Milk production touches a record high of 132.43 mt in 2012-13

India recorded a peak production of milk at 132.43 mt in the year 2012-13 according to the Economic Survey for 2013-14, released in New Delhi today. India ranks first in global milk production and accounts for 17 per cent of world production. Milk production has become an important secondary source of income for 70 million rural households engaged in dairying and for 70 per cent of the workforce that comprises women. The average year-on-year growth rate of milk at 4.04 per cent vis-à-vis the world average of 2.2 per cent shows sustained growth in availability of milk and milk products for the growing population.

Globally India is the second largest producer of fruits and vegetables; the largest producer of mango, banana, coconut, cashew, papaya, and pomegranate; and the largest producer and exporter of spices. Horticulture production, estimated at 265 million tones, exceeded the production of foodgrains and oilseeds in 2012-13, owing to an 8.6% increase in productivity of horticulture crops between 2008-09 and 2012-13. India ranks first in the productivity of grapes, banana, cassava, and papaya.

A comprehensive new scheme National Programme on Bovine Breeding and Dairy Development was launched with the objective of enhancing milk production and productivity in a sustainable manner. The National Dairy Plan Phase-I, launched in March 2012 with the objectives of improving productivity of milch animals, strengthening and expanding village-level infrastructure for milk procurement, and providing producers greater access to the market in the dairy sector continues. The number of milch animals increased from 62 million in 2000 to 83.15 million in 2012, thus adding to the improved milch herd of the country.

India ranks second in world fish production, contributing about 5.4% of global fish production. It is also a major producer of fish through aquaculture. Total fish production during 2013-14 is estimated at 9.45 mt with 6.10 mt coming from the inland sector and 3.35 mt from the marine sector. The sector contributes about 1 per cent to overall GDP and represents 4.6% of agricultural GDP.

Human Development to be Taken into Account in Formulating and Implementing Social Sector Programmes: Economic Survey 2013-14

The Economic Survey 2013-14 presented by the Finance Minister Shri Arun Jaitely as precursor to the General Budget in the Lok Sabha today shows some interesting results of inter-state comparisons of socio-economic development of select states based on available indicators from various sources and furnish some clear policy pointers. While some states have done very well in terms of growth indicators, they are poor performers in terms of other human development indicators. The Economic survey states the Human Development dimension needs to be taken into account in formulating and implementing social sector programmes and arriving at criteria for devolution of funds to states.

Population

Kerela is the best performing state in terms of the two indicators- Decadal growth of population (4.9 per cent) and sex ratio (1084) and is well ahead of other states. Andhra Pradesh is a distant second in terms of population growth and third in terms of sex ratio with Tamil Nadu in second place in terms of sex ratio. Bihar has the highest decadal growth of population (25.4) and Haryana the lowest sex ratio (879).

Growth

Bihar is the best performing state in terms of growth rate of both gross state domestic product (GSDP) 2012-13 (15.1 per cent and average GSDP 2005-06 to 2012-13 (9.9 per cent) and also per capita income growth 2012-13 (13.9 per cent). Madhya Pradesh, Gujarat and Kerela are other states that have performed well in all these indicators and well above the all India average. However, in terms of absolute values of GSDP and per capita income, Maharashtra and Haryana respectively are at the top. While Tamil Nadu has the lowest growth in GSDP 2012-13 and Assam the lowest average GSDP growth Rajasthan has the lowest per capita income growth in 2012-13.

Poverty

Poverty estimates indicate that Bihar which had the second highest poverty headcount ratio (HCR) in 2004-05 moved to first place in 2011-12 with the HCR at 33.7 per cent relegating Odisha to second place. Kerala had the lowest poverty (7.1 per cent) followed by Himachal Pradesh (8.1 per cent) and Punjab (8.3 per cent).

