Economy

Nagaland tax and economic reforms

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Nagaland tax and economic reforms

The Commissionerate of Taxes, Nagaland was created in August 1964 with the appointment of the then Commissioner, Nagaland because the ex-officio Commissioner of Taxes. The department started functioning with a Superintendent of Taxes and an Inspector deputed from Assam Taxation Service. A fully fledged post of Commissioner of Taxes, Nagaland was created on August 20, 1976, with its Headquarter at Kohima. Later on, the Headquarter was shifted right down to Dimapur in November, 1976, for higher tax administration. Presently, the commissionerate workplace is found opposite to the workplace of the Deputy Commissioner, Dimapur. The Department functions underneath the executive management of the Finance Commissioner through the Revenue Branch of Finance Department, Kohima. The department is headed by the Commissioner of Taxes who is typically from the I.A.S. cadre. He is assisted by 2 further and 2 Deputy Commissioners of Taxes. For higher tax administration the department is split into 3 Zones of Dimapur, Kohima and Mokokchung. The Zonal offices area unit headed by Assistant Commissioners of Taxes. All the Districts Tax offices area unit manned by Superintendent of Taxes. The Department of Taxes is that the highest revenue generating department within the State. the whole revenue assortment throughout the year 2011-2012 was Rs 258.36 crores.

The Finance Department is chargeable for all matters regarding money administration of the government, together with preparation of the States’ Annual Budget. It exercises management and supervising over the Receipts and Expenditure of the govt. and initiates numerous measures for improvement in financial management, further resources mobilisation, economy and potency in Government expenditures etc. It conjointly formulates policies regarding levy and assortment of varied taxes like price additional Tax, oil Tax, Central nuisance tax, Professions Tax, recreation Tax etc. The Department exercises body management and supervising over the 3 Directorates of Treasuries and Accounts, Nagaland State Lotteries and Taxes.

Till attainment of Statehood, the then Naga Hills District was an administrative body underneath Assam. Among others, sales tax Law of Assam was extended to Naga Hills effective from 2-2-1948. However, it’s not obtainable on record, to determine whether or not any revenue was collected from the Naga Hills District.

(i) Year of Establishment: The Department of Taxes, Nagaland was established in August 1964, with the appointment of the Commissioner, Nagaland because the ex-officio Commissioner of Taxes vide Government Notification NO.SGN.182/63/29 (a) 14-6-63

(ii) Structure set-up at the time of inception: A full fledged Commissioner of Taxes was created on 20th August 1976, with its Headquarters at Kohima. Within the same year, the Headquarter was shifted right down to Dimapur, the business hub of the State, for higher tax administration. A post of Superintendent of Taxes was conjointly created and an official from Assam Taxation Service was brought on deputation to start out the functioning of the Department beside skeleton workers.

(iii)        Activities of the department at the beginning: With the establishment of the Department, the question of adoption of the prevailing Taxation Laws of Assam as applied to the erstwhile Naga Hills District to the freshly formed State by the Nagaland Adoption of Laws Order, 1965 were examined however owing to some confusion the provisions of Taxation Laws couldn’t be enforced by adoption/modification. Meanwhile, the govt. took a call to own its own Laws that crystal rectifier to the enactment of the subsequent Taxation Laws.

  1. The Nagaland sales tax Act, 1967.
  2. The Nagaland Finance (Sales Tax) Act, 1967.
  3. The Nagaland Profession, Trade, Callings and Employment Taxation Act, 1968.
  4. The Nagaland (Sales of petroleum & petroleum products, together with Motor spirit and Lubricants) Taxation Act, 1967.
  5. The Nagaland passenger and goods Taxation Act, 1967.

District Tax Offices: All the District Tax offices perform underneath the superintendence of the Zonal Assistant Commissioners of Taxes. Every District Tax office is headed by a Superintendent of Taxes. Dealers register their business and file tax returns within the District Tax workplace. Tax is directly deposited within the several Government heads of account by the tax remunerator through the District Treasury workplace. Nagaland Taxation Check Gates: The department has erected four Check Gates at the strategic entry points specifically Zubza and Tsutapela underneath Kohima and Mokokchung severally and Dillai Road and New Field Gate at Dimapur with a read to forestall evasion of tax. These Check Gates monitor the movement of merchandise – each coming into and going out of dutiable goods through the State. The Nagaland Taxation Check Gates at Dillai Road and Gologhat Road, Dimapur, perform underneath the management of the Assistant Commissioner of Taxes, Mobile Squad. The Zubza and therefore the Tsutapela Check Gates perform underneath the direct management and supervision of the Assistant Commissioners of Taxes Kohima and Mokokchung Zones respectively.

One of the strengths of Nagaland lies in her natural resources however presently natural resources that can not be replaced particularly the non-renewable resources are empty at can greatly. Sadly the policies relating to the extraction of natural resources area unit inadequate thereby the economic performance stay not solely poor however has opened the window towards way reaching harmful consequences. On another level, sound of natural resources ought to be backed by policies that might enhance revenue generation. The pattern of development ought to be such; it ought to scrutinize diversifying the revenue to different sectors to reinforce development. This needs correct investment policies particularly on revenue generation with target shifting the pattern of economic development towards producing and service sectors.

Industrialization of each little and massive industries is another major concern for economic development. Today, of the 2 major industries, one is within the ‘processes of revival and therefore the different is detected no additional. The revival of Tuli manufactory is an imperative necessity if Nagaland is to revive economy. Further, having a pulp centre for the paper mill in every district will certainly cause work potency, employment generation and inflated production. to the current finish of end of industry, power and electricity is another major concern.

Goods and Services Tax (GST) is a comprehensive indirect tax on manufacture, sale, and consumption of goods and services throughout India. GST would replace respective taxes levied by the central and state governments.

What is GST?

  • It is a destination-based taxation system.
  • It has been established by the 101st Constitutional Amendment Act.
  • It is an indirect tax for the whole country on the lines of “One Nation One Tax” to make India a unified market.
  • It is a single tax on supply of Goods and Services in its entire product cycle or life cycle i.e. from manufacturer to the consumer.
  • It is calculated only in the “Value addition” at any stage of a goods or services.
  • The final consumer will pay only his part of the tax and not the entire supply chain which was the case earlier.
  • There is a provision of GST Council to decide upon any matter related to GST whose chairman in the finance minister of India.

What taxes at center and state level are incorporated into the GST?

At the State Level

  • State Value Added Tax/Sales Tax
  • Entertainment Tax (Other than the tax levied by the local bodies)
  • Octroi and Entry Tax
  • Purchase Tax
  • Luxury Tax
  • Taxes on lottery, betting, and gambling

At the Central level

  • Central Excise Duty
  • Additional Excise Duty
  • Service Tax
  • Additional Customs Duty (Countervailing Duty)
  • Special Additional Duty of Customs

Benefits of GST

For Central and State Governments

  • Simple and Easy to administer: Because multiple indirect taxes at the central and state levels are being replaced by a single tax “GST”. Moreover, backed with a robust end to end IT system, it would be easier to administer.
  • Better control on leakage: Because of better tax compliance, reduction of rent seeking, transparency in taxation due to IT use, an inbuilt mechanism in the design of GST that would incentivize tax compliance by traders.
  • Higher revenue efficiency: Since the cost of collection will decrease along with an increase in the ease of compliance, it will lead to higher tax revenue.

For the Consumer

  • The single and transparent tax will provide a lowering of inflation.
  • Relief in overall tax burden.
  • Tax democracy that is luxury items will be taxed more and basic goods will be tax-free.

For the Business Class

  • Ease of doing business will increase due to easy tax compliance.
  • Uniformity of tax rate and structure, therefore, better future business decision making and investments by the corporates.
  • Removal of cascading effects of taxes.
  • Reduction in transactional cost will lead to improved competitiveness.
  • Gain to the manufacturer and exporters.
  • It is expected to raise the country GDP by 2% points.

