Farm sector growth may triple on monsoons

The farm sector had grown at 1.9% last fiscal; likely to grow in the range of 5.2-5.7 % in 2013-14

The agriculture sector is likely to grow in the range of 5.2-5.7 per cent in 2013-14, nearly three times more than last year as good monsoon has raised the prospects of a bumper harvest, a CACP discussion paper said.

It warned however that “automatic” trickling down of bumper harvests to increase the economic activity may not be realised unless policymakers play the facilitator’s role well.

The farm sector had grown at 1.9 per cent last fiscal.

“Comparing these likely agri-GDP growth rates in 2013-14 agriculture year (July-June) with the 2012-13 performance, it turns out that agri-GDP growth is likely to be about three times higher than last year,” said a discussion paper co-authored by CACP chief Ashok Gulati.

The farm growth is expected to be in the range of 5.2-5.7 per cent this year because monsoon showers have been one of the best the country has experienced in the last two decades or so, it said.

Gulati, in his personal capacity, said in the discussion paper: “Farm growth is likely to come largely from oilseeds, pulses, cotton and coarse cereals belt of central and western parts of India, which is less irrigated and thereby more dependent on rains.”

The Commission for Agricultural Costs and Prices (CACP) is a statutory body under the Agriculture Ministry which advises the government on pricing policy for major farm commodities.

Noting that a higher agri-GDP growth is likely to boost the overall performance of the economy via its multiplier effect, the paper said, farm income may rise 15 per cent in nominal terms, triggering some increased demand for agri-inputs for durable and FMCG goods in rural areas.

However, the virtuous cycle of economic growth may just be a distant dream unless the necessary condition of increasing rural or farm incomes is realised, it said. Suggesting that the government prepare well for a big harvest, the paper said it should liquidate at least 20 million tonnes of foodgrains in the domestic market or for exports without compromising on the needs of Food law.

Clearing the excess stock for new crop will help contain food inflation and also save on high carrying costs of grains and thus reduce fiscal deficit, it said.

Second, the paper suggested de-listing of fruits and vegetables from the Agricultural Produce Market Committee (APMC) Act and incentivise processors and modern retailers to buy directly from farmers. “This would compress their value chains benefiting both consumers and producers, saving on large wastage, and further bringing down food inflation,” the paper said, adding that once food inflation is down, subsidies on fuel and fertilisers can be cut more aggressively reducing fiscal deficit.

Third, the paper recommended that the government facilitate and create conducive international trade rules and policies so as to hedge farmers against falling domestic prices, because of increased supplies.