Commodity Analysis

Farm distress is real, slump in agri GDP proves it

Rajalakshmi Nirmal | Updated on September 01, 2019 Published on September 01, 2019

Doubling farmers’ income in the next three years looks a tough task

When the Central Statistics Office (CSO) released the Q1 GDP numbers recently, it also showed numbers for agriculture, forestry and fishing as a segment. For the June quarter, this segment’s growth on real terms was 2 per cent, against the 5.1 per cent in the same quarter the previous year.

Agri GDP growth has been sliding since the beginning of 2018-19. Against the 5 per cent growth reported in 2017-18, 2018-19 ended with a growth of 2.75 per cent.

Though broad numbers from the Ministry of Agriculture show that the country has been doing well on crop output, dissecting it reveals that there has been a drop in production in some major food as well as non-food crops. Among non-food crops, take groundnut for instance. The crop’s output for 2018-19 is estimated at 66.95 lakh tonnes against 92.53 lakh tonnes in 2017-18.

Similarly, castor seed production last year is estimated at 12.15 lakh tonnes, down from 15.68 lakh tonnes in 2017-18. In case of cotton, production has dropped, from 328 lakh bales in 2017-18 to 287 lakh bales in 2018-19. In the foodgrains basket, pulses, maize, bajra, ragi and all nutri-cereals have all also seen a production drop in 2018-19.

 

 

 

Foodgrain production had been growing robustly until 2017-18. If we break the last 10 years into UPA and NDA years, between 2009-10 and 2013-14 (UPA years), foodgrain output recorded an annualised growth of 5 per cent. This, however, reduced to 3 per cent in the NDA years between 2014-15 and 2018-19.

Monsoon failure

While new irrigation projects have helped, monsoon failure in four of the five years (between 2014-15 and 2018-19 — two deficient and two below-normal monsoon) have had an impact on crop output.

The slump in output of the crops has been slow in reflecting in their prices because of weak demand and, in some cases, because of excess inventory from previous years being available in the market, like in the case of pulses. However, prices have started to move up of late. This explains food inflation rising in the past few months and the nominal agri GDP growth at 7.9 per cent for the April-June 2019 quarter versus 6.8 per cent in the same period the previous year.

Weakness in domestic demand aside, demand from export orders for certain agri products was also poor, keeping the prices muted. In the April-June 2019 quarter, India’s agri commodity exports were ₹60,614 crore, down five per cent from the previous year. Export of rice, coffee and tea have been lower than in last year.

Farmers’ income

For the agri GDP growth to revive in the coming quarters, the sub-sectors in agriculture — forestry, livestock and fishing — need to show some strength.

Otherwise, the task of doubling farmers’ income — for which the BJP’s manifesto had set a target of 2022 — looks difficult.

The income support scheme alone can’t help. Under Pradhan Mantri Kisan Samman Nidhi, farmers get ₹6,000 a year in three instalments.

The higher MSPs (minimum support prices) announced haven’t really had an impact on prices. Apart from paddy, wheat and some pulse crops, MSP procurement has not been effective on others. The electronic National Agriculture Market (eNAM) scheme, which was expected to bring more buyers for farmers’ produce and get them a remunerative price, is still in its preliminary stage. While the 585 markets targeted to be covered under the scheme were reached within the set deadline, inter-mandi and inter-State trades have failed to happen in full swing. Absence of full support from States in implementing the project has also been an impediment.

Data from the Ministry of Agriculture and Farmers’ Welfare, presented to the Lok Sabha, show that as of June 30, more than 1.64 crore farmers were registered on the eNAM platform. However, of these, only about 80 lakh (49 per cent) have traded on the platform. The total number of farmers in the country, as per census 2011, is 11.89 crore.

Published on September 01, 2019
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