Non-crop sector pulls the farm sector gross value added in Q2 of FY23

Absence of updated numbers raises some questions on non-crop estimates

The strong second quarter numbers for Gross Value Added (GVA) for agriculture and allied sector for FY23 pegged at 4.6 per cent have come in for some criticism for being too optimistic and somewhat removed from reality.

This is largely because crop sector production of this kharif has been below last year, while the absence of updated numbers make estimation difficult in the non-crop sector too.

GVA for agriculture, forestry, and fishing during the comparable period (July-September) last year was 3.2 per cent. The long-term average growth for agriculture and allied sectors is 3.5 per cent-4 per cent.

Also noteworthy was the growth at current prices, which remained at a high of 15 per cent, marginally less than the previous quarter, but higher than the 6.9 per cent of the corresponding quarter last year.

This translated into an inflation impact of 10.4 per cent, a tad lower than the 12.9 per cent of the previous quarter, which sometimes is also used as a proxy for measuring farmers’ income by a few economists.

As prices of farm products rose, so were the prices of inputs such as fertilisers, seeds etc which would have wiped off gains from high inflation in agriculture products.

However, experts and economists say that strong GVA numbers for agriculture and allied sectors in the second quarter of FY23 could largely be due to the performance of the non-crop sector whose share in overall agriculture GVA has been consistently rising for the last few years. (see chart)

Therefore, even if the crop sector falters a bit, agriculture growth will be consistent if the non-crop sector, which includes milk, meat, horticulture, fisheries etc, show a good growth.

Data shows the share of the crop sector has dropped from 59 per cent to 55 per cent in agriculture GVA between 2016-17 to 2020-21. The share of the non-crop sector in the same has risen from 41 per cent to 45 per cent during the same period.

A big contributor to the growth in the share of the non-crop sector has been milk, whose production and prices both have risen consistently for the last few years while the value realised has also been higher.

In 2021, India is projected to produce around 210 million tonnes of milk, which is almost 10 per cent higher than the previous year, a trend it has been maintaining over the last several years.

In the case of horticulture crops too, data shows that over the last few years, it has consistently outstripped the crop sector in terms of production and also value.

In 2020-21, India’s total horticulture production is estimated to be at a new record of 333.3 million tonnes, a decrease of about 1.35 million tonnes (or 0.4 per cent) over 2020-21, while foodgrains production of 2021-22 has been pegged at 316.06 million tons as per the second advance estimate.

“The problem with non-crop sector is that the latest quarter-wise numbers are not readily available therefore, the government does some estimation, indirect calculation and approximation to arrive at the numbers, which is explained in the detail in the methodology adopted to arrive at the numbers,” Devendra Pant, Chief Economist India Ratings, said.

Meanwhile, on the production front, as per the first advanced estimate for 2022-23 (July-June), production of rice in the kharif season is expected to be almost 6.05 per cent less than the same period last year at 104.99 million tonnes.