Informist, Monday, Jun 5, 2023
By Priyansh Verma
NEW DELHI - The GDP growth data for the March quarter sprang a surprise, showing broad-based growth across the economy. Agriculture, in particular, recorded buoyant growth, and this is likely to sustain in the current financial year as well, say economists.
Normal rains in this monsoon season are likely to lead to robust food grain output, and recovery in rural demand is expected to boost farm sector growth.
India's GDP grew 6.1% in Jan-Mar, against 4.5% in the previous quarter. The growth was 100 basis points higher than consensus estimate. The gross value added in the agriculture sector rose 5.5% year-on-year, the most in 12 quarters.
The data for the farm sector for Jan-Mar was compiled using the third advance estimates of crop production for 2022-23, production of major livestock products, and fish production, the National Statistical Office said in a release with the GDP data.
"The strong agriculture GVA print in Jan-Mar may be attributed to the robust rabi season activity. Advance estimates for food grain production showed record production in wheat, oilseeds, etc," says Amruta Ghare, economist at Barclays. "Unlike last year, heat waves and unseasonal rains during the quarter didn't seem to have impacted the rabi crop as much."
In its third advance estimates, the government pegged India's rabi and summer food grain output at 175.42 mln tn, up 9.5% from last year. The output of wheat, the main rabi crop, is pegged at 112.7 mln tn.
According to NSO, rice production in the March quarter surged 32.1% year-on-year, reflecting minimal impact of adverse climatic conditions.
For 2022-23, GVA in the agriculture sector grew 4.0% year-on-year.
The Reserve Bank of India's Annual Report for 2023-23 attributed the "buoyancy" in the agriculture sector during the year to normal southwest monsoon rainfall. In 2022, southwest monsoon rainfall was at 106% of the long-period average.
"These rains ensured congenial soil moisture content as well as sufficient reservoir levels, which augurs well for the rabi season crops," according to the RBI report.
As of Jan 12, the end of the northeast monsoon, reservoir water storage level was at 70% of the full capacity, 20% higher than the average for the last 10 years. As a result, the rabi crop sowing season ended with a record acreage of 72.1 mln ha, up 3.3% year-on-year.
Experts said higher prices of crops during Jan-Mar could lead to a rise in food grain production.
"Usually, when prices are elevated, output rises because there is more incentive to produce," says Prithviraj Srinivas, chief economist at Axis Capital. "Price realisation has been pretty strong, that's also a contributing factor."
In Jan-Mar, retail cereals inflation averaged 16.1%, while overall food inflation averaged 5.6%.
Besides crop output, other high-frequency indicators also indicated a rise in farm sector activity and an improvement in rural demand.
"Rural wage growth is also showing sustained pickup averaging at 6.0% year-on-year in Jan-Mar," Gaura Sen Gupta, economist, IDFC FIRST Bank, says. "Fast moving consumer goods sales volume in rural areas is showing nascent signs of a recovery in Jan-Mar, indicating improvement in rural demand conditions."
The RBI's report said that demand in rural areas, which was deeply scathed by the second wave of the COVID-19 pandemic a year ago, recovered in 2022-23. "Although job demand under the Mahatma Gandhi National Rural Employment Guarantee Scheme declined on a year-on-year basis, it still prevailed above the pre-pandemic level in 2022-23.".
SUSTAINED GROWTH
This financial year, growth in the agriculture sector is only expected to rise. Axis Capitals' Srinivas estimates GVA growth in agriculture in 2023-24 at 4.1%.
Though there is a strong possibility of El Nino weather conditions developing in the second half of the monsoon season this year, the India Meteorological Department has predicted overall rainfall to be normal at 96% of the long period average.
The El Nino, an abnormal warming of surface ocean temperatures in the eastern tropical Pacific, is usually associated with lower rainfall in India. The weather department hopes that positive Indian Ocean Dipole conditions, considered favourable for the monsoon, will offset some of the negative impact of El Nino.
"If rainfall does end up being normal, this would mark almost the fifth consecutive year of the country receiving either a normal or above-normal monsoon season, helping both agricultural and industrial activity," Barclays says in a report. "So far, cumulative rainfall in the pre-monsoon season has been robust, but still the risks during the monsoon season will need to be watched carefully." End
Edited by Avishek Dutta
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (11) 4220-1000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2023. All rights reserved.
