Whereas the Indian economy shot past expectations to clock an impressive 7.6% growth in the September quarter, retaining its crown as the world’s fastest-growing major economy, the growth in the agriculture sector was 1.2% as compared to last year’s 2.5% thanks to an erratic monsoon, National Statistical Office (NSO) data showed.

Currently, the agriculture sector contributes 18% to the GDP while it employs about 40% of the workforce.

After strong growth of 7.8% in the first quarter, the second quarter, too, surprised on the upside with 7.6% growth. This takes the first half of GDP growth to a robust 7.7%. However, economists still expect growth to be slow in the second half because of the deepening global slowdown; the lagged impact of domestic rate hikes manifesting fully through the second half of this fiscal; and erratic weather and an El Niño event creating some downside to agricultural growth prospects.

According to the first advance estimates of the agriculture ministry, kharif production in 2023-24 (July-June) is 4.6% lower than last year. The decline is because of a prolonged dry spell in August and an uneven monsoon at the beginning of the four-month (June-September) season. The south-west monsoon has been highly uneven and skewed mainly because of the adverse impact of El Niño. Statistically, the June to September season ended with a deficit of 5.6%, classifying the 2023 monsoon as “below normal”, the first in over four years.

India has done well in achieving growth targets but lags when it comes to efficiency gains. The emphasis should shift from growth to efficient growth—a cost-effective increase in production. This requires the deployment of state-of-the-art technology in agriculture, smart farming and maximizing the value of main and by-products, according to Niti Aayog member Ramesh Chand.

“The main yardstick to measure the progress of agriculture is yield per unit of land. This ignores other more limiting and cost-related factors such as water usage, fertilizer application and labour intensity. Along with yield, the productivity of other inputs should also be maximized,” Chand said.

Concerns over the kharif output pushed prices of food items up, leading the government to take a series of measures to tame food inflation.

To begin with, the government between July and December prohibited the export of non-basmati white rice and onions, imposed an export duty of 20% on parboiled rice, set a minimum export price (MEP) of $1,200 per tonne for basmati rice and then lowered it to $950 per tonne, and extended the ban on sugar exports and asked mills to not use cane juice to make ethanol amid supply concerns.

Over the past year, crops of wheat, rice, cane, soybeans, spices, pulses and vegetables have been hit by heat waves, rains, floods and pest attacks. The loss is worsened by export curbs—farmers could have partially recovered losses through exports and higher domestic prices. A hit to farm income also means tepid growth in non-farm wages and low rural demand.

Data from the consumer affairs ministry shows retail prices of rice and some pulse varieties such as tur are significantly higher, nearly 15% and 41%, respectively on-year. Cooking oil prices are significantly lower compared with last year, as prices fell by 11-25%. But vegetable prices have been volatile. Tomatoes, too, are now 19% costlier than last year.

Food inflation, measured by the Consumer Food Price Index, which accounts for nearly half of the overall consumer price basket, rose to 8.70% in November from 6.61% in October and 6.62% in September as vegetable and pulses inflation rose to 17.70% and 20.23%, respectively, from 2.70% and 18.79% recorded last month. The food and beverage inflation went up 8.02% in November from 6.24% in October.

In July, retail inflation rose to a 15-month high of 7.4%, led by an increase in food prices spurred by seasonal fluctuations. This prompted the government to strengthen buffers for essential food items, make periodic open market releases, and ease imports of essential food items through trade policy measures.

The government also stepped in to prevent hoarding by revising stock limits and channelling supplies through designated retail outlets to curb inflation via means other than stringent trade policies.

The Centre wants to keep food prices down ahead of the general elections in April-May next year. So, over the past year, it has restricted exports of wheat, rice, onion and sugar, cut import duties on edible oils, and made arrangements with other countries to import pulses. In November, it was also announced that the free foodgrain scheme, which provides 5 kg of grains every month to over 810 million people, will be extended till 2029.

