Good rains could boost agriculture, overall-economy: Crisil


New Delhi: A good monsoon could push farm growth rates to 6%, Crisil Research said in a report on Wednesday. In such a positive scenario GDP growth rate could cross 8% and average retail inflation, be under 5% during 2016-17, the report added.

Poor rains severely affected farm growth rates in the past two years. India’s agricultural growth in the two years averaged a dismal 0.4%, much below the long term trend of 3%. The report said that good rains in 2016 have improved the situation in all states except Gujarat and Odisha where the monsoon has been deficient so far.

However, the report warned that farm output is at risk in case La Nina conditions develop in the coming weeks, leading to excessive rainfall in September when crops mature. So far, 89 districts in 8 states have faced excessive rains and floods, Crisil said. La Nina is a weather phenomenon that causes cooler than normal surface temperatures in parts of the Pacific ocean, and which is associated with excessive rains in India.

The report said that overall, the crop situation is better than the average of past six years with crops such as coarse grains, pulses, and soybean faring better compared to last year.

Gujarat and Odisha where rains were less than normal are unlikely to impact overall production, numbers from the report show. These two states account for only 9% of India’s total production of rice, the main monsoon crop, and Gujarat which accounts for 29% of India cotton area grows the fibre crop under irrigation.

However, rain-fed groundnut production in Gujarat—the state accounts for 39% of total production in India—is vulnerable, the report said.

According to Crisil, ample rains are likely to revive rural consumption, pushing up private consumption of two-wheelers and consumer durables. “This, in turn, will raise capacity utilisation and kick start the investment cycle by the end of this fiscal.”

Based on forecasts of ample rains—estimated to be at 106% of the long-period average this year—the agriculture ministry has set a target of producing a record 270 million tonnes of foodgrain in 2016-17, 7% more than the 252.2 million tonnes estimated to have been produced in 2015-16.

Data from the India Meteorological Department shows the rainfall for the entire country was normal as on Wednesday. Central India has received 9% more rainfall compared to normal, while the north-western parts have received normal rains. However, east and north-eastern India has recorded a deficit of 11% so far.

Till last week, winter crops like rice, pulses, coarse grains, oilseeds, sugarcane and cotton had been planted in 69.3 million hectares, 3.3% higher than the 67.1 million hectares sown by this time last year. Importantly, pulses whose soaring prices have fuelled food inflation in the past year, have been sown in an area of 9 million hectares, nearly 40% higher than the 6.5 million hectares planted by this time last year.