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Agriculture in a High Growth State: Case of Gujarat (1960 to 2006)

Theories of structural change suggest that the share of the agricultural sector will fall in course of economic growth, while agricultural incomes are expected to rise. This paper examines the hypothesis and analyses the role of agriculture in Gujarat. Agricultural production is still fluctuating, resulting in low and fluctuating agricultural incomes. High growth rates in other sectors have not generated commensurate growth in agricultural incomes. Significant constraints on private investment in agriculture exist, creating an efficiency case for public investment. The issue of stagnant agricultural incomes presents an argument for public investment in agriculture on distributive grounds.

Agriculture in a High Growth State: Case of Gujarat (1960 to 2006)

Anita K Dixit

Gujarat was Rs 16,878 compared to the all-India average of Rs 12,416.

We start in Section 1 by a quantitative analysis of the three sectors in Gujarat and try to understand the interrelations in their growth patterns. We use data starting from 1960-61, when the state was

Theories of structural change suggest that the share of the agricultural sector will fall in course of economic growth, while agricultural incomes are expected to rise. This paper examines the hypothesis and analyses the role of agriculture in Gujarat. Agricultural production is still fluctuating, resulting in low and fluctuating agricultural incomes. High growth rates in other sectors have not generated commensurate growth in agricultural incomes. Significant constraints on private investment in agriculture exist, creating an efficiency case for public investment. The issue of stagnant agricultural incomes presents an argument for public investment in agriculture on distributive grounds.

I would like to acknowledge Barbara Harriss-White, Utsa Patnaik, and Indraneel Dasgupta, as well as seminar audiences at the University of Kolkata and Jadavpur University, for their guidance and useful suggestions.

Anita K Dixit (anidixit@gmail.com) is Visiting Study Fellow, Oxford Department of International Development, Queen Elizabeth House, Oxford, UK.

A
n economy in the process of growth is theoretically visualised to become less dependent on agriculture and increasingly dependent on the secondary and tertiary sectors. The agricultural sector is seen to increasingly become a provider of labour and a creator of capital in the economy, as well as providing foodgrain (wage goods) and agro-industrial raw materials for the growing industrial and service sectors. In the two-sector Lewis model, agriculture was characterised as an overpopulated sector with zero marginal productivity, which served as a provider of labour to other productive sectors. The models of Ragnar Nurkse and Maurice Dobb visualised the agricultural sector as a creator of capital through the use of its unemployed labour. In all these models the utility of the agricultural sector was in its excess, potentially productive, labour. Other models, dealing with the structural transformation of an economy in the process of growth (Kuznets 1966, 1973; Chenery and Syrquin 1975) emphasise the reduction in the share of the primary sector in national income (but a reduction in its share in employment only at a later stage), and an increase in the share of the secondary and tertiary sectors.

This paper seeks to examine these hypotheses regarding the role of the agricultural sector in the process of economic growth, in Gujarat. The state of Gujarat is one of the fastest growing states in India. Its performance has always been better than the all-India in terms of economic growth. In 2004-05, the net state domestic product (NSDP) of Gujarat at constant (1993-94) prices was Rs 90,783 crore, while the all-India figure was Rs 13,64,259 crore, with the state share then at 6.65%. Gujarat had 4.91% of India’s total population in 2004-05. The estimated real (1993-94 prices) per capita NSDP for 2004-05 in

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carved out from the earlier Bombay Province, going up to 2005-06. We also calculate the extent of structural change in the state, and undertake a correlation exercise to establish a relation between rates of growth in the three sectors – primary, secondary and tertiary. Section 2 further develops this theme by looking at price ratios of the primary sector versus other sectors. In the last, short, section, we undertake a disaggregated examination of the agricultural sector itself to see the composition of its growth.

The paper concludes that the agricultural sector still has a pivotal role to play in the overall growth of the state, in spite of its low and declining role in the NSDP. Especially in the post-liberalisation years, the relation between the agricultural and industrial sectors has grown stronger. Since commercial (and not foodgrain) crops contribute the major share of agricultural production, it is reasonable to conclude that the agricultural sector is a provider of raw materials and not of wage goods. However, the emphasis on development of commercial crops in the state has not resulted in higher incomes in the agricultural sector itself. There is therefore need for public investment in agriculture, in order to improve both productivity and incomes in the sector.

1 Shares of Three Sectors

We compare the shares of the three sectors at the Gujarat and all-India levels within a decadal framework. In 1960-61 Gujarat had a lower share of income from agriculture than India. In the 1960s and 1970s the share of the primary sector in the state tended to be stagnant, while it declined at the all-India level from 52% to 40% between 1960 and 1980-81. It was during the latter half of the 1980s that the share of agriculture in Gujarat started rapidly declining, much faster than the all-India level. From 40.8% in 1980-81 it declined

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to 27.6% in 1990-91, while at the all-India level it declined from 41% to 34% (Appendix 2, p 70). The state level share of the primary sector had fallen by 1999-2000 to 19%, and this low proportion continued thereafter. This is a result of a decline in the absolute level of real agricultural output in the years following 1999-2000, and a simultaneous increase in output in the secondary and tertiary sectors (Appendix 1, p 69).

While in India as a whole it is the services sector that has grown the fastest, the secondary sector has shown the most rapid growth in Gujarat. The marked increase in the share of the industrial sector occurred in 1986-87 when it rose to 33.1% from 27.9% in the previous year; and it remained consistently over 30% of the NSDP thereafter. On the other hand, the share of the tertiary sector in 2005-06 was 41.87%, lower than the 50% share of the sector at the all-India level.

The share of the primary as well as the secondary sectors is highly fluctuating in the state as compared to the all-India situation. Figure 1 indicates the trends of growth in the three sectors by the use of five-year moving averages. The most obvious trend is the sharply declining one of the primary sector. The average share of

Figure 1: Five-Year Moving Average of Sectoral Shares in NSDP (Constant 1980-81 Prices, 1960-61 to 2005-06, in %)

the sector declines from about 45% to about 17% between the quinquennium ending (QE) 1963-64 and QE 2005-06. The share of the secondary sector also exhibits large fluctuations in the five-year averages, though not throughout the period.

