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Distress in farms: GDP data confirms deflation is here

Agriculture growth lower in ‘nominal’ than ‘real’ terms during Apr-June quarter

Written by Harish Damodaran | New Delhi | Updated: September 2, 2017 4:55 am
Loan waiver issue, Punjab news, Loan waiver issue news, Latest news, India news, Sukhdev Singh Kokri Kalan, India news The table shows that farm sector growth has been more in nominal than real terms for every quarter, barring the last one. (Representational image)

WHY did the last quarter, particularly June, see a spate of farm protests across large swathes of the country — from Nashik-Ahmednagar in Maharashtra and the Neemuch-Mandsaur-Ratlam stretch of Madhya Pradesh, to Rajasthan’s Hadoti region and the Cauvery delta districts of Tamil Nadu? The Central Statistics Office’s (CSO) just-released GDP data for April-June provides a clue. The annual growth in gross value added from agriculture during the quarter was only 2.3 per cent in real terms (i.e. at constant prices), as against 5.2 per cent for January-March and 6.9 per cent for October-December.

But what’s more significant is the growth in nominal terms or at current prices unadjusted for inflation. That, at 0.3 per cent, was even lower. Simply put, it means that even though farm output for the last quarter was 2.3 per cent higher year-on-year, the fall in prices by 2 per cent resulted in the value of agricultural production rising just 0.3 per cent.

The table shows that farm sector growth has been more in nominal than real terms for every quarter, barring the last one. Even in quarters that registered output declines due to drought (October-December 2014 and October-December 2015) or unseasonal rains/hailstorm (January-March 2015), inflation ensured higher value of farm produce at current prices. The recent April-June quarter has been an exception, though.

It witnessed a price crash across farm commodities. The CSO data officially confirms that agriculture entered deflation territory during this quarter, coinciding with the harvesting and marketing of rabi crops. And its effects truly played out in June; what started off as a ‘Shetkari Sampa’ (farmer’s strike) in Puntamba village of Maharashtra’s Ahmednagar district spread within days to other parts of the state and beyond.

“The agitations were surprisingly most strong in areas not known for militant peasant uprisings. In Rajasthan, farmer movements have traditionally been in the Shekhawati or northern districts like Sikar, Jhunjhunu, Ganganagar and Hanumangarh, whereas this time they have taken place in the south-eastern parts covering Jhalawar, Kota, Baran and Bundi. The same goes for Mandsaur-Neemuch, which have hardly had a history of police firing on angry farmers”, notes Yogendra Yadav, founder-member of the farm advocacy organisation, Jai Kisan Andolan.

Farmer agitations previously were mostly about demanding higher support prices for crops — wanting more. “Here, it was simply about deflation. The reason for taking to the streets was the desperation from losing even what they had. Nobody had seen this kind of price collapse across crops”, adds Yadav. Interestingly, the Finance Ministry’s recent Volume II Economic Survey had made a mention of a decline in “real farm revenues” (price multiplied by the quantity of market arrivals, deflated by the rural consumer price index) for a host of pulses and vegetable crops. “This year appears to have been atypical in the magnitude of price decline”, it said, while acknowledging the “puzzle” of “lower prices and lower farm revenues”.

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    Dr B
    Sep 2, 2017 at 11:47 am
    Real analysis by Indian express. For the fall in farm products totally central governments import and export policy is responsible. Government continuously import farm products keep the farm product prices at low level as appea t of city people and restrict our farmers t o export their own farm product by taking the benefits of non unity of farmers. As far as the Indian farmers are concerned all governments including BJP policies are anti Farmers.
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      v b
      Sep 2, 2017 at 11:08 am
      I think that the drop in prices of agricultural commodities is attributable to manipulation by intermediaries. While the contribution of Agriculture to GDP would have dropped, the contribution of Services (which include Trade) would have gone up if the Traders declared their full income but traders rarely declare their full income. The only way of Agriculture’s contribution is revealed is through farmers selling their produce directly to consumers--at least bulk consumers.
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      1. K
        Kadu
        Sep 2, 2017 at 6:45 am
        When some one says deflation then it is deflation of not only farm products but the other commodities used to produces farm products too. Here GDP is very low which was due and inevitably predicted at the time of demonetization. No matter how ne tweets the fact with current scenario of social disturbance, or terrorist concern or natural calamity.
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        Adda