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Budget 2021 run-up: Green shoots galore, agri stands out in the year of the pandemic

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Agriculture has been the only bright spot of the Indian economy from past couple of years carrying the heavy weight of lifting the growth rate of the overall economy. Even during the pandemic, it is only the agriculture sector that has shown signs of hope be it on the front of the production or exports.

During the April to June 2020, agriculture was the only sector to register growth. During the second quarter from July to September, while India’s GDP contacted 7.5%, agriculture grew by 3.4%. The contribution of agriculture in 2019-20 to the overall economic growth surpassed that of the industrial sector.

The Reserve Bank of India (RBI) in its annual report of Economic Review of 2019-20 published in August 2020 noted that when the outlook for other sectors was gloomy the contribution of agriculture to overall economic growth (15.2 per cent) surpassed that of the industrial sector (4.7 per cent) for the first time since 2013-14.

While two consecutive severe droughts during the first term of the Modi government had weighed heavily on agricultural growth, bountiful rainfall during the past two years has been the main driver of agricultural growth during the second term of this government.

Not only foodgrains but even horticulture production which accounts for 40% GVA (gross value added) in the farm sector reached an all time high of 320.48 million tonnes in 2019-20.

“These achievements stand out in the overcast of gloom on the outlook,” says RBI.

Increase in production of pulses, especially gram from 9.94 MT in 2018-19 to 10.90 MT in 2019-20 has not only helped reduce import dependence, but also helped take care of protein requirements of millions of poor under the Prime Minister Garib Kalyan Yojana during the lockdown period

Siraj Hussain, Visiting Senior Fellow, ICRIER, New Delhi said, “While the economy had taken a downturn from Q2 of 2019-20, much before the Covid-19 pandemic hit India in March 2020, the agriculture sector was performing better. The rate of GDP growth of agriculture is higher. Agricultural exports, especially export of rice in 2020-21 have done well. In the last two years, pulses prices have remained higher, giving better returns to the farmers. Overall, it has been a mixed picture for agriculture as producers of milk, poultry, maize suffered losses due to the crash of prices.

Agricultural export during April-September, 2020 has increased by 43.4% to Rs 53626.6 crore as compared to Rs 37397.3 crore in the same period last year. The increase in export of main commodities during this period is: groundnut (35%), refined sugar (104%), wheat (206%), Basmati rice (13%) and non-Basmati rice (105%)

Price realization by farmers, especially for the crops backing the minimum support price, gave good returns to the growers. Cotton prices in physical trade have jumped 25% from April to December. Farmers growing pulses, mustard, soyabean could get better returns.

The surplus agricultural production has now become a point of concern for both the RBI as well as some agricultural economists. Ashok Gulati, Infosys Chair Professor of Agriculture at ICRIER said, “There are huge inefficiencies in grain management, where actual stocks with the government are two and a half times the buffer stock norms. This calls for unlocking the capital that is serving no one’s purpose.” Gulati concluded that agriculture cannot lift the burden of the rest of the economy for very long.



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