Editorial

Agriculture has emerged as the bright spot in a gloomy economy

| Updated on July 13, 2020 Published on July 12, 2020

A combination of policy steps has begun to show positive effects

Amidst predictions of dismal, if not negative, GDP growth this fiscal, agriculture seems to have emerged as a silver lining. If agriculture growth, at 4 per cent for 2019-20 matched that of the economy, it may well exceed GDP growth this fiscal. Its share in GDP too may rise by a couple of percentage points. In 2018-19 as well as the years preceding it, agriculture has invariably lagged the rest of the economy, growing at about 2-2.5 per cent while the rest of the economy was in the 6-8 per cent growth range. Now, with Covid 19 having thrown industry and services out of gear, agriculture will work as the primary driver of demand. Other drivers such as trade, transport and communications have been badly hit by the pandemic; their growth levels, at 2.6 per cent in the fourth quarter of 2019-20 when effects of the lockdown had barely come into effect, could take some time to return to trend levels of 7-8 per cent. The same holds true for finance and real estate. In this scenario of vulnerability, a normal monsoon has come as a saviour. Kharif acreages are up 44 per cent at 580 lakh hectares over last year, led by a sharp increase in cultivation of pulses, oilseeds and cereals. Tractor sales went up by 52 per cent in June, while fertiliser offtake is reported to have doubled over last year. An increase in demand for cement too points to rural optimism. FMCG majors catering to rural markets are reporting high capacity utilisation.

A combination of policy steps has begun to show positive effects. Open ended wheat procurement of about 38 million tonnes so far, the highest in recent years, provided farmers particularly in Punjab and Haryana with cash to prepare for the next crop. As for the other States, cash transfers under PM Kisan as well as the PM Garib Kalyan Yojana, besides higher MGNREGA wages and outlays, may have helped in preparing for the kharif crop as well as managing the return of migrants. The fact that 63 lakh SHGs can access collateral-free loans up to ₹20 lakh, against ₹10 lakh earlier, can make a difference to the lives of millions of women and their households. In this ambience, it will not be surprising if some of the migrants prefer to stay back and use their urban skills to good effect in the rural economy.

However, these are yet early days. There is the possibility of depressed prices nullifying output gains. The Centre and States should prepare for rolling out price support schemes and improving the working of its crop insurance programme in situations of crop loss, possibly due to locusts. If rural India is to be the engine of the economy, it follows that the economic impact of rural distress will be widely and deeply felt.

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Published on July 12, 2020
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