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Madhya Pradesh: How Agriculture Can Be A Growth Spoiler

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The role of agriculture in India’s economic growth is amply discussed and well documented. While breaking down growth state-wise – not an exercise many embark on – it becomes clear how important this facet is, particularly when there are high expectations of strong national GDP growth.

 

IndiaSpend’s Dhritiman Gupta looks at Madhya Pradesh (population: 72 million) to discover just how badly an Indian state’s economic prospects could be affected without steady agricultural growth, whether or not industry does well. This is something that most policy planners would know but may not be apparent to all.

 

More than 75% of Madhya Pradesh’s population resides in villages, deriving its livelihood from agriculture. In fact, over 2000-04 and 2005-06, industry recorded a negative growth rate while agriculture stagnated.

 

Let’s first look at annual GDP growth rates since 2000. Then we will look at the composition of the growth. For purposes of comparison, we will take an ‘advanced state’ Maharashtra, a relatively ‘backward’ state Bihar and a ‘similar’ state, Rajasthan.

 

Table 1

 

State-Wise GDP Growth Figures

 

Year Madhya Pradesh Maharashtra Rajasthan Bihar
2000-01 -6.9 -2.1 -2.0 16.0
2001-02 7.1 4.0 10.8 -4.7
2002-03 -3.9 6.8 -9.9 11.8
2003-04 11.4 8.0 28.6 -5.1
2004-05 3.0 8.7 -1.8 12.1
2005-06 5.3 14.4 6.6 0.9
2006-07 9.2 14.1 11.6 17.7
2007-08 4.6 10.7 5.1 7.6
2008-09 12.3 3.3 9.0 14.5
2009-10 10.5 13.2 5.5 10.4
2010-11 8.1 10.4 10.9 14.7
Average Growth 1994-02 4.7 4.9 7.3 4.9
Average Growth 2004-12 7.6 10.7 6.7 11.4
Improvement over the periods 2.9 5.8 -0.6 6.5

(Figures are in %)

 

Source: Planning Commission Data

 

MP’s Fluctuating Growth Rates

 

The first thing to take away is that growth rates in Madhya Pradesh have never been steady. In fact they have always fluctuated wildly. The period 2000-05 saw 2 periods when GDP shrunk.

 

Since 2005, growth rates picked up but they are still unsteady. Similar fluctuations have been seen in Rajasthan and Bihar’s numbers from 2000 to 2005. Since 2006, however, Bihar has consistently recorded double-digit growth rates.

 

Maharashtra, on the other hand, has shown steady growth since 2001-02. The only real blip in its growth record is the year 2008-09, when India was hit by global recession.

 

So what could explain such fluctuations in growth? Why is Bihar doing better than Madhya Pradesh? Why is Rajasthan not doing as well as Madhya Pradesh? Before trying to answer all these questions let’s look at how MP improved its numbers.

 

Over 1994-02, Madhya Pradesh grew at 4.7%, which improved to 7.6% for the period 2004-12; up 2.9% percentage points. Bihar did the best by improving 6.5%, closely followed by Maharashtra at 5.8%. Rajasthan has however slowed down.

 

Over 1994-02, Rajasthan was growing at 7.3%, which went down to 6.7% for the period 2004-12.

 

Let’s now break up the growth rates across agriculture and industries. First let’s look at agricultural growth rates.

 

Table 2

 

State-Wise Agricultural Growth, Or Not

 

Years Madhya Pradesh Maharasthra Rajasthan Bihar
2000-01 -26.2 -4.5 -6.1 34.4
2001-02 23.5 5.5 26.2 -19.1
2002-03 -18.5 2.5 -33.5 24.6
2003-04 36.7 10.4 81.3 -16.2
2004-05 -4.3 -6.0 -13.6 13.5
2005-06 7.5 8.8 -0.8 -10.8
2006-07 2.0 10.5 10.1 29.9
2007-08 -1.8 10.3 5.7 -6.5
2008-09 NA NA 4.2 14.6
2009-10 NA NA -18.9 -15.4
Average Growth 1996-04 3.8 3.7 9.9 5.9
Average since 2004 0.8 5.9 1.1 8.1

(Figures are in %)

 

Source: Planning Commission Data

 

Poor Agricultural Growth

 

A look at the table helps us understand why growth rates have been fluctuating in Madhya Pradesh as well as Rajasthan and Bihar.

 

Moreover, a comparison of Table 1 and Table 2 shows that growth rates have plummeted in the years when agriculture has suffered.

 

In fact MP’s agriculture growth rates have dropped from 3.8% over 1996-04 to 0.8% since 2004. Rajasthan suffered a similar fate while Maharashtra and Bihar improved their numbers. Bihar improved its agricultural growth rates from 5.9 over 1996-04 to 8.1 % since 2004. But still yearly fluctuations persist, exposing farmers to the vagaries of nature.

