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Declining Share of Primary Sector in Gross Value Added (GVA)
Context:
The share of the primary sector in Gross Value Added (GVA) has declined to 19.7% in FY24, the lowest in the current GDP series (base year 2011-12). The sector, comprising agriculture, livestock, forestry, fishing, mining, and quarrying, had a share of 21.7% in FY12, peaking at 22.1% in FY21 during the COVID-19 pandemic.
Sector-wise Trends in GVA
- Primary Sector: Declined from 21.7% in FY12 to 19.7% in FY24.
- Secondary Sector: Declined from 29.3% in FY12 to 25.9% in FY24.
- Tertiary Sector: Increased from 49% in FY12 to 54.4% in FY24.
- The growing share of the services sector highlights structural shifts in the economy, while the manufacturing sector has stagnated.
Key Causes of the Declining Share of the Primary Sector
- Structural Transformation of the Economy:
- Economic growth has led to a shift from agriculture to services and industry.
- Declining productivity and profitability in agriculture have pushed labor towards other sectors.
- Agrarian Distress and Rural Income Challenges:
- Rural distress has intensified due to low agricultural income, erratic monsoons, and high input costs.
- Farmers’ real income growth remains sluggish, despite government schemes like PM-KISAN and MSP support.
- Increasing Dependence on Agriculture for Employment:
- The share of agriculture in the rural workforce increased from 42.5% in FY19 to 46.1% in FY24 (PLFS data).
- Reverse migration during COVID-19 led to higher reliance on agriculture, exacerbating underemployment and disguised unemployment.
- Declining Investments in Agriculture and Allied Activities:
- Private sector investment remains low, and public spending on rural infrastructure is inadequate.
- Mechanisation, irrigation, and market linkages need improvement to boost productivity.
- Mining and Quarrying Sector Challenges:
- Policy uncertainties, environmental concerns, and regulatory hurdles have limited the expansion of mining activities.
- Dependence on imports for critical minerals has increased, affecting domestic production.
Implications of the Declining Share of the Primary Sector
- Rural Employment and Livelihood Challenges:
- Rural unemployment rose to 7.6% in FY24 from 7.2% in FY23 and 7.3% in FY22 (CMIE data).
- Increase in agricultural workforce without corresponding income growth leads to poverty and rural distress.
- Widening Rural-Urban Disparities:
- The urban economy is expanding due to the tertiary sector’s rise, while rural areas lag behind.
- Income inequality between rural and urban areas is increasing, affecting overall economic balance.
- Pressure on Social Welfare Schemes:
- The government needs to increase spending on MNREGA, food security, and rural employment programs.
- Fiscal constraints could limit the government’s ability to provide adequate rural support.
- Food Security Concerns:
- Low profitability in agriculture might reduce production incentives, affecting national food security.
- Crop diversification and climate resilience measures are essential to ensure sustainable food production.
Policy Measures and the Way Forward
- Enhancing Agricultural Productivity and Income:
- Promote precision farming, sustainable agricultural practices, and agri-tech innovations.
- Improve MSP implementation, expand crop insurance, and enhance irrigation infrastructure.
- Boosting Rural Non-Farm Employment:
- Strengthen rural industries, MSMEs, and agro-processing units to reduce over-dependence on agriculture.
- Expand Skill India and Digital India initiatives to create employment in rural areas.
- Revitalising the Secondary Sector:
- Promote Make in India, PLI schemes, and industrial corridors to boost the manufacturing sector.
- Address challenges in MSMEs and ease of doing business to attract investments.
- Balanced Growth in the Tertiary Sector:
- Expand rural digital infrastructure and e-commerce access to integrate villages into the services sector.
- Improve rural connectivity and logistics to enhance economic participation.
- Mining Sector Reforms:
- Simplify environmental clearances and ensure sustainable mining practices.
- Reduce import dependency on minerals by promoting domestic exploration and extraction.
