Farming isn't doing as well as our GDP data suggests

For most farmers, relevant growth rates of aggregate output are not the same as the growth rate of the whole farm sector.
For most farmers, relevant growth rates of aggregate output are not the same as the growth rate of the whole farm sector.


Clearly, there is much more to GDP data than aggregate estimates.

The National Statistical Office (NSO) released estimates of gross domestic product (GDP) for the second quarter of this fiscal year on 30 November. Based on these, 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%; the manufacturing sector witnessed a contraction of 4.3%. This is disappointing, given that most analysts predict a downward revision of these estimates for the full fiscal year. Their expectation isn’t unfounded. 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%.

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Clearly, there is much more to GDP data than aggregate estimates. One of the surprising elements is growth in the agricultural sector; its GVA grew 4.6% in the second quarter and 4.5% in the first half of the fiscal year. The first two quarters of this year included the rabi harvest of 2022 and the kharif crop for which sowing is completed. The agriculture ministry had revised its 2022 production estimates of a majority of rabi crops, given the sudden onset of a heatwave in March. The estimate for wheat, one of our 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, our 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. In fact, 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 has grown at a 7% annual rate, which is the highest in recent decades. Data on the crop sector is more robust now, based as it is on crop-cutting surveys and thanks 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 sector is also at variance with past data, where the livestock sector has shown trends similar to the crop sector.

The issue is not only about the quality of data on India’s agricultural sector, which certainly needs improvement overall, but a more serious one of what is happening with 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. A case in point is 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 at 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.

With rural wages 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.

Himanshu is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi.

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