Robust farm growth key driver of FY23 GDP expansion
Despite setbacks, such as extreme weather and damage to staples, gross value added (GVA) in agriculture and allied activities grew a targeted 4% for 2022-23
Robust farm growth, apart from the services sector, was one of the key drivers of India’s better-than-expected economic performance in 2022-23 in contrast to just 1.3% expansion in the manufacturing sector.
Despite setbacks, such as extreme weather and damage to staples, gross value added (GVA) in agriculture and allied activities grew a targeted 4% for 2022-23. In the January-March quarter of 2022-23, farm sector GVA accelerated to 5.5%, the highest in 11 months, provisional estimates released by the National Statistical Office on Wednesday showed. GVA is a measure of growth that strips out net taxes.
Agriculture continues to be vital for the overall economy because nearly half of India’s population depends on a farm-based livelihood. Job losses in other sectors due to the pandemic shifted a large chunk of the workforce back to agriculture. This is likely to have increased disguised employment in the sector, which refers to redundant labour.
Strong growth in agriculture and allied activities was largely propelled by a rebound in the third and fourth quarters of 2022-23 at 4.7% and 5.5%. To be sure, farm growth was a muted 2.4% in the first quarter while it was 2.5% in the second quarter.
The momentum in farm growth however does not tie in with muted private final consumption expenditure (PFCE), a measure of people’s spending power. Also, since extreme weather roiled wheat for a second straight year in 2023, the share of allied farm activities in agricultural GVA could have been more than that of crops.
“Obviously, private consumption has been stagnating. But it is important to remember that, relatively speaking, that is also because the share of government capital expenditure has become larger. Plus, you also have a bit of crowding in of private investment,” economist M Govinda Rao said.
While the share of PFCE in GDP in 2022-23 (provisional estimates) stood at 58.5%, it was 58.3% in 2021-22 (first revised estimate).
With higher government investment, the economy will see a pick-up in household consumption with a lag in the current financial year, said NR Bhanumurthy, vice-chancellor of Dr BR Ambedkar School of Economics University, Bengaluru.
Record official projections of food output, especially of wheat and mustard, during the winter-sown season, is a key reason for higher fourth-quarter growth, said Abhishek Agrawal, an analyst with Comtrade, a commodity trading firm.
Despite a prolonged spell of untimely rain and hailstorms, which were feared to have damaged wheat, the government’s third advance estimates of agricultural production on May 25 pegged the staple’s output at a record 112.7 million tonne. Mustard output was also pegged at a record 12.4 million-tonne.