Hopes that India’s agricultural output for FY18 will match last year’s record performance are now waning. The agriculture ministry’s first advance estimates released this week project a 134.6 million tonne foodgrain harvest for the ongoing kharif season which translates into a 2.8 per cent decline over last year’s output. More importantly, while the estimates indicate higher output of paddy, sugarcane and cotton, they point to a decline in coarse cereals (down 3 per cent), pulses such as tur (down 9 per cent) and oilseeds (down 11 per cent). It is early days for a prognosis about agricultural prospects for the whole of FY18 as the first advance estimates are based mainly on cropping area rather than crop yields. The winter rabi crop, which chips in with half of the foodgrain output and a third of the oilseed harvest, also makes a material contribution to annual output. From the initial signs though, it appears unlikely that we will manage an encore of the 4.9 per cent jump in agriculture GVA (gross value added) which boosted GDP growth in FY17.
On paper, this year’s south-west monsoon is ‘normal’ by IMD standards with the quantum of rainfall until end-September just 5 per cent below the long-period average. But the distribution has proved erratic, with deficient rains in some parts of Uttar Pradesh and Madhya Pradesh, and deluge in Gujarat, Maharashtra and Rajasthan skewing prospects. In making their sowing decisions this year, farmers seem to have relied more on signals from market prices than the Minimum Support Prices (MSPs). Rattled by the collapse in the market prices of pulses and oilseeds which triggered widespread farmer agitations a few months ago, the Centre had quietly announced hefty hikes of 7-10 per cent in the kharif MSP for crops such as coarse cereals, pulses and soyabean in June. Despite this, these estimates point to a material decline in the area sown for coarse cereals such as jowar, bajra and ragi, and pulses such as tur and soyabean. Area sown has registered a sharp increase both for sugarcane and cotton, which have offered remunerative prices this past year.
From a macroeconomic perspective, the long-term shift in cropping patterns away from essential staples which are in short supply — such as coarse cereals and pulses — towards water-intensive crops such as sugarcane and cotton isn’t a healthy trend. But then, after being forced to grapple with low output in bad monsoon years and distress sales in good monsoon ones, one cannot blame farmers for seeking to maximise income prospects. The situation suggests that MSP-based interventions in India’s agri-markets are no longer working as they should. The Centre needs to consider new mechanisms such as those suggested by the NITI Aayog’s recent action agenda to broadcast the right production signals to India’s agri sector.