In India, agriculture is the backbone of the economy, demographically the broadest economic sector and responsible for feeding 1.25 billion mouths.
Agriculture and its allied sectors like forestry and fisheries accounted for 16.6 per cent of the gross domestic product (GDP) in 2009. We cannot completely ignore the centrality of agriculture just because its economic contribution to GDP has been declining and now hovers around a comparatively low of 14 per cent.
Importance of agriculture
Agriculture plays a significant role in the overall socio-economic fabric of the country despite prominence given to secondary and tertiary sectors including industrial development, during the last four decades.
Agriculture serves as raw materials for several industries including sugar, food processing, cotton and jute. It thus, plays an important role in industrial development and also as earner of foreign exchange. Agricultural products such as jute, cotton, tea, coffee, spices, tobacco, sugar, oil, cashew etc. bring valuable foreign exchange.
If we look at China which began its reform process in 1978 with agriculture, farm GDP grew by 7.1 per cent per annum during the next six years as it dismantled the commune system and price controls. Liberalization of prices was followed by a whopping growth of farm incomes, almost by 14 per cent per year. This led to China’s manufacturing revolution as demand for manufactured goods received a boost.
Before every election, the leaders of the country keep focussing on accentuating overall growth but what they forget is that the objective of accelerating growth will have insignificant meaning unless agriculture takes its deserving place in the agenda of policy reforms.
In fact India is a vast country to just depend on one model for efficiently utilising public expenditures for extending true food security and alleviating poverty. And with a below normal prediction of Monsoon in India, keeping up to the agricultural GDP growth estimate of 3.3 per cent could be a far cry.
El Nino’s effect on Agriculture GDP growth
The Indian Meteorological Department’s (IMD) forecast put the Monsoon figure at 95% of the Long Period Average (LPA), with a model error of ± 5%, which corroborated Skymet’s earlier observation of below normal rain during monsoon in India this year.
And as reiterated by Skymet Meteorology Division in India, it is a bit early to comment on El Nino effects on food prices and thus, maintain agriculture GDP growth estimate at 3.3 per cent. However, if El Nino conditions are fully factored in, the agriculture GDP growth could be lower by 250-300 basis points (bps), and the average retail inflation could see 100 bps rise, according to reliable sources.
Are policymakers responsible for food price inflation?
At times we feel the agricultural situation has been rosy since 1950 as production of food grains increased by more than five times and milk even more while, population increased by a little more than three times. We can perceive that India has produced food faster than its growth in population, thanks to the Green, White and Blue revolutions. Then why do we constantly hear about insufficient returns leading to farmers’ suicides?
Since 1997, the overall farm GDP growth rate has been at an average of 3 per cent per annum, well below the targeted rate of 4 per cent. Food price inflation has been high since the last five years and this year’s bizarre weather in India seems to be flaring this inflation in various parts of the country.
The major disconnect seems in the policies which focus on grains for food security concerns while supplies of high-value products like fruits, vegetables, milk products, eggs, meat and fish are lagging behind demand. With rising incomes people opt for nutritious food and thus, pushing up prices.
So the question arises, is it the policymakers who have been leading to a dearth of nutritious food and crippling price inflation?
picture courtesy- Bhuwanchand
