Farm output surges, growth may touch 7% this year
India's sluggish agriculture sector — its biggest impediment to a high growth rate — is finally poised to take off. Farm growth won't just meet its target of 4% this year, it could even climb to never-seen levels, possibly 7%. Zia Haq reports.Great leap forward?business Updated: Nov 29, 2010 02:15 IST
India's sluggish agriculture sector — its biggest impediment to a high growth rate — is finally poised to take off.
Farm growth won't just meet its target of 4% this year, it could even climb to never-seen levels, possibly 7%, government officials, planners and independent economists told HT. "We may see 6-7% growth, depending on how the rabi (winter) crops go," Planning Commission member Abhijit Sen said.
The main reason for this optimism is the outstanding kharif (summer) output, which alone delivered nearly 3% farm growth over last year, Sen added.
Agriculture secretary P.K. Basu too said a turnaround was in the offing.
This will mean more money in the hands of two-thirds of all Indians, who depend on farm income. Rural spending will rise, which will push up manufacturing and thereby, the economy.
Prone to seasonal swings and dependent on the monsoon, farm growth has been volatile in recent years. In 2009-10, the worst drought in three decades shrank farm growth to almost zero.
High farm growth won't quite alter the overall projected growth of 8.5% for this year, as agriculture's share in gross domestic product — the sum total of all income from all sectors — is barely 16%. "However, it will mean more robust contribution to the economy," finance secretary Ashok Chawla said.
What's driving farm growth? "Our agriculture seems to be finally responding to prices," NR Bhanumurthy, economist with state-owned National Institute of Public Finance and Policy (NIPR), said. The NIPR's own forecast is 5.6% farm growth.
Periodic hikes in minimum support prices (MSP) have worked. Between 2004 and 2010, MSP — the assured price at which the government buys paddy and wheat — was raised by 78.6% and 75%, respectively.
Fast-changing consumption patterns have prompted more high-end crops to be grown and high food prices may have a role too, economists say. Cheaper farm loans — at 5% this year from 7% till 2009 — also helped.
Another reason is the "low base" effect: following last year's drought, growth was practically nil, so this year may shine in comparison. But the drought also meant farmers this year worked aggressively to make good their losses, Bhanumurthy said.