Rural growth not enough to lift overall economy; agriculture holds only this much share in GVA

Rural growth not enough to lift overall economy; agriculture holds only this much share in GVA

agriculture, farm growth, farm sector, agri GVAAgri GVA comprised around 14.6 per cent to 17.8 per cent during FY13-FY20, and is expected to be 17.3 per cent in the current fiscal.

Even as the agriculture sector remains fairly immune to the disruptions led by the coronavirus pandemic, the sectoral growth may not offset the loss of the overall economy. The rural demand will perk-up somewhat, but will not be able to offset the shortfall in urban demand as the share of agriculture in India’s GVA is smaller. Agri GVA comprised around 14.6 per cent to 17.8 per cent during FY13-FY20, and is expected to be 17.3 per cent in the current fiscal, India Ratings said in a report. While other sectors were brought to a near-standstill, it was earlier believed that the rural demand could drive the economic recovery.

While the above data signifies agriculture’s role in the overall economy, it is also evident that the conditions differ across states. There are a few states, such as Punjab and West Bengal, where agriculture forms the larger chunk of the GSDP. However, even having a higher share of agriculture in GSVA is not considered to be a plus point because of agriculture’s lower potential of growth and productivity, compared to the industrial or services sector. Although, it is also expected that in the post-pandemic period, those states stand to benefit and witness higher rural spend where the share of agriculture in GSVA is higher.

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Andhra Pradesh, Madhya Pradesh, Rajasthan, Uttar Pradesh, Punjab, and West Bengal are the six states that contributed 32.7 per cent to real GVA in FY20. These states are poised for higher rural spend in FY21, the report added. 

Meanwhile, since the largest chunk of the rural population consists of daily wage earners and not farmers, looking into the rural wages is as vital as the agricultural income to understand the rural demand. India Ratings underlined that the rural wages have been under pressure and fell substantially both in nominal and real terms during FY16-FY20. Thus, FY21 may not result in significantly higher income either for farmers or wage earners than in the previous years, it added.  

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