Indian Agriculture is not doing as well as Our GDP Data Suggest : Daily Current Affairs

Date: 17/12/2022

Relevance: GS-3: Major crops-cropping patterns in various parts of the country, food security.

Key Phrases: Worsening Of Rural Distress Are Real, National Statistical Office, Gross Domestic Product, Non-Crop Sector Outpacing The Crop Sector, Index Of Industrial Production.

Why in News?

The National Statistical Office (NSO) released estimates of gross domestic product (GDP) for the second quarter of this fiscal year on 30 November.

Key Highlights:

Based on the estimates, India’s GDP in the July-September quarter increased by 6.3% compared to last year, whereas the gross value added (GVA) during the same period increased by 5.6% whereas the manufacturing sector witnessed a contraction of 4.3%.
Estimates of the Index of Industrial Production (IIP) for October showed a contraction of 4% compared to last year, with manufacturing contracting by 5.6%. For the half year of April-September, manufacturing growth was at a negligible 0.1%.

Do you know?

Gross domestic product (GDP):

Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period.
As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.
GDP is calculated by the Central Statistics Office under the Ministry of Statistics and Program.
GDP = private consumption + gross investment + government investment + government spending + (exports-imports)

Gross Value Added (GVA):

Gross Value Added (GVA) is defined as the value of output minus the value of intermediate consumption and is a measure of the contribution to growth made by an individual producer, industry or sector.
At the macro level, from a national accounting perspective, GVA is the sum of a country’s GDP and net of subsidies and taxes in the economy.
Gross Value Added = GDP + subsidies on products - taxes on products

GDP vs GVA:

While the GDP maps the economy from the expenditure (or demand) side that is by adding up all the expenditures, the GVA provides a picture of the economy from the supply side. GVA maps the “value-added” by different sectors of the economy such as agriculture, industry and services.

What do the agricultural statistics reveal?

Its GVA grew by 4.6% in the second quarter and by 4.5% in the first half of the fiscal year.
The estimate for wheat, one of the major crops, was revised downwards by 2.6%, and for all cereals by 2.1%.
Total food grain production including pulses was also lower than last year.
Similarly, the first advance estimate of production for the kharif crop of 2022 shows a 6.4% decline compared to last year for rice, the predominant kharif crop.
Including pulses, the total kharif foodgrain output is expected to be 4.1% lower than last year.
Most of this is well known, with eight major states having received deficient rains during the kharif season along with lower yields expected on account of black fungus infection.
Despite both rabi and kharif crops not doing better compared to last year, a GVA growth of more than 4.5% is surprising but not unexpected.

Non-Crop Sector Outpacing the Crop Sector:

In the new series of GDP, it has been the case that the non-crop sector, which accounted for only one-third of total output, accounts for almost three-fourths of the agriculture sector’s total growth.
As a result, the crop sector, which employs almost two-thirds of the total agricultural workers, has seen growth rates that are much lower.
For example, the annual growth rate of the crop sector between 2011-12 and 2020-21 is only 1.2%, among the lowest in recent decades, barring the crisis period of 1999-00 to 2004-05.
As against this, livestock, fishing and forestry have grown at a 7% annual rate, which is the highest in recent decades.

Issue of Quality Data on the Agricultural Sector:

Data on the crop sector is more robust now, based on crop-cutting surveys and due to improvements in data collection over the years.
Data on other sectors, unfortunately, is not so robust, as it is based on market arrivals and there are often severe discrepancies between different data sources.
The divergence between the crop and non-crop sectors is also at variance with past data, where the livestock sector has shown trends similar to the crop sector.
The quality of data on India’s agricultural sector certainly needs improvement overall.

What is the status of farmers and their incomes?

For the majority of farmers, relevant growth rates of aggregate output are not the same as the growth rate of the whole farm sector.
This can be clearly witnessed in the growth pattern of the agricultural sector between 2013-14 and 2018-19, when the crop sector grew by only 0.2% as against a growth of 7.7% for the rest of the farm sector, with the entire sector growing at 3.14%.
Incidentally, this was also the period when investment in agriculture declined in real terms.
Looking only at the crop sector, it is evident that there is a sharp deceleration in growth rates compared to the pre-2014 period when crop sector output increased by more than 2.5% annually.
Given that farmers have seen their incomes decline in recent years, going by the same data, a false sense of complacency based on the splendid performance of the agricultural sector as a whole may be misleading.

Conclusion:

With rural wage data continuing to show negative growth in real terms, apprehensions of a worsening of rural distress are real.
This is now getting confirmed from separate data on sales of consumable items in rural areas, both durable and non-durable.
With uncertainty in the global economy and a weakening of the export sector, reviving rural demand is the surest way to revive India’s economy.

Source: Live Mint

Mains Question:

Q. Indian agriculture is lagging in growth compared with the rest of the economy for decades. It is time to rewrite the policies to provide fresh impetus to agriculture growth. Examine. (250 words).