Sunday, February 28, 2016
The services sector in India has remained the most vibrant sector in terms of contribution to national and state incomes, trade flows, FDI inflows, and employment. According to the Economic Survey 2015-16 tabled in Parliament, the services sector contributed almost 66.1% of its gross value added growth in 2015-16 becoming the important net foreign exchange earner and the most attractive sector for FDI (Foreign Direct Investment) inflows. Despite the slow down in the post crisis period (2010-14) India showed the fastest service sector growth with a CAGR (Compound Annual Growth Rate) of 8.6% followed by China at 8.4%. In 2014 India’s services sector growth at 10.3% was noticeably higher than China at 8.0%. As per the ILO (International Labour Organisation) report on “Global Employment and Social Outlook : Trends 2015” job creation in the coming years will be mainly in the service sector.
In 2014, FDI in India at 34billion US$ increased by 22% over 2013. There has been a significant growth in FDI inflows in 2014-15 and 2015-16(April – October) in general and in Services Sector in particular. In 2014-15, FDI inflows to the Services Sector grew by a whopping 70.4% to 16.4 billion US$. This rising trend is continuing in the first seven months of 2015-16 with the FDI equity inflows in the services sector growing by 74.7% to 14.8 billion US$. Significant FDI related liberalization has taken place in a number of sectors to ensure that India remains a increasingly attractive investment destination.
India’s Services Trade
Services exports have been a dynamic element of India’s trade and globalization in recent years. India’s services export grew from 16.8 billion US$ in 2001 to 155.6 billion US $ in 2014 which constitutes 7.5% of the GDP making the country the 8th largest services exporter in the world. The overall openness of the economy reflected by total trade including services as a percentage of GDP shows a higher degree of openness at 50% in 2014-15 compared to 38% in 2004-05.
India’s Services Import at 81.1 billion US$ grew by 3.3% in 2014-15 . The Government has taken policy initiatives to promote services exports which include the Service Export from India Scheme (SEIS) and organizing Global Exhibition on Services (GES).
Tourism is a major engine of economic growth, and a generator of employment of diverse kinds. According to Economic Survey India’s tourism growth which was 10.2% in terms of foreign Tourist Arrival (FTA) and 9.7% in terms of foreign exchange Earnings(FEE) in 2014 decelerated to 4.5% in terms of FTAs and fell by 2.8% in terms of FEEs in 2015. The lower growth in FTAs and fall in FEEs in 2015 is due to negative or low growth in FTAs from high spending tourists originating from European countries like France, Germany and UK. However, domestic tourism continues to be an important contributor to the sector providing much needed resilience In 2014 it grew by 12.9%. The top five states in domestic tourist visits in 2014 are Tamil Nadu, Uttar Pradesh, Karnataka, Maharashtra and Andhra Pradesh. In 2014-15, Government has launched two schemes for thematic development of tourism, these are Swadesh Darshan and National Mission on Pilgrimage Rejuvenation and Spiritual Augmentation Drive (PRASAD). To promote medical tourism, the Government has launched India’s Healthcare Portal and Advantage Health Care India.
Shipping & Port Services
Around 95% of India’s trade by volume and 68% in terms of value is transported by sea. As per UNCTAD, India with 11.7 million twenty-foot equivalent units of container (TEUs) and a world share of 1.7%, ranked ninth in 2014 among developing countries in terms of containership operations. A vision for coastal shipping tourism and regional development has been prepared with a view to increasing the share of the coastal/inland water-ways transport mode from 7% to 10% by 2019-20. The cargo traffic of India ports increased by 8.2% to 1052.21 million tonnes in 2014-15. In India’s Maritime Agenda, the target for the year 2020 is 3130 million tonnes of port capacity with an investment of approximately Rs. 2,96,000/- crores.
The IT-BPM sector has demonstrated flexibility and as per the Economic Survey is expected to touch an estimated share of 9.5% of GDP and more than 45% in total services export in 2015-16. E-commerce is expected to grow at 21.4% in 2015-16 to reach 17 billion US$. India home to a new breed of young start ups has clearly evolved to become the third largest base of technology start ups in the world. Within one year the number of start ups have grown by 40% creating 80,000-85,000 jobs in 2015. This emerging sector is set to get up a fillip with the Startup India programme.
Research and Development Services
As per the CSO’s(Central Statistical Organization) new method there is no separate head for R&D, it is a part of the professional scientific & technical activities including R&D which grew at 3.8% and 25.5 respectively in 2013-14 and 2014-15. According to the Survey, India’s R&D globalization and services market is set to almost double by 2020 to 38 billion US$.
