberalisation logic that private investment would take care of reduction in public investment has also miserably failed. The decennial All India Debt and Investment Surveys have pointed out halving of gross capital formation of rural households between 1982 and 1992 and the survey results for 2002, which are not yet available, also would no doubt confirm this dangerous trend since there is no indication of any recovery in recent years. This is also confirmed by macro data: the Gross Capital Formation in Agriculture as a percentage of GDP declined from 7.08% in 1991 to 6.42% in 2001-02 while GFCF/GDP in public sector fell from 2.18% to a meagre 1.56% and in private sector also marginally from 4.90% to 4.86% during the same years. Ideally, as agriculture constitutes nearly 25% of the GDP and the GFCF also accounts for around 25% of the GDP, the GFCF (agriculture) should be around 6.25% but it is lower than a measly 1.6%. The Approach Paper offers no explanation for this. Without doubling public investment, how the planners hope to double agricultural growth is a mystery!
POVERTY
The only good thing about the Planning Commission's Approach Paper is that it has nailed Planning Commission's own earlier lie that BPL population had come down to 26% in 1999-2000 from 36% in 1993-94, which it was able to show by manipulating the methodology. Now, the Approach Paper admits that the results of the NSSO thick sample of 2004-05 – which adopted the older 1993-94 method and hence was comparable to 1993-94 results – show that the population below the poverty line in 2004-05 remained 28%, more than the manipulated 10% fall it had shown earlier in 1999-00! This is a revelation. Since the results of the 2004-05 Round are not available to the general public and the Planning Commission members have privileged access to these data, this revelation is the only good thing they have done.
Against the prescribed norm of 2400 calories a day per person in rural areas, the bottom 30% of the population consumed on an average only 1626 calories per person per day and the middle 40% consumed only 2009 calories during 1999-2000, according to NSSO data. These figures had fallen from 1678 and 2119 calories in 1993-94 respectively. The National Family Health Survey II shows that 50% of women and more than 70% of children in the country have anaemia. The National Nutrition Monitoring Bureau survey in 2001-02 shows that nearly half of the rural children suffer from malnutrition.
Cereal consumption has declined among all classes in rural areas. Per capita expenditure on non-cereal food among the bottom 30% of the rural population was a measly Rs.34.74 in 1999-00 and among the middle 40% it was Rs.40.16. The Approach Paper boasts that India is the largest producer of milk in the world but the sad reality is per capita availability of milk is just 216 grams per day, the lowest among major developing countries.
The PDS coverage had been very low during the X Plan. The all-India coverage just before the beginning of the X Plan itself was very poor – around 32.38% of total rural households accessing rice and only 16.59% accessing wheat, according to the 1999-2000 NSSO data. The corresponding figures for urban households were 20.28% and 15.12%. But the coverage in states like UP and Bihar were shockingly low – 8.07% rural households for rice and 7.34% for wheat in UP and 5.40% and 8.98% for Bihar . Even in West Bengal the coverage was around 17% compared to 75% for Tamil Nadu and 68% for both Kerala and Karnataka. The main culprit was the Targeted Public Distribution System, dividing beneficiaries into BPL and APL, introduced in 1996 by the United Front Government with the full support of the CPI(M). Far from increasing the coverage, the TPDS has further worsened it by excluding a large section of small and marginal farmers and we have all along been demanding abolition of TPDS and going back to the earlier universal PDS. The XI Plan Approach paper has no position on increasing the coverage or on the popular demand for reverting back to the old system. The Cabinet Committee on Economic Affairs of the UPA Government had approved on January 6, 2006 a set of measures to curtail food subsidy including reduction of foodgrains by 5 kgs a month to a BPL household and increase in issue prices for both BPL and APL households. These measures were postponed due to stiff opposition from the people. Now, again the Ministry of Consumer Affairs, Food and Public Distribution has revived the same proposals and added new proposals like reducing issue of grains in the food-for-work schemes from 5 kgs to 3 kgs and substituting it by cash and considerably substituting the quantum of wheat issued through PDS by coarse grains, and forwarded them again to the CCEA in July this year. The financial implication of this package is reportedly Rs.5329 crore cut in food subsidies. This despite the fact that off-take is low in PDS, even among BPL families. And, worse still, even a study conducted by the Planning Commission has revealed that only 42% of the foodgrains intended for BPL families through PDS actually reaches them and the rest gets diverted to black market.
