Agriculture and Saving and Investment in India - Case Study Example

Agriculture and Saving and Investment in India Name Course Tutor Date Agriculture and Saving and Investment in India Introduction In the process of growth and property that is today witnessed in many Asian countries, there are several factors which are considered to contribute to such growth. While others argue that it is majorly oil and minerals, in some cases it is agriculture, and saving and investment (Park & Shin, 2009). India is one of such cases. Park & Park (2010) claim that India is a low- middle income country in which high regard for agriculture, and saving and investment culture are considered as the major ingredients which have contributed towards its development. However, such culture has been accompanied with some policies which provide direction to which agricultural practices will follow. These policies are some of the changes which have been done in India to influence development; these policies were done in four stages. According to Tripathi & Prasad (2009, p.65) Phase stage was from 1947 to mid 1960s, stage two mid-1960s to 1980, stage three was from 1981 to 1991, and last stage was from 1992 up to date. Based on the information, this essay will discuss how policy initiatives on agriculture, and saving and investment have influenced economic development of India since 1960. This essay considers period from 1960s to date. Therefore, some of the policies which will be discussed include the irrigation project development and improving cooperative credits, high-yielding crop varieties. On saving and investments, policies such as foreign investment policy, currency exchange limits and physical capital improvement policy will be discussed. Agricultural policies In the past, the county has depended on service sector, industrial sector and agriculture to improve it economy, but the level of commitment had not yield high performance (Somini, (2008). It is until 1960s that Indian citizens started venturing into serious agriculture and culture of saving and investment after realizing its importance to the economy from other countries. These were the period before 1960 when India used to depend on the food aid and other imports in order to fulfill its domestic needs. Nevertheless, harsh drought, which went on for two years in the early 1965 to late 1966 persuaded India to create a reform policy on agriculture, which would make sure India does not depend foreign imports and aid to curb food security (Barry, Collins & Virmani, 2007). India enforced considerable policy reforms emphasizing on food grain and self-sufficiency objectives. Pradhan (2007, p.9) posits that one of the agricultural policy which has influenced Indian economic development since 1960s is irrigation project development. In India, Irrigation means supplying of water to crops from rivers, wells, tanks, canals and new artificial inventions. In the period prior to 1960s, 64 percent of tilled land in India was relying on the monsoons for water (Sivasubramonian, 2004). As a seasonal aspect, Monsoons were not sustainable, making the country to under the risk of food insecurity. Somini (2008) affirms that in order to improve its agricultural sector in a bid to uplift its economy, the government number one agenda was to lower over reliance on the monsoons while supporting the development of irrigations. Tripathi & Prasad (2009, p.66) claim that this project was aimed at advancing the productivity in the agricultural sector, putting more large tracts of land under farming, improving levels of output, job creation, controlling floods and mitigation of droughts. In so doing, India would increase its food surplus to its increasing population. Without irrigation, the country would rely on unsustainable foreign aid for food. The situation puts them in an awkward position; it appears the government could not feed its people. Even though, irrigation has improved agriculture in India, it has also brought alkalinity and salinity in various agricultural lands (Balakrishnan et al., 2008). Another policy which influenced economic development in India is the improvement of cooperative credits by the government (Tripathi & Prasad, 2009, p.65). Sivasubramonian (2004) contends that it is very difficult to carry out commercial farming without proper capital. This was the experience of India farmers and other people who were planning to venture into commercial farming in the early 1960s. The situation reduced most of them to subsistence farming. Therefore, the government understood this weakness and drafted improvement cooperative credit policy to ensure farmers can secure loans or money to expand their agricultural practices. The government created cooperative credits institution while increasing the budget for the existing ones (Tripathi & Prasad, 2009, p.66). The efficiency of credits is dependent on the professionalism with which they are managed by institutions. It enabled farmers to rent land, buy enough seeds, pay people to help till, buy storage facilities and transport the produce to the market. In so doing, the government ensured farmers could employ themselves and also employee others (Pradhan, 2007, p.7). This enables the farmers and people employed in the agricultural field to earn their national income. In other instances, the farmers motivated themselves to form their own cooperative societies to be able to provide them with loans. Sivasubramonian (2004) argues that farmers had practical inspiration to create agricultural cooperatives so as to "overcome the belief of smallness". They wanted to prove even the poor had a substantial potential that can be marshaled through self-help strategies. While lending the farmers inform of credit and they pay back, cooperative society institutions are able to generate capital and expand their services to promote economic development in India. Today, India rates agriculture as one of the important sectors since provides employment to almost 60 percent of the whole Indian workforce (Tripathi & Prasad 2009, p.1). It therefore proves that effective and well operational cooperative society institutions influences on the social and economic development of a nation since they develop in terms of local programs and local strength of the economy. Credits were advantageous to farmers, but only to a certain extent. Just like a bank loan, it looks at the track record of farmers but ignore the first-time farmers. In that perspective, it can be argued that it was selective in nature. Farmers were also encouraged to plant high-yielding crop varieties after observing other countries improve their food security. Tripathi & Prasad (2009, p.65) argue that one strategy before Indian government was to adopt high-yielding varieties of crops. Therefore, they started by planting wheat and rice of high-yielding varieties which they made available to citizens at CGIAR institutes, particularly at IRRI and CIMMYT (Tripathi & Prasad, 2009, p.71). In a wake of a somber debate, the government in power at that time made a strong decision to embrace high-yielding crop varieties of rice and wheat which entailed the application of irrigation and fertilizers. According to Pradhan (2007, p.9), the advantage of this policy is that it takes a short time to mature and also produced rapid products since there was abrupt yield. As a result, production of rice and wheat within the short period of 6 years between 1966 and 1972 and marked a rise of 40 million tons, which was an increase of 168 percent compared