Health

Infant Mortality rate (IMR) in 2012 was the lowest in Kerala (12) and the highest in Madhya Pradesh (56) followed by Assam (55), Odisha, and Uttar Pradesh (53 each) against a national IMR of 42. Birth rate was also lowest in Kerala (14.9) and highest in Bihar (27.7) against a national average of 21.6. Death rate was lowest in Maharashtra and West Bengal (6.3) and highest in Odisha (8.5) against a national average of 7.0.

Social sector programmes

Progress in terms of 24x7 primary and other health centre facilities under the National Rural Health Mission (NRHM) is highest in Karnataka (2328) followed by Tamil Nadu and Rajasthan, and lowest in Himachal Pradesh (156) and Haryana (398).

Agriculture Sector: Highlights

·         Record food grains production of 264.4 mt in the year 2013-14

·         Record production of oilseeds of 32.4 mt in the year 2013-14

·         Record production of pulses of 19.6 mt in the year 2013-14

·         Groundnut shows the largest increase in productivity i.e., 73.17% in the year 2013-14.

·         India ranks first in the world in productivity of grapes, banana, cassava, peas, and papaya.

·         Agriculture sector growth rate 4.7% in the year 2013-14

·         Area under foodgrains increased by 4.47% to 126.2 million ha in the year 2013-14

·         Area under oilseeds increased by 6.42% to 28.2 million ha in the year 2013-14.

·         Stocks of foodgrains in the Central Pool stood  at 69.84 million tonnes as on June 1, 2014

·         Net availability of foodgrains increased by 15% to 229.1 million tonnes in 2013

·         Per capita net availability of foodgrains increased to 186.4 kg per year in 2013

·         Agriculture exports grow by 5.1% in the year 2013-14

·         Exports of marine products show a growth rate of 45% in the year 2013-14

·         Milk production touches a record high of 132.43 mt in the year 2012-13

·         Contribution of livestock sector to total GDP was 4.1% in the year 2012-13

·         Year-on-year growth rate of milk production in India is 4.04% vis-a-vis world average of 2.2%

·         Credit to agriculture sector exceeds target of Rs. 7,00,000 crore in the year 2013-14

·         Share of agriculture and allied sectors in GDP declines to 13.9% in 2013-14

·         Number of cultivators decline from 127.3 million in 2001 to 118.7 million in 2011

Biometric Identification to Improve Subsidy Schemes

Programmes such as food subsidy have huge overhead costs. In other cases, such as the fertilizer subsidy, the expenditures generate a distorted resource allocation that hampers productivity. Besides, not all the money put into subsidy schemes reaches the poor.

Therefore, it is increasingly feasible to identify households below the poverty line and give them cash. The new technologies of biometric identification, and payments through mobile phones, have created a range of new possibilities for the design of programmes. These would lead to a reduction in poverty at a lower cost when compared with the present subsidy programmes.

Subsidy programmes are particularly problematic when they hamper changes in prices and the consequent shifts in resource allocation which must take place. When the price of diesel rises, in the medium term, the economy shifts away from diesel. But this adaption is blocked if the price of diesel is not actually raised. When the purchase price for cereals is raised, cereal production becomes more attractive, even though consumers might want more non-cereals.

Poverty ratio declines to 21.9 per cent Expenditure on Education increases to 3.3 per cent of GDP

United Nation’s Human Development Report signifies existing gaps in Health and Education indicators in India need to be bridged faster

The Economic Survey 2013-14 presented by the Finance Minister Shri Arun Jaitely has asked policy makers to design and execute development strategies targeting the young population that was approximately 58 per cent in 2001 and will increase to more than 64 per cent in 2021. The Government has to take timely action to make people healthy, educated and adequately skilled.

Social-sector expenditure Expenditure on social services by the general government (centre and states) as a proportion of total expenditure increased almost continuously from 23.8 per cent in 2008-09 to 25.2 per cent in 2013-14 (Budget Estimates). As a percentage of the Gross Domestic Product (GDP), expenditure on social services increased from 6.8 per cent in 2008-09 to 7.2 per cent in 2013-14 (BE).

