Agriculture emerged as the bright spot, while contact-based services, manufacturing and construction were hit the hardest by the coronavirus pandemic, the government’s annual pre-budget Economic Survey tabled in Parliament on January 29 has said.
The growth in agriculture comes amid the Economic Survey estimating India's gross domestic GDP to contract by 7.7 percent during FY 21. It is expected to grow by 11 percent in FY22, making India one of the world's fastest- growing economies in the aftermath of the COVID-19 pandemic, said the survey tabled by Finance Minister Nirmala Sitharaman in Parliament.
“Agriculture was largely insulated from the lockdown in India as timely and proactive exemptions from the COVID-19 induced lockdowns to the sector facilitated harvesting of rabi crops and sowing of kharif crops,” it said.
However, supply chain disruptions impacted the flow of agricultural goods, leading to high food inflation and adverse impact on some major exports, the survey said.
“Agriculture is set to cushion the shock of the COVID-19 pandemic on the Indian economy in 2020-21, with a growth of 3.4 percent in both Q1 and Q2. It is the only sector that has contributed positively to the overall Gross Value Added (GVA) in both Q1 and Q2 2020-21,” it said.
It indicated that farm activities for rabi harvesting and kharif sowing were largely unaffected by the lockdown announced to tackle the spread of COVID-19.
In view of the hope of a bountiful kharif harvest, the foodgrain production target has been set at 301 million tonnes for the crop year ending June. This is 1.5 percent higher than the record output achieved last crop year.
“Rural demand has remained resilient, empowered by the government’s thrust on the rural economy and infrastructure in previous years, through a bouquet of reforms for both farm and non-farm sectors,” it added.
An increase in credit growth in agriculture and allied activities to 7.4 percent in October 2020 from 7.1 percent the previous year also helped. In addition, the current crop year 2020-21 has been “bestowed with abundant monsoons leading to the agricultural sector emerging as the silver lining of the economy”, the survey said.
On the trade front, agriculture and allied products proved resilient along with drugs, pharmaceuticals, ores, and minerals to record growth expansion.
Prices of agricultural commodities remained more or less stable during the pandemic-induced restrictions due to the lower income elasticity of demand for these compared to other goods, the survey said.
The sector has also got renewed thrust due to various measures on credit, market reforms and food processing under Atmanirbhar Bharat Abhiyan.
Various government initiatives also saw the potential of the livestock and poultry sectors being tapped, the survey said.
A feature of growth in the agriculture sector was livestock and poultry sectors outperforming crops. The share of crops in GVA dropped from 11.2 during 2014-15 to 9.14 during 2019-20 but the fall has been made up by the growth in the share of livestock and fisheries sectors.
India, which accounts for 2.5 percent of the global agricultural trade, has remained a net exporter of farm goods with exports pegged at Rs 2.52 lakh crore and imports at Rs 1.47 lakh crore. However, there has been a significant change in the composition of exports with non-basmati rice, sugar and spices showing a rising trend.
Referring to the three agricultural laws, the Survey said they were “a remedy and not malady” for farmers from various restrictions they faced in marketing their produce.
“There were restrictions for farmers in selling agri-produce outside the notified APMC (agricultural produce marketing committee) market yards. The farmers were also restricted to sell the produce only to registered licensees of state governments.
“APMC regulations have indeed resulted in a number of inefficiencies and consequent loss to farmers. The presence of multiple intermediaries between the farmers and the final consumers has led to low realization by farmers,” the survey said.
Further, a large number of cess and taxes levied by APMCs cut into farmers’ realisations, while only a small portion was ploughed back for development of mandi infrastructure, the survey, prepared under Chief Economic Adviser Krishnamurthy V Subramanian, said.
“Poor infrastructure at the mandis compounds the problem price realisation for the farmers. Issues related to manual weighing, single window systems, and lack of modern grading and sorting processes create long delays and measurement errors that tend to be biased against the seller,” it added.
Farmers waiting in long queues, mostly in hot sun, to sell their produce with limited ability to take their produce elsewhere, even if prices were higher, is a characteristic feature of APMC mandis. The delays led to post-harvest losses that were 4-6 percent in the case of cereals and pulses, 7-12 percent in vegetables, and 6-18 percent in fruits.
Stating that various committees had recommended several reforms in the marketing of agricultural commodities recognizing the current limitations, the Survey said at least 20 reports starting from 2001 had recommended agricultural market reforms.
Besides, various Economic Surveys, including by the current government, recommended them, the survey said, indicating that the reforms had been made after widespread consultations.
(Subramani Ra Mancombu is a Chennai-based journalist who writes on commodities and agriculture.)