Nominal agri growth will double, real growth will fall; Modi’s doubling farmer income still a dream

By: |
Published: January 9, 2020 5:07:29 PM

Driven by high food prices, the nominal GVA growth in the agriculture sector is estimated to more than double in the current year.

Agri goods, nominal gva, real gva, farmer income, farm produce, farm output, crop output, doubling farmers' incomeIt has become more complex to understand if farmers’ income can be doubled by 2022, if yes, how can such slow real growth in farm sector lead to achieving the ambitious target of the government.

India’s agriculture GVA is once again estimated to remain below 3 per cent even as Prime Minister Narendra Modi had assured to double farmers’ income by 2022. The Ministry of Statistics and Programme Implementation released the first advance estimates of national income, earlier this week, that showed real GVA growth in the agricultural sector will remain 2.8 per cent in the current fiscal, which is further below the deteriorated level of 2.9 per cent in FY19. The real GVA growth of agri sector may fall for the consecutive fourth year this time. However, driven by high food prices, the nominal GVA growth in the agriculture sector is estimated to more than double in the current year.

The question here arises, shall we consider the cheerful nominal GVA or depressing real GVA, to measure the sectoral growth? “To measure the actual output growth of agri sector, we will have to go by the real GVA, as nominal GVA is inflated by high food prices,” Aditi Nayar, Principal Economist, ICRA, told Financial Express Online.

Also Read: Modi’s latest gift to north-east; households, industries to be soon put on gas grid network

Higher food prices may also have a negative impact on the farmers’ income. High grain prices, accompanied by an increase in input prices may result in a net positive or negative change in profitability, depending on the crop, the intensity of input use, and the final input/output price ratio, said Food and Agriculture Organisation, UN. Furthermore, given that agriculture is a seasonal activity, the timing of the price movement and the expectation of future price changes are also very important in determining planting and marketing decisions.

The farm sector in India is now hit by high inflation and even RBI does not have a clear picture of when the CFPI will come down to a decent level. “The key question is: will the upside in other food prices reverse or persist, especially those of pulses and milk? If it persists, will it spill over into non-food inflation? This too warrants close monitoring of incoming data over the next few months and, therefore, a pause,” said RBI.

Also Read: Manufacturing, construction to take down economy this year; govt estimates show major fall in growth

It also said that on the inflation front, unseasonal rains in October and early November damaged certain crops and also disrupted the mandi arrival patterns that resulted in a temporary imbalance in demand and supply. This is considered to be one of the important reasons behind the price pressures in several vegetables, especially onion prices.

NITI Aayog earlier said in a report that a growth rate of 14 per cent will be required to double the farmers’ income. However, it also clarified that the government’s intention seems to double the income of farmers from farming in real terms, which tends to be almost the same as in nominal terms if non-agricultural prices do not rise in comparison to food prices. This again makes it more complex to understand if the farmers’ income can be doubled by 2022, if yes, how can such slow real growth in farm sector lead to achieving the ambitious target of the government.

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Next Stories
1Economic Slowdown: World Bank projects India’s growth at 5% for FY 2019-20
2Coal Imports: Supreme Court revives probes against Adani firms
3GDP growth estimate at 5 per cent is optimistic, could go down till 4.6 per cent for the fiscal, say analysts