As we have seen earlier, the tertiary sector has shown the least fluctuation in its share of NSDP. Up to the five-year period ending 1977, it follows the trend of the secondary sector, after which it diverges from the secondary sector and starts increasing independently. Overall the share of the sector has increased from about 27% to about 44.6% during the entire period.

The high fluctuations in the shares of the primary and secondary sectors are reflected in higher variance values in Gujarat than for the all-India data. Variance in the primary sector is 66.29 for all-India while it is 78.33 at the state level; for the secondary sector, country and state variances are 4.35 and 20.88, respectively. On the other hand, variance is higher

(54.32) at the all-India level than at the state level (22.95) for the tertiary sector, reflecting the high growth in services at the all-India level.

As compared to the situation at the all-India level, the share of the secondary sector has increased much more rapidly in Gujarat after 1985-86. The services sector is a much larger contributor at the all-India level, while it still lags behind secondary sector in India. In Gujarat as compared to the country as a whole, therefore, it appears that growth is led by the secondary sector; but its share in NSDP fluctuates within a generally rising trend. Similarly the share of the primary sector exhibits large fluctuations within a generally

Primary Secondary Tertiary

– Si)2

i

declining trend. in an increase in the value of the CSC, and

also in a decline in the share of the primary

Extent of Structural Change

sector and an increase in the share of the

Dholakia (1983) has constructed a coeffi-secondary and tertiary sectors in total

cient of structural change (CSC), an index based on which it becomes possible to compare output structures at two points of time, and thus measure the relative direction of growth of a region. In what follows, we use this index to analyse the growth of the three sectors in Gujarat.

The formula for the CSC is:

n

׳ (S∑

i–1

secondary and sector 3 the tertiary sector respectively. Therefore, S1 = share of primary sector in the initial year of the series, i e, 1960-61

= share of secondary sector in 1960-61

S2 S3 = share of tertiary sector in 1960-61 S’1 = share of primary sector in each terminal year S’2 = share of secondary sector in each terminal year S’3 = share of tertiary sector in each terminal year.

The upper and lower limits of the CSC are therefore 100 and 200, respectively. The index does not however indicate whether the change is towards a greater share of the primary, secondary or tertiary sector, and must be used in conjunction with the data on sectoral shares to understand the direction and magnitude of structural change.

The data for the state indicates that structural changes in the composition of the NSDP were not very high in the initial years of the state’s existence (Appendix Table 3, p 71). In fact, in 1972-73 and 1974-75, two years when agricultural output declined in absolute real terms, there was very little increase in the output of other sectors. The decline in agricultural output was then reflected in the decline in the overall NSDP of the state. Substantial changes in the production structure began after 1985-86, reflected

NSDP of the state.

The comparative contribution of the three sectors can be expressed through an analysis of growth rates. Overall, the state’s NSDP has increased by 10.8 times its original (1960-61) value in real terms. There is very little growth in the primary sector, which has increased by only 4.29 times. On the other hand, the secondary

sector has increased 17.67 times and the

)

Up to the five-year period ending 1982-83, the share of the secondary sector on

CSC =

(

an average remains around 25%, with a where Si

1 + x 100

n

services sector has grown to 15.8 times its

few fluctuations. After 1982-83, however, and S’i are the relative shares size in 1960-61.

there are large fluctuations in the trend. of the ith sector in the initial period The linear growth rate in the state has After the five-year period ending 1996-97, and terminal period respectively, and n averaged 5% annually over the 45-year the share of the secondary sector has is the number of sectors being considered period. The rate of growth has increased maintained itself at the relatively high – since there are three sectors, n=3. from 3% in the 1960s to 8% in the period level of 37-39%. Sector 1 indicates the primary, sector 2 the 2000-06. Overall, the highest rate of

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Figure 2: Sectorwise NSDP (1980-81 Prices, 1960-61 to 2005-06, Rs crore) corresponding to an the relation remains significant at the

Primary sector Secondary sector Total NSDP Tertiary sector

35,000

30,000

20,000

10,000

0 1960 -61 1964-65 1968-69 1972-73 1976-77 1980-81 1984-85 1988-89

growth is in the secondary sector, mainly manufacturing (7%), followed by the tertiary sector (6%). The compound rate of growth of the primary sector (consisting mainly of agriculture) over the entire period was 3%. However it increased to 14% during 2000-06. Thus, the agricultural sector has exhibited a sudden spurt of growth in the last six years of the series.

The primary sector shows fluctuating growth throughout. In the 45-year series there are 20 years with negative growth and eight years when the annual growth rate is less than 0.1%. Almost half the years show negative or low growth rates – and this pattern has been maintained in spite of the expansion in irrigation facilities in 1960-61 and the Green Revolution technology in the 1970s. Even during the six years 2000-06, where the compound growth rate is as high as 16% in agriculture as a sub-sector, every alternate year has shown a decline in production due to uncertainty of weather conditions.

The secondary sector, on the other hand, showed extremely low growth in the first 12 years of the state’s existence. Higher rates of growth in the industrial sector became more frequent in the 1980s and 1990s. The period from 1982-83 to 1993-94 was an extremely volatile one for the industrial sector. Beyond this, the secondary sector has grown fairly steadily though slowly. The tertiary sector has low growth rates in as many as 33 out of the 45 years being considered, but there were only four years when growth rates in the tertiary sector were actually negative. In short, the tertiary sector has registered a steady albeit slow rate of growth throughout the period under consideration.

Total NSDP follows the direction set by the primary sector from 1960-61 to 1981-82 (Figure 2). It dips in a bad agricultural year (e g, 1972-73, 1974-75) and rises

66

1992-93 1996-97 2000-01 2004-05

increase in agricul-5% level. Taking the period 1990-2006 tural performance together, the relation between primary (1976-77 onwards). and secondary sector production again On the other hand, emerges as significant at the 1% level. the performance of The secondary and tertiary sectors have NSDP post-1982-83, maintained a high and mostly significant though still influ-(except for 1980-90) relation. The primary enced by the primary and tertiary sectors become significantly sector, is seen to be correlated in 1990-2000 at 1%, the value following the upward being 0.811, and this high correlation

trend of the other two sectors, specifically continues in the period 2000-06. It the tertiary sector after 1992-93. The appears, therefore, that the primary spurt of NSDP growth in the period after sector operated independently of the two 2000-01 is equally attributable to the other sectors till 1990, after which it has size and growth of the secondary and the become integrally associated with the tertiary sectors. rest of the economy. This association was

later given policy endorsement after Correlation between the Sectors 2000, in the Gujarat Agro Vision 2010 Growth rates in the three sectors are inter-document, which further emphasised the dependent. In what follows we therefore use interrelationship between the primary

correlation to analyse the relation between the three sectors.

