The first advance estimates of GDP and Gross Value Added (GVA) at basic prices for various sectors for the year 2017-18 are out.
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 overall GDP growth rate, slated to be 6.5%, which is the lowest in the first four years of the Modi government. Prime minister Narendra Modi also 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 up in the discussions, but the official view was that ‘we should work towards increasing farmers’ income’ and ‘the government is committed to doubling 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% of the workforce in India engaged in agriculture, unless this sector performs well ‘sabka saath, sabka vikas’ is not possible; and, as the World Development Report (2008) found, growth in agriculture is at least two-three times more effective in reducing poverty than the same growth coming from non-agri sectors.
So, for poverty elimination, it is important to see how agriculture is performing. The advance estimates for 2017-18 put agri-GDP growth at 2.1%, down from 4.9% in the preceding year. But it will be worth comparing agri-performance in first four years of the Modi government with those of the first four years of the UPA (2004-05 to 2007-08) government or even ten years of UPA rule (2004-05 to 2013-14). We also go beyond that and compare it with agri-performance in AB Vajpayee period (1998-99 to 2003-04), and under the PV Narasimha Rao government (1991-92 to 1995-96) when economic reforms started. This would give us a long-term perspective of Indian agriculture and also of farmers’ incomes. It is against this back-drop we will also examine the feasibility of often-cited goal of DFI by 2022. The accompanying graphic shows that agri-GDP, under the Rao government, grew at a modest annual rate of 2.4%, while the overall GDP growth rate was 5.2% per annum.
The agri-performance improved marginally from 2.4% to 2.9% under the Vajapyee government and so did the overall GDP growth, from 5.2% to 6% per annum. This process of gradual improvement continued during the first four years of the Manmohan Singh government, and even for the entire 10-year UPA period (2004-05 to 2013-14), when agri-GDP registered a growth rate of 3.7% and overall GDP saw a growth of 7.9%. The challenge before the Modi government is to do better than this. Although there is still one more year for the Modi government before the elections, the flavour of first four years is now available. The agri-GDP growth has plunged to just 1.9%, exactly half of 3.8% achieved in the first four years of the Manmohan Singh era (UPA-1). The overall GDP growth (7.2%) under first four years of Modi era is also significantly below the first four years of Manmohan Singh’s government (8.9%), and also lower than the UPA’s ten-year performance (7.9%). So, there is a significant gap that the Modi government must bridge before it can say that it has performed better than any government in the past.
Needless to say, each regime faced varying economic environments, both external and internal, in which they had to perform. And it is always a mixed bag of these conditions that one inherits, and they have to make the best of it over a five-year period. Blaming the previous regimes or external environment is not useful. If the Modi government was hit by back-to-back droughts, it also got a windfall of thousands of crores as savings from lower import bills for crude oil when crude prices fell by more than 50%. Tumbling global commodity prices also helped tame inflation at home. So, no excuses of droughts can be given! With just one year more to go, even if the agri-GDP growth jumps to, say, 4% in 2018-19, the five-year average will still be 2.3%, the lowest since reforms started. That’s not what farmers were hoping for.
Poor agri-performance during the Modi era is also reflected in shrinking agri-trade surplus (exports minus imports). It first climbed from $3.6 billion in 2004-05 to $25.5 billion by 2013-14, a seven-fold increase during the Manmohan Singh period, but then collapsed to just $8.2 billion by 2016-17, a fall by two-thirds. 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’ incomes (DFI) by 2022. The NSSO data on farmers’ incomes shows that during 2002-03 to 2012-13, farmers’ real incomes increased by 3.6% on compound annual growth rate basis.
The Dalwai Committee report on DFI points out that real incomes of farmers’ need to increase at CAGR of 10.4% to achieve the target. It gives detailed recommendations, which are hard to implement in the run up to elections in 2019. By using the Dalwai Committee methodology, we have estimated real incomes of farmers during 2012-13 to 2016-17, and the CAGR comes to just 2.5%. To jump from 2.5% to 10.4% is the real challenge. Can the Modi government do this vault jump? Only time will tell.