Sowing as of December 14, which accounts for ~81% of the total sowing in rabi season, was down 5.25% on-year to 476 lakh hectare compared with 502.5 lakh hectare in the previous rabi season. “This is of concern, because the rabi crop accounts for ~40% of India’s agricultural produce (based on key 14 crops which account for 97% of total agricultural produce except sugarcane and horticulture crops), in both volume and value terms,” says CRISIL Research.
While all major crops have seen a decline in area sown, crops that account for ~5-7% of total rabi production have shown an increase and wheat that contributes over 65% to total rabi production has remained flat. Coarse cereals have seen a sharp decline of ~20.4% on-year, with the maximum shortfall being in Maharashtra and Karnataka. Pulses sowing have dropped ~9.3% on-year, with the maximum shortfall in Maharashtra.
The area under oilseeds has fallen ~0.5%, with key states like Haryana and Karnataka logging declines.
Sowing of paddy is down ~28%. For the record, paddy contributes ~15% of total rabi production. Also, less than 15% of total paddy production is in the rabi season.
The southwest monsoon season ended with rainfall 9.4% short of the long-period average (LPA). Though this is categorised as normal by the Indian Meteorological Department (IMD), rainfall distribution has been somewhat patchy – both across time and regions – and there are pockets of stress.
According to a just-released CRISIL Impact Note, regions such as Karnataka and Gujarat were the most impacted by dry spells. The situation has worsened with a delay in the northeast monsoon, along with a deficit of 49%, as of December 12. Even though the northeast monsoon contributes less than 20% to overall rainfall, it is critical for agriculture in regions like Tamil Nadu, Pondicherry, Rayalaseema and south coastal Andhra Pradesh, and parts of Kerala.
Further, reservoir levels have been impacted due to weak monsoon in September and October. The water storage available in 91 major reservoirs of the country as of December 12 was 57% of their storage capacity, down from 65% in the week ended November 15. The reservoir levels are 6% below their LPA and around 2% lower on-year.
Predictably, lower water availability has pulled down rabi acreage in 2018
Lower cash in the hands of farmers has also impacted rabi sowing this year. The gross value of output for 9 out of 14 key crops has seen a decline between September 1 and December 15, compared with the corresponding period last year. Even though mandi prices of major crops (11 out of 14 crops) during this period have increased, arrivals of these 14 crops have declined 17% on-year. This is despite ~1% rise in kharif production this year (according to the first advanced estimates provided by Department of Agriculture), implying farmers or middlemen are holding on to stock.
Further, the mandi prices of 9 out of 14 key crops are below their minimum support prices (MSPs). The mandi prices of tur and urad are ruling ~28% lower than their respective MSPs, while those of Bajra and maize are 21% lower.
Distress in the rural economy could impact growth in agri-linked sectors
Around 67% of India’s population resides in rural areas and contributes ~47% to gross domestic product (GDP) and 54% to private consumption. Further, about 56% of rural households depend heavily on farms as their primary source of income.
In the last two years, given normal monsoon, the rural economy had fared well and was driving overall growth. In the automobile sector, tractors, light commercial vehicles (LCV) and two-wheelers logged healthy growth in the last two fiscals. In the FMCG sector as well, leading players have indicated that rural India is growing 25% faster than their urban counterparts.
However, with the rabi season showing clear signs of weakness, rural India’s contribution has come under a cloud. Unless the sowing situation improves in the next few weeks, there could be a trickle-down effect on the sectors being driven by rural India.
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