Agricultural GDP is underestimated due to inaccurate non-cereal data.
Written by Neelkanth Mishra | Updated: January 9, 2014 9:41:30 pm
This article appeared in the Indian Express (link).
It started with a mundane question: what is the chicken population in India? There are glaring inconsistencies in the available data. The National Sample Survey Organisation’s (NSSO’s) surveys show a 20 per cent annual growth of chicken consumption between 2005 and 2010. But according to the Food and Agriculture Organisation (FAO), the production of chicken meat only rose 10 per cent a year during the same period. The FAO figure was still higher than the 7 per cent reported by the animal husbandry department – whose data feeds into the GDP calculations. So we have three different reported growth rates for chicken meat production, and no idea which is correct.
We are not counting chickens to bore you to sleep. Poultry farming, in addition to providing an affordable source of nutrition, could be creating close to a million jobs a year. The arithmetic is surprisingly simple: as per the GDP data, India consumed about Rs 30, 400 crore worth of chicken in 2010. If demand was rising at 12 per cent a year, and chicken prices have risen by about 14 per cent every year, the consumption this financial year should be Rs 80, 000 crore. This implies there will be Rs 17, 000 crore of additional sales just this year. So, across the value chain – that is, feed producers, hatcheries and poultry farmers – more than a million additional people can earn around Rs 250 per working day. If the growth rate of demand were higher, at say 15 to 20 per cent a year, 1.5 to 2 million new jobs would have been created at the same income per day. These growth rates do matter.
Take buffaloes, for example. India exported 1.1 million tonnes of buffalo meat last year to become the largest beef exporter in the world. Buffalo meat exports are expected to grow another 20 per cent this year, which will translate into nearly 13 million buffaloes. This is where the buffalo arithmetic started to confound us. According to the 2007 livestock census, India had 105 million buffaloes, of which 85 million were female and bull calves (either too young to breed or lactating or expecting). One wonders where the buffalo meat came from. If the 2 per cent annual buffalo population growth rate as given in the national accounts was correct, by now we should have run out of them.
What raised our suspicions even further was that the largest increase in buffalo meat exports was from Uttar Pradesh while the national accounts statistics, which feed into the GDP calculations, do not suggest such rapid growth. We believe that the export data, compiled by a handful of certified abattoirs, is more reliable. On the other hand, counting buffaloes spread across 65, 000 villages is less so.
In our view, these inconsistencies in the data point towards under-reported agricultural growth, which in turn implies that the income growth at the bottom of the wealth pyramid is far more sustainable than previously thought. Also, the growth has little to do with high minimum support prices for cereals or the MGNREGA.
Until recently, we did not question the accuracy of the reported agricultural GDP. We were fully aware that 94 per cent of India’s agricultural output is informal, not generated by incorporated companies. But because agriculture has been a substantial source of taxes for governments for centuries, we thought the data gathering and output measurements would be accurate. One can, for example, retrieve historical records and calculate paddy yields for 18th century Coimbatore.
But we were wrong. Not because the data on cereals is inaccurate, but because cereals, which were earlier pretty much the only taxed part of agriculture, only account for 20 per cent of Indias agricultural output. There is little accurate data for the rest. Categories such as fruit and vegetables (17 per cent) and milk (17 per cent) are almost as important as cereals. In fact, when it comes to the reported incremental growth between 2005 and 2011, cereals contributed only 14 per cent, whereas animal products including dairy, eggs, meat and fish contributed 37 per cent, and fruit and vegetables 23 per cent. As discussed earlier, actual growth may have been even higher.
Accurate data collection is a daunting task. How do you count the chicken production in Bagodar near Giridih in Jharkhand? How do you measure the buffalo milk output in the Sector 9 khataal (dairy farm) of Bokaro Steel City? How do you measure the tonnage of tomatoes, cauliflowers and aubergines produced when consumption is almost immediate and storage facilities are limited?
Comprehensive consumption surveys as well as anecdotal evidence suggest that eating habits are changing dramatically: Indians are consuming more fruit and vegetables and animal products, and less cereals. Naturally, demand is met with rising production of these higher-value items, which in turn creates jobs and incomes, further fuelling the demand for these food items. The catalyst for this seemingly endless virtuous cycle, in our view, is the silent transformation brought about by the spread of rural roads, cellphones and the creation of rural economic clusters that we discussed in Hope lies low (IE, April 12, 2013).
Given the near absence of good quality, frequently available data, the national accounts team applies intelligent assumptions to estimate this growth. However, given the unprecedented nature of this change, this growth is likely underestimated because their assumptions are based on past trends. Such errors should get corrected in the next GDP series. Among other primary sources of data for this series, the livestock survey was completed in 2012, and its output should be the best available indicator of the scale of the change.
The growth in milk and meat production, and fruit and vegetable farming may have created millions of jobs in the informal economy and lifted many out of poverty. Analyses that solely rely on GDP data would not be able to capture these trends.
While the resilience of this growth is encouraging, it is no excuse for complacency. Astute observers have noted that the one animal farmer that India has for every 75 citizens is among the most inefficient in the world. We must set our aspirations higher. While such growth could result in increased prosperity over the next two to three generations, effective policies and administration could help to deliver it in a shorter timeframe.