Advance warnings

The National Statistical Office (NSO) has released its first advance estimates of national income for 2023-24. Beating all expectations, NSO estimates, the Gross Domestic Product (GDP) will record a growth of 7.3 per cent. However, this good news hides an economic reality that is a not-so-good news for the country’s largest employer—the agriculture sector. The agriculture sector (including livestock, forestry and fishing) is estimated to grow at 1.8 per cent in 2023-24 (at 2011-12 prices)—a steep decline from the 4 per cent growth in the financial year 2022-23.

Among the eight economic activities taken under the NSO estimate, agriculture has the lowest growth rate. This is also one of the lowest agricultural growths in recent years. In 2021-22, agricultural growth fell to 3 per cent in comparison to 3.3 per cent in 2020-21. Before 2021, for six years, the agriculture sector grew at an average of 4.6 per cent (even though in three of the six years the rate was below 4 per cent while in the rest three years it was around 6 per cent) because the base year for comparison was 2015-16 when agricultural growth was 0.6 per cent due to severe drought.

The current year’s low growth is attributed to erratic monsoon and massive crop losses due to such events, partially due to the ongoing El Nino effect.  According to NSO, the production of rice dipped by 5.4 per cent in 2023-24 in comparison to 2022-23. In 2022-23, rice production reported a marginal growth of 0.5 per cent in comparison to 2021-21. This means more than two years of low production of the staple that employs a major chunk of the country’s farmers. It also means that earnings of farmers have been stagnating or growing at an insignificant farm wage growth rate of 1.3 per cent for the last one decade, coinciding with the incumbent government’s two tenures starting 2014. So, what does this low growth mean for the country’s economy?

Agriculture employs more than 45 per cent of the country’s workforce. Their earning defines the national GDP. The low growth projection has come at a time when individual consumption accounts for nearly 61 per cent of the country’s GDP (this is termed as the Private Final Consumption Expenditure, or PFCE, in the NSO accounting). If such a percentage of the consumers do not have the capacity to spend, the GDP will naturally be impacted. Moreover, so much distress for so long will also mean that people are adding debt, or slipping into a poverty trap. Per capita PFCE in 2023-24 is estimated to be Rs 1,29,400 (at current prices or without factoring in the inflation rate) which is just Rs 10,123 higher than what it was in 2022-23. Expenditure is usually treated as a proxy for income because people tend to spend according to their income. This meagre expenditure growth indicates a state of low income. The last few years of PFCE data shows stagnancy, and if one factors in inflation, it may well go into the negative growth bracket.

Notwithstanding the NSO advance estimates, the agricultural growth in the second half of the fiscal year is not that encouraging, given the low acreage of the winter crops and also the crop losses due to erratic and extreme weather events since September 2023. As the revised estimates come in coming weeks, clear picture will emerge.

But what this estimate shows is the behaviour of the agriculture sector in a changed climate. It also shows how a majority of Indians, who depend on agriculture, will continue to bear losses. This has a negative bearing on the national economy.  

This will first be published in the 16-31 January, 2024 print edition of Down To Earth 

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