Has demonetisation adversely impacted the economy? If it has, how much bearing it will have on the Gross Domestic Product (GDP) growth? Predictions and analysis vary with different reports and agencies. According to the figures put out by the Central Statistical Office (CSO), the growth will slow down to 7.1 per cent as opposed to earlier projection of 7.6 per cent. Sectors like mining and quarrying, manufacturing, construction, trade, hotels, transport, communication, financial, real estate and professional services all are likely to see a slowdown.
What about agriculture? This is an area which employs half of the country’s workforce. The figures for this sector show a jump in growth compared to last two years which saw back to back droughts. Agriculture and allied sectors are expected to register a growth of 4.1 per cent. Last year it was 1.2 per cent. This is lower than what the government was hoping for (6 per cent) but given the overall uncertainty, this must be satisfying for the government.
Niti Aayog member Ramesh Chand and Consultant Jaspal Singh in their blog on the Aayog’s site have also analysed how the demonetisation has had a small and insignificant impact on agriculture sector. They have chosen four parameters -- area sown, crop pattern, productivity and market -- and compared the data with last year.
Here is a brief summary of their analysis for each parameter from the report:
Effect on productivity
This can result in 1.05 per cent decline in crop output and 0.75 per cent decline in agricultural output but the blog cautions that these point of sales statistics are raw and likely to increase with more reportage by other fertiliser companies.
Effect on prices
Prices of agricultural commodities dropped as too less money was chasing too many goods. This was especially true in the case of perishable commodities and their producers did suffer due to price drop. Seasonal glut and bumper crops were other two reasons for price drop. Total loss to farmers during November and December is estimated to be around 0.26 per cent however, it is not yet certain whether this was due to demonetisation or usual seasonal glut.
Based on above changes, the duo concludes that the growth rate for crop sector for the whole year will come around 7.48 per cent and farmers’ income in year 2016-17 will witness an increase of 5.8 per cent in real terms.
You can read the complete blog on Niti Aayog website here.
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