India’s growth story could be hampered by low agricultural productivity and inadequate physical infrastructure, especially power, in the medium- to long-term, says Prime Minister’s Economic Advisory Council.

“The Council is of the view that the two principal constraints to growth that face India in the medium to long term are low productivity in agriculture on the one hand and inadequate physical infrastructure on the other, of which, the most important component is the power sector,” it said.

The PMEAC indicated the major constraints to growth in its review of the economy released on Friday, wherein it said the country would return to nine per cent growth by 2011-12.

“Technological and organisational factors have emerged as a major constraint to sustainable growth in agriculture,” the PM’s economic panel said, citing no major breakthrough in farm research since the Green Revolution years.

The research should focus more on crops and regions, it should target at resource-conserving and environment friendly technologies, it should also cover ignored areas and must pay attention to domestic and international demand, PMEAC said.

Further, soil-health cards must be provided to all cultivators on priority basis to help arrest the trend of declining response to inputs like fertilizers and irrigation.





Backing controversial Genetically Modified (GM) crops, the PM’s panel said, “After the success of Bt-cotton and the benefits it has brought to the farmers in Gujarat and Maharashtra, it is imperative that the government must have a clear policy on GM crops.”

Saying that the Indian farmer is mainly exposed to four risks – credit and finance, price, acts of God and technology, the PMEAC asked for extension of more credit, introduction of electronic spot markets, establishing a regulatory body for ware-housing and extensive use of the insurance tool.

On power, the panel said, “The need to accelerate power generating capacity and improve distribution network is of utmost importance.”

The shortage of peak power as well as of aggregate energy is officially estimated to be 10-15 percent, but measured on a more comprehensive basis the shortage is higher, it said.

“The average cost of power for most industrial units … works out to around Rs 6-7 per unit. This is a handicap to the competitiveness of Indian industry,” the panel said.

“These large shortages also lead to production losses. The combined impact is quite adverse to sustained economic expansion,” it added.
Despite significant capacity creation, including that from the private sector, power shortages will remain due to historical deficit conditions and the higher trajectory of Indian growth seen in recent years, the review said.

It is now one-and-a-half years since India was able to regain access to global nuclear technology, as well as to nuclear fuel.

“There is an urgent need to make the necessary regulatory changes quickly so that investment, including that from established private companies interested in this business, can begin to flow,” the panel said.