Ample rains may propel farm profits to rise 3-5% in 2020
The spread of covid-19 infections in rural areas will be a major risk to the expected growth in the farm sector, Crisil saysFarmers are likely to plant 2-3% more area during the kharif crop season in 2020 compared to last year, says Crisil
NEW DELHI: Buoyed by ample rains and higher than normal plantings, farmers are likely to reap 3-5% higher profits year-on-year, Crisil Research said on Monday.
Farmers are likely to plant 2-3% more area during the rain-fed June to October Kharif crop season in 2020 compared to the previous year, leading to a 5-6% rise in production. The rise in acreage will be led by higher planting of paddy due to better rains and the return of migrant workers to their home states in eastern India, Crisil said.
However, area under vegetables, cotton and maize is likely to be lower due to reduced planting following a crash in prices. While production of grains, oilseeds and pulses are likely to grow by 4%, 16% and 7%, respectively, production of vegetables could dip 2% due to excess rains in few states, Crisil said.
Based on an analysis of 25 key crops, Crisil said profitability for paddy is likely to increase 10% year-on-year due to government procurement at higher support prices and robust exports. However, surplus production will likely exert pressure on prices and profitability of oilseeds. Weak domestic and international demand is likely to lead to lower cotton and maize prices.
Planting numbers from the agriculture ministry showed that till Friday, overall sown area was 8.5% higher year-on-year. The June to September southwest monsoon rains have so far been 8% above normal has so far seen a surplus of 8% compared to the 50-year average.
In parts, the agriculture sector is looking good and can stem the drop in overall GDP growth rate to an extent, said Dharmakirti Joshi, chief economist at Crisil. He, however, warned that the spread of covid-19 in rural areas remains an uncharted territory and will be a key risk factor.
According to Joshi, a robust Kharif harvest is likely to cool rising food inflation which quickened to 9.6% in July from to 8.7% in June. However, wholesale prices for farmers are likely to increase at a slower pace than retail prices.
The spread of Covid-19 infections in rural areas will be a major risk to the expected growth in the farm sector, Crisil said. Data on spread of infections shows that the case load in rural India increased sharply from 18% in March to 47% in August (till 13 August).
Between June and August, Covid-19 cases in rural India increased by over 7 times compared to a 3.3 times rise in urban areas. A rapid spread of infections in rural India could lead to intermittent lockdowns and disruptions in the food supply chain.
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