As a percentage of GDP, expenditure on education has gone up from 2.9 per cent in 2008-09 to 3.3 per cent in 2013-14 (BE). There is need not only to increase it further, but also address quality issues. Expenditure on health is just 1.4 per cent of GDP. Though, in 2013-14, there was an increase in outlay by 7.44 per cent over the previous year still a lot more needs to be done to provide quality and affordable healthcare for the large Indian population.

Poverty

The poverty ratio (based on the Monthly Per Capita Expenditure (MPCE) of Rs.816 for rural areas and Rs. 1000 for urban areas in 2011-12 at all India level), has declined from 37.2 per cent in 2004-05 to 21.9 per cent in 2011-12. In absolute terms, the number of poor declined from 407.1 million (40.71 crores) in 2004-05 to 269.3 million (26.93 crores) in 2011-12 with an average annual decline of 2.2 percentage points during 2004-05 to 2011-12.

India’s Human Development Rank and performance

According to the United Nations Human Development Report (HDR) 2013, India has slipped down in HDI with its overall global ranking at 136 (out of the 186 countries) as against 134 (out of 187 countries) as per HDR 2012. It is still in the medium human development category with countries including China, Egypt, Indonesia, South Africa and Vietnam. India’s HDI of 0.554 in 2012 has slipped down a notch from 0.551 in 2011.

The existing gap in health and education indicators in India as compared to developed countries and also many of the developing countries highlights the need for much faster and wider spread of basic health and education. Life expectancy at birth was 65.8 year compared to 81.3 year in Norway, 73.7 year in China and 75.1 year in Sri Lanka as per HDR 2013. The Indian performance in mean years of schooling (4.4 years) is even below that of Bangladesh and Pakistan which have lower per capita incomes. However, in terms of average annual HDI growth rate for 2000-12, India is well ahead of many countries with high and very high human development.

Inequality

Not only is inequality lower in India than many other countries, it has also decreased as reflected in a 9.2 per cent fall in its Gini coefficient from 36.8 during 2010-11 to 33.4 during 2011-12. As per the quintile income ratio, the inequality between the top and bottom quintiles in India was lower than in a large number of countries both developed and developing. The HDR measures inequality in terms of two indicators. The Gini Coefficient measures the deviation of distribution of income or consumption from a perfectly equally distribution among individuals within a country. The quintile income ratio is a ratio of the average income of the richest 20 per cent of the population to that of the poorest 20 per cent.

Employment

During 2004-05 to 2011-12, employment growth (Compound Annual Growth Rate[CAGR]) was only 0.5 per cent, compared to 2.8 per cent during 1999-2000 to 2004-05 as per usual status. Based on current daily status (CDS), CAGR was 1.2 per cent and 2.6 per cent respectively for the same periods. However, unemployment rate in India continued to hover around 2 per cent under usual status (principal+subsidary) and fell under CDS steeply from 8.2 per cent in 2004-05 to 5.6 per cent in 2011-12.

Inter-state comparison

The inter-state comparisons of some major states which show varied performance furnish clear policy pointers like the need for greater focus on human development dimension while formulating and implementing social-sector programmes and in devolution of funds to states.

Inclusion of women

The Economic Survey says that empowerment of women is needed to reap the benefits of the time bound demographic dividend. Greater inclusion of women involves not just a step up in the gender budget which has gone up from 2.79 per cent in 2005-06 to 5.83 per cent of the GBS in 2013-14, but also a greater share of women in the decision-making process.

Low and Stable Inflation, Tax and Expenditure Reform and a Well-Functioning Market Economy a Must to Improve Long-Term Growth Prospects

Investments can be revived by improving long term-growth prospects. For this, reforms are needed on three fronts: creating a framework for sustained low and stable inflation, setting public finances on a sustainable path by tax and expenditure reform, and creating the legal and regulatory framework for a well-functioning market economy.

