GDP data: Farm sector maintains strong growth; full year might see a blip

Agriculture and allied activities continued to register a good performance in the pandemic-battered economy of FY21, clocking impressive 3.9 per cent growth at constant prices in the October-December quarter, largely aided by a good kharif harvest. However, for the fiscal year, farm sector growth, according to the second advance estimate of GDP, has shown a drop from 3.4 per cent in the first estimate to 3 per cent, which has surprised many.

“I’m surprised by the drop in full-year farm sector GVA (gross value added) from 3.4 per cent to 3 per cent, which shows allied activities might not do very well in the fourth quarter because rabi production is expected to be strong according to the latest data,” Madan Sabnavis, chief economist at CARE Ratings, told Business Standard. The data from the Ministry of Statistics and Programme Implementation showed farm sector growth at current prices during October-December was estimated at 7.4 per cent, translating into an inflation impact of 3.5 per cent, lower than its equivalent of 11.7 per cent during the same quarter of FY20. Agriculture is perhaps the only sector that has consistently maintained growth in all the quarters even as other sectors were squeezed.

While several sectors returned to growth in Q3 , agriculture was all along different. GVA in last fiscal year at constant prices was 4.3 per cent.

Meanwhile, the second advance estimate for agricultural production, released a few days ago, showed India was expected to produce foodgrains of over 303 million tonnes, an all-time high, in the 2020-21 crop year (July-June) due to strong kharif and rabi harvests.

Average foodgrain production of the last five years — from 2015-16 crop year to 2019-20 crop year — was 278.88 million tonnes. A good monsoon, along with favourable weather, is expected to have aided this rise.

However, the output increase could cause stress on domestic prices of some crops, namely chana and mustard, in the coming months, unless there is government intervention through procurement at minimum support prices. In the 2020-21 crop year, the production of pulses is expected to be 24.42 million tonnes, against last year’s 23.03 million tonnes and higher than the average production of the last five years, which has been estimated at 21.99 million tonnes.

Similarly, in case of oilseeds, production in 2020-21 is estimated to be 37.31 million tonnes against last year’s 33.22 million tonnes and the last five years’ average of 30.55 million tonnes.

Sugarcane production in 2020-21 is expected to be 397.66 million tonnes, around 27.16 million tonnes more than in 2019-20 while cotton production is estimated to 36.54 million bales, which is 0.48 million bales more than last year (1 bale=170 kg).

The southwest monsoon, meanwhile, in 2020 was 9 per cent above average, which made it the second consecutive year of the rains being more than normal —something that has happened for the first time in almost 60 years.

Of the 685 districts in the country, the monsoon was normal in almost 75 per cent of them, while it was deficient and below normal in the rest.