The X Plan (2002-07) document had set out grand paper targets – reducing infant mortality rate to 45 per 1000 live births and by 2003 it was still at 60. The target for reducing maternal mortality rate was 2 per 1000 live births and it was still 4. The target was for achieving 100% till class five in elementary education but enrolment was low, and worse still, the drop out rate was still 31% in 2003-04. Not even half the target for reducing anaemia among children has been met.
The World Hunger Report 2006 has calculated that more people die in India every year after 2000 due to hunger and malnutrition than the number of people who died in 1943 due to the Bengal Famine. An official committee set up by the Maharashtra government came out with startling facts in August 2004 that in the preceding years 1.25 lakh to 1.75 lakh children had died in Maharashtra alone due to malnutrition. 56,000 children died in Bombay slums alone. This nothing short of a national emergency but it is totally a non-issue for the Approach Paper. The Approach Paper doesn't set any target for poverty reduction, reducing malnutrition and other human development indicators during the XI Plan. We will have to wait for the full Plan documents to know the government's approach in this regard.
EMPLOYMENT
Unemployment has emerges as the most important social and political issue in the country in recent years. The rate of growth of employment per annum in agriculture was a negative –0.34% (usual status) during 1993-94 to 1999-2000 and 0.02% in terms of current daily status. The corresponding usual status figure for manufacturing was 2.05% and total employment growth in the country during the same period was o.96% per annum (usual status) and 1.07% (current daily status), much below the population growth. The organized sector employment was down by 4.14% during 1998-2003 despite a high GDP growth of 5.3%, according to an ASSOCHAM study. The manufacturing industrial sector is not creating any net additional employment anymore. The NSSO 60 th Round conducted in 2004 has put unemployment in 2004 at a higher level than in 1993-94. Employment elasticity had decline to the lowest level of 0.15 in 2000-01, confirming the phenomenon of jobless growth.
Regarding the much-hyped NREGA, around 7.32 million people have been given jobs till June 2006 [Prem Shankar Jha, A High Premium , Hindustan Times , June 1, 2006] against a total number of 26.6 million applicants [P.Sainath in Outlook Interview] This is because the number of applicants who have been given job cards and the number of job card holders who have been given jobs are very much less. As on May 23, 2006, the status reports from various States indicated that 2,44,77,877 applications for registration were received and 1,70,89,915 job cards were issued. [Rajiv Ranjan Roy in The Pioneer ] Assuming that a highly optimistic figure of around 10 million people getting 100 days of work this year, the total expenditure would work out to Rs.6000 crore only (for 1000 million mandays of work). This means Chidambaram would “save” nearly Rs.10,000 crore from the paper allocation of Rs.16,419 for NREGA for 2006-07. This is nothing but a conspiracy. The actual spending on NREGA would work out lower than the spending on earlier employment schemes which were merged into the NRGEA. Even the earlier Employment Assurance Scheme (EAS) provided 100 days of work to two members in a family. Even the EAS and JRY/JGSY together created 1075.3 million mandays of work in 1993-94. It remains to be seen whether the present NREGA would exceed this figure. The NREGA is supposed to be extended to the entire country in five years falling in the XI Plan period but the Approach Paper doesn't indicate how the necessary funds are going to be raised.
Without delving deeper into the long-term impact of prolonged disproportionality between agricultural and non-agricultural growth rates and a host of theoretical issues posed by this, the Approach Paper simply says, “In fact, if the economy does grow at 9% and the agricultural sector at 4% only, income disparity between agriculture and non-agriculture will increase further unless the agricultural workforce reduces absolutely by around 10 million during the 11th Plan and non-agricultural employment increases at 5% per annum to absorb not just this shift but also all new entrants into the labour force. This poses a major challenge not only in terms of generating non-agricultural employment but also managing the resulting livelihood changes”. But this is a tall order.