GST Council

  • It is the 1st Federal Institution of India, as per the Finance minister.
  • It will approve all decision related to taxation in the country.
  • It consists of Centre, 29 states, Delhi and Puducherry.
  • Centre has 1/3rd voting rights and states have 2/3rd voting rights.
  • Decisions are taken after a majority in the council.

Supporting Laws to implement GST

For the implementation of GST, apart from the Constitution Amendment Act, some other statutes are also necessary. Recently 5 supporting laws to the GST were recommended by the council. 4 for the bills should be passed by the parliament, while the 5th one should be passed by respective state legislatures. The details are given below.

  • The Central Goods and Services Tax Bill 2017 (The CGST Bill).
  • The Integrated Goods and Services Tax Bill 2017 (The IGST Bill).
  • The Union Territory Goods and Services Tax Bill 2017 (The UTGST Bill).
  • The Goods and Services Tax (Compensation to the States) Bill 2017 (The Compensation Bill).
  • And a state GST will be passed by the respective state legislative assemblies.
  • Tax slabs are decided as 0%, 5%, 12%, 18%, 28% along with categories of exempted and zero rated goods for different types of goods and services.
  • Further, a cess would be levied on certain goods such as luxury cars, aerated drinks, pan masala and tobacco products, over and above the rate of 28% for payment of compensation to the States.
  • However, which goods and services fall into which bracket is still an enormous task to be completed by the GST council.
  • Highest tax slab is pegged at 40%.

Another massive challenge to economic development comes from road and connectivity. Roads and property area unit important to economic development, however the condition of the roads is hampering the economic and social progress of the state. Proper roads and a viable transport system could be a lifeline. It will effectively bring multiple socio-economic reforms in terms of economic transformation particularly within the rural areas through accrued social mobility, booming market, production of commodity, reduced impoverishment which is able to end in a reworked means of life. These area unit incentives to reinforce socio-economic development and a property growth. On the full, the ‘lack’ of correct roads in Nagaland could be a real presentation of a serious ‘stumbling block’ within the emergence of Nagaland as associate economic powerhouse. The pattern of development particularly within the rural sector ought to essentially address the issues related to fast urbanization. To the present finish, improved roads and property, a system of agriculture that encourages farming and faculty education can go a protracted manner in solving the issues of urbanization.

Nagaland Public Finance and fiscal Policy

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Nagaland Public Finance and fiscal Policy

Nagaland is one amongst the north-eastern states in India. It’s bordered on its west and north by Assam, on its east by Myanmar (formerly referred to as Burma), on its north by Arunachal Pradesh, and on its south by Manipur.

Nagaland is one of India’s smallest states, with an entire space of 16,579 sq kilometre. The Naga Hills run through this small state that has Saramati as its highest peak at a height of regarding 12,600 ft. Dhansiri, Doyang, Dikhu and Jhanji ar the rivers that flow through this state. The piece of land is mountainous, thickly sylvan, and cut by deep watercourse valleys. There’s a decent type of plant and animal life. Nagaland features a monsoon climate with sometimes high humidity; rain averages between 1800 to 2500 mm (70 to 100 inches) a year.

Nagaland has a legislative assembly with sixty seats. The state sends 2 members to the Indian Parliament: one to the Rajya Sabha and one to the Lok Sabha. There are seven government body districts – Mokokchung, Tuensang, Mon, Wokha, Zunheboto, Phek and Kohima.

The state is found between the 93°20′ E and 95°15′ E Longitudes and 25°6′ and 27°4′ N Latitudes. The total space lined by the state is 16,579 sq. kilometer. Nagaland was declared the sixteenth state of the country of India on 1 December 1963. Before this, Nagaland accustomed could be a union territory. The other attention-grabbing knowledge concerning Nagaland is that it homes as many as sixteen entirely completely different ethnic groups. These groups of people have their own separate cultural identities that embrace customs, dresses and languages. Nearly ninety make the most the population of Nagaland is devout Christians. The state collectively options considerable Hindu individuals. Kohima, the capital town of the state, options a variety of websites that ought to be visited by the tourists as a result of it will facilitate them in getting an insight of the rich history place. The name ‘Kohima’ has been derived from the name of a plant referred to as ‘Kew Hi’ that thrives inside the mountainous region. Kohima could be a fascinating place, endued with scores of natural beauty.Nagaland Public Finance and fiscal Policy

PUBLIC FINANCE

With a slender tax base, the State depends on central transfers for its finances since Statehood. Post the fourteenth finance commission recommendations; the State total receipt throughout 2016-2017 (B.E) is anticipated to extend by 15 per cent. Consequently, the State’s business enterprise deficit is calculable to fall inside the 3 per cent business enterprise deficit target as set underneath Nagaland business enterprise Responsibility & Budget Management Act. But a problem of concern is that the State’s total liability that is calculable to stay at 43.77 per cent of GSDP as against the Medium Term economic policy Statement target of 32.15 per cent in 2016-17. Total Receipts of the State

The full receipts of the authorities comprise of the revenue receipts and also the capital receipts. Throughout 2016-17 (B.E) the full receipts of the authorities is calculable to grow by 15 per cent raising the full receipt to Rs.13,870.98 crore from Rs.12,060.99 crore in 2015-16 (R.E). Element wise, throughout 2016-17 (B.E) the share of revenue receipts and capital receipts within the total receipts was seventy 6.19 per cent and 23.81 per cent severally.

State tax income receipt contains of State’s own tax income receipts and share of central tax transfers. State own tax income includes receipts from land revenue, stamp duties and registration, sales tax/VAT, skilled tax, tax on cars, State excise etc. Among the various classes of State’s own taxes; VAT, skilled tax and tax on vehicles contribute the most quantity to State own tax income. Throughout 2016-17 (B.E) the full quantity of tax income is calculable to extend to Rs. 3531.62 crore from Rs. 2985.93 crore in 2015-16 (R.E). As share of total revenue receipts, total tax income account for 33.20 per cent throughout 2015-16 (R.E) and 34.42 per cent throughout 2016-17 (B.E).

The non-tax revenue contains of interest receipts, revenue from administration, State lottery, power, facility, housing, forestry and life and road transport. Within the State, underneath non tax income, the main contribution comes from Power Department. Throughout 2016-17 (B.E) the full non-tax revenue is calculable to extend to Rs. 261.59 crore from Rs. 237.82 crore in 2015-16 (R.E).

State’s own revenue (including tax and non-tax) receipts (SORR) that was Rs. 536.83 crore throughout 2011-12 raised to Rs. 659.22 crore throughout 2014-15. Throughout 2016-17(B.E) the SORR is calculable to additional increase to Rs.776.90 crore. As against absolutely the increase in SORR, the percentage share of the State’s own revenue receipts (i,e. tax and non-tax revenue) to total revenue receipts swayback from 9.61 per cent in 2011-12 to 7.35 per cent in 2016-17 (B.E).

Nagaland gross fiscal deficit soared from Rs 1 Billion in 1991-92 to Rs 11.6 Billion within the fiscal year (FY) 2015-2016 as per the info discharged by reserve bank of India (RBI) on Saturday.

According to the reference book of Statistics of run 1st released in 2016, the number is that the highest business enterprise deficit in sixteen years of Nagaland state since 1991 and State had just one surplus fiscal year in 2003-04.

However, as per the advance budget estimate, the business enterprise deficit is anticipated to decrease to Rs 5.4 billion (Rs 5,400 billion) in FY 2016-17. Overall, the second edition of RBI’s applied math publication titled ‘Handbook of Statistics on States 2016-17’ rumored a hike within the gross business enterprise deficit of all the states of India, surging from a Rs 187.9 billion in FY 1991 to Rs 4,495.2 billion in FY a 2016.

The State with the very best deficit was Rajasthan at Rs 673.5 billion followed by Uttar Pradesh at Rs 643.2 billion. The Gross fiscal Deficit (GFD) shows the surplus of total expenditure together with loans internet of recovery over revenue receipts (including external grants) and non-debt capital receipts.

The rise in fiscal deficit is additionally indicative of 2 deteriorating state of affairs within the economy growing revenue deficit moreover outstanding liabilities.