to what has been achieved in the last 15 years (Tripathi & Prasad, 2009, p.73). The remarkable increase also marked the increase in food surplus, and this was majorly because of enhanced crop varieties, which is able to exploit the environment which is provided. High-yielding crops improve food supply because farmers are able to do many seasons as opposed to the traditional crops. Furthermore, it improves the quality which is more marketable hence increasing income to farmers. Similarly, an increase in productivity enables the country to export and earn foreign exchange in return. Government of India (2008) holds that Agricultural produce makes up approximately 75 percent of Indian total exports. The problems with high-yielding crop varieties are that it is yet to be accepted in many countries because of name is highly linked with the term genetically modified food. Saving and investments Culture of saving and investment has long been regarded as a critical structural attribute of countries in the East Asian (Ashok, Ramaswami & Wadhwa 2009). Annemie (2007, p.145) argues that whereas other ingredients comprise of effective macro-economic policies, human resource accumulation, lees price distortions, foreign trade, advanced technology and strong civil service, savings and investment policies remains at the center to influencing economic development of a country. India has used various savings and investment policies including foreign investment policy, currency exchange limits and physical capital improvement policy. Openness to foreign trade has enabled to improve India economics over the years (Bardhan, 2006, p.7). The government of India in its foreign investment policy has allowed investment to be funded by foreign savings. In that way, India has benefited in terms of roads, telecommunications, road networks, electricity and other additional factors to productive capability are needed for an economic take-off of a poor country (Park& Shin, 2009). On the same note, establishing of the first electricity network and power plant is a development front that propels the nation into the contemporary era. Foreign companies which do well in India have also become a source of motivation to the local to save and invest in a meaningful business or project. Normally, the government also feels it’s time they need their own, hence regulating ownership of foreign firms. Such firms also provide employment to citizens, hence given them the chance to have a national income to save and invest appropriately. Bardhan, P. (2006, p.12) claims that allowing more business into the country has severe consequences on jobs, products and companies. Influx of foreign trade brings new foreign companies into the country. If not controlled, foreigners may take all major jobs leaving the country grappling with unemployment. It may also overshadow the growth of local industries Currency exchange controls is another way the government of India used to improve its economy in the 60’s (Bonner, 2010). This control is normally enforced by the government on buying or selling of foreign currency by citizens or on buying or selling of domestic currency by foreigners. Basu & Annemie (2007, p.152) state that the balance of payment of India was growing at a faster rate, and government had the obligation to stop it by whatever means. In the actual sense, the unfavorable balance of payments normally leads to fall of the value of currency. The best way for India was to control how much foreign currency locals could buy or how much a foreigner could sell (Bonner, 2010). In so doing, a culture of saving was apparently introduced in India. Similarly, the locals had no option but to invest their money locally hence increasing economic development. Local development, such as private companies pay tax to the government which is used to improve service delivery to its citizens (Basu, 2008, p.402). This policy also has its flaws because it forces people to save. When citizens decided to save much money, Park & Park (2010) claim that Indian economy almost plunged into a collapse owing to the fact that businesses will have unsold stocks which make them halt expansion and also cut jobs. According to Rakesh (2008, p.67), in the period before 1960s, India was a lower income country in a poor state and having an inadequate physical capital stock. Physical capital refers to tools, equipment and factories which are employed in the processes of production. In early 60’s, China and other countries which were at level with India appeared to surpass it in terms of economic growth, due to inadequate physical capital such as machines it would use to manufacture goods and store its farm produce. The country created a platform for investment both to both locals and foreigners. Kalpan et al., (2006) maintained that several airports were built in Mumbai, New Delhi and other places to connect India with other countries. The airport results to a major increase in trading activities by lowering cargo transportation and tourism travel costs. On the same note, establishing of the first electricity network and power plant is a development front that propels the nation into the contemporary era. Higher level of investment results to a fast accumulation of the physical capital like infrastructure and plant and equipment (Rakesh 2008, p.65). This resulted to a great growth of productive capability within a short duration, and hence facilitated the economies to more from one level to another. With times and focus on saving and investment, India has greatly changed and today the country own companies, airports and offices, and cricket clubs own pitches among others. Such things attract investments generates income and returns. Rakesh (2008, p.65) argues that increase in physical capital stock has made the citizens to have a high capital deepening (high capital). This has enabled Indians to expand their business and acquire more dynamic labor force. Such practices have enabled India to move from a lower income country to lower middle income country. However, Economic theory claims that investment turns out to be a less significant basis for economic growth when the country gets richer (Park & Park, 2010). This is reflected in the law of diminishing returns. India is one of the fastest growing nations, and its investment may not be important in the future. Conclusion The research has realized its objective which was to discuss how agriculture and saving and investment policies have influenced lower middle-income country, in this case India. The country has improved greatly from agricultural activities and saving and investment culture in terms of its outstanding policies. The development and its status as one of the fastest growing nations globally is as strong message to other third world countries which still belong to a lower income level. It is an indicating that with proper agricultural and saving and investment policies it can really be done. All is needed is the goodwill of the leaders and people. References Ashok, K., Ramaswami, B., & Wadhwa, W. (2009). Economic Liberalization and Indian Economic Growth: What's the evidence? Mimeo, University of British Columbia: Vancouver. Balakrishnan P et al., (2008). Agricultural Growth in India since 1991. Reserve Bank of India, Mumbai. Bardhan, P. (2006). Awakening Giants, Feet of Clay: A comparative Assessment of the Rise of China and India. Journal of South Asian Development, 1(1), 1-17. Basu, K. & Annemie, M. (2007). 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