The country’s farm sector output may have grown by just 2.7 per cent year-on-year in October-December 2018, the lowest in 11 quarters. But what should worry the NDA government more than the low increase in “real” terms (i.e. at constant prices) is the growth in “nominal” terms (at current prices unadjusted for inflation).
The latter number, at 2.04 per cent, is the lowest for any quarter as per the Central Statistics Office’s new 2011-12 base year series and also the worst since the minus 1.1 per cent rate recorded way back in October-December 2004 (based on the then 1999-2000 GDP series).
October-December 2018 is also the second consecutive quarter where growth in gross value added (GVA) from agriculture has been lower in nominal than in real terms.
Simply put, it means that while farm production per se during the last quarter was 2.67 per cent higher than in October-December 2017, the increase in current value terms has been only 2.04 per cent because of prices falling by 0.61 per cent.
This is classic deflation, which did not happen in January-March 2016.
That quarter saw an even lower 1.07 per cent real rise in farm sector production, yet growth in nominal terms was 7.94 per cent (see table), as produce prices went up by 6.79 per cent year-on-year.
October-December 2018 further marks the seventh successive quarter of agricultural GVA growth at current prices being in single digits, starting with April-June 2017 when the rabi crop planted just after demonetisation got marketed.
Given that GVA is the value of output less the cost of all inputs and raw materials that go into the production of any good, it is a reasonable proxy for income or “take home” of the farmer.
And since for the farmer, it is not mere output but income (output multiplied by price) that matters, growth in nominal agricultural GVA being at low single-digits isn’t good news. Nor would it be so for any ruling party ahead of elections.