Agriculture Q2 growth shows marginal recovery at 2.1%; farmer incomes dip

Most rabi crops, including wheat, mustard and chana, were selling at 10% to 37% below the MSP in the first few months after their harvest

Agriculture and allied sector growth showed a marginal recovery of 2.1 per cent at constant prices in the second quarter (July-September or Q2) of 2019-20 (FY20), up from 2 per cent in the first quarter (April-June or Q1). 

Farmer incomes, however, dipped as nominal growth slipped on account of a bumper rabi harvest last year. Farm growth in real terms during the same period last year was 4.9 per cent. 

A drop in nominal growth from 7.9 per cent in Q1FY20 to 7.4 per cent in Q2FY20 meant that overall inflation, which could also be a proxy for farmers’ income, dropped from a high of 5.9 per cent to 5.3 per cent. 

The fall was on account of a drop in prices of rabi crops. 

Most crops were selling at 10 per cent to 37 per cent below the minimum support price (MSP) in the first few months after their harvest. However, most analysts said the first and second quarter of a financial year do not reflect the true picture of agriculture growth. The real scenario will unfold from the third quarter (Q3) onwards when the impact of the kharif harvest — and what effect unseasonal rain had on it — will be felt.

“After the rabi harvest, prices of most agriculture commodities fell below their MSP levels, which is the reason why nominal farm growth might have a taken a hit. Nonetheless, Q1 and Q2 of a financial year do not show the real impact of kharif harvest or the losses suffered by it, which will be seen in the coming quarters,” said Madan Sabnavis, chief economist at CARE Ratings.

According to the first Advanced Estimate of FY20, production of kharif crops is expected to fall by only 0.8 per cent despite delayed progress of the southwest monsoon in June. Good rain in the subsequent months is expected to have recouped losses.

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However, the estimates are expected to change in the coming months as the full impact of excess rainfall and floods on the standing soybean, urad dal, maize and 

cotton crops in central and western India in late August and September and also in October is yet to be taken into account.

The estimates showed rice production will fall by 1.74 per cent due to delayed onset of rains over the eastern India.

“Since September, the agriculture scenario in India has undergone a big change due to excessive post-monsoon rain in central and western India and all these will have a bearing on the final output numbers of kharif crops,” a senior official said.

Post-monsoon rain in the months of October to November this year were 32 per cent more than normal. These damaged large tracts of standing kharif crop in several states.

Prior to that, the southwest monsoon in 2019 staged a recovery since July and is almost 5 per cent more than normal as on September 23. 

The four-month monsoon contributes to over 70 per cent of the country’s total precipitation and is vital for its agriculture sector.

Meanwhile, the production data showed that overall kharif pulses production is estimated to fall by 4.19 per cent to 8.23 million tonnes. 

Kharif crops contribute around 40 per cent of India’s annual pulses production, while the rest comes from the rabi season.

According to the first estimate, urad production in 2019 kharif season is expected at 2.43 million tonnes, which is 5.07 per cent less than the fourth Advanced Estimates of 2018-19.

The data showed that among the commercial crops, oilseeds production in the kharif season is likely to be 22.38 million tonnes, which is 5.22 per cent more than the fourth estimate of 2018-19, as fall in soybean production seems to have been compensated by the rise in groundnut output.