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Farm sector's likely robust FY14 show may not dispel gloom

Sanjeeb Mukherjee  |  New Delhi 

For the first time since 1991-92, the country's this financial year is expected to stay depressed, at a sub-five-per-cent level, despite a robust 5-7 per cent agricultural output growth likely for the year.

In the past two decades, the country's slipped below five per cent in only three years - in 1997-98, 2000-01 and 2002-03. And, agricultural output in all of those three years had suffered due to bad monsoon (see chart). The current year, however, could see a deviation from that trend.


In other words, if you exclude the impact of the monsoon on economic growth, the current financial year's economic performance could be the worst in the past two decades.

Indeed, gross domestic product (GDP) has felt the pinch in all years of low agricultural output but has still managed to grow at a rate higher than four per cent, indicating that industries and services made good the production loss in agriculture.

For instance, the rate of agricultural growth in 1995-96 was almost flat, but grew 7.3 per cent - thanks to industries and services growing at double-digit rates. In 1997-98, when agricultural production fell 1.3 per cent due to a weak monsoon, still grew at 4.3 per cent. And, in 2002-03, agricultural production saw its worst fall in the post-reforms period, declining 4.9 per cent, but managed to grow four per cent, as industries and services clocked seven-eight per cent growth in that year.

The situation in the current financial year, however, appears to be different. By all available estimates, 2013-14 is expected to be an excellent crop year and yet the overall would be tepid at below five per cent. Even last year (2012-13), agriculture grew by only 1.9 per cent due to erratic monsoon, but growth stayed at around five per cent.

Analysts believe the underlying weakness in the economy has dampened growth in industry and services and is unlikely to spur growth, even as economists might be pinning hopes on a strong revival in agriculture growth in the remaining quarters of the year to boost the overall economic activity.

The share of agriculture in the overall has declined to 16-17 per cent, compared with more than 20 per cent in the 1980s and 1990s. In those years, low farm growth led to a sharp fall in growth. In 1986-87, 1987-88 and 1991-92, agricultural growth dropped to 0.6 per cent, minus 1.1 per cent and minus 1.4 per cent. As a result, growth fell to 4.3 per cent, 3.5 per cent and 1.4 per cent, respectively.

However, in 2004-05, agricultural growth declined to 1.1 per cent from 8.2 per cent the previous year, due to a drought, but the overall growth was seven per cent. Similarly, in 2009-10, agricultural output grew a mere 1.5 per cent but the overall expanded 8.6 per cent, underlining agriculture's declining share in the overall and an increasing importance of industries and services.

First Published: Sat, August 31 2013. 23:02 IST
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