From plate to plough: Growth amidst gloom

Agriculture GDP bucks the trend of decline in other sectors. But can the government help the farmers sustain this growth?

Written by Ashok Gulati | Published:January 16, 2017 12:26 am
Agriculture, GDP growth, financial year, NITI Aayog, financial year 2016-2017, FY 2016-2017, indian express opinions, indian express news The sector that shows a big increase — from 6.6 per cent to 12.8 per cent — is public administration and defence. Illustration: C R Sasikumar

The first advanced estimates of GDP growth for the financial year 2016-2017 (FY17) show a marginal decline from 7.6 per cent last year to 7.1 per cent this year. Of the various sectors, gross value added at basic prices (2011-12), mining and quarrying is down from 7.4 per cent to minus (-)1.8 per cent; manufacturing from 9.3 per cent to 7.4 per cent, construction from 3.9 per cent to 2.9 per cent; trade, hotels, transport, communication from 9 per cent to 6 per cent and financial, real estate and professional services from 10.3 per cent to 9 per cent. The sector that shows a big increase — from 6.6 per cent to 12.8 per cent — is public administration and defence. That gives very little comfort — at least directly — to the masses. These declining growth rates do not take into account the impact of demonetisation yet. All this is not very encouraging.

However, one sector offers a glimmer of hope: Agriculture, and its allied sectors, which registered a jump from 1.2 per cent last year to 4.1 per cent this year. This sector engages almost half the workforce of the country and provides food security. Droughts hurt this sector badly in the last two years. So, the anticipated growth of 4.1 per cent brings much needed relief, although it is far lower than the 5.5 per cent agri-GDP growth NITI Aayog officials were projecting for some time. Interestingly, it shows that the Central Statistical Office (CSO) is not swayed by the over-enthusiastic “feel good” signals from NITI Aayog. This enhances CSO’s credibility.

This 4.1 per cent expected growth is primarily based on first advance estimates of kharif crops, but the estimates of rabi crops and of livestock (milk, eggs, wool) and forestry and fishery are based on targets for FY17, which are normally more optimistic than what the reality may finally turn out to be. In any case, even with this optimistic forecast, the first three years of the Modi government are likely to yield an agri-GDP growth of just 1.7 per cent per year, and the growth for the forgotten Twelfth Five Year Plan (FYP) (2012-13 to 2016-17) is going to be 2.2 per cent per annum. This will be the lowest growth rate registered in any FYP since economic reforms began in 1991, and way below the target of 4 per cent, indicating the biggest failure of policy making (see figure).

Nevertheless, in this gloomy performance of agriculture over the last three to five years, as an optimist, I must count the strengths of our farmers, who can rise to the occasion given a positive policy environment. The kharif foodgrain production in FY17 has registered an impressive growth of 8.9 per cent over kharif of FY16, with a special highlight — kharif pulses recorded a whopping increase of 58 per cent. This was the result of very high pulse prices — around Rs 180-200/kg in retail markets before the sowing season. The prices were incentive enough for farmers to plant a much higher area under pulses. A good monsoon helped yield a bumper crop. With a 58 per cent increase in production, prices of tur and moong came tumbling down. In several markets, prices went below the minimum support prices (MSPs).

This was a golden opportunity for the government to build a buffer stock of two million metric tonnes and support farmers by ensuring that market prices do not drop below MSP. But this opportunity was not tapped fully; the area under pulses may drop next year, and imports increase.

The case of kharif oilseeds was similar. Production jumped by 41 per cent, led by the 65 per cent increase in the soybean harvest. As a result, soybean prices crashed in major markets, going below the MSP at places.

India is the largest importer of pulses and one of the top two importers of edible oils. The total import bill on edible oils and pulses hovers around $12-15 billion. India has had a Mission on Oilseeds and Pulses for the past 25 years, without much success in increasing production. Now, when production jumps, the system is not geared to ensure even the MSP to farmers. This will surely discourage farmers and the country will remain dependent on imports of pulses and oilseeds for years to come.

The minimum policymakers could have done was to remove restrictions on free functioning of exports and markets. Exports of pulses and oilseeds are highly restrictive, and traders have been encumbered by stocking restrictions. This does not allow the free play of markets to benefit farmers. And when government agencies fail to ensure even the MSP, the policy environment smells of an anti-farmer and pro-consumer bias.

