Farming share in GDP may rise about 18% in FY21, but will the tiller gain?

Provisional data shows that inflation impact in 2020-21 is expected to be about 3.9%, down from 7.4% in 2019-20

Agriculture has been among the few bright spots in an otherwise gloomy Covid-19-affected economic scenario and is expected to clock a positive growth in FY21, as per the first advanced estimate released a few weeks back.

However, the extent to which this has translated into higher incomes for farmers remains to be seen because the same provisional data puts inflation impact in 2020-21 at about 3.9 per cent, down from 7.4 per cent in 2019-20.

The WPI inflation data has been taken till November 2020, after which prices of some food items, particularly protein-rich produce such as milk, meat and eggs spiked due to pent-up demand and low supplies, thus it is difficult to conclude comprehensively that inflation hasn't been helpful. 

But, more importantly, high prices always do not translate into higher incomes for farmers because of multiple layers of intermediaries between the cultivator and the consumer.

Nonetheless, the provisional first advanced GDP estimate for 2020-21 shows that the share of agriculture and allied activities at current prices in the country’s total GDP is expected to be around 17.89 per cent, which will be the highest since the series started in 2011-12.

Correspondingly, the share of manufacturing in the same pie is expected to be around 13.11 per cent, which is among the lowest in the same time.

While the share of agriculture and allied activities in total GDP has usually been higher than manufacturing, in FY21, the gap between the two is expected to widen significantly.

The overall size of the economy, though, is expected to shrink due to slower growth, which magnifies the share. Yet, the development is significant in itself.

A big reason for this is that though all manufacturing activities came to standstill during lockdown almost, farming continued unabated, and largely due to the grit of millions of hardworking farmers of the country, India managed to weather the Covid-19 storm with some difficulty on the food front.

Good agricultural performance is the cornerstone of any economic revival, as it impacts perhaps the widest segment of the population and could help boost the rural sector.

Funds invested in agriculture have a wider impact on the population and better cascading impact, several experts feel.

To maintain the robust performance of the farm sector, it has to break from its long-term growth trend of 3-4 per cent and push towards 5 per cent growth.

Agriculture’s strong performance in FY21

Gross Value Added (GVA) for agriculture and allied activities is expected to grow at 3.4 per cent at constant prices in the financial year 2020-21, slightly lower than last year, but the best growth among all other sectors battered by the Covid-19 pandemic.

At current prices, GVA growth in agriculture and allied activities is expected to be about 7.3 per cent in 2020-21, slightly lower than the 11.4 per cent estimated for 2019-20.

This means that inflation impact will be about 3.9 per cent in 2020-21, lower than 7.4 per cent in 2019-20 as per the first advanced estimate.

Agriculture is one of the few sector seen clocking positive growth in 2020-21 as per estimates released by MoSPI today, along with electricity, gas and water supply. It will also be the highest among all the sectors, reflecting the stellar role farmers played during the lockdown months to venture into their fields and produce farm goods in record amounts.

However, given the relatively smaller share of farming, a positive growth isn’t expected to make a big push to overall GDP, but does have a positive spin off impact.

“The 3.4 per cent growth estimated by MoSPI for agriculture and allied activities, though slightly lower than last year, is near the long-term average for the sector of 3-4 per cent. It is among the few sectors that have clocked positive growth rates this year,” D K Joshi, chief economist at Crisil, had told Business Standard when the data was released few weeks back.

India’s kharif food grain production in 2020-21 as per the first estimate is expected to be at a record 144.52 million tonnes, or 0.80 per cent more than the production in 2019-20.

In food grains, rice production is estimated to be 102.36 million tonnes, or 0.37 per cent more than 2019-20.

The production of pulses is expected to be about 9.31 million tonnes, which is almost 21 per cent more than 2019-20.

Oilseed output is pegged at 25.72 million tonnes, or 15.28 per cent more than the 2019-20.

The data also showed that production of cotton is estimated to be 37.18 million bales (1 bale = 170 kilograms) which is almost 5 per cent more than last year, while sugarcane production is estimated to be 399.83 million tonnes, or 12.41 per cent more.

Production of kharif crops is expected to be good due to the strong southwest monsoon. In the June to September season, was 109 per cent of the Long Period Average in 2020, which was 9 per cent more than normal.

Not only was the monsoon good this year, even the winter rains that followed the monsoons have been one per cent above normal, spurring strong rabi sowing as well.

Rabi crops have been sown in around 62.07 million hectares till January 1, which is 1.75 million hectares more than the same period last year.