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
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.