Poor crop yield may affect prices

New Delhi: The new Economic Survey by the Finance Minister, P Chidambaram - a day before the budget - suggests a bout of sustained inflation, but there is some good news.

The survey has indicated that the Indian economy has decidedly taken off to a higher growth phase.

However, there was some worry as far as the agriculture sector was concerned. Chidambaram said that poor agricultural performance could be a challenge to stable prices.

The Economic Survey stated that inadequate investments, incentives and

post-harvest value addition had contributed to "lacklusture" farm sector growth.

Though firm prices and better crop prospects in the Rabi season have brightened the outlook in the short-term, the prospects for agriculture will be determined by the pace and quality of the reforms in this sector.

The Finance Minister had reasons enough to be concerned as the share of agriculture in GDP in declined to 18.5 per cent in 2006-07 and the projected growth was only 2.7 per cent.

Low investment, imbalance in fertiliser use, low rate of seeds replacement, a distorted incentive system and low post-harvest value addition continued to be a drag on the sector's performance, the Survey stated.

The Survey was positive about crop production in the country, though the lower yield compared to the global average continues to be a cause of concern.

"Low yield per unit area across almost all crops has become a regular feature of Indian agriculture," it said.

The ability to increase investment in surface irrigation, groundwater recharge, restoring water bodies and developing high yielding varieties of non-cereal food crops will be other key factors that will determine prospects in the medium term.

Noting that wholesale prices of most agricultural products were firm in 2006-07, the survey said this along with better crop prospects "augurs well for farm income".

It suggested that the development of area-specific seeds and their application, particularly in the water abundant eastern region, could increase yields in these areas.

(With inputs from PTI)