With the enactment of a fiscal Responsibility and Budget Management Act (FRBM) Act, 2005 at the centre, the Twelfth Finance Commission (XII FC) suggested that every State enact a fiscal responsibility legislation prescribing specific annual targets with a read to eliminate the Revenue Deficit by 2008-09 and scale back financial Deficit supported a path for reduction of borrowings and guarantees. The State of Nagaland enacted Nagaland financial Responsibility and Budget Management (NFRBM) Act in 2005. The targets prescribed in NFRBM Act and projections created by government in its Medium Term fiscal policy Statement (MTFPS), targets planned within the Budget, Fourteenth Finance Commission (XIV FC) targets for the State vis-a-vis achievements throughout the year 2014-15

Nagaland gross fiscal deficit soared from Rs 1 Billion in 1991-92 to Rs 11.6 Billion within the fiscal year (FY) 2015-2016 as per the information discharged by reserve bank of India (RBI) on Saturday.

According to RBI, the reference work of Statistics initial discharged in 2016, it’s the best fiscal deficit in 16 years of Nagaland state since 1991 and State had only 1 surplus fiscal year in 2003-04.

However, as per the advance budget estimate, the financial deficit is predicted to decrease to Rs 5.4 billion in FY2016-17. Overall, the second edition of RBI’s statistical publication titled ‘Handbook of Statistics on States 2016-17’ according a hike within the gross fiscal deficit of all the states of India, surging from a Rs 187.9 billion in FY 1991 to Rs 4,495.2 billion in FY2016.

The State with the best deficit was Rajasthan at Rs 673.5 billion followed by Uttar Pradesh at Rs 643.2 billion. The Gross fiscal Deficit (GFD) shows the surplus of total expenditure together with loans internet of recovery over revenue receipts (including external grants) and non-debt capital receipts.

The rise in financial deficit is additionally indicative of 2 deteriorating state of affairs within the economy growing revenue deficit moreover outstanding liabilities. (UNI)

In Nagaland’s 2015-16 budget, one amongst the best contributors to the state’s increase in revenue on the capital account are internal debt. The inner debt of the state is predicted to extend by quite 55th from the revised estimates of 2014-15. The government is predicted to lift the aforesaid quantity from enhanced market borrowings to the tune of Rs. 480 crores and ways that and suggests that advances from the tally to the tune of Rs. 626 crores of rupees. The exaggerated borrowings can presumably place a pressure on the debt service burden within the future. However, the increased GSDP, to the tune of quite terrorist organization, is predicted to cut back the consolidated debt as a printed of GSDP to 35.4% from 4.5%. Thus the importance of economic process once more props its head within the budget numbers. To confirm that the amount of debt square measure property within the end of the day there’s a requirement to confirm that the divisor, particularly GSDP should increase moreover. The fiscal deficit is predicted to be 4.91% of the GSDP. Reduction in financial deficit that has been envisaged by the XIV Finance Commission to sub third levels would require our state to renew its target revenue generation. For this purpose it’s necessary that we glance at newer sources of tax income. It’s going to be pertinent to say the expertise of Mizoram that gathered over Rs.7.23 crores at intervals an area of underneath three months. The enacting of the Mizoram Liquor Prohibition & management Act, 2014 when a. associate degree sophisticated dialogue on the difficulty of prohibition in our state should be conducted so it’ll provide some respite to the cash stripped Nagaland government.

The main feature of our revenue performance is that the increase of quite two hundredth in own tax income compared to RE 2014-15 and budgeted at Rs. 434.46 crores. Together with this increase there has been a decrease in non-tax revenue by 27th and is budgeted to be at Rs. 360.48. The revenue deficit is budgeted to be 125th of GSDP.

Another feature that’s noteworthy is that the slow however steady increase in interest payments created by our government. It exaggerated from the particular figure of Rs. 450.6cr in 2013-14 to the budgeted to Rs. 661.42cr in 2015-16. As mentioned earlier it’s vital that there’s a combined effort to cut back the interest burden on the govt. in an exceedingly comprehensive manner. No budget discussion in Nagaland is complete while not a reference or an examination of the position or otherwise of the role competes by central transfers. It’s been budgeted that there’ll be a rise (compared to RE 2014-15) within the transfers from the centre to Rs. 8227 cr. this is often simply over 37.0% of the anticipated increase in GSDP.

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Agriculture of Nagaland

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Agriculture of Nagaland

  • Nagaland, the smallest hilly state situated at the extreme northeastern end of India, lies between 25° 6′ and 27° 4′ latitude, North of Equator and between the Longitudinal line 93° 20’ E and 95° 15’E.
  • The state shares its boundary with Assam on the West, Myanmar on the East, Arunachal Pradesh and parts of Assam on the North and Manipur on the South.
  • One prominent feature of traditional agriculture practices in Nagaland is its high degree of agro-biodiversity.
  • This high agro-biodiversity evolved through exploitation of local site factors, consideration of food security for the family, judicious selection of crops and varieties for cultivation, diversified forms of traditional agricultural systems and in recent years, the cash income generating possibilities.
  • There are four diversified forms of traditional agriculture practiced by the rural villagers of Nagaland: the Jhum (Shifting Cultivation) System, Terrace Rice Cultivation (TRC), Firewood Reserve Forests and Home Gardens.

Agro-Climatic Zones

  • In general, Nagaland has a typical monsoon climate with variants ranging from tropical to temperate conditions.
  • In the plains and low altitudes, the temperatures remains high almost throughout the year excepting the month of December and January, and in the hills and higher altitudes the temperature remain low.
  • The climate is quite invigorating throughout the year. The year is divided into four seasons: Winter, Pre-monsoon, Monsoon and Retreading Monsoon.
  • For agriculture purpose, it is divided into two seasons : Winter (Rabi) and Summer (Kharif)
  1. Sub Alpine temperate zone (1500-3500m MSL)
  2. Sub tropical Hill Zone (1000-1500m MSL)
  3. Sub tropical Plain zone (400-1000m MSL)
  4. Mild tropical Hill zone (200-800m MSL)

Land Use Pattern

  • The total geographical area of the State is 16,57,900 Ha. Out of which 7, 22,464 Ha. are under cultivable area which comes to 43.58%.
  • The major land use pattern is slash and burn cultivation locally known as
  • The Angami and Chakesang tribes have on the other hand, developed a system of Wet Terrace Rice Cultivation (WTRC) which is practiced alongside jhum cultivation.
  • Besides, there are other land use systems such as Horticulture and Agro-forestry, which are of recent origin.
  • The combination of horticultural crops with forestry will ensure parmenent plant cover on hill-slops.

Feature of Agriculture of Nagaland

  • Nagaland has basically an agricultural economy.
  • Over 70% of the population is dependent on Agriculture of Nagaland.
  • The main crops are rice, millet, maize and pulses.
  • Cash crops like sugarcane and potato are also becoming popular.
  • Coffee, cardamom and tea are grown as plantation crops in Nagaland.
  • Rice is the dominant crop and also the staple diet of the people, of the gross cropped area under food grains, rice accounts for about 84.4%.
  • Oil seeds are also an important crop which includes Rapeseed, mustard etc.
  • Coffee cardamom and tea are grown as plantation crops in Nagaland.
  • Principal crops are Arums, yams, millet, maize, potatoes and sugarcane. Vegetable crops are melon, cucumbers, spinach leaf, mustard, onion, chillies, carrots, tomatoes, brinjal etc.
  • The two methods of cultivation among the Naga tribes are jhuming and terrace cultivation.
  • The area under jhum cultivation is about 87.339 hectares and under terraced cultivation is about 62,091 hectares.

Jhum Cultivition of Agriculture of Nagaland

  • In jhuming, the individual parcels out his field into a number of plots and cultivates a particular plot for one or two years.
  • In the following year, he shifts to the next plot and that also is cultivated for the same period. In this way, after the rotation is completed, the first plot is taken up again.
  • The jungle is felled and burnt and the crops are sown on the ground fertilized by ashes.
  • The complete rotation of plots may take between six to ten years depending upon the acreage of the field.
  • The longer this duration is, the more fertile the soil becomes and better the crops are, this method of cultivation is in vogue among the Semas, Aos and Lothas.
  • Jhuming has its obvious disadvantages. A large area of land is required for cultivation. Besides, the crops is dependent on rainfall.

