With the onset of globalisation, Indian industry faces competitive challenge from MNC's counterparts. As per the latest update, industrial performance on the overall has remained stagnant at around 4.8 per cent on the average for the fiscal year 1997-98. Even the exports have registered an overall low growth of around four per cent. If one analyses the downturn in the economy one finds that existing infrastructure bottlenecks have contributed significantly to this downward trend in the economy. Invitation to foreign players were offered to participate in the infrastructure development of our country with the hope that it will ease the finances of the government. Government then could use these resources in agriculture and rural development programmes. What government did not realise was contrary to the contemporary belief that the privatisation will solve the problem of Infrastructure bottlenecks, it has to play an active role as investor which could help crowd-in private investments in thesecritical areas.

As Industry and the external sector struggles to regain lost ground. Can BJP and it's allies afford to divert the resources from these critical areas to Agriculture? The answer to this question is a natural `no'. These sectors are as important as the agriculture sector is. This shows a declining trend since mid-eighties. In agricultural sector correlation between public sector investment and private investment show strong and positive relationship. Public investment in agriculture crowds in private investment and help rural economy develop and become prosperous. When even after five decades of development India has not been transformed into an industrial economy, there is a need to redefine growth strategy focussing on agriculture.

As no strategy of economic reform can succeed with substantial and broad- based agricultural development. Agricultural development cannot take place without substantial investment into rural infrastructure. Thus there is a need to relook at the current approachto agriculture and rural development and see how we can increase public investment in agriculture both quantitatively and qualitatively. Agricultural sector has been receiving substantial funds in the form of input subsidies and for rural development programmes. A closer analysis of the impact of subsidies on agricultural drives home the point that it had limited or no impact. What is actually happening is that their growing share in the plan outlay has crowded out funds for public investments. With declining public investments and private investments following suit, Agricultural productivity shows declining trend since mid-eighties. There is a dire need to step up investment in agriculture so that the vicious circle trap can be broken and the economy can achieve high agricultural growth rate. How can this be done?

Let's take the case of agricultural subsidies, 40 per cent of the total spending on agriculture was absorbed by subsidies, whereas productivity enhancing expenditure in the total agricultureexpenditure declined from 60 per cent in 81-82 to 38 per cent in 96-97. It is thus clear that subsidies have crowded out funds which could have otherwise used for agricultural investments. Add to this the allocation for public distribution system and plethora of rural development programmes. They have not delivered as expected. A huge amount of funds have been allocated for these programmes with an objective of increasing the availability of infrastructure and alleviating poverty but none could be achieved. Why not phase them out altogether? There is enough empirical evidence to prove the above point, the analysis of last seven budgets brings home the point that there are three critical deficiencies of the budget on government expenditure on and for agriculture and rural development. They are: