The Indian economic system is all set to contract this yr as a result of Covid-19 pandemic. There may be solely vivid spot on this yr’s financial story; the agriculture sector. A superb rabi (winter) crop harvest, sufficient rainfall through the ongoing monsoon and inspiring information on sowing on kharif (monsoon) crops, all level in the direction of efficiency by agriculture. Finance minister Nirmala Sitharaman echoed these sentiments whereas talking on the India Concepts Summit organized by the US India Enterprise Council. “Now we have had an excellent rabi crop. All of what had been obligatory, have been procured at cheap value in order that farmers should not left excessive and dry searching for purchasers. Now the estimate for kharif crop has additionally come. We are able to clearly see agriculture driving the revival”, Sitharaman stated on Tuesday.

Can a excessive progress charge in agriculture increase demand? This can’t be taken without any consideration. Actual progress charge calculations have in mind worth of manufacturing at fixed costs. The fixed value methodology is important to make sure comparability throughout time durations. Everyday buying energy, and due to this fact demand, is extra more likely to be a operate of present or nominal incomes.

A HT evaluation of lately launched Nationwide Account Statistics (NAS) information reveals that actual and nominal incomes needn’t transfer in the identical route for India’s farmers.

The NAS offers worth of output for all crops at present and fixed costs from 2011-12 to 2018-19. The worth of output for crops may be taken as a proxy for farm incomes. In fixed value phrases, worth of output of crops grew on the highest charge, 5.9%, in 2016-17. This was not the yr of quickest progress in nominal farm incomes, although. The very best nominal earnings progress was 15.3% in 2013-14, when the true earnings progress was 4.9%. In 2012-13, when actual incomes grew at 0.6%, nominal incomes grew at 11.6%. That is greater than the 11.1% nominal earnings progress in 2016-17, when actual progress was the best. (See Chart 1)

Can agriculture revive economy? – india news

To make certain, the headline numbers on worth of output of all crops cover important crop-wise variations. For instance, actual worth of output for cereals and fruit and veggies grew on the nearly the identical charge, 1.3% and 1.4%, in 2018-19. Nonetheless the expansion in nominal values was drastically totally different. It was 8.4% for cereals and 0.1% for fruit and veggies. (See Chart 2A and 2B)

When learn in consonance with wholesale costs index (WPI) information, which reveals that fruit and vegetable costs are way more risky than cereal costs, the divergence between nominal and actual worth of output doesn’t appear stunning. WPI is a extra helpful measure so far as monitoring farm gate costs is anxious. (See Chart 3)

Whereas it’s common to trace rice and wheat output as a metric of agricultural efficiency, fruit and veggies are as necessary as cereals on the subject of farm incomes. In 2018-19, the entire worth of output of fruit and veggies in fixed costs was Rs 3.74 lakh crore. For cereals, this determine was Rs 3.61 lakh crore.

A bumper crop this yr may create a glut in agricultural markets. Given the truth that non-farm output, and due to this fact buying powers, are set to contract, this might effectively result in a pointy fall in meals costs. If this occurs, the present worth of output of crops and due to this fact progress in farm earnings could also be decrease than actual progress in agriculture. It will have a direct bearing on agriculture’s potential to spice up the remainder of the economic system. If the agriculture sector has to play a lead function in financial restoration, coverage intervention is required to ensure that farm costs don’t crash and put a squeeze on farm incomes.

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