By Ashok gulati & Ranjana Roy

The Central Statistics Office (CSO) has released second advanced estimates of national income for 2018-19, along with quarterly estimates of GDP (Q3). The overall GDP growth for Q3 is down to 6.6% and for the whole year (2018-19), GDP is expected to grow at 7%, a notch lower than the 7.2% achieved in 2017-18.

Our concern, however, is with agriculture performance, which engages almost 47% of India’s work force, and its growth has significant influence on poverty. The growth of Gross Value Added (GVA) at basic prices from the ‘agriculture, forestry and fishing’ sector is expected to be 2.7% in 2018-19 as against 5% in 2017-18, registering a massive drop of 46%. The CSO clearly states that GVA for this sector has been compiled using the Second Advanced Estimates of production of crops for 2018-19, but in case of the livestock sector, estimates are taken from production targets for milk, eggs, meat and wool. Generally, targets are more optimistic than what turns out to be the reality!

It is normally agreed that the year-on-year growth rates of agriculture fluctuate much more than overall GDP growth rates, as almost 52% of our cropped area is still dependent on monsoons. So, year-on-year comparison can be misleading. Thus, we look at the five-year performance of agriculture under the Modi government and compare it with the regimes of earlier governments, starting with the Narasimha Rao government that ushered in economic reforms in 1991 (1991-92 to 1995-96). We avoid the two years of 1996-97 and 1997-98 which saw three prime ministers (Atal Bihari Vajpayee (first time), Deve Gowda, IK Gujral). But we take 1998-2003-04 (Vajpayee government); 2004-05 to 2008-09 (UPA-1), 2009-10 to 2013-14 (UPA-2) and 2014-15 to 2018-19 (Modi government).

As can be seen, Modi government’s record in agriculture performance is very mediocre: At 2.9%, it is better than the 2.4% achieved during Narasimha Rao’s period, equals the performance during the Vajpayee period, is a notch lower than the 3.1% of UPA-I but significantly lower than the 4.3% growth rate achieved during UPA-2. Looking at these growth rates over a longer period is important because the real incomes of agri-households (agri-HHs) move in tandem with overall agri-GDP growth. This is also important to note in the light of the much-talked about ambitious target of doubling farmers’ incomes by 2022-23, as declared by the Modi government.

The attached graphic also presents the monthly incomes of agri-HHs in major states of India and for all India, as estimated in the NABARD’s latest survey on financial inclusion, often called the NAFIS for 2015-16 agricultural year. Punjab agri-HHs had the highest monthly income of `23,133 while Uttar Pradesh, with `6,668 is at the lowest rung. Overall, at an all-India level, the average income of an agri-HH in 2015-16 turned out to be just `8,931 per month. The compound annual growth rates (CAGR) of real incomes between 2002-03 (NSSO survey) and 2015-16 (NABARD survey) comes to 3.7% at the all-India level, with a high of 8.4% for Odisha (though with a low base) and minus (-) 2.3% for J&K agri-HHs. It may be noted that the CAGR is very much impacted by the base or terminal year’s performance of agriculture. It is interesting to see that the CAGR of agri-GDP for the period 2002-03 to 2015-16 is 3.8% while CAGR of agri-HHs incomes is 3.7%.

The Expert Committee headed by Ashok Dalwai on Doubling Farmers’ Incomes by 2022-23 estimated that the required rate of growth would be 10.4% per annum with a base of 2015-16. Now, three years are coming to a close from that base of 2015-16, and there are no signs of any acceleration in growth rates of agri-GDP during the Modi government period. In fact, it has decelerated to 2.9%. What this implies is that in the remaining four years left till 2022-23, the required rate of growth in agri-HHs’ incomes and agri-GDP growth would be about 15% per annum. This is almost impossible, given whatever policy instruments the government has applied so far, including the latest PM Kisan scheme of giving `6,000 per annum to small and marginal farmers. And this does not auger well for the Modi government seeking re-election. Dreaming big is good provided one is able to mobilise resources and policies to unleash ‘animal spirits’ in agriculture. So far, one cannot see that.

Instead, what one sees is rising anger and restlessness amongst peasantry, which is forcing several states to loosen up their purse strings, announcing loan waivers and/or direct income support. Of course, there is a lot of politics in these freebies, a sort of bait for votes, but there is also a genuine simmering discontent amongst peasants due to falling profitability in several crops that needs to be addressed.

Time has run out for the Modi government, but whichever new political set up takes shape in April-May 2019, it is better for them to start early on the path of structural reforms in agriculture, from agri-marketing to opening up land lease markets, to rationalisation of food and input subsidies (fertilisers, power, irrigation, insurance, interest subvention), and putting in more money in innovations that can ensure not only higher productivity in agriculture but also its sustainability and profitability. And finally, it may be advisable to shift the target date for doubling farmers’ incomes from 2022-23 to 2029-30, which will be more realistic and achievable, and grounded in reality.

Gulati is Infosys chair professor for agriculture and Roy is a consultant at ICRIER