Fall in agri output raises growth concerns

Agriculture Output Declined 2.2% Despite Normal Monsoon & Increase In Area Under Cultivation

DESPITE a normal monsoon and the total area under cultivation going up, the agricultural output posted a 2.2% decline, pulling down the overall GDP growth rate for the quarter ended December 31, 2008.
    Experts attribute this to a decline in the production of commercial crops like oil seeds, cotton and sugarcane and the high base for the corresponding quarter last fiscal. The slump has taken market analysts by surprise as the data available till now betrayed no signs of a fall in agriculture output.
    "The gross crop area had actually recorded an increase," said NCDEX chief economist Madan Sabnavis. Credit rating agency Icra's chief economist Saumitra Chaudhary said the slump was a technical thing. The second advance estimates released by the government on February 12 showed a fall of 1.3% in foodgrain production. These were initial estimates, which get revised, often upwards.
    To make a fair comparison, if second advance estimates of 2008-09 were compared to second advance estimates of 2007-08, foodgrain production was actually up by 2.9% this year. So, possibility of upward revision in output of foodgrain in third and fourth estimates raises hope for better GDP numbers for the sector, said Mr Chaudhary.
    Good monsoon and higher prices of foodgrain had resulted in higher acreage in 2008. Area under rabi crops was up 3.1% till February 13, 2009, compared to the corresponding period last year while rice, a major kharif crop, showed a rise of 1.1% in area under cultivation.
    Experts felt that an increase in the output of horticulture crops, livestock products and fisheries, which accounts a share of 8% in agriculture GDP as a whole, might augur well for overall farm output.
    Suresh Tendulkar, chairman of Economic advisory Council to the prime minister, said there was no possibility of decline in agriculture output during FY09. He anticipated the overall growth in agriculture output little lower than 3% for FY09. Mr Chaudhary, too, felt that agricultural growth will touch 2-2.5% this fiscal year provided the climatic conditions for rabi crops stayed neutral.
    The only concern remained a decline in production of non-foodgrain. Oilseeds, cotton and sugarcane were estimated to record a fall of 13%, 14% and 17%, respectively, this year. If that be so, it could adversely impact the overall growth in agriculture output but might have a very little impact because these commercial crops carry a lower weight of 37% compared to foodgrain while calculating agriculture output as a whole.