According to the Survey Consultancy Services is emerging as one of the fastest growing service segments in India. Government has taken several initiatives like the Marketing Development Assistance and Market Access Initiative Scheme among others for capacity development of domestic consultants.
Real Estate and Housing
This sector constituted 8.0% of the India’s GVA (Gross Value Added) in 2014-15 and grew by 9.1%. The sector has grown at a CAGR of 8.1% since 2011-12. However, the construction sector has witnessed a slowdown in last few years due to weakening of both domestic and global growth. The Government has announced plans to build six crore houses by the year 2022 under the Housing for All scheme.
According to the Survey, Rs. 12,31,073 crore trade and repair services sector, with a 10.7% share in GVA, grew by 10.8% in 2014-15. India’s retail market is expected to grow to 1.3 trillion US$ by 2020 making India the world’s fastest growing major developing market. The E-commerce market in India is expected to reach 16 billion US$ by the end of 2015 on the back of growing internet population and increased online shoppers.
Media and Entertainment Services
According to the Economic Survey, the industry has recorded unprecedented growth over the last two decades making it one of the fastest growing industries in India. It is projected to grow at a CAGR of 13.9% to reach 1964 billion rupees by 2019. Digital advertising and gaming, which grew by 44.5% and 22.4% respectively in 2014, are projected to drive the growth of this sector in the coming years.
India Posts is the largest Postal network in world. Towards financial inclusion, the number of post office savings bank (POSB) accounts has increased from 30.86 crore to 33.97 crore and total deposits in POSB accounts and cash certificate to Rs. 6.53 lakhs crore in the last one year. More than 80 lakh Sukanya Samridhi Yojna accounts have been opened. The IT Modernization Project of the Department of Posts, with a total outlay of Rs. 4909 crore, involves computerization and networking of all the post offices.
Agriculture Sector needs a Transformation to ensure Sustainable Livelihoods for the Farmers and Food Security
The Economic Survey 2015-16 presented in the Parliament by the Union Finance Minister Shri Arun Jaitley stressed on the declining growth in agriculture, owing to two consecutive drought years and due to decline in production and area sown of major crops.The agriculture sector needs a transformation to ensure sustainable livelihoods for the farmers and food security for the population. The transformation in agriculture has to be steered by raising productivity in agriculture, by investing in efficient irrigation technologies, and efficient use of all inputs. Economic Survey 2015-16 emphasizes that to improve productivity in agriculture in India needs to be guided by followings:
To raise the productivity of agriculture in India there is need to expand the acreage under irrigation along with adoption of appropriate technologies for efficient utilization of water through suitable pricing. First, adoption of irrigation technologies which improve efficiency in the use of water is imperative in a scenario where flood irrigation has resulted in wastage of water. Second, focus on efficient irrigation technologies is owing to climate change and indiscriminate wastage of water in agriculture and other uses. Having ‘more crop per drop’ through motto to improve productivity in agriculture which can ensure food and water security in the future.
Net irrigated Area to Total cropped area in India
As per the latest available data on irrigation, the all India percentage distribution of net irrigated are to the total cropped area during 2012-13 was 33.9 per cent. There is regional disparity in irrigated farming, with net irrigated area to Total cropped area at more than 50 per cent in the states of Punjab, Tamil Nadu and Uttar Pradesh, while it is at less than 50 per cent in the remaining States. There is need to scope for increasing the coverage of irrigated area across the country to increase productivity in agriculture.
There is need to arrest the declining trend in efficient utilization of irrigation potential and also reverse it in the next two three years. A larger share of funds available under the Mahatama Gandhi National Rural Employment Guarantee Act (MGNEREGA)/ other employment generating schemes need to be deployed for creating and maintenance of community assets including de-silting and repair of tanks and other water bodies that are used for irrigation.
Efficiency in Irrigation
Achieving efficiency in the use of irrigation systems will be the main determinant of agriculture productivity. The conventional systems of irrigation have become on-viable in many parts of India due to increasing shortages of water, wastage of water through over irrigation, and concerns of salination of soil as per Task force on Agriculture (NITI Aayog, 2015). The introduction of efficient irrigation technologies which are both economically and technically efficient like drip and sprinkler irrigation can improve water use efficiency , reduce costs of production by reducing labour costs and power consumption.
Water productivity at the all India level is very low and needs to be enhanced through tapping, harvesting and recycling water, efficient on-farm water management practices, mirco-irrigation (MI), use of waste water and resource conservation technologies. The overall irrigation efficiency of the major and medium irrigation projects in India is estimated at around 38 per cent. Efficiency of the surface irrigation system can be improved from about 35-40 per cent to around 60 per cent and that of groundwater from about 65-70 per cent to 75 per cent.