The three sectors are closely correlated.1 Correlation coefficients over the period 1960-61 to 2005-06 are high, and all significant at the 1% level (Table 1). The correlation coefficient between the secondary and tertiary sector is as high as 0.97. In order to capture the changes in the interrelations between the variables we have taken correlation coefficients separately by each decade of the 45-year series.

In the three decades between 1960 and 1990, the correlation coefficient between the primary and secondary sector is not significant at 1% level. However, the trend is reversed dramatically after 1990 with a high (0.857) and significant relation emerging between the primary and secondary sectors. Between 2000 and 2006

Table 1: Correlation Matrix between NSDP Originating in Primary, Secondary and Tertiary Sectors (Gujarat, Overall and by Decade)

Total NSDP Primary Sector Secondary Sector Tertiary Sector

1960-2006 Total NSDP 1 0.872** 0.985** 0.992**

Primary sector 0.872** 1 0.846(**) 0.820(**)

Secondary sector 0.985** 0.846(**) 1 0.978(**)

Tertiary sector 0.992** 0.820(**) 0.978(**)

1960-70 Total NSDP 1 .786** .876** .950**

Primary sector .786** 1 .267 .457

Secondary sector .876** .267 1 .973(**)

Tertiary sector .950** .457 .973(**)

1970-80 Total NSDP 1 .857** .793** .899**

Primary sector .857** 1 .357 .558

Secondary sector .793** .357 1 .962(**)

Tertiary sector .899** .558 .962(**)

1980-90 Total NSDP 1 .399 .343 .906**

Primary sector .399 1 .238 -.074

Secondary sector .343 .238 1 .284

Tertiary sector .906** -.074 .284 1

1990-2000 Total NSDP 1 .735** .974** .953**

Primary sector .735** 1 .857(**) .811(**)

Secondary sector .974** .857(**) 1 .914(**)

Tertiary sector .953** .811(**) .914(**)

2000-06 Total NSDP 1 0.905(*) 0.964(**) 0.982**

Primary sector 0.905(*) 1 0.854(*) 0.918(**)

Secondary sector 0.964(**) 0.854(*) 1 0.986(**)

Tertiary sector 0.982** 0.918(**) 0.986(**)

1990-2006 Total NSDP 1 0.768** 0.985** 0.975**

Primary sector 0.768** 1 0.750(**) 0.646(**)

Secondary sector 0.985** 0.750(**) 1 0.961 (**)

Tertiary sector 0.975** 0.646(**) 0.961 (**)

* Correlation is significant at the 0.05 level (2-tailed). ** Correlation is significant at the 0.01 level (2-tailed).

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and secondary sectors through the development of agro-industries.

2 Production and Prices

It is essential to study the agricultural/ non-agricultural sector terms of trade in order to understand the role of the agricultural sector in overall economic development. Terms of trade between sectors would be strictly defined as the ratio of the prices of goods traded between the two sectors. However, for lack of data we have not undertaken analysis of the traded goods, but of all goods produced in the primary and non-primary sector (sum of the other two sectors), and use the term “price ratio” rather than “terms of trade” in this analysis.

The agricultural/non-agricultural price ratio is the ratio of deflators in the agricultural and non-agricultural sectors. These deflators are in turn the ratios of current prices to constant prices in each sector. Prices have moved in favour of the agricultural sector. The agricultural to nonagricultural price ratio is higher than 1 for all years after 1981-82, and several of the years before that (Figure 3). We can treat 1981-82 as the break-point in the series, since the price ratio is less than 1 (against the primary sector) before that and greater than 1 (in favour of the primary sector) after. The relative rate of increase in the primary sector prices has speeded up post1982-83 from 0.21% to 0.41%. The terms of trade (price ratio) have moved definitely in favour of the agricultural sector after 1982-83.

Per capita figures for total NSDP are available at the state level; however the data have been calculated sectorally by using the industrial classification of workers from the Primary Census Abstracts.2 This yields the NSDP per worker rather than per capita. Per worker NSDP data therefore relates to only the census years.

Trends in total and per capita NSDP in the three sectors display certain differences. The total real NSDP from the agricultural sector is higher than that from the two other sectors, until 1982-83 (Figure 4). The three series start to diverge only after that, and more specifically after 1990-91. The NSDP in the tertiary sector shows a high and steady growth rate, followed by the secondary sector. NSDP in the primary

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sector shows very little Figure 3: Price Ratios of Agricultural to Non-agricultural Sectors

(1980-81 Prices, 1960-61 to 2005-06)

growth (Figure 5).

1.8

However, per capita

1.6

income in the primary

1.4

sector has always been the

1.2

lowest of all three sectors

1

(Appendix Table 4, p 71).

0.8

Theoretical and empiri

0.6

cal analyses on struc

1960-61 1964-65 1968-69 1972-73 1976-77 1980-81 1984-85 1988-89 1992-93 1996-97 2000-01 2004-05

tural change in an econ-

Figure 4: Sectorwise NSDP (1980-81 Prices, Selected Years, in Rs crore)

omy by Kuznets (1966,

10000

1973) and Chenery (1975) argue that the 8000 shift from primary to

6000

secondary and tertiary sectors in the share of

4000

NSDP occurs first, and is followed only later by 2000 shifts in the occupational structure out of 0

1960-61 1970-71 1980-81 1990-91 1999-2000

the primary sector. In

Figure 5: Average Annual Growth Rates Sectorwise Per Capita NSDP

Gujarat, the decline in

(1960-61 to 1999-2000, %) NSDP share of the pri-25

Primary mary sector is even 20 greater, since the abso

15

lute level of income from

10

the primary sector has

5

remained almost stag

0

nant. The proportion of

1960-61 to 1970-71 1970-71 to 1980-81 1980-81 to 1990-91 1990-91 to 2000-01

population employed in

Figure 6: Ratio of Primary to Non-primary Per Worker NSDP (Selected Years)

the agricultural sector

0.5

has remained relatively

0.4

stable at 77.3% in 2004-05, while it was 78.7% in 0.3 1993-94. Thus absolute 0.2 size of the population in

