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Thesynergyonline Edit Team

FOLLOWING the Kobe earthquake, Japanese imports from Asia only slowed for about 6 months before rebounding, and Japan's share in Asia’s exports has fallen significantly since then (7.3 percent share in 2010 vs. 12.3 percent in 1995).

The slowdown in Japan's imports post-Kobe was more pronounced in industrial materials and consumer goods, while capital equipment imports posted a strong rebound. We think, MY, SG, TH looks relatively more vulnerable to a sharper slowdown in exports to Japan.

However, slower exports to Japan could be offset by stronger exports for product segments where Asian countries compete directly with Japan – KR and TW have export structures most similar to Japan..

In the near term, Japanese companies are likely to delay overseas direct investment plans. However, longer term, we could see greater demand from Japan companies to diversify production bases in geologically more stable countries.

In the last six years, Asia accounted for the largest share (27 percent) of Japan’s total ODI – CH received the most, but JP ODI grew the fastest in Southeast Asia, particularly SG, MY and VN; stock of JP ODI (percentage of GDP) is also high in TH.

Asia only took a very small share of Japan outward portfolio investments in the last few years. Recent flows are, at most. One to two percent of gross forex reserves. However, portfolio flow volatility due to global risk aversion is another matter.

Higher demand for fossil fuels on the back of Japan's power supply shortage, and a possible longer-term bias away from nuclear energy, coupled with MENA supply concerns, could add to volatility in oil prices. In Asia, we think inflation is more relatively vulnerable to higher oil prices in VN, IN, TH and MY.

Spillover effects of Japanese tragedy have prompted a sell-off in risk assets and sharp rally in Asia rates. Assuming the nuclear fallout is contained, growth fears in Asia may be overdone (plus risks in oil/ commodities prices under-priced). We think this opens opportunities to re-enter paid positions in Asia rates. Eventually, we could see recovery in Asia risk assets.

A possible medium-to-longer term impact is to what extent countries that directly compete with Japan could gain some market advantage if Japanese peers face production constraints.

Thesynergyonline Edit Team

IN the first half of 2010-11, farm sector has achieved growth of 3.8 percent, rebounding from -0.1 percent and 0.4 percent in the preceding two years. The full-year growth in farm sector is estimated to be 5.4 percent. Substantial expansion in area and production of major crops has been witnessed in both kharif and rabi seasons.

In the Annual Report of the Department of Agriculture and Cooperation (Ministry of Agriculture), the Department has expressed satisfaction over the growth of investment and capital formation in agriculture in the recent past. According to the Annual Report, the total expenditure in the first four years of the 11th Plan is estimated to be Rs 44,413 crore, up from Rs 14,952 crore in the entire 5 year period of the 10th Plan.

The Gross Capital Formation, or investment, in agriculture sector related to GDP in this sector has shown a substantial increasing trend from 15.8 percent in 2005-06 to 22.3 percent in 2009-10. In absolute terms, the capital formation in agriculture and allied activities in 2009-10 was over Rs. 1.3 lakh crore.

Based on the Central Statistical Organisation’s estimates, the share of agriculture in the country’s Gross Domestic Product (GDP) has fallen from 17.4 percent in 2006-07 to 14.2 percent in 2011-11. Agriculture Ministry feels that the falling share of agriculture in GDP is an expected outcome in a fast growing and structurally changing economy.

The focus of the Department of Agriculture and Cooperation in 2010-11 was on mobilizing higher investment in agriculture, bridging yield gaps, timely and adequate supply of quality inputs, and providing adequate support services to farmers.

The Rastriya Krishi Vikas Yojana has succeeded as a catalyst for pulling in more public investments for agriculture and allied sectors. This scheme has become exceedingly popular with states on account of flexibility autonomy provided in planning as well as execution.

With help from the incentives from this scheme, some States have increased agricultural outlay spectacularly – Chhattisgarh by 892 percent, Orissa by 730 percent, Maharashtra by 605 percent, Tripura by 425 percent and Bihar by 423 percent.

The other major programmes including the National Food Security Mission, National Horticulture Mission and Extending Green Revolution to the Eastern States - have made significant progress in terms of utilization of funds as well as meeting physical targets.

The availability of quality seeds now stands at over 321 lakh quintals, showing a jump of 2.5 times in five years. Over 8 lakh hectares additional area has been covered since 2009-10 with assistance from the National Mission on Micro Irrigation. Pulses production has seen a jump in the last two years.

Minimum Support Prices (MSP) of all major crops, especially pulses have been raised substantial in the last few years. In 2010-11 too, MSPs for rice, wheat, coarse cereals, pulses and oilseeds were raised on top the raise effected in earlier years. The Modified National Agricultural Insurance Scheme (MNAIS) was implemented on pilot basis in rabi 2010-11.

The Department has drafted a National Mission on Seeds with a proposed outlay of Rs. 3,773 crore for a period of five years starting 2011-12 to boost quality seeds production in the country.

To meet the challenge posed by climate change, a National Mission for Sustainable Agriculture will be implemented in the country. A fund is also proposed for rehabilitation of sick cooperatives.

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