The level of farm mechanization in India requires more to be done in terms of introduction of better equipment for each farming operation in order to reduce drudgery, to improve efficiency by saving on time and labor, improve productivity, minimize wastage and reduce labor costs for each operation. With shortage of labour for agriculture operations owing to rural urban migration, shift from agriculture to services and rise in demand for labor in non- farm activities, there is need to use labour for agriculture operation judiciously, which makes a strong case for mechanization of farming. The overall level of mechanization in farming is below 50 per cent in the case of majority of the farming operations in India. With increasing fragmentation of landholdings and low rates of tractor penetration among small farmers, there is need for a market in tractor rentals, akin to cars and road construction equipment, driven by private participation. With suitable mobile and internet applications, manufacturers of tractors along with other stakeholders need to deliberate on this, since it will also increase demand for tractors.
The promotion of appropriate farm equipment which are durable, light weight and low cost, region, crop and operation specific using indigenous/ adapted technologies need to be made available for small and marginal farmers to improve productivity.
The basic inputs for increasing productivity in agriculture is seed. It is estimated that the quality for seed accounts for 20-25 per cent of productivity (DAC&FW, 2015).
The issues that require immediate attention are:
Seeds which are open pollinated verities can be developed by farmers from their own harvested crops. However, for high-yielding hybrid verities, the farmer has to depend on the market for each crop.\
Another concern is shortage in the supply of quality seeds. While there is a demand for banning non-certified seeds, certification per-se does not ensure quality seeds Ideally, facilitating more players (private and public) and competition in the market for seeds would improve availability of quality seeds at lower/comprehensive prices.
(iii) Research and technology for seed development.
Inadequate research and genetic engineering has been a constraint in the development of seeds/ seeds technology in major crops during the past few decades in India. There is need to encourage development of seeds/ seed technologies in both private and public sectors to initiate another round of Green revaluation. This development should cover a all agriculture segments/ corps-cereals, coarse cereals, fruits and vegetables, pulses, oilseeds, animal husbandry and pisciculture—simultaneously.
(iv) GM crops and seeds:
Concerns about affordability of hybrids and GM seeds, environmental and ethical issues in cultivation of GM crops, risk to the food chain, dieses spread and cross pollination have resulted in their non-introduction . These issues needs to be debated, tested, evaluated, so that introduction of hybrids is facilitated in the next six months. The adoption of hybrid and HYV seeds is one definite pathway to raising productivity in Indian agriculture.
Fertilizers is a critical and expensive input required to improve agricultural output. To facilitate and promote the use of fertilizers in order to improve productivity, the Government has been providing fertilizer subsidy to farmers. The fertilizer subsidy is around 10 per cent of the total agriculture GDP in 2013-14.
There is a need to rationalize fertilizer subsidy in an input, crop and region neutral format and minimize diversions. The disbursal of subsidy on fertilizers should shift to DBT, the benefits of which will be maximized, if all controls (including imports) on the fertilizer industry/outputs are lifted simultaneously. In the case of P and K fertilizer subsidy, with the Nutrient Based Subsidy (NBS) scheme, a fixed amount of subsidy will be given on each grade based on their content.
Crop-responsive, balanced use of fertilizers:
It is important to facilitate the optimal use of fertilizers depending on the soil health and fertility status. Linking the soil health card to provide profile of the soil and fertilizer on the basis of the same profile utilizing fertilizer, even if not subsidized can improve the yield of crops.
Micro nutrients and organic fertilizers:
Indian soils show deficiency of micro nutrients like boron, zinc, copper and iron in most parts of the country, which limits crop yields and productivity. According to agronomic trails conducted by the Indian Council of Agricultural Research (ICAR), fertilizers which supplement micro nutrients the range of 0.3 to 0.6 ton per ha. The micro nutrient deficiency can be overcome if there is expansion of the use of organic fertilizer. Moreover, it is cheaper for small farmers to adopt and use organic composting and manure. This can help improve and retain soil fertility. With 67 % of Indian soil characterized by low organic carbon, there is great scope for enhancing the use of organic fertilizers.
Judicious use of chemical fertilizers, bio-fertilizers and locally available organic manures like farmyard manure, compost, vermin compost and green manure based on soil testing is necessary to maintain soil health and productivity.
Regional disparity in fertilizer consumption:
There are wide regional disparities in the consumption of fertilizers. These disparities in fertilizer consumption may be attributed to the availability of irrigation facilities in the high consuming state since irrigation is a requirement for proper absorption of fertilizers. I is necessary to reduce the disparities through appropriate soil-testing faculties and policy measures.
