The rain gods are smiling, so expect a good kharif crop

At last, a break from bad news.

While news from the global economy continues to be gloomy, the latest trends on the kharif crop for 2011 give reasons for some cheer.

Latest reports on the monsoon’s progress, sowing trends, and the offtake of agricultural inputs all point to a good farm output. Since agriculture impacts rural demand, which constitutes 70 percent of India, this is a positive indicator for India’s growth conditions.

The first indicator pointing to a potentially good agricultural crop is the monsoon. In the season so far (1 June to 10 August), the actual rainfall is only 1 percent short of normal. A departure of up to 5 percent is considered to be within the normal range.

Moreover, even regional variations point to normal rains. Rainfall in three of the four broadly homogeneous regions - Northwest, Central and Southern India - has been normal, while falling short in East and Northeast India.

Secondly, reports on sowing progress show decent performance in the season so far. Sowing is only 2 percent short of the area sown last year. Since 2010 saw a healthy increase in cropped area, this is not a big cause for concern.

In fact, staple crops like rice have seen a rise of over 8 percent over the previous year as well. The Hindu Business Line reports that it will be a bumper harvest for crops like rice, cotton and soya. Sugarcane and jute are expected to record a good harvest as well.

Thirdly, sales of agricultural inputs have reportedly shown a robust rise during this sowing season. Tractor sales are also buoyant. A Business Standard report quotes a Mahindra and Mahindra official as saying: “Tractor sales are directly proportional to rainfall. Till August, rainfall was 95 percent of what was initially projected by the government, which led to a spurt in sales…We are expecting double-digit growth in sales in this financial year”.

However, there could be a few dampeners to the kharif season story in the form of lower sowing for pulses and groundnut due to initial delays in rainfall, according to an Economic Times report.

Further, the report also points to a hit to rice cultivation in Andhra Pradesh, one of the leading rice producing states, on account of a farmers’ agitation demanding better prices. Also, a shortage of fertilisers has been reported, which could affect agricultural output.

All in all, though there are risk factors still present for the kharif crop, the progress looks good for now.