Follow Us:
Saturday, December 14, 2019

Growth fails to lift farm fortunes

The fact of farm prices rising at a slower pace than general inflation probably explains the spurt in agrarian unrest, particularly visible since April-June 2017.

Written by Harish Damodaran | New Delhi | Updated: September 1, 2018 7:39:02 am
The BJP-led state government in Maharashtra has recently made it mandatory for private traders to pay MSP for their purchases. Not doing so would attract a one-year prison sentence and Rs 50,000 fine. (Express Archive)

The Indian economy may have registered 8 per cent annual growth in real terms during April-June, the first time in eight quarters. But the farm sector has grown by just 7 per cent, that too, at current prices unadjusted for inflation. And this is the fifth successive quarter in which agriculture’s growth in nominal terms has been at single digits.

For the economy as a whole, the year-on-year rise in gross value added (GVA, which is GDP net of product taxes and subsidies) during April-June 2018 was 7.97 per cent at 2011-12 prices and 12.89 per cent at current prices. In other words, output per se was up 7.97 per cent, even as the general price level rose by 4.92 per cent.

However, the growth in GVA for the farm sector at current prices (6.95 per cent) was only marginally higher than that in real production terms (5.30 per cent), translating into an inflation of only 1.65 per cent. This trend, of lower year-on-year price increase for agricultural produce than for overall GVA, was seen in the earlier five quarters as well, coinciding with the period after demonetisation: January-March 2017 (3.81 per cent versus 5.43 per cent), April-June 2017 (minus 2.37 versus 2.48 per cent), July-September 2017 (1.67 per cent versus 3.08 per cent), October-Dec 2017 (3.75 per cent versus 4.08 per cent) and January-March 2018 (0.42 per cent versus 3.14 per cent).

The fact of farm prices rising at a slower pace than general inflation probably explains the spurt in agrarian unrest, particularly visible since April-June 2017. That was a quarter when the rabi crop sown after note ban was marketed and agricultural prices actually fell – reflected in farm sector GVA growth at current prices being below that at 2011-12 prices. It led to a spate of farmer protests across large swathes of the country.

It also explains the Centre’s subsequent response, whether the steep hikes in import duties on pulses, edible oils, sugar and wheat or fixing of minimum support prices for crops at 1.5 times their estimated production costs. The BJP-led state government in Maharashtra has recently made it mandatory for private traders to pay MSP for their purchases. Not doing so would attract a one-year prison sentence and Rs 50,000 fine.

Whether these actions will have an impact on prices, though, will be known from October, when the current kharif crop starts arriving in the mandis. And it will also get reflected in the GDP data for the coming quarters.

For all the latest Business News, download Indian Express App

Advertisement
Advertisement
Advertisement
Advertisement