INDIAN ECONOMY A GLOBAL OUTLOOK: AGRICULTURE AND RURAL DEVELOPMENT: FOOD CRISIS IMPACT OF INFLATION NEGATIVE GROWTH REFORMS

RMS IN AGRICULTURE. INTERNATIONAL TRADE AND BALANCE OF PAYMENTS.

PRESENTED BY: PAYAL MASKARA SEMESTER : IV B

OVERVIEW:The economy of India is the 12th largest economy in the world by nominal value and the 4th Largest by purchasing power parity (PPP). The Economy grew from a socialist-inspired economy, to a global competitive economy after it adopted the LPG. In the 21st century, India is one of the emerging economic power and is predict that by 2020, India will be among the leading economies of the world. By 2008, India had established itself as the world's second-fastest growing major economy. The year 2009 saw a significant slowdown in India's official GDP growth rate to 6.1% as well as the return of a large projected fiscal deficit of 10.3% of GDP which would be among the highest in the world. India's large service industry accounts for 62.6% of the country's GDP while the industrial and agricultural sector contribute 20% and 17.5% respectively. Agriculture is the predominant occupation in India, accounting for about 52% of employment. The service sector makes up a further 34% and industrial sector around 14%. Total Labour force of India is 467 million, and is subdivided into Agriculture (52%), Industry (14%), Services (34%) India's per capita income (nominal) is $1032, ranked 139th in the world, while its per capita (PPP) of US$2,932 is ranked128th. 40% of the population is illiterate and only 15% of the students reach high school. The 2009 report by Transparency International ranks India at 84th place on corruption.

RURAL DEVELOPMENT:Rural development implies both the economic betterment of people as well as greater social transformation. In order to provide the rural people with better prospects for economic development, increased participation of people in the rural development programmes, decentralization of planning, better enforcement of land reforms and greater access to credit are envisaged. Initially, main thrust for development was laid on agriculture industry, communication, education, health and allied sectors but later on it was realized that accelerated development can be provided only if governmental efforts are adequately supplemented by direct and indirect involvement of people at the grass root level. On October 2, 1952, was an important landmark in the history of the rural development. This programme underwent many changes and was handled by different Ministries. In October 1974, the Department of Rural Development came into existence as a part of Ministry of Food and Agriculture. In 1999 Ministry of Rural Areas and Employment was renamed as Ministry of Rural Development. This Ministrys main objective is to alleviate rural poverty and ensure improved quality of life for the rural population especially those below the poverty line. The Ministry consists of the following three Departments: Department of Rural Development Department of Land Resources Department of Drinking Water Supply Sh. Sisir Adhikari is the Minister of State for Rural Development.

PROVISIONS FOR RURAL DEVELOPMENT IN BUDGET 2010:-

 Rs. 66,100 crore provided for Rural Development. Allocation for Mahatma Gandhi National Rural Employment Guarantee Scheme stepped up to Rs.40,100 crore in 2010-11. An amount of Rs.48,000 crore allocated for rural infrastructure programmes under Bharat Nirman. Unit cost under Indira Awas Yojana increased to Rs.45,000 in the plain areas and to Rs.48,500 in the hilly areas. Allocation for this scheme increased to Rs.10,000 crore. Allocation to Backward Region Grant Fund enhanced by 26 per cent from Rs.5,800 crore in 200910 to Rs 7,300 crore in 2010-11. Additional central assistance of Rs 1,200 crore provided for drought mitigation in the Bundelkhand region.

AGRICULTURE: pepper. It also has the world's largest cattle population: 193 million It is the second largest producer of wheat, rice, sugar, cotton, silk, peanuts and inland fish. It is the third largest producer of tobacco. India is the largest fruit producer, accounting for 10% of the world fruit production. It is the leading producer of bananas, sapotas and mangoes. India is the second largest producer and the largest consumer of silk in the world, with the majority of the production taking place in Karnataka State, particularly in Mysore and the North Bangalore regions. India is the second largest producer of rice in the world after China. India ranks 2nd worldwide in farm output. Agriculture and allied sectors like forestry, logging and fishing accounted for 17.5 of the GDP in 2009. Total Employment is 60% of the total workforce. India is the largest producer in the world of milk, cashew nuts, coconuts, tea, ginger, turmeric and black

