News Analysis

How agri-GDP growth dried up in last 5 years

Rajalakshmi Nirmal BL Research Bureau | Updated on March 31, 2019


Two deficit and 2 below-normal monsoon years to blame; yet, prices kept in check by carry-over stocks, rising output & imports

India’s agri-GDP growth in constant (2011-12) prices was just 2.7 per cent in the October-December 2018 period. This is lower than the 4.2 per cent growth in the September quarter and 5.1 per cent in the June quarter, according to recent data from MOSPI (Ministry of Statistics and Programme Implementation).

The growth in agri GDP in the five years of Narendra Modi government — between 2014-15 and 2018-19 — is 2.89 per cent. This is 67 per cent of the 4.27 per cent growth recorded in the UPA II rule between 2009-10 and 2013-14.

So, why has growth dropped? Well, due to many reasons.

The primary reason is bad monsoon in four of the last five years. If 2014 and 2015 were monsoon deficient years, 2017 and 2018 were below-normal monsoon years.

Precipitation was comparatively better during the UPA II years, when there was one deficient and one below-normal monsoon years.

It is, therefore, not surprising that the foodgrain production increased at 4.9 per cent a year under the UPA II, but dropped to 2.8 per cent a year in the last five years.

Similarly, the output increase in non-food crops — oilseeds, sugar cane and cotton — was also way higher in the UPA II period. For instance, oilseeds output increased at an annual average of 7 per cent under UPA II, compared to 3.4 per cent under the present government.

If crop production was impacted by bad monsoon, why did prices not go up?




Output, stocks check prices

Despite the deficient/erratic monsoons that impacted crop output, food prices moved south in the last five years. This is because the output, especially of food crops, kept recording new highs every year. The interventions by the government on building irrigation projects through the Accelerated Irrigation Benefits Programme and the increase in area under micro irrigation helped, says Ashok Dalwai, Chairman, Committee on Doubling of Farmers’ Income.

Food production in 2016-17, 2017-18 and 2018-19 rose to 275.11 million tonnes, 277.49 million tonnes and 281.37 million tonnes, respectively. At the end of the last UPA II, that is, in 2013-14, foodgrain production totalled 265.05 lakh tonnes.

Further, stocks carried forward from previous years increased the supply, keeping prices contained. And, to top it all, food imports continued. For instance, in 2016-17 when food output jumped 9.37 per cent and pulses production was up 42 per cent following a normal monsoon, a record 66.08 lakh tonnes of pulses were imported. This resulted in inventory piling up, resulting in pulses prices crashing. Siraj Husain, a former Agriculture Secretary, agrees that carry-over stocks combined with jump in production plus large imports that crushed prices of pulses.

Price correction has been sharp in horticulture crops, too, especially onions, tomatoes and potatoes in the last one year; this also which weighed on agri GDP. These crops have been seeing a consistent rise in production over the last three years despite the poor monsoon. Previous season stocks of onions and potatoes kept prices contained.

Weak global prices

In many commodities, including sugar and oilseeds, domestic market rates are influenced by global market prices.

Globally, prices of many commodities dropped in the last five years. Had the global prices been strong, that would have lifted Indian prices too. In sugar, higher global prices would have made it lucrative for mills to export and clear the excess in the domestic market and, thus, help domestic prices.

Published on March 31, 2019

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