Oilseeds and pulses are grown in relatively less irrigated and poorer regions, consume much less water and fix nitrogen in soil — thus saving large fertiliser subsidies. Therefore, supporting them should be a national priority. It will also help alleviate poverty faster and boost the demand for manufactured products, thus helping industry. Tractor demand is already showing recovery with a 15-20 per cent growth over the corresponding period last year — the demand should rise in the coming months.

However, the current agri-situation raises a fundamental question: How long will Indian agriculture, and therefore, the well being of more than half the population dependent on it, remain hostage to monsoons and ineffective implementation of the MSP policy? Not just farmers who cultivate pulses and oilseeds, but paddy farmers in the eastern belt — including the Varanasi mandal, Prime Minister Narendra Modi’s parliamentary constituency — did not get the MSP. If the PMO does not take note of this and take corrective measures, sabka saath, sabka vikas and eliminating poverty, even by 2030, may remain a distant dream.

The writer is Infosys Chair Professor for Agriculture at ICRIER

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  1. P
    Prashant
    Jan 16, 2017 at 11:14 am
    This is an excellent way to find the shortcomings of Government,,,,,,On other side we have anchors like Ravish of Ndtv😊😊,,don't know what he wants
    Reply
    1. K
      K SHESHU
      Jan 16, 2017 at 2:23 pm
      The impact of demonetization is profound on the ground and the farmers are facing the worst situation for years
      Reply
      1. A
        ak dev
        Jan 16, 2017 at 12:18 am
        Opposition has lost the credibility of correctly informing the public. During demonetisation debates oppositions has spread misinformation that sowing of Rabi crop has been badly affected. However, numbers say the opposite. Former PM Man Mohan Singh also put rubbish just to suite his political ideology.
        Reply
        1. A
          ankit
          Jan 16, 2017 at 3:47 am
          Every year prices of 1 or 2 crops sky rocket while others below or near msp. Next year something opposite happens. CPI is 45% agri products. Govt. is targetting CPI. It is unfortunate that govt uses export duty as a weapon instead of import duty, to disadvantage of farmers. Nirmala sithraman puts a tough face but dhe had been a disaster. Where is swamy?
          Reply
          1. R
            Rajesh Kapoor
            Jan 16, 2017 at 9:54 am
            Ver well analysed scenario! There is urgent need to take pro-farmers action, especially small and marginal farmers in arid and semi-arid regions who grow more of pulses and oilseeds. Their vulnerabilities have indeed been increasing! Such articles should not remain only academically important
            Reply
            1. R
              Rajesh Kapoor
              Jan 16, 2017 at 9:55 am
              Very well analysed scenario! There is urgent need to take pro-farmers action, especially small and marginal farmers in arid and semi-arid regions who grow more of pulses and oilseeds. Their vulnerabilities have indeed been increasing! Such articles should not remain only academically important
              Reply
              1. G
                Gangadhar Garud
                Jan 16, 2017 at 12:25 am
                Gangadhar Garudlt;br/gt;The agricultural productivity in India is very low compared to developed countries.Primarily due to fragmentation of land.On the average the land holdings is hardly 1 to 2 hectors.It is not possible to use modern methods and even experiment with such a holding.lt;br/gt;Solution is to bring atleast few hundred farmers to gether to pull the resources,cooperatives were started with this idea but got politicalised.lt;br/gt;Solution is the governments should promise a farmer the income he could get by tilting his land piece annually in ssuitable instalments provided he loans his land to an enterpreuner. The enterprenuer or a group of enterpreneurs (agricultural qualified) thus can acquire land of atleast 500 hectors.This land can be farmed with all the modern methods,experiments can also be suitably conducted,irrigation can be provided if required since financial sources are available.National productivity can be improved,climatic changes can be effectively faced.lt;br/gt;As regards funding by the Government, it could be mentioned that Maharashtra Government last year has doled out 10,000 crores to the farmers who have committed suicide and who have incurred lot of loan from sharks.
                Reply
                1. M
                  Manzoor
                  Jan 16, 2017 at 7:53 am
                  After three years of dry spell this year we are having very good monsoon thats why big jump of agriculture production (estimated) but still below Niti Aayog's estimation of 5.1% and that is because of demonetisation.
                  Reply
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