0.1

agriculture has risen,

0 1960-61 1970-71 1980-81 1990-91 1999-2000

and has led to a steady

Ratio A/NA PW NSDP

decline in real income per worker in the sector (Table 2). The gap especially owing to the high growth rate between per worker incomes in the pri-in per worker income in the secondary mary and the other two sectors has sector.3 There is a sharp decline in the increased substantially after 1990-91, ratio of real NSDP per worker in the

Table 2: Sectoral Distribution of Population and Per Worker NSDP (at 1980-81 prices, selected years)
y = 0.0117x + 0.8293 R² = 0.5599 Price ratio Linear (price ratio)
Tertiary Primary Secondary
Secondary Tertiary
0.39 0.49 0.41 0.28 0.21
Year 1960-61 1970-71 1980-81 1990-91 1999-2000
Workers per sector
Primary 58,75,910.00 57,08,947.00 69,00,214.00 84,23,399.00 1,01,23,279.44
Secondary 11,81,808.00 11,32,715.00 18,55,106.00 25,17,954.00 30,26,088.63
Tertiary 14,46,870.00 15,53,844.00 22,28,692.00 31,54,339.00 37,90,899.04
Total NSDP (Rs lakhs)
Primary 1,39,991.56 2,40,367.74 2,67,178.00 2,99,266.00 3,15,760.53
Secondary 75,529.36 1,05,514.46 1,78,366.00 3,12,788.00 7,92,313.90
Tertiary 85,658.45 1,26,762.05 2,09,198.00 4,09,387.00 8,74,108.09
Per worker NSDP (Rs)
Primary 2,382.47 4,210.37 3,872.02 3,552.79 3,119.15
Secondary 6,391.00 9,315.18 9,614.87 12,422.31 26,182.77
Tertiary 5,920.26 8,157.96 9,386.58 12,978.54 23,058.07
vol xliv No 50 67

agricultural sector to that in the non-area per agricultural worker was 1.24 In terms of total production, wheat and agricultural sector (Figure 6, p 67). hectares. After 1970 net sown area (NSA) sugar cane are also important. Gujarat

has been lost to fallow and wasteland due has an edge in the yield of bajra and 3 Profile of Agriculture to degradation. the cash crops while its productivity of Gujarat had a gross cropped area of The main crops grown in the state are rice and wheat, the major food staples, is 1,11,43,800 hectares in 1998-99, 34.5% groundnut, millet (bajra) and cotton in relatively low. of which was irrigated. The operated terms of area under cultivation (Table 3). The share of coarse grain in terms of

Table 3: Production of Major Crop Groups Gujarat (1960-61 to 2000-01, ‘000 tonnes) area and production has gone down over

Year Rice + Wheat Coarse Grain Cereals Pulses Foodgrains Groundnut Oil Seeds Sugar Cane the years, though the yield of coarse grains

1960-61 564 973 1,719 169 1,888 1,214 1,260 130

has increased from 3.27 to 7.96 quintals/

1970-71 1,605 2,844 4,643 201 4,844 1,869 1,943 228

hectare (Tables 4 and 5). On the other

1980-81 1,957 2,314 4,438 520 4,958 1,616 2,005 790

hand, the area under rice and wheat

1985-86 1,437 1,243 2,762 385 3,147 473 964 715

(totally) has increased marginally and

1989-90 1,923 2,430 4,438 572 5,010 1,670 2,580 916

their share in total agricultural produc

1990-91 2,285 1,993 4,359 624 4,983 983 2,044 1,035

tion substantially, reflecting a growth in

1991-92 1,922 1,440 3,420 419 3,839 711 1,650 974

yield. The share of pulses in area has simi

1992-93 2,373 2,837 5,285 656 5,941 2,200 3,332 1,087 1993-94 1,994 1,533 3,602 549 4,151 596 1,550 1,023 larly increased from 7% to 10% during the

1994-95 3,165 1,988 5,215 546 5,760 2,305 3,684 1,687 time, but their share in total production

1995-96 2,325 1,904 4,287 486 4,774 1,032 2,212 2,060 has declined.