 

Improving Industrial Growth

 

In theory, industrial growth is more dependable than agriculture. But industry in Madhya Pradesh has been consistently recording negative growth rates over 2000-04, an average of -4.4%. Bihar and Rajasthan had figures of -4.7% and -0.9% respectively for the same period.

 

However, since 2004, all these states have reported consistent and positive industrial growth. Over 2004-09, industry in Madhya Pradesh grew at 6.73%. The figures for Bihar and Rajasthan are 5.8% and 7.7% respectively. This explains higher and steadier overall growth numbers in the states since 2004-05.

 

Good Per Capita Income

 

Now let’s look at the general condition of Madhya Pradesh’s populace. First up, let’s take a look at the per-capita incomes.

 

Table 3

 

How Per Capita Income Grew In Four States

 

States Per-Capita Income 2000-01(In Rs) Per-Capita Income 2010-11(In Rs) Per-Capita Income in 2010-11 as multiple of 2000-01
Madhya Pradesh 11,150 22,382 2.0
Maharashtra 21,892 62,729 2.8
Bihar 6,554 13,632 2.0
Rajasthan 12,480 26,436 2.1
All India Numbers 16,172 35,993 2.2

Source: Planning Commission Data

 

The per-capita income for Madhya Pradesh has doubled since 2000-01. This is good. However you should compare Maharashtra, which despite having started on a higher base almost tripled its citizen’s income. Incidentally, Gujarat has more than tripled its per-capita income over the same period.

 

MP Reduced Poverty By 11%

 

Let’s take a look at Madhya Pradesh’s poverty reduction record.

 

Table 4

 

Poverty Reduction Record of Madhya Pradesh.

 

State Madhya Pradesh Maharashtra Bihar Rajasthan
% of BPL people in 2004-05 48.6 38.2 54.4 34.4
 No of BPL people in 2004-05 (million) 31.5 39.2 49.3 20.9
% of BPL people in 2009-10 36.7 24.5 53.5 24.8
No of BPL people in 2009-10 (millions) 26.1 27 54.3 16.7
% Reduction 11.9 13.7 0.9 9.6
Absolute Reduction(+)/Increase(-) (In Millions) 5.4 12.2 -5.0 (increase) 4.2
Total Population in 2009-10(million) 71.3 110.5 101 67.3

 

Source: Planning Commission Data

 

Except Bihar all other states have done a commendable job in reducing poverty. The best performer was Maharashtra which not only reduced the poverty rate by 13.7 percentage points but also the absolute number of poor people by 12.2 million. Bihar was the worst performer.

 

Madhya Pradesh reduced it poverty rate by 11.9 percentage points. The state reduced the number of poor people by 5.4 million.

 

Poor Literacy Improvement Rate

 

Let’s see how Madhya Pradesh is doing on the literacy front.

 

Table 5

 

Literacy Rates in Madhya Pradesh

 

State Literacy Rate 2001 (% of population) Literacy Rate 2011(% of population) % Improvement
Madhya Pradesh 63.7 70.6 6.9
Maharashtra 76.8 82.9 6.1
Bihar 47.0 63.8 16.8
Rajasthan 60.4 67.0 6.6

Source: Planning Commission Data

 

Madhya Pradesh ranked 28th out of 35 states and Union Territories when it came to literacy rates in 2011. It recorded a 6.9 percentage point improvement over the last decade.

 

The best improvement was recorded by Bihar with a figure of 16.8 percentage points. But this is on account of the lower base Bihar was on in 2001.

 

Poor Life Expectancy

 

Let’s see how Madhya Pradesh fares when it comes to Life Expectancy.

 

Table 6

 

MP’s Poor Record Of Life Expectancy

 

State Life Expectancy 2001-05 (No of Years) Life Expectancy 2002-06 (No of Years)
Male Female Male Female
Madhya Pradesh 57.8 57.5 58.1 57.9
Maharashtra 65.8 68.1 66 68.4
Bihar 62.0 60.1 62.2 60.4
Rajasthan 61.2 62.2 61.5 62.3

 

Source: Planning Commission Data

 

As far life-expectancy concerned, Madhya Pradesh is the worst among the 15 states for which data is available. Not only are people in MP expected to live approximately 16 years less than the people of Kerala, they live around 8 years less than people in Bihar. A life-expectancy of below 60 years is really poor by modern standards.

 

Besides since 2001-05, Madhya Pradesh has not been able to add much to the years of its citizens. To be fair neither has any other state. But Madhya Pradesh evidently needs to look at and invest more in its health sector.

 

MP is weaker than most big states on social indicators. It has never been a steady performer on the growth charts. Importantly, a state’s GDP figures can go totally awry if agricultural growth is not playing a supporting role. Cumulatively, this does not augur well for national GDP.

 

Agriculture after all is dependent on good monsoons and the like. That’s the good and bad news when it comes to the states. MP is only the worst hit.

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