India’s growth hopes chase monsoon’s vagaries amid record plantings

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IAC Picture by Parivartan Sharma

Farmer Rao Talib rues that a late monsoon burst has partly damaged his rice crop in the northern Khedi Shikohpur village near Dehradun, but he is still hopeful that the harvest will be enough to see his family through the Covid pandemic.

The responsibility of maintaining a large family of nine has grown as recently one of his brothers returned to the village home from Saudi Arabia after losing his driver’s job. “We have had a decent spell of monsoon this year. However, heavy rains now are not good as we are just a month away from harvest,” he says.

Like Talib, millions of Indian farmers are hoping that an excellent monsoon spell does not veer off course near the end of the June-September season. Nearly 20% of workers who left their village homes to take up city jobs have returned in one of the nation’s biggest mass migrations since independence.

Dispelling The Gloom

The stakes are even higher as the rural sector appears as one of the few bright spots in India’s economy, as urban demand for everything from cars to construction has dried up after the world’s strictest lockdown. Helped by the monsoon, India’s summer crop plantings have hit a record high.

“The prospect of agriculture is much better than other activities. It may counterbalance the negative impact of industry and services,” says Sujan Hajra, chief economist at Anand Rathi Securities. “However, while there will be significant volume growth in agriculture, price realisation won’t grow so much.”

He noted that prices of agriculture crops grew by only 2.2% on year during the April-June quarter.

Agriculture contributes a little less than 15% to India’s Gross Domestic Product (GDP) currently, though the impact of any positive growth is felt widely as it accounts for the largest portion of the nation’s workforce. 

Though the sector’s performance has emerged as a silver lining, the mass migration of workers may dilute the impact on total rural demand, Hajra said. That is because urban remittances account for about 5% of the rural household income, much of which is used for discretionary spending.

Will the rural uptick last ?

Since an easing of the lockdown in July, there has been a sharp rural uptake in sales of tractors, fertilizers, steel and cement. But at the same time, there has been a petering out of some of this demand in August, which could mean that the initial increase was an outcome of pent up ask.

Another economist said that he expected rural demand to only strengthen.

Sunil Sinha, principal economist at India Ratings, said that the uptick in rural demand had been visible  from end-May onwards as urban areas were largely shut down even as people in rural areas were operating with relative freedom. 

“My own sense is that this will probably pick up once we enter the festive season,” Sinha said. “You have to take into account that we will have four consecutive good seasonal harvests. Usually, even if we get two consecutive good harvests, rural demand picks up significantly.”  

The previous winter season crop season was a bumper one, while the prior summer and winter crop output were quite good as well. Purchases of everything from garments to automobiles usually pick up with the festive season as it’s considered an auspicious period.      

India’s festival season has begun with the birthday celebrations of Ganesha last month. The tempo will pick up in coming weeks with a series of auspicious occasions and celebrations, which will culminate in mid-November with Diwali.

Government policies helping

Besides the impact of good monsoon rains, D.K. Joshi, chief economist at CRISIL noted that the government’s efforts to expand the state-run MGNREGA (Mahatma Gandhi National Rural Employment Guarantee) programme as well as provision of free grains and pulses to families would help mitigate the impact of the migration of workers.

Average income per person per month under MGNREGA doubled to Rs 1,000 in the first four months of the current fiscal year that started in April. The April-July period also typically sees 25% greater execution of work compared with the rest of the year, but this time saw a rise of 46% aiding the rural recovery.

Economists also held out hope from a recent shift in government policies towards structural reforms for the rural sector, such as allowing farmers to sell their produce anywhere. They said such policies are bound to boost rural sector growth over the medium- to long-term.

Biman Mukherji is a columnist and consulting editor at Indoasiancommodities.com. He has worked for international news organisations such as Reuters, The Wall Street Journal as well as for newspapers like The Times of India. He can be reached at biman.mukherji@indoasiancommodities.in

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