The first advance estimates of GDP growth for FY17 show a marginal decline, from 7.6% last year to 7.1% this year. Of the various sectors, gross value added at basic prices (2011-12), mining and quarrying is down from 7.4% to minus (-)1.8%, manufacturing from 9.3% to 7.4%, construction from 3.9% to 2.9%; trade, hotels, transport, communication, etc, from 9% to 6%, and financial, real estate and professional services from 10.3% to 9%. The sector showing a big increase from 6.6% to 12.8% is public administration and defence, which gives very little comfort directly to masses. These declining growth rates do not take into account the impact of demonetisation yet. All this is not very encouraging.
However, there is one sector which brings a glimmer of hope, and that is agriculture and allied sector, which registers a jump from 1.2% last year to 4.1% this year. It is a critical sector, engaging almost half the workforce of country and providing food security. It suffered in the last two years, thanks to back-to-back droughts. So, an anticipated growth of 4.1% brings much-needed relief, although it is far lower than 5.5% agri-GDP growth that NITI Aayog officials have been talking about for some time now. Interestingly, it shows that Central Statistical Office (CSO) is not swayed by the over-enthusiastic ‘feel-good’ signals being relayed by NITI. This enhances the CSO’s credibility.
Within agriculture, it may be noted that this 4.1% expected growth is primarily based on first advance estimates of kharif crops, but the estimates of rabi crops and of livestock (milk, eggs, wool, etc) 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 Modi government are likely to yield agri-GDP growth of just 1.7% per year, and for the forgotten twelfth Five Year Plan (FYP) (2012-13 to 2016-17), it is going to be 2.2% 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%, indicating the biggest failure of policy making .
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Nevertheless, in this gloomy performance of agriculture over the last three-five years, as an optimist, I must count the bright spots and the strengths of our farmers who can always rise to the occasion given a positive policy environment. The kharif foodgrain production in FY17 has registered an impressive growth of 8.9% over kharif of FY16, with a special highlight where kharif pulses recorded a whopping increase of 58%! High prices, hovering around R180-200/kg in retail markets before the sowing season, induced farmers to bring larger area under pulses. The good monsoon, of course, helped give a good yield. No wonder, with a 58% 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 2 million metric tonnes and support farmers by ensuring market prices did not drop below MSP. But this opportunity was not tapped fully, and this may see area under pulses dropping next year and imports rising.
A somewhat similar thing happened in the case of kharif oilseeds as well; these had registered a big jump, of 41%, led by a 65% vault-jump by soybean. As a result, soybean prices crashed in major markets, going below MSP at places.
It is interesting to note that India is the largest importer of pulses and one of the top two importers of edible oils. Total import bill on edible oils and pulses hovers around $12-15 billion. At home, India has a Mission Oilseeds and Pulses to promote their production for the last 25 years, without much success. And now, when production jumps, the system is not geared to ensure even MSP to farmers. This will surely discourage farmers to produce more pulses and oilseeds next time, and thus the country will remain import-dependent. The minimum that the policy makers could do is to remove all restrictions on free functioning of markets and exports. Exports of pulses and oilseeds are highly restricted, and there are also stocking limits on traders at home. This does not allow the free play of markets to benefit farmers, and when government agencies fail to ensure even MSP, the entire policy environment smells of anti-farmer and pro-consumer bias.
Interestingly, oilseeds and pulses are grown in relatively less-irrigated and poorer regions, consume much less water and fix nitrogen in soil thereby saving large outgo on fertiliser subsidies. Therefore, supporting them should be a national priority. It will also help alleviate poverty faster, and boost demand for manufactured products and help industry. Tractor demand is already showing recovery with 15-20% growth over the corresponding period of last year, and more may follow.
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 MSPs policy? It is not just the case of pulses and oilseeds, but even in case of paddy, farmers did not get MSP in eastern belt, including the Varanasi mandal, which is the parliamentary constituency of the prime minister. If the prime minister’ office does not take note of this and take corrective measures, realising ‘sabka saath, sabka vikas’ and eliminating poverty even by 2030 may remain a distant dream.
The author is Infosys chair professor for agriculture at ICRIER