Drought casts spell on Maharshtra economy, growth stagnant at 7.5%

Sandeep Ashar
The dip is the sharpest fall since 2014, also a drought year, when crop production fell 16.7 per cent. (Express /File)

Suffering from a crippling drought and growing agrarian distress, Maharashtra s economic growth remained stagnant at 7.5 per cent. According to the Economic Survey Report (ESR) 2018-19, which was presented to the state legislature on Monday, the real gross state domestic product (GSDP) at constant (2011-12) market prices in 2018-19 was Rs 20,88,835 crore, up 7.5 per cent over 2016-17. In 2017-18, the state s economy had grown at the same rate.
In the backdrop of scanty and uneven rains resulting in drought situation during 2018-19, the state economy is expected to maintain the pace of growth as registered in the earlier year, mentioned the report. But the state was still growing at a faster pace as compared to the national economy, which only grew at 6.8 per cent in 2018-19. Maharashtra accounts for about 14.4 per cent of India s gross domestic product.

The state is amidst the third drought in five years, with harsh climatic conditions ravaging both kharif and rabi crop production in 2017-18 and 2018-19. The decline in agriculture output for two consecutive years has adversely affected the rural economy which is highly dependent on agriculture, said a senior official.

Even as Maharashtra enjoys the status of being India s most industrialised state, about 53 per cent of its population relies on agriculture and allied sectors for livelihood.

The one indicator that will worry the Devendra Fadnavis-led government the most as it spells out its final budget before the state polls on Tuesday is the negative growth in the crop sector. The erratic rainfall with long dry spells during the monsoon season hampered the crop sector plummeting the growth to minus 8 per cent over the previous year. The share of agriculture and allied sector is declining over the period resulting in cascading impact on other sectors like agro-processing industries, trade, hotel, and restaurants, the report stated.

It blamed dependency of weather condition, decreasing size of farm holdings, high input costs, and market uncertainty as the main causes for growing farm distress. The state received only 73.6 pc of the normal rainfall during monsoon 2018. Out of the 355 tehsils (excluding talukas in Mumbai), 192 received deficient rainfall. During kharif sowing, production of cereals and pulses recorded a sharp drop of 8 pc and 35 pc respective, whereas the area under cultivation during rabi sowing was 50 pc less as compared to 2017-18, the report stated. Even horticulture crop took a hit.

Explained: How severe is the water crisis in Maharashtra?

The state s rural economy has been on a downslide since 2013-14, when the agriculture sector, spurred on by a good monsoon that year, had clocked a near 13 per cent growth and the food production had witnessed a 30 per cent increase. Admitting that the sharp drop in agricultural output was worrying, Finance Minister Sudhir Mungantiwar attributed the drought conditions for the stunted rural Maharashtra s growth story. He also said that reversing the negative growth story of the farm sector would be his budget s topmost priority. In some respite, other rural sectors including livestock rearing, forestry, and fisheries recorded a positive growth. It helped us somewhat balance the negative growth in the crop sector, Mungantiwar said. Overall the agriculture and allied activities grew at 0.4 pc over 17-18, ESR mentioned.

But what softened the blow for the Fadnavis government was the positive growth story of the services sector, which is projected to grow at 9.2 per cent. The quantum jump within the services sector was in the financial, real estate, and professional services segments, which continued to grow at 9.2 per cent despite the economic slowdown, and the hospitality segment that clocked 8.1 per cent growth.

The state is amidst the third drought in five years, with harsh climatic conditions ravaging both kharif and rabi crop production in 2017-18 and 2018-19.

Another key indicator shows that the government s push for Ease of Doing Business and the replication of Make in India initiatives in Maharashtra is yet to alter ground realities. The report has projected a 6.9 per cent growth rate for the industries sector, compared to 7.6 per cent in 2017-18. While the government on Monday thumped its back for a positive growth story in the real estate sector that continues to clock positive growth, the slowdown and drought conditions appeared to have impacted the mining and quarrying industry, and the power, gas and water sector, where the growth rate decelerated sharply. The real estate sector grew at 9.9 per cent compared to 7.9 per cent last year. Mungantiwar, however, continued to the bullish about the sector, and indicated that his budget will have a special thrust on the MSME sector, which is the second largest employment generator in the state after agriculture.

State s fiscal managers pointed that the state needs to consistently clock double digit growth, if it wants to meet the target of become a 1 trillion-dollar economy by 2025, which was earlier announced by Chief Minister Devendra Fadnavis. But the most the Fadnavis government has managed so far is a 9.2 pc growth in 2016-17. We have had four deficient monsoons in five years. You must factor that as well, said Mungantiwar. Another problem that the Devendra Fadnavis government might want to fix through the budget is the relatively low spend on capital works.

In 2018-19, the capital expenditure accounted for only 12.6 pc of the total expenditure.Maharashtra s per capita income at current prices was estimated at Rs 1,91,827 in 2018-19 as compared to Rs 176102 in 17-18, a rise of 8.9 per cent. The ESR has omitted any commentary of the overall state of Maharashtra s economy.