Kharif output to be healthy, says report

Despite the government estimating a lower kharif production due to uneven distribution of rains, the summer crop output is expected to be "healthy", as last year was a bumper year in terms of acreage and output.
According to Crisil, the projected decline in kharif production is due to a sharp increase in both the sowing area and production of most crops last year.
As compared to last year, sowing as of September 29, was lower for foodgrain and oilseeds, Crisil report said today.
The government's first advance estimates suggest kharif production could be 2.8 per cent lower on-year for foodgrain and as much as 7.7 per cent lower for oilseeds.

The flip side to a good monsoon and a bumper crop of last year is that prices for most foodgrain have fallen and consequently reduced farmers' profits.
For pulses and oilseeds, prices fell even below their minimum support prices and cost of cultivation, resulting in a loss on the margins, the report said adding that for several crops, prices and profit margins have continued to decline in recent months.

Many states are trying to assuage distressed farmers by announcing loan waivers. However, this would increase the pressure on the already-stretched fiscal deficits of these states, the report said.
"We estimate that if other states also announce loan waiver schemes the way UP, Maharashtra, Karnataka, and Punjab did, the collective cost to the exchequer would be about Rs 2.5 trillion- or 0.5 per cent of GDP, assuming the waiver gets equally staggered over the next three years," Crisil noted.

The cost could be significantly high for Tamil Nadu, which has the highest outstanding agricultural loans among states. Kerala, MP and Rajasthan, too, could feel some pressure, it added.
Meanwhile, a report by another rating agency Care also said the monsoon has been normal with 5 per cent deficit.
The report said kharif output will be lower than last year for some crops but still higher than that in 2015. "Stocks of rice and pulses with government should buffer this impact," the report said.
Further, inflation impact could be more from the minimum support price, which have been increased across the board. Imports of edible oil will be critical from the point of view of inflation and has to be monitored, the Care said.