Terrace Cultivation of Agriculture of Nagaland

  • A more modern method is that of preparing terraced fields.
  • The Angamis are experts in this art.
  • The complete hillside is cut, beautiful terraces whose width would depend up on the gradient of the feature, are made.
  • The fields are irrigated by a net work of water channels.
  • Normally the terraces are so graduated that water flows down conveniently from one terrace to the other below it, and so on.
  • Bamboo pipes are used to regulate the flow of water.
  • The excavating of the terraces requires a colossal effort, and one marvels at the amount of human energy expended in cutting them into shape, but these terraced fields, once prepared, are much easier to maintain than the jhum plots.
  • They have also the advantage of being closer to the village site.
  • The State Government is trying to persuade the villagers to change over from jhuming to terracing.
  • The Government is in fact, making all out efforts to improve the agriculture.
  • It has under taken a number of irrigation projects, supplied pumping set to farmers, started community Development projects, set up seed farms and established an agricultural research centre.
  • As a result of these measures, there has already been a sustained increase in the tonnage of rice produced.

Agriculture of Nagaland

Crop Rotations:

  1. Paddy- Mustard
  2. Paddy- maize
  3. Paddy- linseed
  4. Maize – Black gram
  5. Soybean –fallow
  6. Paddy-cabbage
  7. Maize- winter vegetables
  8. Cucurbits – winter vegetables
  9. Paddy –fallow
  10. Maize –fallow
  11. Ginger –fallow

Crop Sequences:

  1. Paddy followed by Mustard
  2. Paddy followed by maize
  3. Paddy followed by linseed
  4. Maize followed by Black gram
  5. Soybean followed by fallow
  6. Paddy followed by cabbage
  7. Maize followed by winter vegetables
  8. Cucurbits followed by winter vegetables
  9. Paddy mono crop
  10. Maize mono crop
  11. Ginger mono crops

 

Inter Cropping: Jhum paddy maize, colocasia, soybean, cucurbits

Mixed Cropping Jhum paddy maize, colocasia, soybean, cucurbits

Cash Crops: Cotton Sugarcane, Jute, Tea, Coriander

Rice

  • Cultivation of rice requires hot and moist climate.
  • It is a Kharief crop and is sown in March-April and harvested in Autumn.
  • Sufficient water must cover the fields.
  • Temperature: Rice requires hot and humid conditions. The temperature should be fairly high i.e. 24°C mean monthly temperature with average temperature of 22°C to 32°C.
  • Rainfall: Rainfall ranging between 150-300 cm is suitable for its growth, where rainfall is less than 100 cm, rice is cultivated with the help of irrigation.
  • Soil: Rice is grown in varied soil conditions but deep clayey and loamy soil provides the ideal conditions.

Maize

  • It requires hot dry climate.
  • Rainfall required for maize varies from 75 cms to 125 cms.
  • It is sown in May-July and harvested in August-November

Salient Features of  Indian/Agriculture of Nagaland

  1. Subsistence Agriculture of Nagaland: Most parts of India have subsistence agriculture. This type of Agriculture of Nagaland has been practised in India for several hundreds of years and still prevails in a larger part of India in spite of the large scale change in agricultural practices after independence.
  2. Pressure of population on Agriculture of Nagaland : Despite increase in urbanization and industrialization, about 70% of population is still directly or indirectly dependent on agriculture.
  3. Mechanization of farming: Green Revolution took place in India in the late sixties and early seventies. After more than forty years of Green Revolution and revolution in agricultural machinery and equipments, complete mechanization is still a distant dream
  4. Dependence upon monsoon: Since independence, there has been a rapid expansion of irrigation infrastructure. Despite the large scale expansion, only about one third of total cropped area is irrigated today. As a consequence, two third of cropped areas is still dependent upon monsoon. Monsoon in India is uncertain and unreliable. This has become even more unreliable due to change in climate.
  5. Variety of crops: India has diversity of topography, climate and soil. Since India has both tropical and temperate climate, crops of both the climate are found in India. There are very few countries in the world that have variety comparable to that of India..
  6. Predominance of food crops: Since Indian agriculture has to feed a large population, production of food crops is the first priority of the farmers almost everywhere in the country. However, in recent years, there has been a decline in the share of land used for food crops due to various other commercially most advantageous uses of this land.
  7. Seasonal patterns: India has three distinct agricultural/cropping seasons. You might have heard about kharif, rabi and zaid. In India there are specific crops grown in these three seasons. For example rice is a kharif crop whereas wheat is a rabi crop.

 

Challenges are faced by farmers

Farmers of our country are facing lot of problems regarding agricultural production of crop. Few of them are shortlisted below:

  • Uncertain weather
  • Uneven water availability
  • Lesser yield
  • Low quality crops
  • Lack of soil nutrients
  • Buyer’s monopoly
  • Less cash in hand
  • Less scientific guidance during agricultural
  • Less information regarding selection of crop seed
  • Inadequate information of plant root moisture holding capacity
  • Less information of scientific irrigation process for maximum yield
  • Less aware of the market and growing technology

 

Public Finance, Monetary Policies, Inflation & Control Mechanism, Repo Rate, Reverse Repo Rate, CRR & SLR.

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Table of Content:-

  1. Public Finance
  2. Monetary Policies
  3. Inflation & Control Mechanism,
  4. Repo Rate
  5. Reverse Repo Rate
  6. CRR
  7. SLR.

Public Finance

Public finance is the study of the role of the government in the economy. It is the branch of economics which assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones.

It includes the study of :-

  • Fiscal Policy
  • Deficits and Deficit Financing
  • Fiscal Consolidation
  • Public Debt- Internal and External debt

Fiscal policy relates to raising and expenditure of money in quantitative and qualitative manner.Fiscal policy is the use of government spending and taxation to influence the economy. Governments typically use fiscal policy to promote strong and sustainable growth and reduce poverty. The role and objectives of fiscal policy gained prominence during the recent global economic crisis, when governments stepped in to support financial systems, jump-start growth, and mitigate the impact of the crisis on vulnerable groups.

pfHistorically, the prominence of fiscal policy as a policy tool has waxed and waned. Before 1930, an approach of limited government, or laissez-faire, prevailed. With the stock market crash and the Great Depression, policymakers pushed for governments to play a more proactive role in the economy. More recently, countries had scaled back the size and function of government—with markets taking on an enhanced role in the allocation of goods and services—but when the global financial crisis threatened worldwide recession, many countries returned to a more active fiscal policy.

How does fiscal policy work?

When policymakers seek to influence the economy, they have two main tools at their disposal—monetary policy and fiscal policy. Central banks indirectly target activity by influencing the money supply through adjustments to interest rates, bank reserve requirements, and the purchase and sale of government securities and foreign exchange. Governments influence the economy by changing the level and types of taxes, the extent and composition of spending, and the degree and form of borrowing.

Deficit financing, practice in which a government spends more money than it receives as revenue, the difference being made up by borrowing or minting new funds.

Fiscal consolidation is a term that is used to describe the creation of strategies that are aimed at minimizing deficits while also curtailing the accumulation of more debt. The term is most commonly employed when referring to efforts of a local or national government to lower the level of debt carried by the jurisdiction, but can also be applied to the efforts of businesses or even households to reduce debt while simultaneously limiting the generation of new debt obligations. From this perspective, the goal of fiscal consolidation in any setting is to improve financial stability by creating a more desirable financial position.

The public debt is defined as how much a country owes to lenders outside of itself. These can include individuals, businesses and even other governments.public debt is the accumulation of annual budget deficits. It’s the result of years of government leaders spending more than they take in via tax revenues.

