Agri Business

Green shoots sighted in farm sector growth

Vishwanath Kulkarni Bengaluru | Updated on January 17, 2018 Published on August 21, 2016




Monsoon bounty to spur 6% agri growth, boost consumption, add 1 point to GDP

After two rain-deficit years, bountiful showers this year have brightened the prospects of strong farm sector growth. This is likely to add a percentage point to the growth in GDP.

“Agriculture growth will be at 6 per cent this year,” NITI Aayog Member Ramesh Chand told BusinessLine here, commenting on the progress of the monsoon and kharif sowings.

“The robust growth in agriculture can add up to 1 percentage point to the overall economic growth,” Chand added.

Widespread monsoon rains have boosted the planting of key kharif crops such as rice, pulses and oilseeds, raising the prospects of a good harvest. This is expected to ease food inflation, lift farm income and boost consumption, aiding overall economic growth.

The Finance Ministry is expecting the economy to grow at 7.5 to 8 per cent this financial year. Weak monsoons in the past two years had dragged down farm sector growth to 1.2 per cent in 2015-16 and -0.2 per cent in 2014-15.

Despite a delayed start, the rapid progress of the South-West Monsoon has ensured a year-on-year growth of 6 per cent in kharif acreage, as farmers brought more area under rice, pulses, cereals and oilseeds cultivation ( see table).

A strong growth in agriculture would check food inflation and increase farmers’ income, Chand said. “One can expect inflation to come down in pulses as the acreage under pulses is 35 per cent more than last year,” he added.

Farmers will gain not only through growth, but also through savings in input costs. That will be good for the overall economy, Chand added.

However, Devendra Pant, Chief Economist at India Ratings and Research, expects the growth rate of gross value added in agriculture to be around 3 per cent this fiscal, with most of it coming in during the second half.

Pant said the rise in farm incomes would largely depend on the prices of commodities; it would benefit sectors such as consumer durables, automobiles — two-wheelers and low-end cars — and also consumer non-durables and gold.

Apart from pulses, acreages under oilseeds and rice are up 4 per cent each, and coarse cereals 7 per cent (mainly on account of a higher acreage in maize). Only acreages under cotton and sugarcane are lower by 8 per cent each over the previous year. “Besides higher acreage, good rain this year is expected to boost crop yields,” said Vinita Advani Acharya, Senior Research Analyst at Geofin Comtrade.

The forecast of a normal monsoon this year had prompted the Centre to raise farm sector production targets. The overall foodgrain production target is set at 270.10 million tonnes, against last year’s 252.22 million tonnes, according to the Fourth Advance Estimates.

“Production of kharif pulses will get better and this may impact farmers’ realisations,” said Tejinder Narang, a grains trade analyst. Already, pulses prices have softened in anticipation of a better harvest, he added.

Prices of minor pulses such as moong or green gram in Karnataka have slipped below the minimum support price levels of ₹5,250 per quintal. Also, the prices of tur and urad have come down, Acharya added.

“We are hopeful of a good oilseeds harvest,” said BV Mehta, Executive Director of the Solvent Extractors Association of India. However, the forecast of an extended monsoon has clouded the prospects of a bumper oilseeds harvest. Mehta estimates that edible oil imports for the oil year ending October 2016 will be in excess of 15 million tonnes.

Published on August 21, 2016

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