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Thus, one important reason for the lower off-take was the decision taken
in the 2000-01 Budget to increase the prices of grain available in the
Public Distribution System to the so-called "economic cost" of the FCI for
the Above Poverty Line (APL) population and to half that cost for the
Below Poverty Line (BPL) population. This resulted in a sharp decline in
sales especially in the Targeted PDS. But, as the RBI Report points out,
the expansion of buffer food stocks to 3 times the desired level has been
accompanied by a decline in per capita availability of foodgrain in the
economy as a whole. This fell from a high of 505.5 grams per day in 1997
to 470.4 grams in 1999 and then to 458.6 grams in 2000, indicating that
the basic food security problem, far from being solved, has actually
worsened.
Simultaneously, the economic conditions of most cultivators has
deteriorated because the falling international prices of most agricultural
commodities in a context of more open trade in these goods has combined
with higher input prices to squeeze cultivating margins. Falling market
prices have meant that more cultivators have chosen to sell to official
procurement bodies, thus adding even more to the excess food stocks.
Throughout the liberalising reform process, it has been clear that the
industrial sector is much more important for government strategy than the
agricultural sector, despite the fact that most of the labour force still
remains in agriculture. But even industrial growth has shown signs of not
just deceleration but actual recession over the past few years. While the
manufacturing recession was evident from late 1996, there were
expectations of a recovery based on a slight increase in growth rates over
1999. However, as Chart 7 makes abundantly clear, these hopes of a quick
recovery have been belied and the last year's industrial performance shows
deceleration once again. Indeed, the quarterly data show a more worrying
pattern of deceleration over each quarter in recent times, suggesting a
deepening of recession.
Chart 7 >>
Chart 8 indicates that capital goods and basic goods are the worst
performing sectors in the recent period. This of course reflects the
slowdown in investment, in turn reflecting the depressed private
expectations in a context of recession and reduced public investment. But
of course this is also bad news for the future prognosis for industry as a
whole, which would be affected by the slowdown in these sub-sectors.
Chart 8 >>
Durable consumer goods have performed the best among al the sub-sectors of
manufacturing. Once again, this has been affected by very specific
policies of the government such as the Pay Commission award which allowed
for more purchase of such goods by a segment of public sector employees,
and the special protection afforded to the automobile industry in the face
of wider import liberalisation for a range of final consumer goods.
Non-durable consumer goods, which include many items of mass consumption,
have been growing very slowly throughout this period, reflecting the very
limited expansion of a mass market through the liberalisation process.
In this context, it comes as no great surprise to note, from Chart 9, that
the infrastructure industries have also performed relatively poorly. To a
large extent this reflects the inadequacy of public investment and
maintenance over this period, but the slowdown in growth of effective
demand has also played a role. In addition to a low average rate of
growth, most of these sectors have displayed very high volatility and
fluctuation in growth rates even over a relatively short time period.
Chart 9 >>
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