Created: 3/28/1965

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MEMORANDUM FOR: Deputy Director/Intelligence

Director, Research and Reports

Analysis of the Impact of

Implementing Brezhnev's Agricultural Plan

Secretary Brezboev's agriculturalat tbe CPSU Central Committee Plenum on

S, is important primarily for two reasons; first, it recognizes tho needroad, concerted attack on many of the problems that have severely inhibited tho productivity of Soviet agriculture in the past; and secondly, it acknowledges that the substantial resources needed to implement tho plan can only be provided by cutting budgetary allocations to other priority claimants. The investment part of the plan can be deliniated with reasonable clarity. Agriculture's share of state investment is to rise fromercent of the total4 to nearlyercent The noo-investnent parts of theincreased purchase prices to collective and stateut in tho prices charged farms for machinery, fertilizer and other inputs; and increased subsidies in retail food prices are only three of many proposedalso add to the state bill if the agricultural needs of the country are to be met. The latter series of measures are most difficult to quantify, but aanalysis shows that they will be much less costly than the increase in investment even though of significance.

Brezhnev did not specify thebudgets would be "adjusted" to provideits added rubles, some reduction in the rate of



growth of previously favored components of heavy industry seems probable. Also, while the types of inputs needed to boost agriculture would not seem tout in projected military research and development outlays, it is possible that certain hardware procurement schedules will be adjusted downward.

Of the planned investment outlays ofillion rubles (aboutillion US dollars at the official rate of exchange) in the, the state is toaboutercent and the collective farms the remainder. Thisrastic change; in the Seven-Year Planhe state unsuccessfully tried to force collective farms to carry aboutercent of agricultural investment. The present planned state share of Investment seems feasible, but it is not so certain that the collective farms will be able to provide their scheduled share. For the collective farms to investillion rubles, from on estimated levelillionn average annual Increase5 percent will be necessary. However, the new incentives "guaranteed" the collective farms may succeed in providing the funds needed to stimulate Increases in investment at the planned rate. The annual sum required to meet the state's share of investment is to increaseillion rubles5 to2 billion rubles

About half of state investment,illion rubles, is scheduled for construction and installation work. This includesew agricultural machinery plants at an average cost of aboutillion dollars each. In addition, the plan calls for the constructionepair workspecialized workshops as well as the rebuilding of many existing agricultural machinery repair facilities now on state and collective farms.

No official data are yet available on the current regime's expectations for total investment easonable acceleration of annualwould mean that state agricultural investment will take aboutercent of total investment0 as compared toercent 0



state non-agricultural investment increasedut the rate of industrial growth declined. Our preliminary analysis leadsentative estimate that state non-agricultural investment will only increase aboutercent in theeriod. If this is confirmed (it is based largely on Khrushchev's earlier statement, mado inhat total state investment would be betweenndillion rublesurther moderate decline in tho rate ofgrowth Dooms probable.

Chief, Economic Research Area Research and Reports


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