BackPoor rains seen impacting rural demand
Automobile sales plunged in segments that have a high rural focus last year and the trend has continued and even amplified this year, says a Crisil report
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New Delhi: Deficit rainfall will impact the farm-dependent rural India’s demand, which has already slowed in the past few years, says a Crisil Research report released on Thursday.
Automobile sales plunged in segments that have a high rural focus last year and the trend has continued and even amplified this year, said the report, titled Rain Check: all you need to know about monsoon 2015.
For instance, a second consecutive year of weak rainfall has led to tractor sales dipping by 16.4% between April and August this year (year-on-year), while motorcycle sales fell by 4.2% in the same period.
“Already rural incomes are dented due to falling wage growth. Add three consecutive monsoon shocks and what you get is a significant erosion in farm income," the report said, adding that falling export prices of agriculture commodities like rice and wheat has added to this rural income shock.
While global prices of rice and wheat fell by 17%, the sharp slide in rural wages has hit small farmers who supplement their income with off-farm wages, the report said.
The report further notes that nearly 40% of households in India depend on farming and the monsoon shock is accentuated due to vulnerabilities like high dependence on farm income, indebtedness, and low irrigation and insurance cover leading to a spate of suicides.
The southwest monsoon that irrigates over half of India’s farms recorded a deficit of 14% of the average this year. Last year the monsoon recorded a deficit of 12%.
The worst effects of deficit rains will be borne by states such as Maharashtra and Karnataka with low irrigation cover (18% to 34% of crop area), according to the report. Further, based on a DRIP index (deficient rainfall impact parameter), the report estimated that crops of arhar (pigeon pea), jowar (sorghum) and soyabean will be most affected.
According to the first advance estimate released by the farm ministry on 16 September, monsoon-dependent kharif output is likely to drop to 124 million tonnes (mt) in 2015, compared to 126.3 mt last year, and 128.7 mt in 2013-14.
The Crisil report estimated that the agriculture sector will register a growth rate of 1.5% in 2015-16, mostly due to better numbers from the livestock and fisheries sector which accounts for a little over a quarter of the sectoral GDP. Also, a low base, will provide a lift to the growth number, the report adds.
In 2014-15, the farm sector grew at a dismal 0.2%.
What’s worse, the report cautioned that deficit rains also means lower reservoir levels which do not augur well for the upcoming Rabi (winter) crop for which sowing beings in October.
Water levels in reservoirs were 43% below normal in Maharashtra and Karnataka as on 1 October, while in Punjab and Uttar Pradesh the deficits are 15% and 25%, respectively.
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