First, the government must ensure a low and stable inflation rate through fiscal consolidation, establishing a monetary policy framework, and creating a competitive national market for food. Initiation of reforms on these fronts will reduce inflation uncertainty and restore a stable business environment. Further lower inflationary expectations would increase domestic household financial saving and make resources available for investment.

Second, public finances need to be put on a sustainable path. India needs sharp fiscal correction, a new Fiscal Responsibility and Budget Management (FRBM) Act with teeth, better accounting practices, greater transparency and improved budgetary management. Improvements on both tax and expenditure are needed to obtain high quality fiscal adjustment. The tax regime must be simple, predictable and stable. This requires a single-rate goods and services tax (GST), fewer exemptions in direct taxes, and a transformation of tax administration. Government expenditure reform involves three elements: shifting subsidy programmes away from price subsidies to income support, a change in the focus of government spending towards provision of public goods, and a focus on outcomes through an improvement in systems of accountability. A focus on health and education outcomes, rather than inputs and expenditure must be a priority. Improvements in credit ratings, lower inflation, lower cost of capital, and greater business confidence that would ensue will yield short-term benefits in response to long-term initiatives.

Third, the government faces the task of putting in place the legal foundations of a well-functioning market economy for India. This must be a carefully executed project as it involves legislative, regulatory, and administrative changes. It involves both removing existing restrictions where there is no market failure and building state capacity to allow businesses to operate in a stable environment. This will help improve the ease of doing business. While product markets have seen reform in India, there is a pressing need to reform factor markets such as those for land, labour and capital. Reforming the financial sector would involve reducing financial repression through which the state usurps a large share of household financial savings, financial sector regulatory reform and changing the laws and regulations governing the flow of foreign capital into India.

Reforming the food market is a huge challenge. Restrictions on farmers to buy, sell and store their produce to customers across the country and the world imposed by Indian laws enacted in the 1950s and 60s have not been removed, even though restrictions on industry were removed long ago. Restoring economic freedom of farmers and allowing them to be part of a competitive national market is essential for controlling food inflation. There is a huge opportunity today for Indian agriculture to be transformed through creation of markets as well as state intervention in public goods such as rural infrastructure and training as well as setting up modern regulatory frameworks for warehousing and commodity futures. Rationalisation of subsidies on inputs such as fertilizer and food is essential. Government needs to eventually move towards income support for farmers and poor households, so that market forces are able to respond to changes in consumption and technology.

GST to be a Major Milestone for Indirect Tax Reform DTC required as a Clean Modern Replacement for existing it laws

In a non-market economy, in addition to laws, taxes and subsidies are used for encouraging or discouraging activities that the central planner considers good for the economy. India’s complex tax system suffers from problems in both structures and administration. Uneven and high tax rates and uneven tax treatment of similar economic activities have induced distortions in the behavior of firms and households. Tax reform in India can improve the ease of doing business and promote efficiency and productivity growth.

There is consensus that the GST will be a major milestone for indirect tax reform in India. Replacing all existing indirect taxes by the GST will create a national market, eliminate cascading taxes, and align taxation of imports and exports correctly. This will improve the competitiveness of production and export from India. The implementation of a Central GST (CenGST) could be the first step towards the GST. Once the CenGST is implemented, and the information technology system for CenGST has worked, estimation risk will be lower and it will be easier for the centre and states to move to the GST.

Just as the GST is a transformation of indirect taxes, the DTC is required as a clean modern replacement for the existing income tax law. As with the GST, the key objective must be a simplification with a clean conceptual core, and the removal of a large number of special cesses and exemptions that favour special interest groups. The tax system must move away from industrial policy, with incentives for one activity or another, towards a simple framework.

As with the GST, the DTC will yield gains by removing distortions of individual and corporate decision making, reducing compliance cost and litigation, and improving tax collections.