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The importance of being rice, for India’s GDP

business Updated: Feb 28, 2009 01:26 IST
Arnab Hazra

Is a bowl of rice better than a few chapattis? Your dietician may vote for the roti, but as far as the nation’s Gross Domestic Product (GDP) is concerned, rice appears to have a clear edge.

While the contraction in agricultural output through the October- December quarter, as reported by the Central Statistical Organisation on Friday, is being largely attributed to a high base in the same period a year ago, the growing weight of rice in the farmer’s basket also seems to have played a role.

Farmers in India usually obtain two crops, Kharif and Rabi. Kharif is harvested in September, and reflected in the October-December quarter. Rice is the principal Kharif crop. Rabi is sown after October, and the harvest reflects in the January-March quarter. Wheat is the principal Rabi crop. Rice output is more vulnerable to fluctuations in rainfall than wheat. An analysis by HT Research shows more cyclical fluctuations in Kharif.

“The huge dependence on rains and low irrigated lands causes this seasonality,” said Shashanka Bhide, Senior Fellow at National Council of Applied Economic Research, New Delhi. So last year we had record productions in rice and the base effect is a spoiler this year. If one were to take the third quarter output this year and see the growth rate over 2006-07, it works out to 4.5 per cent over two years, or an yearly average of 2.5 per cent.

The agricultural GDP rises after the Kharif harvest, but declines in the next nine months. After the harvest of Rabi crops, the value of agricultural output declines by almost one-fifth, despite a good Kharif.

At present both Kharif and Rabi have an equal contribution in total foodgrains output. So the sharp deceleration in agricultural output after the Rabi harvest is particularly perplexing. The Economic Survey reports that in the period 2002-06, while rice production has seen a growth of 1.75 per cent, for wheat it was 0.42 per cent. Rice has maintained a positive growth in yield, while it is negative for wheat. So, if the agricultural GDP has to grow, it would seem that rice output needs to grow even faster than it is at present. Rice, it does seem, is more important for India’s GDP.