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JANUARY 14, 2007
 Letter From
 Message From
The Prime Minister
 Editor's Letter
 The Great Indian
M iddle Class
 India'S Poor
 The Next 15 Years

Flying High
The Indian aviation industry is growing at a rapid pace, thanks to air transport deregulation, emergence of new operators, lower fares and large untapped demand for air travel. The numbers tell an interesting story: India will require an estimated 1,100 aircraft. The average annual passenger traffic growth in India through 2025 is estimated at 7.7 per cent, well above the world average of 4.8 per cent and China's 7.2 per cent.

Bars Of Gold
The global gold industry is flourishing, largely fuelled by Asian demand and a weak US dollar. The boom is probably only halfway through since prices bottomed out in 2000. Since 1800, the boom and bust cycles have averaged about 10 years. While production is down, the value of gold purchased today is up 47 per cent from a year ago. The super-cycle of high metal prices is seen to be spurred largely by demand from China and India. An analysis.
More Net Specials
Business Today,  December 31, 2006
The Big Variable

It's time Indian agriculture got its second Green Revolution. A higher growth rate won't just benefit millions of farmers, but turbo charge the economy.

"During 1990-91, the country has experienced an excellent monsoon for the third year in succession. Production of foodgrain is likely to reach another peak exceeding the target of 176.5 million tonnes..."
Economic Survey, Union Budget, 1990-91

"The technologies and the strategies unleashed by the first Green Revolution have run their course. This requires, as I have said before, a Second Green Revolution"
Prime Minister Manmohan Singh, January 2006

He needs help: Ironically, the sector in most need of reforms has been given a raw deal

Ironic, but true. While the last 15 years have seen the Indian economy grow from strength to strength, the agriculture sector has gone in the other direction. Reasons: They range from changes in global climate patterns to soil degradation to insufficient agricultural reforms. The decline has been so bad that this year, the country will import a record six million tonnes of wheat. Says M.S. Swaminathan, Chairman, National Committee on Farmers: "It is a wake-up call. We need to raise overall food production to meet growth".

Swaminathan has made sweeping recommendations to the government of India for reviving agriculture, and those call for initiatives in areas such as land reforms, irrigation, knowledge enhancement, market reforms, and more effective credit. The magnitude of the problem is such that any short-term improvement-at least, sustainable-in farm productivity seems unlikely. What's clear, however, is that the sector is in urgent need of reforms.

The reasons are many. For instance, the near-stagnant growth in agriculture has created a major problem-one of labour management. With 60 per cent of the work force in the farm sector, whose contribution to the GDP is gradually on the decline, the socio-political fallout of economic disparities across regions will be too serious a problem to ignore. The rural-urban divide will be wedged open wider, since the services sector boom continues to enrich the middle class in urban areas.

Picture of plenty? On the contrary, the stagnant growth in agriculture has led the government to import 6 million tonnes of wheat

Beyond this corrosive damage is the collateral impact on the power sector. Through the 90s, politicians used the state-run power utilities as a tool to implement populist measures. But now a maturing of strategy is evident on this front. Towards the end of his tenure as Andhra Pradesh's Chief Minister, Chandrababu Naidu, a reformist at heart, turned his energies towards implementing the Godavari lift irrigation programme. However, that did not save his job.

Voted out of power, he commented to some colleagues that perhaps he should have gone about the irrigation programmes with greater zeal. Contends Naidu: "There was severe drought for four-five continuous years, and the opposition party took advantage of that." But his future policy says it all: "My slogan now is: In information technology, we are global leaders. So, why can't we become global leaders in food supply also."

Act Now

Clearly, Prime Minister Manmohan Singh's call for a second revolution in the agriculture sector echoes the political sentiment of the day-that agriculture growth is integral to electoral politics as well as economic growth. While there is no denying that we are ourselves to blame for the stagnant growth in agriculture, global developments have also turned the tide against us. Global warming has reduced the span of winters, leading to early maturing of wheat-every one degree rise in temperature above normal levels during the second half of December leads to a yield loss of about 315 kg per hectare.

What does it mean? The criticality of food security cannot be over-emphasised. When wheat was exported a few years ago, the realisation was no more than around $90 per tonne. However, today, the import price is nothing less than $260-270 per tonne. "The drop in global inventory coupled with diverse uses of grain (read: biofuels) has led to the firming up of the market," says Atul Chaturvedi, President, Adani Agro.

Hybrid zone: Bt cotton planting has gone up from 0.1 million acres to an estimated 9 million acres

Sowing the seeds for rejuvenating the agriculture sector will not be an easy one, since the sector will be competing with social sectors like health and education for government funds. In the seeds business itself, government will require to improve delivery of new crop systems from the laboratory to the farm, since the private sector has so far evinced interest only in the hybrid variety. First, it was Bt cotton, which, was introduced in 2002. In spite of the controversies over resistance to infections, Bt cotton planting has soared from 0.1 million acres to an estimated nine million acres in 2006, roughly 40 per cent of the overall cotton acreage. The private sector industry, comprising companies like Cargill and Bayer, is now sensing an opportunity to sell Bt rice. Its confidence is justified. Half of China's rice area, for example, is germinated with Bt rice.

It is not as if there are no success stories to look up to. If milk were considered a crop, it will well turn out to be the single largest crop, with an annual production of 100 million tonnes. The 70s programme to revive the dairy industry in the country through the cooperative movement, cold chain infrastructure and a sound marketing system endures to this day. The private sector, it seems, has taken a cue from this. Says Sanjeev Asthana, President & Chief Executive, Reliance Retail: "We plan to get into several agri-products and create a supply chain that would optimally remunerate the farmer."

If the economy needs to stay ahead of the 8 per cent mark on a consistent basis, there is little option but to sow the seeds of a Second Green Revolution.




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