For the first time since 1991-92, the country's economic growth 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 economic growth 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 GDP 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, GDP 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 GDP managed to grow four per cent, as industries and services clocked seven-eight per cent growth in that year.
Analysts believe the underlying weakness in the economy has dampened growth in industry and services and is unlikely to spur GDP 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 GDP 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 GDP growth. In 1986-87, 1987-88 and 1991-92, agricultural GDP growth dropped to 0.6 per cent, minus 1.1 per cent and minus 1.4 per cent. As a result, GDP 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 GDP growth was seven per cent. Similarly, in 2009-10, agricultural output grew a mere 1.5 per cent but the overall GDP expanded 8.6 per cent, underlining agriculture's declining share in the overall GDP and an increasing importance of industries and services.