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