 

Monetary Policies

Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.
Objectives of Monetary Policies are:-
  •  Accelerated growth of the economy
  • Balancing saving and investments
  • Exchange rate stabilization
  • Price stability
  • Employment generation

Monetary Policy could be expansionary or contractionary;  Expansionary policy would increase the total money supply in the economy while contractionary policy would decrease the money supply in the economy.

RBI issues the Bi-Monthly monetary policy statement. The tools available with RBI to achieve the targets of monetary policy are:-

  • Bank rates
  • Reserve Ratios
  • Open Market Operations
  • Intervention in forex market
  • Moral suasion

 

 

Repo Rate- Repo rate is the rate at which the central bank of a country (RBI in case of India) lends money to commercial banks in the event of any shortfall of funds. In the event of inflation, central banks increase repo rate as this acts as a disincentive for banks to borrow from the central bank. This ultimately reduces the money supply in the economy and thus helps in arresting inflation.

Reverse Repo Rate is the rate at which RBI borrows money from the commercial banks.An increase in the reverse repo rate will decrease the money supply and vice-versa, other things remaining constant. An increase in reverse repo rate means that commercial banks will get more incentives to park their funds with the RBI, thereby decreasing the supply of money in the market.

Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank. CRR is set according to the guidelines of the central bank of a country.The amount specified as the CRR is held in cash and cash equivalents, is stored in bank vaults or parked with the Reserve Bank of India. The aim here is to ensure that banks do not run out of cash to meet the payment demands of their depositors. CRR is a crucial monetary policy tool and is used for controlling money supply in an economy.

CRR specifications give greater control to the central bank over money supply. Commercial banks have to hold only some specified part of the total deposits as reserves. This is called fractional reserve banking.

Statutory liquidity ratio (SLR) is the Indian government term for reserve requirement that the commercial banks in India require to maintain in the form of gold, government approved securities before providing credit to the customers.its the ratio of liquid assets to net demand and time liabilities.Apart from Cash Reserve Ratio (CRR), banks have to maintain a stipulated proportion of their net demand and time liabilities in the form of liquid assets like cash, gold and unencumbered securities. Treasury bills, dated securities issued under market borrowing programme and market stabilisation schemes (MSS), etc also form part of the SLR. Banks have to report to the RBI every alternate Friday their SLR maintenance, and pay penalties for failing to maintain SLR as mandated.

Inflation & Control Mechanism

inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. When the price level rises, each unit of currency buys fewer goods and services.It is the percentage change in the value of the Wholesale Price Index (WPI) on a year-on year basis. It effectively measures the change in the prices of a basket of goods and services in a year. In India, inflation is calculated by taking the WPI as base.

Formula for calculating Inflation=

(WPI in month of current year-WPI in same month of previous year)
————————————————————————————– X 100
WPI in same month of previous year

Inflation occurs due to an imbalance between demand and supply of money, changes in production and distribution cost or increase in taxes on products. When economy experiences inflation, i.e. when the price level of goods and services rises, the value of currency reduces. This means now each unit of currency buys fewer goods and services.

It has its worst impact on consumers. High prices of day-to-day goods make it difficult for consumers to afford even the basic commodities in life. This leaves them with no choice but to ask for higher incomes. Hence the government tries to keep inflation under control.

Contrary to its negative effects, a moderate level of inflation characterizes a good economy. An inflation rate of 2 or 3% is beneficial for an economy as it encourages people to buy more and borrow more, because during times of lower inflation, the level of interest rate also remains low. Hence the government as well as the central bank always strive to achieve a limited level of inflation.

Various measures of Inflation are:-

  • GDP Deflator
  • Cost of Living Index
  • Producer Price Index(PPI)
  • Wholesale Price Index(WPI)
  • Consumer Price Index(CPI)

There are following types on Inflation based on their causes:-

  • Demand pull inflation
  • cost push inflation
  • structural inflation
  • speculation
  • cartelization
  • hoarding

Various control measures to curb rising inflation are:-

  • Fiscal measures like reduction in indirect taxes
  • Dual pricing
  • Monetary measures
  • Supply side measures like importing the shortage goods to meet the demand
  • Administrative measures to curb hoarding, Cratelization.

 

 

Indian Agriculture

by

 

  • Mainstay of Indian Economy
  • Since independence, undergone a change from being the sector contributing the highest share to the GDP to one contributing the lowest share.
  • Agriculture is a state subject.
  • GDP contribution (Agriculture and allied sector)
    • 5 pc in 1950-51
    • 7 pc in 2008-09 and 14.6 pc in 2009-10. It was 19 pc in 2004-05. (2004-05 prices)
    • Agricultural GDP grew by 0.4 pc in 2009-10 and -0.1 pc in 2008-09.
  • Employment
    • 9 pc in 1961
    • 9 pc in 1999-2000
    • 2 pc in 2008-09
    • 1999-2000: Number at 237.8 million
  • GCF
    • Share in total GCF 2009-10: 7.7 pc (2004-05 prices)
    • GCF as % of agricultural GDP: 2007-08 – 16.3, 2008-09(P) – 19.67, 2009-10(QE) – 20.3
    • GCF as % of total GDP: 2007-08 – 2.69, 2008-09P – 3.09, 2009-10QE – 2.97
  • Contributes to agricultural growth and industrial demand
  • Contributed 10.59 pc of total exports in 2009-10.
  • Due to the large number of workforce in this sector, the growth of agriculture is a necessary condition for inclusive growth.
  • Food grains production
    • Highest in 2008-09: 234. 47 mn t
    • 2009-10: 218.11 mn t

Agriculture and Industry

  • Agriculture as
    • Supplier of wage goods to the industrial sector
    • Provider of raw materials
    • Consumer of agricultural capital goods produced by industry
  • Stagnation in agriculture
    • Get data on CAGR

Land Reforms

  • Great scarcity and uneven distribution of land
  • Focus of agricultural policies in the initial years was on institutional changes through land reforms
  • Two objectives of land reforms in India
    • To remove the impediments to agriculture that arise due to the character of agrarian structure in rural areas
    • To reduce or eliminate the exploitation of tenants/small farmers
  • Four main areas of land reforms in India
    • Abolition of intermediaries (zamindars)
    • Tenancy reforms
    • Land ceilings
    • Consolidation of disparate land holdings
  • Economic arguments for land reforms
    • Equity
    • Small farms tend to be more productive than large farms
    • Owner cultivated plots of land tend to be more productive that those under sharecropped tenancy
  • Abolition of zamindari was successful while the other three areas of land reforms met with limited success
  • Operation Bargha. Also, LR in Kerala
  • Regional trends in LR
  • Effect of land reforms
    • On tenants
      • Absentee landlordism declined
      • Tenancy declined. In some cases, tenants were evacuated from the land.
      • In some cases there was a drift of tenants into landless
      • Where tenants had not been evicted, tenancy was pushed underground
    • On equity
    • On productivity
    • On agrarian power relations
  • The National Commission on Farmers has placed the unfinished agenda in land reform first in its list of five factors central overcome an agrarian crisis
  • Way forwards
    • Land reforms that make tenancy legal and give well defined rights to tenants, including women, are now necessary

 

