January 16, 2017 12:26:01 am
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.
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