1996-97 2,760 2,597 5,425 664 6,089 2,368 3,802 1,665 There is a decline in the percentage
1997-98 2,799 2,637 5,469 618 6,113 2,494 3,866 1,467 of cultivated area and production of
1998-99 2,879 2,465 5,399 640 6,038 2,465 3,881 1,734 foodgrains, attributable mainly to the
1999-2000 2,120 1,812 3,992 446 4,438 733 1,826 1,867 decline in area under coarse grain. Pro
2000-01 1,403 1,485 2,936 249 3,185 740 1,738 1,818 duction of foodgrain fell sharply from
Source: Statistical Abstract of Gujarat 2004, Table 11.2.
Table 4: Area Under Major Crop Groups Gujarat (1960-61 to 2000-01, ‘000 hectares) 1993-94 onwards, though non-foodgrains
Year Rice + Wheat Coarse Grain Cereals Pulses Foodgrains Groundnut Oil Seeds Sugar Cane have always dominated the agricultural
1960-61 911 2,973 4,121 512 4,632 1,982 2,206 26 sector in Gujarat. The share of oilseeds
1970-71 1,158 3,691 5,087 496 5,583 1,778 1,966 39 in cultivated area increased from 32%
1980-81 1,192 2,906 4,324 794 5,118 2,179 2,660 98 to 41% during 1960-2000, though their
1985-86 1,092 2,949 4,213 870 5,083 1,868 2,492 123 share in total production declined. Area
1989-90 1,196 2,502 3,830 941 4,770 2,038 2,873 106 under sugar cane increased 10-fold.
1990-91 1991-92 1992-93 1993-94 1994-95 1,232 1,182 1,310 1,220 1,514 2,457 2,454 2,512 2,395 2,320 3,800 3,632 3,925 3,711 3,926 949 883 962 880 932 4,749 4,515 4,887 4,591 4,858 1,826 1,976 1,880 2,035 1,914 2,818 2,865 2,919 3,028 2,981 115 113 127 128 222 High value crops such as spice, fruits and vegetables are also increasingly replacing foodgrains; their share in area stagnated around 11% until 1983, after which it
1995-96 1,318 2,234 3,634 877 4,511 1,871 2,912 251 doubled to 22.51%. Over 1990-2003,
1996-97 1,384 2,182 3,642 915 4,557 1,803 2,850 232 production of fruit and vegetables, fol
1997-98 1,454 2,099 3,620 905 4,525 1,839 2,885 225 lowed by spices and cotton, grew rapidly.
1998-99 1,363 2,014 3,446 884 4,330 1,881 2,927 243 Production of most crops (except for
1999-2000 1,238 1,904 3,207 792 3,999 1,849 2,864 255 spices) fluctuates around a declining trend.
2000-01 1,047 1,865 2,975 743 3,718 1,822 2,861 257 Production of oilseeds fluctuates the
Source: Statistical Abstract of Gujarat 2004, Table 11.2. Table 5: Value of Selected Crops Gujarat (as a percentage of total, 1990-91 to 2002-03) Year Foodgrains Oil Seeds Cotton Tobacco Fruit/ Veg 1990-91 28.27 24.02 11.27 2.98 10.56 Spices 4.76 Total 100 most violently. The cultivation of cash crops requires heavy investment in irrigation, which then
1991-92 20.97 21.88 11.74 3.04 13.89 4.64 100 has to be covered up through substantial
1992-93 22.35 28.37 13.32 2.21 12.46 4.02 100 returns. Irrigated area has been increas
1993-94 21.72 18.38 14.50 2.95 17.80 3.74 100 ing, from 27.2% of NSA in 1984 to 31.2% in
1994-95 20.66 31.01 14.25 2.46 12.10 3.41 100 1994. However, irrigation in the state is
1995-96 19.79 22.37 17.19 2.82 14.67 3.96 100 beset with various issues such as diver
1996-97 20.72 32.64 17.02 2.49 7.48 3.78 100 sion of water to non-agricultural uses,
1997-98 20.19 30.25 18.46 1.97 9.71 3.97 100 inequality of access, overuse, etc. The
1998-99 18.51 28.01 20.88 1.82 1999-2000 19.52 17.92 16.28 2.87 2000-01 14.25 21.08 11.11 2.62 11.01 16.78 22.37 4.94 100 3.84 100 3.96 100 most important source of irrigation in Gujarat is wells, and it increased from
2001-02 18.40 31.68 10.91 1.71 15.76 4.61 100 79% of irrigated area in 1970-71 to 86%
2002-03 16.53 18.30 13.48 1.70 21.35 6.52 100 in 2000-01, while area under surface
Source: www.mospi.nic.in (Ministry of Statistics and Programme Implementation). irrigation declined.
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Gujarat has embarked on the path of increasing overall income of the primary The increased integration of the agriculeconomic growth right from its forma-sector. The agricultural sector has served tural sector into the economy in the 1990s tion in 1960-61. The state has gone to fuel economic growth in other sectors, is likely to have been based on increased through structural change in its output. but that economic growth has not fed into demand for agricultural inputs useful for Throughout the period studied in this the sector itself. agro-industry rather than on increased paper, there has been an increase in After the 1980s the Gujarat economy demand for wage goods. The state’s growth the share of the industrial sector in the has progressed to the second stage of policy, inasmuch as it relates to the agri-NSDP and a reduction in the share of the economic growth. However, the integral cultural sector, is spelt out in Gujarat Agro agricultural sector. relationship between the agricultural and Vision 2010. It bases itself on this increased

In the 1980s, the joint share of the non-non-agricultural sectors still continues. input demand from the industrial sector, agricultural sectors in the NSDP became

Appendix Table 1: Sectoral Net State Domestic Product at Constant (1980-81) Prices and Annual Growth Rates

larger than the agricultural sector. Growth

(1960-61 to 2003-04 )

rates in the non-agricultural sector have Year NSDP at Constant Prices by Sector (Rs Lakhs) Annual Growth Rates of NSDP by Constant Prices by Sector

been high and increasing. At the same time, the price ratio turned in favour of the agricultural sector, remaining consistently over 1 in all the years after 1981-82, whereas it has remained below 1 in the years before this. Increased relative agricultural prices indicate an inadequate supply response to

Primary Secondary Tertiary Total NSDP Primary Secondary Tertiary Total NSDP Sector Sector Sector Sector Sector Sector