PROVISION FOR AGRICULTURE IN BUDGET 2010:Government will follow a four-pronged strategy, covering
(a) Agricultural production Rs. 400 crore provided to extend the green revolution to the eastern region of the country comprising Bihar, Chattisgarh, Jharkhand, Eastern UP, West Bengal and Orissa. Rs. 300 crore provided to organize 60,000 pulses and oil seed villages in rain-fed areas during 2010-11. Rs. 200 crore provided for sustaining the gains already made in the green revolution (b) Reduction in wastage of produce Government to address the issue of opening up of retail trade. FCI to hire godowns from private parties for a guaranteed period of 7 years. (c) Credit support to farmers Banks have been given the target of Rs.3,75,000 crore. The period for repayment of the loan amount by farmers extended in some Drought suffered states.

short-term crop loans as per schedule, increased to 2% for 2010-11.

(d) Impetus to the food processing sector In addition to the ten mega food park projects already being set up, the Government has decided to set up five more such parks. External Commercial Borrowings to be available for cold storage or cold room facility, including for farm level pre-cooling, for preservation or storage of agricultural and allied produce, marine products and meat.

FOOD CRISIS: When the supply does not meet the basic minimum food demand of the people of a country, the scenario is termed as Food Crisis. India has had a growing problem with food output and availability for the mass of the population since the inception of Neo-Liberal Economic reforms in 1991. In India, 26 percent live below poverty line and several hundreds die due to malnutrition. The impact of food crisis is been severely faced by most of the nations of the country and especially by the developing nations and nations with a wide no. of population.

THE REASONS AND SOLUTIONS: The main reason for food crisis in India is its population. India is the second populated state with more than billion living in it. It is estimated that India would require 343.0 million metric tons of food grains in 2020 to feed the whole population. There are only two ways to increase the productivity- by increasing the land under agriculture and by using scientific methods of agriculture. Scientific methods include better quality of fertilizer, genetically modified seeds, better methods irrigation and lots more. The prices of important commodities are rising. Inflation rate has affected agriculture. Prices of commodities such as fertilizers and others used in agriculture have considerably gone up. So income from agriculture has been reduced and farmers are forced to leave agriculture. The Government should support the farmers and help them to avail the fertilizers and other required seeds and crops at an minimal rate and should provide with the proper agricultural environment. Climate change is also one of the major reasons of the increasing food crisis and the reducing agricultural output, there will be severe drought and flood in most part of the agricultural land in India and special arrangement must be taken in order to make agriculture possible. Prices of fossils fuel is raising drastically. The price of crude oil was $50-$60 per barrel in year 2005, today, its price has been doubled; $120 (July) per barrel. Increase in prices of fossil fuels have not affected agriculture directly, but have affected it indirectly by reducing the production of food grains, farmers rather than cultivating food crops, they are now cultivating cash crops, which can produce bio fuel. Farmers get profit by cultivating crops such as Jatropha, which can produce bio fuel. So, production of food grains has considerably reduced. When people have more income on hand, the demand for goods and services increase. If the supply of these goods and services are not adequate there is a shortage and results in price increase of these goods and services. When the cost of production goes up because of increase in price of raw materials. Some people with an aim to make quick profit hoard the goods and create an artificial demand and then they sell the goods at a higher price. This is called hoarding and black marketing. The Central Government has asked all the States to take a control over the Hoarding and engage PDS for the effective food distribution and also to tackle increasing food prices.

 The Global Price Rise and recession is also one of the major reason for the Food Crisis as things have become costly.

INFLATION: Sustained rise in the general price level is termed as Inflation. It is defined as a process which raises the price level. Increase in general price level means depreciation of the value of money. India has been following a great challenge due to increasing rise of inflation rate The rising prices have affected the common man. If the government fails to curb inflation within a stipulated time frame, it will result in further loss of revenue to the government as to cut more duty on imports. Besides, the allies will push for more tax cuts at every possible opportunity. The loss in revenue to the government will hamper several development projects that are under progress. It means that there will be a loss to the nation as well.

IMPACT OF INFLATION: The impact of inflation is most felt by the common man. The prices of all the essential commodities have shoot up The prices of the staple food has rise over a period of time. The prices of sugar has increase as much as 36.6% over a year.

