Agri income may erode by Rs 24,000 on poor monsoon

Shortfall in rains has become a cause of worry

Farmers' income could fall by Rs 24,000 crore due to poor monsoon going by the experience of 2009 when drought in various parts of the country triggered sharp drop in foodgrains production, Avendus Securities said.

"The delay in monsoon rains could pull down production of foodgrains and income of the farming community. If the precedent of 2009-10 were applied, a shortfall of 16 million tonnes would erode incomes and demand for consumer staples by an estimated Rs 240 billion," Avendus Securities Executive Director & Head of Research Anand Shanbhag said in a report.

India's production fell by 16 million tonnes in 2009-10 crop year (July-June) to 218 million tonnes on account of severe drought in various parts of the country.

The 23% deficit in the southwest monsoon rains, as on 13th July, covers a wide range from a 9% deficit in northwestern India to 59% in central India.

The southern peninsula had a 30% deficit while the east and northeast were at 19%. The worst affected states were reported to be Punjab & Haryana, Chandigarh & Delhi with the subdivisions, respectively, reporting 69% and 68% below normal rains.

"The situation could lead to large fall in the production of foodgrains and other crops," he added.

Stating that the propensity to consume is believed to be high in the farming community, Shanbhag said the consumption could shrink if income declines on poor harvest.

"Applying an indicative estimate of Rs 15 per kg, the value of a fall of 16 million tonnes in the production of foodgrains would be Rs 240 billion. A contraction in the income of this magnitude would likely impact the purchase by this segment of the population of a variety of consumer staples," he pointed out.

The brokerage firm said close to 40% of the production of rice is contributed by the states of West Bengal, Punjab and Uttar Pradesh, while nearly 65% of wheat production is contributed by the states of Uttar Pradesh, Punjab and Haryana.

India produced a record 257.44 million tonnes in 2011-12 crop year against 244.78 million tonnes for the previous year.