1960-61 1,39,991.6 75,529.36 85,658.45 3,01,271.2
1961-62 1,63,096 78,372.4 91,316.32 3,31,440.4 0.17 0.04 0.07 0.10
1962-63 1,55,155.7 80,937.1 92,990.08 3,28,836.5 -0.05 0.03 0.02 -0.01
1963-64 1,64,202.5 88,261.4 98,508.47 3,50,671.6 0.06 0.09 0.06 0.07
1964-65 1,85,579.2 93,438.51 1,06,476.7 3,81,501.9 0.13 0.06 0.08 0.09
1965-66 1,51,976.8 95,919.71 1,04,173.5 3,54,116.3 -0.18 0.03 -0.02 -0.07
the higher demand from the other sectors, 1966-67 1,50,412.4 1,02,019.3 1,07,707 3,63,001.3 -0.01 0.06 0.03 0.03
occurring due to increased relative non 1967-68 1,89,782.9 98,070.87 1,10,299.9 3,97,341.6 0.26 -0.04 0.02 0.09
agricultural incomes. 1968-68 1,52,824.8 1,02,297.7 1,11,558.8 3,69,853.8 -0.19 0.04 0.01 -0.07
In the 1990s, the agricultural sector 1969-70 1,81,230.4 1,06,619.9 1,17,889 4,07,079.6 0.19 0.04 0.06 0.10
developed a closer relation with the sec 1970-71 2,40,367.7 1,05,514.5 1,26,762 4,69,295.3 0.33 -0.01 0.08 0.15
ondary and tertiary sectors, from which it 1971-72 2,50,523.5 1,01,897.3 1,14,771.7 4,83,644.9 0.04 -0.03 -0.09 0.03
had been historically isolated in the state. 1972-73 1,37,968.7 1,21,234.9 1,26,662.6 3,85,963.3 -0.45 0.19 0.10 -0.20
The agricultural sector’s role in an economy 1973-74 2,00,957.1 1,31,618.8 1,41,253 4,72,077.8 0.46 0.09 0.12 0.22
may be to provide agro-industrial inputs, and/or wage goods (mainly foodgrains). Cotton, oilseeds and tobacco are especially important in the state. The share 1974-751975-761976-77 1977-781978-79 1,35,595.9 2,39,393.5 2,46,691.5 2,67,622.5 2,67,622.5 1,32,519.1 1,30,524.2 1,41,449.6 1,60,535 1,68,428.8 1,38,023.4 1,54,699.3 1,69,756.5 1,82,169.6 1,99,184.1 4,06,878.8 5,22,875.7 5,56,792.5 5,95,532.4 6,34,741.9 -0.33 0.77 0.03 0.08 0.00 0.01 -0.02 0.08 0.13 0.05 -0.02 0.12 0.10 0.07 0.09 -0.14 0.29 0.06 0.07 0.07
of high-value crops such as spices, fruit 1979-80 2,59,502.9 1,76,792.4 2,00,802.7 6,36,549 -0.03 0.05 0.01 0.00
and vegetables in total output has 1980-81 2,67,178 1,78,366 2,09,198 6,54,742 0.03 0.01 0.04 0.03
increased after 1990-91. According to ASI 1981-82 3,44,010 1,81,620 2,24,142 7,19,772 0.29 0.02 0.07 0.10
data, the value of output in the food 1982-83 2,68,886 2,01,113 2,39,021 7,09,020 -0.22 0.11 0.07 -0.01
processing industry was 10.26% of total 1983-84 3,27,348 5,21,268 2,62,424 8,45,088 0.22 1.59 0.10 0.19
production in the factory sector in 2004-05. 1984-85 3,31,626 2,35,948 2,77,055 8,44,629 0.01 -0.55 0.06 0.00
On the other hand, the value of foodgrains 1985-86 2,54,414 2,72,078 2,94,942 8,21,434 -0.23 0.15 0.06 -0.03
as a percentage of total agricultural pro 1986-87 2,53,462 2,44,815 3,21,545 8,72,032 0.00 -0.10 0.09 0.06
duction has declined from 1994-95. 1987-88 1,37,713 2,42,467 3,34,334 7,74,882 -0.46 -0.01 0.04 -0.11
Therefore, agriculture’s role not as a wage 1988-89 3,58,043 2,84,593 3,85,381 10,87,339 1.60 0.17 0.15 0.40
good, but as a provider of industrial inputs becomes evident in the increased correlation between the agricultural and industrial sectors. While demand from the secondary and 1989-901990-91 1991-921992-931993-94 1994-95 3,17,637 2,99,266 2,46,798 3,68,547 2,79,798 3,89,146.6 2,74,596 3,12,788 2,43,549 4,81,156 4,86,126 5,73,137.4 4,15,460 4,09,387 4,16,766 4,64,668 5,08,175 5,54,231.7 10,68,111 10,83,915 9,94,403 13,14,371 12,74,099 15,29,848 -0.11 -0.06 -0.18 0.49 -0.24 0.39 -0.04 0.14 -0.22 0.98 0.01 0.18 0.08 -0.01 0.02 0.11 0.09 0.09 -0.02 0.01 -0.08 0.32 -0.03 0.20
tertiary sectors increased, demand from 1995-96 3,43,118 6,26,638.9 6,09,640 15,75,525 -0.12 0.09 0.10 0.03
within the primary sector stagnated with 1996-97 4,55,212.5 7,01,607.3 6,47,263.3 18,15,707 0.33 0.12 0.06 0.15
declining incomes. Absolute NSDP per 1997-98 4,16,783.1 6,57,519 7,32,720.8 18,15,544 -0.08 -0.06 0.13 0.00
worker as well as NSDP per worker within 1998-99 4,39,868.8 7,08,563.2 7,87,935.9 19,43,477 0.06 0.08 0.08 0.07
the primary sector as compared to the other 1999-2000 3,15,760.5 7,92,313.9 8,74,108.1 19,50,703 -0.28 0.12 0.11 0.00
sectors declined, indicating increased 2000-01 2,79,733 7,24,346.4 9,00,098.4 18,73,258 -0.11 -0.09 0.03 -0.04
income inequality between sectors. The 2001-02 3,56,288.4 7,23,179.9 9,65,029.2 20,30,782 0.27 0.00 0.07 0.08
policy emphasis on agro-industry and 2002-03 3,13,706 9,48,663.2 10,48,306 22,58,567 -0.12 0.31 0.09 0.11
commercial crops has not succeeded in 2003-04 5,21,163.8 10,01,672 11,43,934 26,54,233 0.66 0.06 0.09 0.18
Economic & Political Weekly december 12, 2009 vol xliv No 50 69
EPW

and emphasises agro-industry as the agricultural sector as a dynamic sector and A second and most important area of future of agriculture in the state. How-a sustained source of industrial growth, concern is that the agricultural sector, in ever, agricultural production in the state seems premature unless adequate steps spite of its relatively small contribution to still fluctuates strongly. The years of the are taken to weatherproof production. In state income, still continues to employ the present decade (2000-06) are marked by light of the low relative incomes in the largest proportion of workers. The sector an explosive growth in the agricultural sector, there is a significant constraint on is characterised by two trends – a rising sector. However downturns in production private investment in agriculture. This agricultural price ratio and a declining per still occur almost every alternate year. task will have to be undertaken through worker income level. These indicate that In these circumstances, a vision of the public investment. the higher relative agricultural prices have

benefited a selective few farmers but not Appendix Table 2: Sectoral Share of NDP (India) and NSDP (Gujarat) 1960-61 to 2003-04, Constant* Prices the majority in the agricultural sector. The

Year % of total NDP (India) % of NSDP (Gujarat) Primary Secondary Tertiary Primary Secondary Tertiary

1960-61 52.23 19.12 28.65 41.82 25.73 32.45

1961-62 50.86 19.85 29.29 44.29 24.27 31.44

1962-63 48.71 20.78 30.52 42.47 25.26 32.27

1963-64 47.45 21.66 30.90 42.14 25.80 32.06

orientation of the Agro Vision document is towards refocusing the agricultural sector as an industrial input provider, but this vision ignores the distributive aspect within the sector. Dynamic agricultural growth based

