GDP grows at 6.3% in Q2 2017-18, Agriculture remains a concern

The Gross Domestic Product (GDP) growth data, released by Central Statistical Office (CSO) for the second quarter (Q2), might bring some cheers for the Industry, but for the Indian agriculture sector, it does not show any promise for the farmers. The growth in the ‘agriculture, forestry and fishing’ is estimated to be at 1.7 % compared to 2.4 % of the preceding Q2 2017-18.

Quarterly Gross Value Added (GVA) basic prices for Q2 of 2017-18 from ‘agriculture, forestry and fishing’ sector grew by 1.7 % as compared to growth of 4.1 % in Q2 of 2016-17.

According to the information furnished by the Department of Agriculture and Cooperation (DAC), which has been used in compiling the estimate of GVA from agriculture in Q2 of 2017-18, the production of food grains during the Kharif season of agriculture year 2017-18 declined by 2.8 % as compared to the growth of 10.7 % during the same period in 2016-17.
Around 52.5 % of GVA of this sector is based on the livestock products, forestry and fisheries, which registered a combined growth of around 3.8 % in Q2 of 2017-18. Quarterly GVA at Basic Price at constant (2011-12) prices for Q2 of 2017-18 is estimated at Rs. 29.18 lakh crore, as against Rs. 27.51 lakh crore in Q2 of 2016-17, showing a growth rate of 6.1 % as compared to 5.6% in the Q1 of 2017-18.

According to CSO, GDP at constant (2011-12) prices in Q2 of 2017-18 is estimated at Rs. 31.66 lakh crore, as against Rs. 29.79 lakh crore in Q2 of 2016-17, showing a growth rate of 6.3 % in Q2 of 2017-18 as compared to 5.7% in the Q1 of 2017-18.The 6.3 per cent growth in GDP for second quarter comes as a big relief to India Inc, in the backdrop of quite subdued performance of the previous quarter, even if the economic expansion is yet to recover its robustness. Agriculture sector’s sluggish growth has taken out steam out of the encouraging growth data.

“Manufacturing has emerged as bright spot at 7 per cent but agriculture remains an area of concern with mere 1.7 per cent in the second quarter against 2.3 per cent in the previous quarter. Setbacks in the agri performance can have a cascading impact on the consumer inflation, said DS Rawat,” Secretary General, Assocham.

The economic activities which registered growth of over 6.0 % in Q2 of 2017-18 over Q2 of 2016-17 are ‘manufacturing’, ‘electricity, gas, water supply & other utility services and ‘trade, hotels, transport & communication and services related to broadcasting’. The growth in the ‘agriculture, forestry and fishing’, ‘mining and quarrying’, ‘construction’ ‘financial, insurance, real estate and professional services’ and ‘Public administration, defence & other services’ is estimated to be 1.7 %, 5.5 %, 2.6 per cent, 5.7 % and 6.0 % respectively, during this period.
The farm sector will continue to be a drag on overall growth this fiscal, thanks to lingering disadvantage from an unfavourable base following a record harvest last year. The farm sector grew just 1.7% in Q2, because the corresponding quarter last year witnessed a decent 4.1% expansion.

Aditi Nayar, Principal Economist at ICRA, said a back-ended pick-up in spending by states and a favourable base effect could contribute to higher growth in gross value added in the second half of this fiscal than the first half. “However, the unfavourable advance estimates of kharif output of most crops, as well as the impact of higher fuel prices on earnings, are likely to temper the improvement in GVA growth in Q3 FY2018,” she said.