Admitting that, “we must recognise that existing size of operational holdings sets a limit to how much can be earned from farming,” the Approach Paper also mentions that, “land per agricultural worker will remain below one hectare for over a decade even if non-agricultural employment grows at 6% per annum”. This runs counter to Planning Commission's Deputy Chairman Montek Singh's own earlier assertion that land reforms laws have become outdated and land ceilings and tenancy laws have become fetters for agricultural growth and hence need reversal. This indicates possible differences within the Planning Commission and we will have to wait and see further developments on this front.
The Approach Paper identifies a few individual sectors like tourism, textiles, IT and construction to increase where employment is growing but it is totally at a loss when it comes to increasing overall employment. The only prescription the Approach paper has to increase employment in the non-agricultural sector is greater “labour market flexibility” and labour law reforms.
IN LIEU OF A CONCLUSION
Noted economist Prabhat Patnaik, in his capacity as the Vice-Chairman of the Kerala State Planning Board, has circulated a note of criticism on the Approach Paper. In that note, he has expressed serious reservations, officially on behalf of the Kerala State Planning Board, on the approach of the Approach paper of the Planning Commission and on a number of its specific points. He has rightly criticised the emphasis of the Approach Paper on magnitude of growth to be achieved and instead stressed on safeguarding peasant farming. However, Mr Patnaik's note has a couple of surprises as well. He has criticised the Planning Commission's XI Plan Approach Paper for its advocacy of contract farming but he himself is not opposed to contract farming by big business and MNCs in principle, a position maintained earlier by the CPI(M) and its Kisan Sabha. Rather, he only wants the state to intercede itself with a regulatory role between the peasant producers and the business houses. Let us quote from the note of Mr.Patnaik: “And the Approach Paper's endorsement of MNCs' entry into agricultural retailing at the expense of local traders, through an overcoming of the latter's “vested interest” (as if the MNCs are devoid of any “vested interest”), will only generalize the crisis of petty production into a crisis of petty production and petty trade . It will additionally throw large numbers of petty traders out of business and work. In our view therefore the State must interpose itself between the MNCs and the corporate players on the one hand and the petty producers on the other : this is the only way of neutralizing the consequences of the mismatch in their respective bargaining strengths”. “And it requires that if contract farming is to be undertaken then the contract cannot be between petty producers and the corporates alone; the State must insert itself as a party to the contract to ensure that the interests of the petty producers are properly defended”. Even this guarded approval of contract farming by Mr.Patnaik with a caveat doesn't seem to be consistent with what the LF Government in West Bengal has been doing. FritoLay, sister concern of Pepsico India , has been allowed to engage in corporate farming in West Bengal and enter into direct contracts with peasants and purchase potatoes from them for making Lays chips. Even within a brief period of couple of years, the West Bengal farmers have had unsatisfactory experiences with FritoLay. They sold their produce to FritoLay in the first year when market rate of potato procurement was lower than the rate fixed by the company. In the next season, however, FritoLay offered a price lower than the open market price. Reliance is also entering into contract farming and wholesale and retail trade in agricultural produce in a big way in West Bengal . In this backdrop, the LF Government has also prepared a draft Bill – expected to be tabled in the Assembly in the coming winter session – to amend the Agricultural Produce Marketing Committee Act (APMC Act) to allow corporates to engage in forward trading in agricultural produce and in corporate farming without this safeguard proposed by Mr.Patnaik. The CPI(M) seems to be in the habit of proposing one thing to the UPA, like abolition of forward trading, and doing the opposite in West Bengal .
There seems to be no unanimity even within the Planning Commission on the Approach Paper. According to news reports, a senior member of the commission had charged that the approach paper to the 11th Five-Year Plan, which was circulated for discussion, had dropped many points which were earlier discussed and approved by the Commission members. [ Financial Express, August 4, 2006] The newspaper correspondent further reports: “The original approach paper contained something more on employment, land reforms and other social welfare schemes. It contained less number of matters on high-speed growth, public-private partnership projects (PPP), labour market reforms and full convertibility of rupee', the member told Financial Express on conditions of anonymity”. The Planning Commission seems to be specialising increasingly in deceptive projections and planned omissions. But there has been no report of any dissenting member resigning from the Commission.