1964-65 47.93 21.63 30.44 43.78 25.14 31.08 on commercial crops – if stabilised and

1965-66 43.76 23.32 32.91 38.63 27.80 33.57 weatherproofed with the help of irrigation

1966-67 42.92 23.35 33.73 37.29 28.85 33.86 – can be a source of increased incomes

1967-68 45.53 22.24 32.23 42.99 25.33 31.68 within the sector, but special efforts have 1968-68 44.48 22.64 32.87 37.19 28.39 34.42

to be made to see to it that the benefits of

1969-70 44.41 23.11 32.47 40.07 26.88 33.05

1970-71 45.39 22.40 32.21 46.10 23.08 30.82 sector. The present policy is set to strengthen
1971-72 45.22 22.82 31.95 49.46 19.60 31.02 the high growth path of the state, which
1972-73 43.08 23.81 33.09 34.13 29.10 36.77 does not feed back into the agricultural
1973-74 44.23 23.12 32.64 40.65 25.83 33.52 sector, and does little to augment the
1974-75 46.41 20.59 33.00 31.82 30.17 38.01
1975-76 47.80 19.75 32.45 43.72 23.12 33.16 income levels of the majority of the popu
1976-77 44.42 21.56 34.03 44.00 24.47 35.53 lation. It is necessary to ensure that the
1977-78 45.58 21.25 33.17 40.76 24.97 34.27 emphasis on commercial crops translates
1978-79 44.35 21.61 34.04 40.26 24.58 35.16 into regionally widespread incomes for the
1979-80 40.84 22.20 36.96 38.93 25.73 35.34 broad population involved in agriculture.
1980-81 41.30 23.00 35.70 40.81 27.24 31.95 Gujarat is a case of a fast-growing state;
1981-82 41.35 23.33 35.32 43.63 25.23 31.14 it is also, however, a state with its own
1982-83 39.74 23.62 36.64 37.92 28.36 33.71 unique agro-ecological, social and politi
1983-84 40.60 23.86 35.54 38.74 30.21 31.06 cal features. We therefore do not seek to
1984-85 39.11 24.43 36.46 39.26 27.94 32.80

this growth are spread evenly within the

1985-86 37.70 24.54 37.76 30.97 33.12 35.91 regarding the growth process and the role
1986-87 35.88 25.22 38.89 29.07 34.06 36.87 of the agricultural sector. However, the
1987-88 34.50 25.78 39.72 17.77 39.08 43.15 study does indicate that the agricultural
1988-89 36.06 25.15 38.79 32.93 31.63 35.45 sector, even where high growth has been
1989-90 34.42 26.21 39.20 29.74 31.37 38.90
1990-91 34.22 26.58 39.20 27.61 34.62 37.77 achieved, need not disappear, but may
1991-92 33.15 25.78 41.07 24.82 33.27 41.91 maintain its potential as an active contri
1992-93 33.54 25.17 41.29 28.04 36.61 35.35 butor to the growth process, albeit indi
1993-94 35.07 21.67 43.26 26.88 33.29 39.83 rectly as an input provider. It also remains
1994-95 31.55 26.69 41.74 31.13 32.69 36.18 an important source of livelihood for a
1995-96 28.95 28.36 42.68 26.66 34.70 38.64 major proportion of the population. It is
1996-97 28.35 27.91 43.69 30.69 33.72 35.60 the role of economic policy to realise its
1997-98 30.48 22.57 46.95 28.31 31.75 39.94
1998-99 30.38 21.72 47.90 26.83 32.21 40.96
1999-2000 28.74 21.36 49.90 19.81 35.44 44.75
2000-01 27.55 21.97 50.48 18.28 33.74 47.98 available at
2001-02 27.68 21.39 50.94 21.47 31.07 47.45
2002-03 25.45 21.92 52.62 17.00 36.65 46.35 B.N.Dey & Co. News Agent
2003-04 22.10 23.90 54.00 24.03 32.93 43.04 Panbazar

*From 1960-61 to 1970-71 at 1960-61 prices, from 1971-72 to 1979-80 at 1970-71 prices, 1980-81 to 1992-93 at 1980-81 prices, 1993-94 to 2003-04 at 1993-94 prices.

make from this study any generalisations

Source: NDP data calculated from NAS (various issues), NSDP data calculated from state level data available at www.mospi.nic.in Guwahati 781001, Assam and EPWRF (2003).

Ph: 2546979, 2547931

december 12, 2009 vol xliv No 50

EPW
Economic & Political Weekly

potential for economic growth as well as distributive justice.

Notes

1 Dholakia (1983) carried out an analysis of correlation between indices of sectoral production for the period 1960-1978, and comes to the conclusion that there is no significant relation between the production indices of the primary and secondary sectors, but that there is some association between the primary and tertiary sectors.

Appendix Table 3: Coefficient of Structural Change (Base Year 1960-61) for Sectoral Distribution Gujarat

(1960-61 to 2005-06)

Year Constant* Prices Current Prices

1960-61 100.00 100.00

1961-62 101.75 101.10

1962-63 100.47 100.95

1963-64 100.29 100.72

1964-65 101.42 103.21

1965-66 102.29 100.80

2 The industrial classification of workers has been References
changed after 1999-2000. Classification of workers in the primary sector remains the same; however all other workers are classified simply as “workers in household industry” and “other workers”. Therefore it becomes impossible to classify workers into secondary and tertiary sectors after 1999-2000. Due to this, we have Dholakia, Ravindra H (1983): “Economic Growth and Fluctuations in Gujarat” in D T Lakdawala (ed.), Gujarat Economy: Problems and Prospects (Ahmedabad: Sardar Patel Institute of Economic and Social Research). Kuznets, Simon S (1966): Modern Economic Growth:
used data only up to 1999-2000 in the analysis of Rate, Structure, and Spread (New Haven: Yale
per worker NSDP. University Press).
3 The total NSDP in the tertiary sector is higher – (1973): “Modern Economic Growth: Findings
than that in the secondary sector, but the income and Reflections”, Nobel Memorial Lecture, 11
per worker is lower, which indicates an influx of December 1971, American Economic Review, 63,
workers in the tertiary sector in the 1990s. No 3, June.