Technology and Green Revolution

  • In the early 60s India faced several crises
    • It had to fight two wars: Pakistan and China
    • Severe drought in 1965 and 1966
    • US was using PL-480 food supply as a means to twist India’s arms to meet US interests
  • This called for an overhaul of the agricultural strategy and the need to be self-sufficient in food production
  • Three phases of green revolution
    • 1966-1972
    • 1973-1980
    • 1981-1990
  • 1966-1972
    • C Subramaniam and MSS
    • 1965: Agricultural Prices Commission and Food Corporation of India set up
    • Introduction of HYV seed of wheat from Mexico created by CIMMYT
    • Under the new agricultural policy, the spread of HYVs was supported by public investments in fertilisers, power, irrigation and credit
    • Food grain production shot up
      • 1966-67: 74 mt
      • 1971-72: 105 mt
    • India became nearly self-sufficient in food grains
    • What led to the increased production?
      • Favourable pricing policy led to adequate incentives
      • National research system proceeded to indigenise the new seeds to tackle their shortcomings
      • Availability of inputs including canal water, fertilisers, power and credit
      • Subsidies
      • Role of credit began to be important after 1969
    • 1973-1980
      • This phase saw many challenges
      • Consecutive droughts in 1972-73
      • Oil shock
      • Production fell. Imports began again.
      • Thereafter, government increased fertiliser subsidies
      • Groundwater irrigation increased in  importance
      • HYV technology extended from wheat to rice
    • 1981-1990
      • 1986
        • Rice prod: 63.8 mt (1964: 37)
        • Wheat prod: 47 mt (1964: 12 mt)
      • Even when the ‘worst drought of the century’ struck in 1987, food needs could be adequately met due to buffer stocks
      • HYV technology spread eastward to states like West Bengal and Bihar
      • The impact of HYV technology had started to plateau however
      • Input subsidies kept on increasing
      • 1991: Input subsidy was 7.2 pc of agricultural GDP
    • What was the impact of highly regulated policies on agriculture?
      • There were barriers on pricing, movement and private trading of agricultural produce
      • The external sector was burdened with various tariff and non-tariff barriers to agricultural trade flows
      • The overvalued rupee produced an anti-export environment for agriculture
      • High protection to industry produced high industrial prices and adverse terms of trade for agriculture, reducing the relative profitability of the primary sector
    • What was the aim of agricultural pricing in pre-reform era?
      • Ensure inexpensive food for consumers
      • Protect farmers’ incomes from price fluctuations
      • Keep the balance of payments in check
    • Agriculture in post-reform era
      • Impact: 1. Growth in PCI led to an increase in food demand and also diversification. Terms of trade between agricultural and industrial prices improved in favour of agriculture
      • Increased profitability has led to increase in private investments which are now double the public investment in agriculture.
      • Growth rates
        • 1980s: 3 pc
        • 1990s:
        • 2000s:
        • Tenth Plan: 2.47 pc (as against 7.77 pc of overall economic growth)
      • This has however not translated into reduction of poverty
      • There has been an increase in both urban and rural inequality
    • Deceleration in agricultural growth
      • Declined during 90s
      • Deceleration in the growth of area, production and yield
      • Food production of Rabi crops has off late equalled the Kharif crops. This has to an extent reduced the over dependence on monsoon and imparted some stability to agricultural production
      • Area-wise, the deceleration was more in case of the Indo-Gangetic region
    • The instability in agricultural growth is more in states with high percentage of rain-fed areas
    • Acreage: declining trend in most crops during the period 1995-96 to 2004-05
    • Productivity: sharp decline (1995-2005). Healthy performance of cotton and maize though

Major factors affecting growth potential

  • Lack of long term policy perspective
    • No long term strategy for agricultural development
    • National Agricultural Policy was announced only in the year 2000
    • Sectoral priority to industry from the second FYP
    • Weaknesses of policies followed for agricultural development
      • Policies provided little incentives for the farmers as the prices were depressed and the sector was disprotected vis a vis other sectors of the economy
      • Inward-looking policies
      • Excessive price based focus than non-price factors like water, infrastructure, R&D, extension services etc
    • Investment in Agriculture and Subsidies
      • There have been cutbacks in agricultural investment and extension, but not in subsidies
      • Agricultural subsidy as pc of GDP:
      • Public investment in agriculture declined from 4 pc of agriculture GDP in 1976-1980 to
      • Subsidies on fertiliser, power and irrigation have contributed to soil degradation
      • It is important to reduce subsidies and increase public investment in crucial areas such as soil amelioration, watershed development, groundwater recharge, surface irrigation and other infrastructure
      • Public Sector GCF in agriculture stood at less than Rs 50 bn at 1993-94 prices
      • It is imperative to reduce these subsidies for stepping up public investment in agriculture
      • After 2003, the investments have started to increase. In  2006-07 public sector GCF was 3.7 pc of agricultural GDP and  total GCF was 12.5 pc of agricultural GDP
      • Three areas should get priority in public investments
        • Rural roads
        • Electricity
        • Irrigation projects
        • <all three of them are under Bharat Nirman project>
      • Complimentarity between public and private sector capital formation in agricultural sector. Public sector can create infrastructure while the private investment is essential for short term asset building mainly in the areas of mechanisation, ground levelling, private irrigation etc
    • Lagging research and development efforts
      • After the green revolution, there has been no major breakthrough in agricultural research. GM is a promising area but its safety has not yet been conclusively established.
      • Poor productivity in India compared to other countries and even compared to world average
      • India, however, has the largest public agricultural research establishment in the world. ICAR and agricultural universities
      • India spends only 0.3 pc of agricultural GDP for research as compared to 0.7 pc in other developing countries and 2-3 pc in case of developed countries.
      • There is hardly any scope for expansion of area. Hence, productivity must increase to keep up with the increasing demand. R&D has a lot of role to play here
      • New varieties of seeds need to be developed suited to different regions of the country
      • The research system should be responsive to the changing needs and circumstances
    • Technology generation and dissemination
      • Fixed land. Hence technology
      • Focus on yield as well as sustainable use of land
      • Focus should be on specific requirements of each agro-climatic region
      • Ned to develop much stronger linkages between extension and farmers
    • Rising soil degradation and over-exploitation of groundwater
      • Around 40 pc of Indian’s total geographical area are officially estimated as degraded
      • Soil health is deteriorating in Punjab and Haryana
    • Degradation of natural resources
    • Subsidies vis-a-vis investments and farm support systems
    • Agriculture’s terms of trade and farm price volatility
      • Ensure rapid development of backward farm linkages
    • Summary: Need to correct the policy bias against agriculture, make higher investments, develop new varieties of seeds, conserve natural resources like land and water and provide incentives to the farmers to adopt modernisation

 

Some Issues in Indian Agriculture

  • Low public investment
  • Halt in the modernization of agriculture
  • Agricultural indebtedness
  • Farmer suicides
  • Agricultural imports and future markets

Subsidies

  • Talk about bringing urea under the Nutrient Based Subsidy (NBS) system and decontrolling its prices
  • Downsides
    • Fertilizer subsidy touched almost 1 lakh crore in 2008-09
    • Promotes overuse of fertiliser and thereby catalysing soil degradation
    • As a result, agricultural production in the bread baskets of the country has stagnated, posing a threat to the food security of the country
    • Drylands do not receive the benefit of crores of subsidy given in fertilizers

 

Government Intitiatives

  • Green Revolution
  • National Policy on Agriculture, 2002
  • National Policy for Farmers, 2007
    • Major policy provisions include provisions for asset reforms, water use efficiency, use of technology, inputs and services like soil health, good quality seeds, credit, support for women etc
    • Focus on millets as well

Agriculture during the 11th plan

  • Flagship schemes
    • Rashtriya Krishi Vikas Yojana
    • National Food Security Mission
    • National Horticulture Mission (2005-06)
    • Integrated Scheme of Pulses, Oilseeds and Maize
    • Technology Mission for Integrated Development of Horticulture in North-east and Himalayan States (2001-02)
    • National Mission for Sustainable Agriculture
    • National Mission on Micro Irrigation was launched in 2010 in addition to the earlier Micro Irrigation Scheme launched in 2006
    • National Bamboo Mission
  • Avg growth of 2.03 pc against the Plan target of 4 pc per annum.
  • For sustainable and inclusive growth
    • Must focus on the small and marginal farmers as well as female farmers
    • Group approach should be adopted so that they can reap economies of scale
    • Bring technology to farmers
    • Improving efficiency of investments
    • Diversifying while also protecting food security concerns
    • Fostering inclusiveness through a group approach
  • Irrigation
    • Envisages creation of an additional potential of 16 mn ha
    • Bharat Nirman aims to bring an additional 1 crore ha of land under irrigation by 2012
    • Accelerated Irrigation Benefits Programme still on