The weather shock has hampered Kharif production and disturbed the entire crop cycle. Sowing of rabi crops remained lower as of 22 December as deficient monsoon left the soil moisture levels in a precarious state, and water scarcity in many districts emerged as a significant concern.

Although the overall sown area for the 2024-25 Rabi season is expected to decline on year, agronomists are optimistic about crop productivity, anticipating pleasant climatic conditions this year.

In the previous rabi season, unseasonal rainfall and hailstorms are estimated to have weighed on yield of all key crops, including paddy, maize, mustard, and gram. In the case of wheat, the main winter crop, after an adverse impact of the heatwave in the 2022–23 season, an on-year yield improvement was reported last season. However, the quality of the produce had reportedly deteriorated due to the unseasonal rainfall witnessed during February and March this year in Punjab, Haryana, Rajasthan and Madhya Pradesh.

The Global Hunger Index 2023 released in October puts India at the 111th spot among 125 countries. For a couple of years, it has pointed to a steady deterioration of food security in India. Now with a bad kharif and uncertain rabi, Indians need to brace for more food troubles ahead. Despite higher Rabi output, prices of food items may remain firm in the remaining months of the ongoing financial year, pinching consumers’ pockets, according to agronomists.

“Prices of food items such as rice, wheat, pulses, and vegetables are expected to remain elevated for the remaining months of the fiscal year. In the case of cereals, wheat and rice prices are expected to remain high or inch up following lower stock on year,” said Pushan Sharma, Director-Research, Crisil Market Intelligence and Analytics. “Prices of pulses may inch up further owing to tightened supply situation on account of lower production during kharif season and anticipated lower area under pulses for the ongoing rabi season.

Additionally, for vegetable crops like tomato and onion, prices are seen to remain firm until Jan-Feb 2024, when the new crop starts arriving in the market. The incidence of unseasonal heavy rainfall during November in Maharashtra, Gujarat and Rajasthan caused damage to the kharif onion produce and late kharif standing crops, which is expected to tighten the supply and aid price growth,” Sharma added. However, “the export restrictions may put a lid on the upward trend in wheat, rice, pulses and onion prices.”

Government-infused investment via the private sector fails to make much difference in agricultural growth unless the Centre and states make reforms. Agriculture has to play a key role in achieving the goal of Viksit Bharat 2047, inclusive development, green growth and gainful employment.

“States must undertake comprehensive reforms in agriculture and replace restrictive regulations with a new set of regulations that are in tune with the new reality of agriculture, emerging opportunities, capacity and willingness of modern capital to invest in pre- and post-harvest processes and changes in the investment environment, new institutional mechanisms, ICT and consumers’ preferences,” said Chand.

Additionally, to address the challenges of the twenty-first century and achieve Viksit Bharat through agriculture, a significant and sustained increase in farmers’ income and a transformation of agriculture requires a paradigm shift in the approach towards the agriculture sector. Changes in old regulations and liberalization of the sector are necessary for creating an enabling environment for modern and vibrant agriculture during Amrit Kaal. Advancement in science-led technology, an enhanced role for the private sector in both pre and post-harvest phases, liberalized output markets, an active land lease market, and emphasis on efficiency will equip agriculture, suggested Chand.

“The agriculture sector offers some useful experiences to fulfil India’s dream of becoming a developed country by 2047. The dairy, poultry and fishery sectors are close to the growth rate required to make India a developed country. Such growth is also possible in horticulture and agroforestry. The country needs to liberalise these sectors to unleash their potential. While the non-farm sector can give higher growth than agriculture, the latter is important for inclusive growth, employment generation, renewable energy resources and sustainability–all of which are an integral part of the goal to become Viksit Bharat. Thus, we must plan for Viksit Bharat by giving a central role to the agriculture sector during Amrit Kaal,” Chand concluded.

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Published: 24 Dec 2023, 11:27 PM IST