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Farm sector in red

delhi Updated: Feb 26, 2010 01:00 IST
Zia Haq
Zia Haq
Hindustan Times
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India’s farm growth has, worryingly, gone negative by 0.2 per cent, the Budget-eve Economic Survey for 2009-10, said on Thursday.

A 0.2 per cent “contraction” means that even as prices rise, incomes of 52 per cent of all Indians (who depend on agriculture) have fallen to the that extent.

The drag comes after last year’s 1.6 per cent farm gross domestic product, which is the sum of all incomes from agriculture and allied activities.

Agriculture has turned out to be India’s Achilles’ heel, even though the country is predicted to grow by more than 8 per cent overall.

The survey showed that the drought trimmed summer cultivation by 6.5 per cent, while food productivity shrunk by 16 per cent. Over all, agriculture ended up with a bloody nose.

“I think it’s time for administrative reforms in agriculture, like a farmer’s audit of agricultural institutions,” P. Chengal Reddy of the Consortium of Indian Farmers’ Association told Hindustan Times.

The negative growth, seemingly small, is actually a blunt blow at a time when rural spending is driving domestic demand.

According to a 2009 Citibank Research report, rural share of consumer demand for all motorcycles sold was 48.3 per cent. It was 10 per cent for passenger cars and 44 per cent for TV sets.

The effects of the drought quietly showed up in the form of a supply crunch and surging food prices, the single biggest driver of inflation.

“Rising food prices, spurred by expectations of shortfall in production, have brought the issues of food security, food management and productivity to the forefront of national strategy,” the 2009-10 survey, led by chief economic adviser Kaushik Basu and his team, stated.

Food inflation remained above 17 per cent for five straight weeks, data released separately on Thursday showed. Since December, food inflation showed signs of spreading. In January, India’s benchmark wholesale-price index rose 8.6 per cent — the fastest since October 2008.

India is more vulnerable than others to food price swings because of the relatively large weightage of food items in its price index. For example, a 20 per cent spike in rice prices would raise the consumer price index by 2.2 percentage points.

The survey said that more stocked grains should be released to cool prices.