Irrigation

  • 45 pc of nearly 175 mn ha of cropped area is irrigated
  • Trends
    • Nearly trebled from 24 mn ha in 1953-64 to 75 mn ha in 1998-99
    • It accounts for the largest part of total investments in the agricultural sector
    • Importance of ground water as an irrigation source has also increased considerably
  • Uneven access
    • Inter-regional variance
    • Inequality in access within the farming population
  • Areas of concern
    • Depletion of ground water
    • Environmental concerns
    • Costs
  • Steps to take
    • Improving water use efficiency
    • Water governance
    • Economic incentives for efficient use
  • Govt Schemes
    • Accelerated Irrigation Benefits Programme was started during 1996-97. It extends assistance for the completion of incomplete irrigation schemes
  • In 11th FYP – refer previous section

Way Forward

  • Second green revolution (?)
  • Relook at all the issues offering forward and backward linkages in the agricultural production cycle
  • Focus on oilseeds, pulses and coarse cereals
  • Coarse cereals: high nutrition, can be grown in dry areas, enhance fertility of soil in rotation
  • PDS should be reformed: coarse cereals should also be provided through PDS
  • Timely availability of credit at affordable costs
  • Wider extension of insurance facilities to the farm sector
  • Water and irrigation infrastructure
  • Drip irrigation
  • Organic manures should be popularized and their commercial production encouraged
  • Educate farmers about technology and agricultural techniques

Food Security

  • Food security should also incorporate nutritional security. This requires emphasising the increase in production of pulses, fruits, vegetables, poultry and meat.
  • Interpreted broadly
  • Includes nutritional security which particularly incorporates maternal health and infant health due to the involvement of the nutritional aspect
  • Also covers employment security (?)
  • Affordability, accessibility and availability
  • Food security seeks to address all the three dimensions of hunger: chronic, hidden and transient
  • It also is the first step towards inclusive development

Public Distribution System

  • High procurement prices

Irrigation

  • The total irrigation potential in the country has increased from 81.1 mn hectares in 1991-92 to 108.2 mn hectares in March 2010.
  • 1996-97: Accelerated Irrigation Benefit Programme initiated
  • Reservoir Storage Capacity: 151.77 billion cubic metres

Agricultural Pricing

  • To ensure
    • Remunerative prices to growers
    • Encouraging higher investment and production
    • Safeguard the interest of consumers by making sure that adequate supplies are available
  • It also seeks to evolve a balanced and integrated price structure in the perspective of the overall needs of the economy

 

Investment in Agriculture

  • FAO estimates that global agricultural production needs to grow 70 pc by 2050 in order to meet projected food demand
  • Hence investment should grow by a whopping 50 pc
  • In India, public investment in agriculture has witnessed a steady decline from the 6th FYP onwards
  • Share of investment in agriculture has been between 8-10 pc
  • Most of this has gone into current expenditure in the form of increased output and input subsidies
  • Though private sector investment has been increasing, it has not proved to be enough
  • Decreased public spending in creation of supporting infrastructure in rural areas has discouraged private investment in this sector
  • Some of the measures could be
    • Investment in general service like R&D, education, marketing and rural infrastructure
    • Increased investment in rainfed areas
    • Private sector participation
    • Increased investment for sustainable development

 

WTO and Agriculture

 

  • Uruguay Round multilateral trade negotiations were concluded after 7 years of negotiation in December 1993
  • The WTO Agreement on Agriculture was one of the main agreements which was negotiated
  • Agreement on Agriculture contains provisions in three broad areas of agriculture
    • Market Access
    • Domestic Support
    • Export Subsidies
  • Market Access
    • This is the most important aspect of the negotiation because all countries restrict market access while only few have export subsidies and domestic support
    • This includes tariffication, tariff reduction and access opportunities
    • Tariffication means that all NTTBs should be withdrawn (such as quotas, minimum export prices etc)
    • Adopts a single approach using a tiered formula
    • Single approach: everyone except LDCs have to contribute by improving market access for all products
    • Sensitive products: All countries can list some sensitive products and are allowed flexibility in the way these products are treated, although even sensitive products have to see ‘substantial improvements’ in market access.
    • Special and differential treatment
      • Purpose: for rural development, food security and livelihood security
      • Specifically, special treatment is to be given to developing countries in ‘all elements of the negotiation’, including ‘lesser’ commitments in the formula and long implementation period
      • Special products: developing countries will be given additional flexibility for products that are specially important for their food security, livelihood security and rural development.
      • Special Safeguard Mechanisms: is intended to provide contingent protection to poor farmers in developing countries from negative shocks to import prices or from surges in imports. [Safeguards are contingency restrictions on imports taken temporarily to deal with special circumstances such as a sudden surge in imports. AoA has special provisions on safeguards. In agriculture safeguards, (unlike normal safeguards) can be triggered automatically when import volumes rise above a certain level or if prices fall below a certain level; and it is not necessary to demonstrate that serious injury is being caused to the domestic industry]
    • AoA requires (from 1995)
      • 36% average reduction by developed countries, with a minimum per tariff line reduction of 15% over six years
      • 24% average reduction by developing countries with a minimum per tariff line reduction of 10% over ten years
    • Domestic Support (subsidies)
      • AoA structures domestic support into three categories
        • Green Box
        • Amber Box
        • Blue Box
      • Green Box
        • Non (or minimal) trade distorting subsidies
        • They have to be government funded and must not involve price support
        • They tend to be programmes that are not targeted at particular products and include direct income supports for farmers that are not related to current production levels or prices. They also include environmental protection and regional developmental programmes. These subsidies are therefore allowed without limits
      • Amber Box
        • All domestic support measures considered production and trade fall into the amber box
        • These include measures to support prices, or subsidies directly related to production quantities
        • These supports are subject to limits which are allowed: 5% of total production for developed countries, 10% for developing countries
        • Reduction commitments are expressed in terms of a “Total Aggregate Measurement of Support” (Total AMS)
      • Blue Box
        • This is the “amber box with conditions” – conditions designed to reduce distortion
        • Any support that would normally be in the amber box, is placed in the blue box if the support also required farmers to limit production
        • At present there are no limits on spending on blue box subsidies.
      • Export subsidies
        • Developed countries are required to reduce their export subsidy by 36% (by value) or 21% (by volume) over the six years
        • For developing countries the % cuts are 24% (by value) or 14% (by volume) over 10 years
      • India’s commitment
        • As India was maintaining QRs due to balance of payments reasons (which is a GATT consistent measure), it did not have to undertake any commitments in regard to market access
      • In India, exporters of agricultural commodities do not get any direct subsidy. Indirect subsidies are given

 

 

Food Processing

  • Food processing is a large sector that covers activities such as agriculture, horticulture, plantation, animal husbandry and fisheries
  • Ministry of Food Processing indicated the following segments within the Food Processing industry:
    • Dairy, fruits and vegetable processing
    • Grain processing
    • Meat and poultry processing
    • Fisheries
    • Consumer foods including packaged foods, beverages and packaged drinking water
  • Industry is large and has grown after 1991. However, of the country’s total agriculture and food produce, only 2 per cent is processed.
  • FP has 9% share in manufacturing
  • Structure
    • 42 pc: Unorganised
    • 33 pc: SSI
    • 25 pc: Organised

 

Constraints & Drivers of Growth
Changing lifestyles, food habits, organized food retail and urbanization are the key factors for processed foods in India, these are post-liberalization trends and they give boost to the sector.
There has been a notable change in consumption pattern in India. Unlike earlier, now the share and growth rates for fruits, vegetables, meats and dairy have gone higher compared to cereals and pulses. Such a shift implies a need to diversify the food production base to match the changing consumption preferences.
Also in developed countries it has been observed that there has been a shift from carbohydrate staple to animal sources and sugar. Going by this pattern, in future, there will be demand for prepared meals, snack foods and convenience foods and further on the demand would shift towards functional, organic and diet foods.
Some of the key constraints identified by the food processing industry include:

  • Poor infrastructure in terms of cold storage, warehousing, etc
  • Inadequate quality control and testing infrastructure
  • Inefficient supply chain and involvement of middlemen
  • High transportation and inventory carrying cost
  • Affordability, cultural and regional preference of fresh food
  • High taxation
  • High packaging cost

In terms of policy support, the ministry of food processing has taken the following initiatives:

  • Formulation of the National Food Processing Policy
  • Complete de-licensing, excluding for alcoholic beverages
  • Declared as priority sector for lending in 1999
  • 100% FDI on automatic route
  • Excise duty waived on fruits and vegetables processing from 2000 – 01
  • Income tax holiday for fruits and vegetables processing from 2004 – 05
  • Customs duty reduced on freezer van from 20% to 10% from 2005 – 06
  • Implementation of Fruit Products Order
  • Implementation of Meat Food Products Order
  • Enactment of FSS Bill 2005
  • Food Safety and Standards Bill, 2005
  • Mega Food Parks

Apart from these initiatives, the Centre has requested state Governments to undertake the following reforms:

  • Amendment to the APMC Act
  • Lowering of VAT rates
  • Declaring the industry as seasonal
  • Integrate the promotional structure

 

Plan Schemes

During the 10th Plan, the Ministry implemented Plan schemes for Technology Upgradation/Modernization/Establishment of Food Processing Industries, Infrastructure Development, Human Resource Development, Quality Assurance, R&D and other promotional activities.

