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Last updated: 18 Apr, 2019  

rural.job.thumb.jpg Informal sectors of agrarian India yet to recover: Report

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SME Times News Bureau | 18 Apr, 2019

The "informal" sector in many parts of agrarian India is yet to recover from the multiple disruptions over the past several months, a report said on Thursday.

"A market-led sustained recovery may be more gradual than earlier estimated", said the report, adding possibility of a short burst of growth in discretionary consumption like in two- and four-wheelers after the general election.

"We have already trimmed our estimates for the auto sector and are beginning to see earnings cuts for staples. In our view, a 'pure' rural portfolio could underperform in FY20," the report added.

The survey report noted that rural growth is currently weak in 10 out of 13 states visited when compared to September last year.

It also highlighted that rural incomes are impacted by subdued realisations and stress on non-farm income.

"Slackening of rural demand due to agrarian income challenge is now more widespread vis-a-vis only in western regions earlier. This is largely due to crop prices being deflationary," the report noted.

"Stress on non-farm income due to various reasons - ban on sand mining, closure of brick kilns and disruption in NBFCs - further aggravated the situation."

Rural income growth in the last fiscal has been adversely impacted by weak agri-pricing as overall crop production has not been disappointing.

In terms of agri-related income, the expected rise of 13 per cent year-on-year (YoY) for paddy and 5-53 per cent YoY for other crops in the Kharif season clearly did not materialise, barring few states which have good procurement infrastructure, the report said.

"From the income perspective, a clear disappointment has been the steady decline in prices for most food crops, notably the continued downtick in fruits and vegetable prices, particularly in 2HFY19," it said.

The survey highlighted a mixed trend in output across states given the lack of rainfall in western India and a weaker North East monsoon (October-December) impacting southern India.

On a historical note, the report said that safer crops (wheat, paddy, sugarcane) continue to find favour with farmers and have much lower volatility.

On the other hand, there was high volatility in income for farmers growing vegetables and fruits, pulses and cotton, and barring cotton, income declined for a large section of commercial crops in fiscal 2018-19 due to weak pricing levels, it added.

Moreover, the difference in output, and hence in income, from irrigated and non-irrigated farms continue to rise given the patchy and erratic rainfall pattern (9.4 per cent below normal in 2018).

The prices of associated products such as milk had also been weak in the first half of 2018-19. However, going into 2019-20, there have been reports on abatement of output, prices have stabilised and could see an uptick going ahead aided by government subsidy, the report said.

From the income perspective, therefore, agri-income suffered in the last fiscal, and decline was higher for small farmers, while large farmers were still able to get better prices because of their ability to store and also have better market access, it added.

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