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Share of agri GDP and agri production
Saturday, 12 March, 2016, 08 : 00 AM [IST]
S Ganesan
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A perception about Indian agriculture is that the share of agriculture in our GDP (gross domestic product) has steadily decreased from around 40% in 1970s to less than 20% now. It carries an implied message that the situation is getting worse in the agriculture sector and that the decrease is detrimental to our food security. This is a classic example of learned people leaning towards appealing to populist emotions and elemental fears.

The data from around the world over several decades does show that there is in fact an inverse relationship between the share of agricultural GDP and the size of agricultural production in the growing economy.

World: Share of Agri GDP and Agri Production

YearWorld GDP*($ bn)Share of Agri GDP(%)Value of Agri 
Production ($bn)
197033999.7316
2013755664.53260


*At current prices
Source: UN data accessed from www.kushnirs.org

Over the last four decades the share of agriculture in the world’s GDP has decreased by over 50% i.e. from 9.7% to 4.5%. But the agricultural production is up by over 1000% i.e. from $316 bn to $3,260 bn.

The data from India show similar trend.

India: Share of Agri GDP and Agri Production


YearIndia’s GDP*($ bn)Share of Agri GDP(%)Value of Agri
 
Production ($bn)
1970624425
2013193818.2325


*At current prices
Source: UN data accessed from www.kushnirs.org

While the share of agriculture in India’s GDP decreased by over 50% from 44% to 18% between 1970 and 2013, the agricultural production is up by 1300% from a mere $25 bn to $325 bn.

As countries progress rapidly on the path of robust economic growth, the GDP and labour in agriculture invariably decline.  India is no exception.

It is utterly flawed, naïve and manifestly mistaken to assume that the decline in the share of agricultural GDP is a result of shrinking agricultural production. Actually, the agricultural production in terms of volume, value and variety has vastly increased in the recent decades. The decreasing share of agricultural GDP to the total GDP of India should cause no worry as the decrease is accompanied by accelerated increase in agricultural production.

The data concerning India’s GDP growth delivers another interesting message. In the year 2013, the world’s total GDP was $75,566 bn and India’s share in this was 2.6% with $1,938 bn. The world’s agricultural GDP in the same year was $3,260 bn and India accounted for $325 in this, thus achieving an enviable share of 10%.  

The popular perception is that India is a global leader in services sector. This perception is both erroneous and misleading as it masks the reality on the agricultural front.

The latest GDP estimate dated June 15, 2015, released by the United States Central Intelligence Agency  (US-CIA) shows the following global rank for India with supporting data.

Agriculture: 2; Services: 11; Industry: 12
Clearly, the laggards are the services and industry sectors. If there is one sector in India that has silently ascended to global heights, it is agricultural sector.  The value of agricultural production in India is far above than in countries such as USA and Brazil. This fact unfortunately remains unknown and uncelebrated.

Those who habitually fret about Indian agriculture must open their eyes and minds to the contemporary data and trends globally. In the year 1930, USA’s agriculture had a share of 7.7% in the country’s GDP. By 2013, it declined to 1.4%. However, USA still ranks among the top world producers in agriculture.  China ranks number one in agricultural production in the world and its agricultural production is three times higher than India. China’s agricultural sector’ share to its GDP is 9%, just half of India’s. In Somalia,  agriculture holds the lion’s share of 60% to the country’s total GDP. Does it make the country a global leader in agricultural production?

We have to learn to stay rooted in the present and not in the past as we assess our progress in the field of agriculture. We must welcome the fact that the agricultural sector’s share to India’s total GDP is declining even while accelerating and enhancing our food security and global ranking in agricultural production. India has a strong comparative advantage in agriculture as it essentially practices a unique model of mixed farming and multiple cropping to generate diverse output and income leveraging small landholdings and family labour.

Finally, it is appropriate to posit that there is a lot to feel good about India’s achievement in the field of agriculture and practically very little to fret about. Of course, there is still room as well as need for achieving more.  For example, we need to reduce on priority the number of people directly dependent on agriculture. Indian agriculture, a sector that has a share of 18% in the GDP, cannot afford to support 50% of our labour force.  The attention should shift to creating more avenues for off-farm income within and outside rural areas. The off-farm income enhances farm investment, reduces farm debts, promotes innovation and encourages diversification especially among marginal and small farmers.  Agriculture is solely rural. But the rural need not be solely agriculture. Ideally, this transition should occur smoothly, powered more by “pull factor” from the industry and services sector than by “push factor” from the farm sector.

(The author is advisor (public & policy affairs), Crop Care Federation of India Center for Agrochemicals and Environment; VP (corporate affairs), UPL Limited; and chairman, International Treaties Expert Committee, Indian Chemical Council. He can be contacted at ganesanicc@gmail.com)
 
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