Agriculture is estimated to beat industry in terms of deflator growth during the current fiscal. Also, first advance estimate of GDP shows it is best among all three in gross value added as compared to pre-pandemic period. Experts feel that short term measures have yielded result and expect budget to focus on direction from medium and long term.
Deflator measures the changes in prices and also signifies value addition.
Dissection of first advance estimate for FY22 shows change in deflator for Agriculture and Allied Activities in FY21 at 2.81 per cent, which is estimated to rise to 5 per cent in FY22. These numbers for industry are 1.18 per cent and (-) 5.26 per cent in FY21 and FY22 respectively.
Agriculture and Allied Activities are likely to grow at 3.9 per cent in FY22 as against previous year growth of 3.6 per cent and 4.3 per cent of FY20. A research report by SBI says this is expected as agriculture was only sector which was unscathed from the lockdown. The report also showed that Gross Value Added (GVA) for Agriculture and Allied Activities in FY22 is estimated to be 108 per cent of pre pandemic year i.e., FY20. For Industry and Services, the figures have been 104 and 99 per cent respectively.
Value addition in agriculture sector is likely to get further boost with Production Linked Scheme (PLI) for the food processing sector, entailing an outlay of ₹10,900 crore. As on date, over 60 applications have been received. Government officials feel this will further boost export. Government expects to achieve a record export target of $43 billion for agricultural products in FY22 as against $41 billion in FY21.
Shashanka Bhide, Member of Monetary Policy Committee (MPC), said the output has been very good in last 2-3 years despite market not so positive because of Covid and disruptions in logistics. It is more than 3 per cent during the last three years. The Budget has been taking protective measures like allocating funds under PM-Kisan or subsidising inputs.
“Now it is time for support towards long-term issues. One of these could be related to climate change as financial support is required to move in the right direction. That is what I feel needs to be also articulated in the Budget. Of course, there are plans and strategies to deal with it, but more financial support is required to address concerns on cropping pattern and use of water,” he said.
Further, he said in medium term, Budget should also focus on increasing external demand for agriculture output. “It is to be seen how new markets are developed, existing markets are expanded as traditional focus was on inputs and subsidies for (increasing) output. I am expecting a direction in Budget about where agriculture should be in medium term,” he said.
Ajay Vir Jakhar, Chairman of Bharat Krishak Samaj, suggested statutory imposition of import duties on crops / food where landing cost is below MSP (where declared) or its below remunerative prices (where no MSP) such that these don’t enter Indian markets below a threshold price. His other suggestions include double funding for agricultural research institutions and farm extension services and finance a consortium of farmer organisations for developing a metric for measuring true cost of food and payment for farm eco-system services.