As the Indian economy heads towards de-growth on account of the severe impact of COVID-19, a more than normal rainfall and higher showing has come as harbinger of robust crop output this Kharif season giving rise to hope and respite during troubled times.
In a report Silver lining in dark clouds , CRISIL Research said better agriculture output this year will lead to 3 to 5% increase in [per hector] farm gate price of crops in the Kharif season leading to higher [cultivation] income for farmers.
While eastern India, followed by north will lead in profitability of farmers by 26% and 4% respectively, the growth in south will remain flat and western India will see negative growth of 4%, the report said.
This season will witness better profitability for rice, sugar cane and apple farmers while cotton, maize and onion farmers will suffer losses, the report added.
Hetal Gandhi, Director, CRISIL Research, “The eastern states could see the highest growth in crop profitability because of a low base. Southern and western states will bear the brunt of lower cotton and maize prices. North will be the most profitable in kharif season 2020 owing to a favourable crop mix and higher government procurement.”
With rains 7% above the average and well distributed across regions CRISIL Research expects a 2-3% rise in sown area on-year at 109 million hectares for kharif season 2020. Area under paddy cultivation will increase because of both rains and reverse migration of labour to the eastern and southern states.
On the other hand, area under vegetables, cotton and maize would be lower than in the previous season as lower prices have discouraged farmers from sowing them, it said.
Dharmakirti Joshi, Chief Economist, CRISIL said, “The CRISIL Deficient Rainfall Impact Parameter, or DRIP, scores point towards healthy performance of agriculture this year.”
“DRIP, in addition to rainfall deficiency, considers vulnerability arising out of the lack of irrigation buffer across states and crops was red flagging Rajasthan as an adversely impacted state till early August. But with rains catching up, the risk has come down substantially,” he said.
Answering a question Mr Joshi told The Hindu , “Agriculture in parts looks good this year. This is the only recession in which agriculture will [in] positive [territory]. Though the contribution of agriculture is little less than 15% to the GDP, the increase in output this year does not have the heft to offset the impact on other sectors. But if one looks beyond GDP, agriculture supports much more people and hence it is good for the economy.”
CRISIL said kharif output could rise 5-6% on-year to a record. Such a bumper kharif harvest would put down ward pressure on prices of various commodities. However, government support to paddy procurement (the most critical crop in terms of farm income, given it accounts for 30% of foodgrains production), incremental sowing of more remunerative crops and improved productivity on-year will boost profitability by 10 to 11% at an aggregate level.
“We foresee an upward bias for paddy prices and profitability, supported by a 3% increase in MSP. Also, increase in state advised price for sugarcane will boost profitability on-year. Among horticulture crops, apple is expected to witness higher profitability on-year because of improved yield over a low base of 2019 and also on account of anticipated increase in price,” CRISIL said.
In contrast, weak domestic and international demand will keep cotton and maize prices under pressure. Prices and profitability of vegetables are also likely to drop over a high base of 2019.
However, the spread of the pandemic in rural India remains the key monitorable. That’s because the rural share of COVID-19 cases, which was hovering around 20% in June 2020, has spiked to 45% now, CRISIL said.
