The first advance estimates of GDP and Gross Value Added (GVA) at basic prices for various sectors for the year 2017-18 are out. Most economists have commented on the overall GDP growth, slated to be 6.5 per cent, the lowest in the four years of the Narendra Modi government. Prime Minister Narendra Modi called a meeting of economists to discuss proposals for the upcoming budget with a view to accelerate growth and create more jobs. Farm distress came in for discussion, but the official view was that we should work towards increasing farmers’ income and the government is committed to double farmers’ income (DFI) by 2022.
I want to take up the performance of agriculture and farmers’ incomes under the Modi government so far (2014-15 to 2017-18). The reason is simple: With almost 47 per cent of the workforce in India engaged in agriculture, unless this sector performs well, “sabka saath, sabka vikas” will not be possible. Moreover, as the World Development Report (2008) revealed, growth in agriculture is at least two to three times more effective in reducing poverty than the same quantum of growth in non-agricultural sectors. So, from the standpoint of poverty alleviation, an evaluation of the government’s performance in agriculture is important.
The advance estimates for 2017-18 put agri-GDP growth at 2.1 per cent, down from 4.9 per cent in the preceding year. But it will be worth comparing the agri-performance in the first four years of the Modi government with those of the first four years of UPA-1 (2004-05 to 2007-08) or even 10 years of UPA’s rule (2004-05 to 2013-14). We go beyond that and compare the Modi government’s agri-performance with that of the government’s led by Atal Bihari Vajpayee (1998-99 to 2003-04), and P.V. Narasimha Rao (1991-92 to 1995-96, when the economic reforms began). This would give us a long-term perspective of Indian agriculture and also of farmers’ incomes. We will also examine the feasibility of the Modi government’s often-repeated goal of doubling farmers’ income by 2022 against this backdrop.
The graph shows that under the Rao government, agri-GDP grew at a modest annual rate of growth of 2.4 per cent, while the overall GDP growth was 5.2 per cent per annum. There was a marginal improvement in the agri-growth rate under the Vajpayee government: It grew at 2.9 per cent. The overall GDP growth, in the same period, was 6 per cent per annum. This process of gradual improvement continued during the 10 years when the UPA held office. Between 2004-05 and 2013-14, agri-GDP registered a growth rate of 3.7 per cent, while the overall GDP grew at 7.9 per cent.
The challenge before the Modi government is to do better than this. The agri-GDP growth has plunged to just 1.9 per cent, half of what was achieved in the first four years of the UPA. The overall GDP growth, 7.2 per cent, in the first four years of Modi era is also significantly below the first four years of UPA rule (8.9 per cent). So, the Modi government has a lot of catching up to do before it can claim to have performed better than any government in the past.
The economic environment, both external and internal, have varied for the regimes we have analysed. Every government has to make the best of the conditions it inherits — which are usually a mixed bag. Blaming previous regimes or the external environment does not serve any purpose. If the Modi government was hit by back-to-back droughts, it also got a windfall of thousands of crores as savings in the import bill of crude oil with prices falling by more than 50 per cent. Tumbling global commodity prices also helped tame inflation at home. With another year to go for the general elections, even if the agri-GDP growth jumps to 4 per cent in 2018-19, the five-year average will still be 2.3 percent, the lowest since the economic reforms began. That’s not what the farmers were hoping for.
Poor agri-performance during the Modi era is also reflected in shrinking agri-trade surplus (exports minus imports). When the UPA held office, agri-trade surplus climbed from $3.6 billion in 2004-05 to $25.5 billion by 2013-14, a seven-fold increase. But by 2016-17, it had fallen to just $8.2 billion by 2016-17. This does not auger well for Indian agriculture as well as farmers.
One of the points made during the PM’s meeting with economists was that one should focus on doubling farmers’ income by 2022. The NSSO data on farmers’ incomes shows that during 2002-03 to 2012-13, farmers’ real incomes increased by 3.6 per cent on compound annual growth rate (CAGR). The Dalwai Committee report points out that the real incomes of farmers’ need to increase at CAGR of 10.4 per cent to achieve the target of doubling farmers’ incomes by 2022. The report has detailed recommendations, which are hard to implement in the run up to the 2019 general elections. By using the Dalwai Committee methodology, we have estimated real incomes of farmers during 2012-13 to 2016-17: The CAGR comes to just 2.5 per cent. To leapfrog from 2.5 per cent to 10.4 per cent is the real challenge. Is the Modi government up to it? Only time will tell.
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