A much-needed revival in monsoon may have finally happened towards the end of June but experts still vary as to whether this will indeed result in a recovery in the rural economy.
According to the data from the Indian Meteorological Department, the rainfall deficit in the country has progressively decreased over the last three weeks.
Overall the country's deficit in the first two weeks of June was 25 percent of long period average. This decreased to 18 percent by the end of next week and further to 12 percent by 29 June.
Region wise, South Peninsula has witnessed the maximum rainfall. Here the monsoon has been consistently in surplus this year and as of 29 June the excess rainfall stood at 22 percent. Meanwhile, the widest deficit is in East and Northeast India - 27 percent as of 29 June.
However, experts are of the view that it may be too early to assess the evenness of rainfall distribution. It is the distribution that matters for the farm sector more than the overall rain situation.
However, there is a view that even if the rain fall and its distribution are normal this year, it may not be enough to repair the rural economy because the damage caused by the two back-to-back droughts is huge.
Mithilendu Jha, Associate Director, India Ratings & Research, said in a research note estimates for a complete recovery in the farm sector the country will need more than two favourable monsoons.
"Nearly 15 percent of tractor loans disbursed during 2014 and 2015 were overdue for more than three months as of March 2016. The average delinquency rate for close to 12 months seasoned loans was only 9 percent during 2009 amid deficient rainfall and low agri-GDP, and still it took nearly two years for the delinquency rate and agriculture output growth rate to completely normalise," he said in the note.
Comparing 2015 with the 2009, another drought year, he says monsoon was deficient in 47 percent of subdivisions (as classified by the Met) last year compared with 64 percent in 2009. However, nearly half of these subdivisions have faced two consecutive deficient monsoons by 2015 unlike in 2009.
"...Unlike the 2009 downturn, the current cycle has so far seen almost five years of muted growth in not only production and price but also acreage and crop yields," he says in the note.
During the 2009 slowdown, the production of all crops dropped 4 percent Y-o-Y. However, over 25 percent increase in minimum support price for both food grain and non-food grain crops and nearly 4% drop in key input cost (diesel and fertiliser) lessened farmers’ problems.
In 2014 and 2015, not only the production suffered but also the growth in minimum support price was low at a CAGR of below 3 percent. Even after factoring in the reduction in diesel prices in the last two years, farmers’ net profit has been growing at a CAGR of below 10 percent since 2014 and hence impact on farmers’ income has been more pronounced, the note says.
Data by Kishor Kadam