Agriculture to grow at less than 2% on Rabi and livestock rebound: Abhijit Sen

Agriculture production is expected to post a positive growth of 1-1.5% this year even though the advance estimates of the Kharif output show a much larger decline in value terms over the same period last year, according to Abhijit Sen, member of the Planning Commission.

"I am hopeful that Rabi and livestock sector will take a rebound this time. So at the end of the day, it will be positive" he said on Monday.

However, against the normal expectation of 3-3.5% growth in agriculture, supply side issues would play out on the inflationary front, according to him.

Advance estimates of the just concluded Kharif season show a decline of 8% compared to actual output and 4-5% less compared to the advance estimates of the last Kharif in value terms. The decline is largely because of 8% deficit in rainfall compared to about 2% above normal rainfall recorded during the same season last year, he said.

Kharif crop output comprises only quarter of the total agriculture production while 50% is contributed by livestock sector, according to him.

There has been a sharp decline in output of coarse cereals and pulses besides a general decline in other crop groups but not much in rice, he said.

Sen cautioned that the prices of coarse cereals, which are mainly used as livestock feed, would shoot up if the government does not act quickly by releasing more food grain stocks in to the market.

Any failure to act quickly as promised by the government in releasing food grain stocks would in turn impact the prices of milk and livestock products, which so far remained stable, according to him. There is no reason for the prices of rice and wheat going up but the ongoing exports are building pressure on these prices as well, he said.

On inflation, he said the general direction is down from the 8% level though it would remain high in the next couple of months as the full effect of recent passage of oil prices will be seen.

"Two weeks of September saw the oil price pass through and its effect will be felt across the sectors from October onwards," he said, adding that there would be an impact on the prices of agriculture goods owing to the high transport component.

Responding to a question on distress conditions reported in some part of the country, Abhijit Sen said farmers ending up in debt by growing risky cash crops is one reason behind the distress condition.

"The incidence of farmer suicides has certainly come down across the country except in Vidarbha and also we now see in parts of West Bengal. Although farm incomes have gone up, the riskiness of farm economy has not come down," he said.

Little predictability and very little agreement on issues on solutions

Delivering a foundation day lecture at the newly formed School of Economics of the University of Hyderabad, Abhijit Sen earlier said there is very little predictability and very little agreement on issues and solutions pertaining to the economy. Economists have lost much of their value as they have not been able to live up to the expectations in the face of global financial crisis and subsequent slowdown started in 2007, he said. Problem solving would be one area that the institutions and economists could focus on, he suggested.