Appendix Table 4: Per Capita Sectoral NSDP and Its Growth Rate (1980-81 Prices) Gujarat (1960-61 to 2003-04)

Year Per Capita NSDP by Sector – 1980 Prices (Rs) CAGR of Per Capita NSDP at 1980 Prices by Sector Ratio Per Capita
NSDP Primary/
Primary Secondary Tertiary Primary Secondary Tertiary Other Sectors
1960-61 2,382.47 6,391.00 5,920.26 0.39
1961-62 2,705.07 6,462.88 6,150.76 0.14 0.01 0.04 0.43
1962-63 2,507.91 6,504.60 6,104.18 -0.07 0.01 -0.01 0.40
1963-64 2,586.63 6,912.80 6,301.94 0.03 0.06 0.03 0.39
1964-65 2,849.01 7,132.12 6,638.42 0.10 0.03 0.05 0.42

1965-66 2,273.80 7,135.28 6,329.62 -0.20 0.00 -0.05 0.34

1966-67 103.28 102.72

1967-68 100.84 104.22 1966-67 2,193.15 7,395.97 6,377.85 -0.04 0.04 0.01 0.32

1968-69 103.29 102.02 1967-68 2,696.82 6,928.88 6,365.25 0.23 -0.06 0.00 0.41

1969-70 101.26 102.48 1968-68 2,116.40 7,043.66 6,274.14 -0.22 0.02 -0.01 0.32

1970-71 103.05 105.13 1969-70 2,445.94 7,154.53 6,461.51 0.16 0.02 0.03 0.36

1971-72 105.72 104.08 1970-71 4,210.37 9,315.18 8,157.96 0.72 0.30 0.26 0.49

1972-73 105.45 103.62 1971-72 4,282.34 8,778.71 7,208.02 0.02 -0.06 -0.12 0.54

1973-74 100.92 103.34

1972-73 2,301.45 10,192.59 7,762.80 -0.46 0.16 0.08 0.26

1974-75 107.08 105.81

1973-74 3,271.25 10,798.50 8,448.04 0.42 0.06 0.09 0.35

1975-76 101.91 101.57

1974-75 2,154.00 10,609.92 8,055.64 -0.34 -0.02 -0.05 0.24

1976-77 102.30 101.68

1975-76 3,711.07 10,197.97 8,810.98 0.72 -0.04 0.09 0.39

1977-78 101.30 102.00

1976-77 3,731.90 10,784.82 9,435.19 0.01 0.06 0.07 0.37

1978-79 101.93 103.36

1977-78 3,950.82 11,944.54 9,880.73 0.06 0.11 0.05 0.37

1979-80 102.36 103.11

1978-79 3,855.46 12,229.39 10,542.81 -0.02 0.02 0.07 0.34

1980-81 101.09 101.09

1979-80 3,648.24 12,526.81 10,371.94 -0.05 0.02 -0.02 0.32

1981-82 101.32 101.96

1980-81 3,872.02 9,614.87 9,386.58 0.06 -0.23 -0.10 0.41

1982-83 102.81 110.55

1981-82 4,890.58 9,603.89 9,865.64 0.26 0.00 0.05 0.50

1983-84 103.24 101.79

1982-83 3,749.81 10,432.19 10,320.25 -0.23 0.09 0.05 0.36

1984-85 101.96 100.95

1983-84 4,478.20 26,524.58 11,115.01 0.19 1.54 0.08 0.25

1985-86 107.84 107.15

1984-85 4,450.35 11,777.58 11,511.30 -0.01 -0.56 0.04 0.38

1986-87 109.16 106.35

1985-86 3,349.18 13,322.48 12,021.18 -0.25 0.13 0.04 0.27

1987-88 117.04 111.70

1986-87 3,273.13 11,759.31 12,855.95 -0.02 -0.12 0.07 0.26

1988-89 106.40 102.98

1987-88 1,744.52 11,424.80 13,112.79 -0.47 -0.03 0.02 0.14

1989-90 108.55 105.42

1990-91 110.15 106.06 1988-89 4,449.28 13,154.43 14,827.12 1.55 0.15 0.13 0.32

1991-92 112.05 107.12 1989-90 3,872.02 12,450.71 15,680.07 -0.13 -0.05 0.06 0.27

1992-93 110.27 107.10 1990-91 3,552.79 12,422.31 12,978.54 -0.08 0.00 -0.17 0.28

1993-94 110.57 110.57 1991-92 2,870.67 9,476.94 12,945.34 -0.19 -0.24 0.00 0.25

1994-95 107.67 108.21 1992-93 4,200.15 18,344.14 14,141.44 0.46 0.94 0.09 0.26

1995-96 110.78 112.40

1993-94 3,124.25 18,158.91 15,152.83 -0.26 -0.01 0.07 0.19

1996-97 108.12 109.61

1994-95 4,257.40 20,976.32 16,192.03 0.36 0.16 0.07 0.23

1997-98 109.57 110.30

1995-96 3,677.93 22,470.74 17,450.70 -0.14 0.07 0.08 0.19

1998-99 110.63 110.45

1996-97 4,780.84 24,650.39 18,153.07 0.30 0.10 0.04 0.23

1999-00 115.60 115.49
2000-01 116.93 116.54
2001-02 114.92 115.53
2002-03 117.59 116.40
2003-04 112.65 112.34
2004-05 115.63 115.64
2005-06 114.06 113.92

*From 1960-61 to 1970-71 at 1960-61 prices, from 1971-72 to 1979-80 at 1970-71 prices, 1980-81 to 1992-93 at 1980-81 prices, 1993-94 to 2003-04 at 1993-94 prices.

Economic & Political Weekly

EPW
december 12, 2009

1997-98 4,288.74 22,634.32 20,134.33 -0.10 -0.08 0.11 0.20
1998-99 4,434.78 23,898.32 21,213.83 0.03 0.06 0.05 0.20
1999-00 3,119.15 26,182.77 23,058.07 -0.30 0.10 0.09 0.13
2000-01 3,604.90 7,817.87 0.16 -0.70 0.21
2001-02 4,498.63 7,647.47 0.25 -0.02 0.25
2002-03 3,880.89 9,829.09 -0.14 0.29 0.19
2003-04 6,317.02 10,168.48 0.63 0.03 0.29

Source: NSDP data calculated from state level data available at www.mospi.nic.in and EPWRF (2003), population data calculated from Primary Census Abstract (various years).

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