In India, the farmer’s crop yield losses range from 15 to 25 per cent owing to the presence of weeds, pests, diseases and rodents. However, the use of pesticides without following proper guidelines, use of sub standard pesticides and lack of awareness about pesticides use are key concerns in India. These practices have give rise to pesticide residues being found in food products in India, posing major threats to the environment and human beings.
Farmers need to be educated about the classification of insecticides on rte basis of their toxicity. They should also be advised whether specific pesticides are suitable for aerial application.
Being environment friendly, non-toxic and cost effective, bio-pesticides need to be promoted among small farmers to improve productive in agriculture. There is need to address the problem of availability of credit on several fronts. In respect of high interest rates, DBT may be considered to replace subvention of interest rates. The intermediation and refinance model to promote agricultural credit needs to be revisited and replaced with DBT that shall subsidize the interest paid by the farmer, instead of subsidizing refinance to financial institutions.
The ratio of agricultural credit to agricultural GDP has increased from 10 per cent in 1999-2000 to around 38 per cent by 2012-13. However, the share of long-term credit in agriculture or investment credit has declined from 55 per cent in 2006-07 to 39 per cent in 201-12. The decline in needs to be arrested and reversed.
The regional disparity in the distribution of agriculture credit also needs or be addressed. In India, farmers can avail of crop loans up to Rs. 3lakh at 7k per cent interest and the effective rate of interest has been lowered to 4 per cent during 2015-16 for those who repay their loans promptly. These measures help farmers tide over short-term contingencies and price shocks which may affect their seasonal operations.
The small and marginal farmers with Kisan Credit Cards (KCCs) can also avail the benefit of interest subvention scheme extended for a further period of up to six months (post-harvest) against Negotiable Warehouse Receipts (NWRs) at the same rate as available to crop loan to discourage distress sale of corps by small farmers.
Agriculture Extension Services
Agriculture extension services constitute another key input which can improve productivity in agriculture by providing timely advisory services to farmers to adopt best practices, technology, meet with contingencies, market information etc. In India, though there are multiple agencies offering agricultural advisory services, lack of functional autonomy, rigid hierarchal structures leading to lack of innovative methods of providing extension services and coordination failures at multiple levels have resulted in inefficient deliver of extension services.
There needs to be a shift to demand-driven agricultural advisory services that will cater to farmer, region and crop-specific needs. This can be done through a virtual connect, using IT (mobile and internet), integration of agricultural extension services with all stakeholders, their respective hierarchy, extension services in other villages, blocks, agro climate regions, largely for sharing of information, suppliers of inputs, agro-processors, markets and their activity, especially price.
The Economic Survey 2015-16 presented in the Parliament by the Union Finance Minister Shri Arun Jaitley emphasizes that the Indian agricultural system is predominantly a mixed crop-livestock farming system, with the livestock segment supplementing farm incomes by providing employment, draught animals and manure. India ranks first in milk production, accounting for 18.5 per cent of world production, achieving an annual output of 146.3 million tones during 2014-15 as compared to 137.69 million tonnes during 2013-14 recording a growth of 6.26 per cent. Whereas, the Food and Agriculture Organization (FAO) has reported a 3.1 per cent increase in world milk production from 765 million tones in 2013 to 789 million tones in 2014.
The per capita availability of milk in India has increased from 176 grams per day in 1990-91 to 322 grams per day by 2014-15. It is more than the world average of 294 grams per day during 2013. This represents a sustained growth in availability of milk and milk products for the growing population Dairying has become an important secondary source of income for millions of rural households engaged in agriculture. The success of the dairy industry has resulted from the integrated co-operative system of milk collection, transportation, processing and distribution, conversion of the same to milk powder and products, to minimize seasonal impact on suppliers and buyers, retail distribution of milk and milk products, sharing of profits with the farmer, which are ploughed back to enhance productivity and needs to be emulated by other farm produce/producers.
In the poultry segment, the Government’s focus, besides framing suitable policies for enhancing commercial poultry production, is for strengthening the family poultry system, which addresses livelihood issues. Both egg and fish production has also registered an increasing trend over the years. Egg production was around 78.48 billion eggs in 2014-15, while poultry meat production was estimated at 3.04 MT. Fisheries constitute about 1 per cent of the GDP of the country and 5.08 per cent of agriculture GDP. The total fish production during 2014-15 was 10.16 MT, an production during the last quarters of 2015-16 has also shown an increasing trend and is estimated at 4.79 MT( Provisional). There is increasing significance of poultry and livestock products in the context of diversifying farm and non-farm activities in the agriculture sector to increase livelihood security.