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Farm sector likely to grow over 5%Farm sector likely to grow over 5%
Times of India, October 12, 2013
Agricultural GDP is likely to grow by over 5%
Higher farm output augurs well for overall economic growth and should help calm raging food prices.
Surojit Gupta & Sidhartha, TNN | Oct 12, 2013, 01.08AM IST
NEW DELHI: Agricultural GDP is likely to grow by over 5% this year thanks to the most abundant rains in nearly two decades, a government thinktank has forecast. If the prediction turns out right, it could help tame food inflation, provide a much-needed boost to rural incomes and a knock-on effect on other sectors of the economy.
The demand for two-wheelers, tractors and mobiles, in particular, could rise sharply helping the government in its efforts to steer the economy out of a deep slowdown. For the UPA, that would also be great news politically in the runup to the 2014 general elections.
While private economists are still betting on the farm sector growing by around 4.5% this fiscal year, the Commission for Agricultural Costs & Prices has estimated that the sector will clock 5.2-5.7% growth during the 2013-14 agricultural year (July-June). During the last financial year, farm sector growth was estimated at 1.9%. In recent years, the fastest growth rate was in 2010-11, which propelled overall economic growth to 9.3%.
"Comparing these likely agri-GDP growth rates in 2013-14 (agricultural year) with the last year (2012-13) performance, it turns out that the agri-GDP growth is likely to be about three times higher than last year," the study conducted by CACP chairman Ashok Gulati, Shweta Saini and Surbhi Jain said. They reckon that oilseeds, pulses, cotton, and coarse cereals will push farm growth, with Maharashtra, Gujarat, Madhya Pradesh, Rajasthan and Karnataka expected to be the main gainers.
Planning Commission member Saumitra Chaudhuri, who is also a member of the Economic Advisory Council to the PM, too is predicting 5-6% agricultural growth.
"Given that food inflation is hovering in double digits, it is likely to increase farm incomes by almost 15% in nominal terms. Combine this with the fact that farm wages of agricultural labour have been increasing by more than 20% per annum for the last three years, and likely to continue this year too, it should mean lot of income accrual in rural areas (15 to 20%) in nominal terms," the study based on a rigorous mathematical model said. In fact, it pointed out that better rains have already generated higher tractors sales, which are up around 20%, while urea demand has increased by around 10%.
"After the harvest, there is likely to be a surge in demand for mobiles and other FMCGs from rural areas. It would be a golden opportunity for the business CEOs to tap this potential boom in rural expenditure... Those in the manufacturing and services sector, who can tap this emerging demand, can grow fast sending overall growth impulses in the otherwise sagging economy," it said.
Higher farm output augurs well for overall economic growth and should help calm raging food prices. "It will add half-a-percentage point to GDP growth," said National Statistical Commission chairman Pronob Sen. Crisil chief economist DK Joshi said that farm growth of around 5.5% would prompt him to raise his GDP growth estimate from 4.8% at present to 5.2%.
Taming inflation is in fact a key challenge before the UPA government that is on the back foot over corruption and rising prices, with food inflation upwards of 18% in August. If farm growth turns out on predicted lines, the coalition may emerge stronger to deal with criticism over rising prices, corruption, lack of job prospects and a slowing economy.
Several economists have predicted a feeble recovery for the economy, which slowed to a decade-low growth rate of 5% in 2012-13. For the current fiscal year, the forecasts are not robust and expectations are that growth would be around 5%. In the first quarter, GDP growth slowed to 4.4%.