NEGATIVE GROWTH:Negative growth is an economic theory based on a reduction in the production of goods and services to preserve the environment. It contrasts with models of economic growth and sustainable development in which it is possible, mainly through recycling and ecodesign , to produce the same number of goods and services while consuming less energy and fewer raw materials.

IMPACT OF INFLATION ON INDIA:Agricultural production was showing a downward trend this fiscal,grew at about 2.5 per cent rate in the first quarter (Q1) and registered a slow growth rate of 0.91 per cent in the second quarter (Q2). Agriculture will register a negative growth in Q3 as there is a shortfall of kharif crop due to the drought across the country, Mr. Pranab Mukherjee.

REFORMS IN AGRICULTURAL SECTOR: The Indian Agricultural Sector need to have an reform to meet the demands of the masses of India. Some of the reforms suggested are: Firstly, to formulate favourable policies to utilize a larger portion of the investment approved by the central government to solve the "three rural issues"(agriculture, countryside and farmers), as well as take full advantage of and impose sound control on next year's allocated agricultural investment. Secondly, as the pressure of declining agricultural prices grows, measures should be adopted for market regulation of agricultural products to avoid big rises and falls in agricultural prices. Thirdly, every possible means should be taken to increase farmers' income. Fourthly, opportunities should be seized in order to lay a solid foundation for agricultural development as well as improving the ability for comprehensive agricultural development.

 According to CII, Improved rural infrastructure is also playing a key role behind the agri sector's comeback trail. With better rural infrastructure, is comparatively easier and cost-effective to bring farm produce to the market. Better rural roads, more godowns and cold storages, improving rural electricity supply, will all result in faster growth in agriculture. According to CII, Indian farmers are learning to take on the challenge of producing better quality produce at internationally competitive prices. They are willing to use new technologies, and become organized. CII's confidence in India's agriculture stems from the fact that specific commitments are made in the manifestos of the main parties. Significant importance has been given to reforms in agriculture.

BALANCE OF PAYMENT: It is the systematic record of all economic transaction between resident of one country and resident of rest of the world during a given time.

THE STRUCTURE OF BOP: Current Account; Merchandise Income Current transfers Capital Account Reserve Account.
The combined balance of the Current, Capital and Reserve account must be zero. BCA + BKA + BRA = 0

INDIAS BOP CONDITION: Since independence, India's BOP on its current account has been negative. Since liberalisation in the 1990s, India's exports have been consistently rising, covering 80.3% of its imports in 200203, up from 66.2% in 199091. India's growing oil import bill is seen as the main driver behind the large current account deficit. In 2007-08, India imported 120.1 million tonnes of crude oil, more than 3/4th of the domestic demand, at a cost of $61.72 billion. Indian exports and imports declined by 29.2% and 39.2% respectively in June 2009. India is a preferred destination for Foreign Direct Investments (FDI), with Mauritius constituting 44.35%, followed by USA with 11.45%. The Indian economy also saw a turnaround, registering 7 per cent growth during (April September 2009) of 2009-10. The Foreign Exchange reserve for India as on December 2009 was US $ 283.5 Billion. In fiscal 2008-09, the rupee depreciated against major international currencies, except the pound sterling, due to deceleration in capital flows and widened trade deficit. The annual average exchange rate of the rupee in 2008-09 was Rs 45.99 per US dollar indicating depreciation by 12.5 %, over the annual average exchange rate during 2007-08.

 However, annual average exchange rate of the rupee per pound sterling of 78.29 in 2008-09 indicated appreciation by 3.2 per cent over 2007-08. Indias external debt stock stood at US $ 224.59 billion (Rs 1,142,618 crore) in end-March 2009, that is fractionally higher than its previous years level of US$ 224.41 billion (Rs 897,314 crore).

CHALLENGES: Indian economy has been one of the least affected by the global crisis. In fact, India is one of the growth engines, along with China. Firstly, despite recovery, advanced countries continue to face risk of double-dip recession with high unemployment rate, growing fiscal deficit and high public debt - GDP ratios. Such risks can have direct implications for the Indian economy, which is increasingly integrated with the rest of the world. Secondly, with interest rates at historic low in most advanced economies, capital flows from these countries are finding their way into the fast growing Asian economies including India.