In the 11th Plan, it has been proposed to continue assistance to the above schemes with higher levels of assistance. In the 11th Plan, the Ministry proposes to launch a revamped Infrastructure Scheme under which it will promote setting up of Mega Food Parks, cold chain infrastructure, value added centres and packaging centres. The Mega Food Park Scheme will provide backward and forward linkages as well as reliable and sustainable supply chain. The emphasis will be on building strong linkages with agriculture and horticulture, enhancing project implementation capabilities, increased involvement of private sector investments and support for creation of rural infrastructure to ensure a steady supply of good quality agri/horticulture produce. It will provide a mechanism to bring farmers, processors and retailers together and link agricultural production to the market so as to ensure maximization of value addition, minimize wastages and improve farmers’ income. The Mega Food Park would be a well-defined agri/horticultural-processing zone containing state of the art processing facilities with support infrastructure and well established supply chain. The primary objective of the proposed scheme is to facilitate establishment of integrated value chain, with processing at the core and supported by requisite forward and backward linkages. It is envisaged that the implementation of the projects would be assisted by professional Project Management Agencies (PMA) from concept to commissioning. In 11th Plan it is planned to support establishment of thirty (30) Mega Food Parks in various parts of the country.

Vision 2015 on Food Processing Industries

A vision, strategy and action plan has also been finalized for giving boost to growth of food processing sector. The objective is to increase level of processing of perishable food from 6% to 20%, value addition from 20% to 35% and share in global food trade from 1.6% to 3%. The level of processing for fruits and vegetables is envisaged to increase from the present 2.2% to 10% and 15% in 2010 and 2015 respectively. The Cabinet has approved the integrated strategy for promotion of agri-business and vision, strategy and action plan for the Food Processing Sector, based on the recommendations made by the Group of Ministers (GOM).

Integrated Food Law

An Integrated Food Law, i.e. Food Safety and Standards Act, 2006 was notified on 24.8.2006. The Act enables in removing multiplicity of food laws and regulatory agencies and provide single window to food processing sector. Ministry of Health & Family Welfare has been designated as the nodal Ministry for administration and implementation of the Act.

National Institute of Food Technology Entrepreneurship & Management (NIFTEM)

The Ministry has set up a National Institute of Food technology Entrepreneurship & Management (NIFTEM) at Kundli (Haryana). The Institute will function as a knowledge centre in food processing. Certificate of Incorporation of NIFTEM as a section 25 Company under the Companies act 1956 has been obtained.

 

SWOT Analysis of Food–Processing Industry
Strengths

  • Abundant availability of raw material
  • Priority sector status for agro-processing given by the central Government
  • Vast network of manufacturing facilities all over the country
  • Vast domestic market

Weaknesses

  • Low availability of adequate infrastructural facilities
  • Lack of adequate quality control and testing methods as per international standards
  • Inefficient supply chain due to a large number of intermediaries
  • High requirement of working capital.
  • Inadequately developed linkages between R&D labs and industry.
  • Seasonality of raw material

Opportunities

  • Large crop and material base offering a vast potential for agro processing activities
  • Setting of SEZ/AEZ and food parks for providing added incentive to develop greenfield projects
  • Rising income levels and changing consumption patterns
  • Favourable demographic profile and changing lifestyles
  • Integration of development in contemporary technologies such as electronics, material science, bio-technology etc. offer vast scope for rapid improvement and progress
  • Opening of global markets

Threats

  • Affordability and cultural preferences of fresh food
  • High inventory carrying cost
  • High taxation
  • High packaging cost

 

Subsidies

 

Fertilizer Policy:    Urea is the only fertilizer under statutory price control.  Government of India has introduced nutrient based subsidy with effect from 1st April, 2010 in respect of phosphatic and potassic  fertilizers. Under the policy, subsidy is based  on the nutrient (N,P,K and S) content of the  decontrolled P and K fertilizers. Price of Urea has been increased by 10% while price of other subsidized fertilizers are being maintained around current levels. Additional subsidy on micronutrients has been introduced on Boron and Zinc, to begin with.  In order to promote the concept of balanced use of fertilizers and to encourage use of micronutrients, several fertilizers fortifed with Boron and Zinc have been incorporated in the Fertilizer (Control) Order, 1985.

Economic Growth, Development & Planning 

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Economic Growth

  • Economic growth means an increase in real GDP. This increase in real GDP means there is an increase in the value of national output / national expenditure.
  • Economic growth is an important macro-economic objective because it enables increased living standards and helps create new jobs.

Measurement of Economic Growth

Economic growth is measured by changes in the gross domestic product (GDP). It measures a country’s entire economic output for the past year. That takes into account all goods and services that are produced in this country for sale, whether they are sold domestically or sold overseas. It only measures final production, so that the parts manufactured to make a product are not counted. Exports are counted because they are produced in this country. Imports are subtracted from economic growth. Economic growth is measured quarterly measured using real GDP to compensate for the effects of inflation. Here’s more on the GDP growth rate and how you can calculate it.

Measurements of economic growth do not include unpaid services. They include the care of one’s children, unpaid volunteer work, or illegal black-market activities.

Determinants of Economic Growth

  • Productivity.
  • Intensity (hours worked)
  • Demographic changes.
  • Political institutions, property rights, and rule of law.
  • Capital.
  • New products and services.
  • Growth phases and sector shares.

 

The Concept Of Economic Development

  • Economic development is the process by which a nation improves the economic, political, and social well-being of its people.

Differences between Economic Growth and Economic Development

  • Economic growth measures an increase in Real GDP (real output). GDP is a measure of the national income / national output and national expenditure. It basically measures the total volume of goods and services produced in an economy.

Economic Development looks at a wider range of statistics than just GDP per capita. Development is concerned with how people are actually affected. It looks at their actual living standards and the freedom they have to enjoy a good standard of living.

Elements/ Factors Contributing to Economic Development

  • Human Resource
  • Natural Resources
  • Capital Formation
  • Technological Development
  • Social and Political Factors

Economic Planning for India

Economic planning refers to the initiation, control and regulation of economic activity by the state with a view to achieve predetermined objectives within a given time-interval.

The principal function of planning, especially in a federal system, is to evolve a shared vision of and commitment to the national objectives and development strategy not only in the government at all levels, but also among all other economic agents.
NITI Aayog acts as the quintessential platform of the Government of India to bring States to act together in national interest, and thereby fosters Cooperative Federalism.

At the core of NITI Aayog’s creation are two hubs – Team India Hub and the Knowledge and Innovation Hub. The Team India Hub leads the engagement of states with the Central government, while the Knowledge and Innovation Hub builds NITI’s think-tank capabilities. These hubs reflect the two key tasks of the Aayog.

NITI Aayog is also developing itself as a State of the Art Resource Centre, with the necessary resources, knowledge and skills, that will enable it to act with speed, promote research and innovation, provide strategic policy vision for the government, and deal with contingent issues.