Industry & Economy
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Economy
Purchasing power problems & GDP
Sudhanshu Ranade
Chennai
,
July 15
THE share of agriculture in the gross domestic product (GDP) has declined from 44.5 per cent in 1970-71 to 22.2 per cent in 2003-04. But more than 72 per cent of Indians still live in rural areas; and according to the Interim Report of the RBI's Vyas Committee on the Flow of Credit to Agriculture, there has been no change in the proportion of workforce depending on agriculture for their livelihood; about two-thirds of the country's population still depend on agriculture for a living.
This has not so far posed a serious problem from the production/agricultural `surplus' point of view, and probably never will. But the picture takes on a darker hue when one looks at it from the point of view of the `demand constraint' on the growth of the GDP.
Apart from the demand for and flow of inputs into agriculture, the facts referred to above suggest that we have a serious problem. A huge proportion of our people simply do not have sufficient purchasing power (for both agricultural and non-agricultural products) to support a rapidly increasing GDP. The nature, extent, and possible solutions of/for this problem seem to have remained relatively unassessed in both India as a whole and at the State-level.
Figures for 13 `major' States (States that are important from the population and/or GDP of view) have been provided below in an effort to begin plugging this gap in our understanding of the problem; though, of course, the figures give us only a partial view.
To understand the problem in its entirety, the data need to be supplemented with information on parameters such as the size of the rural population in the States, the level and distribution of purchasing power in rural areas, and the proportion of farmers in the States who have been, or will be able to — directly or indirectly — hitch a ride on the `second' Green Revolution.
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