No comfort in GDP numbers

No comfort in GDP numbers
The Economic Times, August 18, 2009, Page 12

Drought Still Painful For Millions

THE low and declining share of agriculture in the economy means the drought in nearly a third of the country would not have a significant impact on GDP growth. That does not mean that human suffering is going to be any less. Agriculture and allied activities have a 17% share in GDP. A big reversal in agriculture this year would, therefore, only knock off about half a percentage point from the GDP growth. With the global economy looking up, we could hope to make up that loss of output elsewhere — through a pick up in exports, for one. That, however, does not mean we close our eyes to the plight of over 50% of population, still dependent on agriculture — most of them marginal farmers or agricultural labourers. The higher prices of farm produce will partly make up for the lower production for the surplus producing farmers. But the marginal farmer may not have enough to feed himself and could end up buying costly grain from the market to meet his basic necessities. Agricultural labourers will be hit equally hard as farm employment will be severely affected because of the drought. Sure, services contribute to an increasingly larger share of the rural GDP — share of agriculture in rural incomes is down to about 40% now — but a large percentage of non-farm income has its source in the farm sector. Even the Economic Survey 2008-09 sees the rural economy as a ‘continuum of interrelated economic activities’. So, while the economy has diversified to an extent where it can afford to shrug off perhaps the worst monsoon in two decades, a vast section of the population is still going to feel the pain.

The government would do well to take measures to lessen the impact of the drought. It must protect real incomes in the affected region through the employment guarantee scheme, and also make food items available through adequately stocked public distribution system using the 50 million tonnes in foodgrain available with the state agencies. From a longer-term perspective, we need to appreciate the acute water crisis the country is heading into. Water must command its economic price to discourage misuse, and conservation of both groundwater and annual precipitation must receive utmost policy attention.