Agricultural GVA growth of 3 pc likely in Q2 FY21: ICRA

The harvest of most crops is expected to be bountiful with above-average monsoon rainfall on a pan-India basis with growth of gross value added (GVA) at basic prices in agriculture, forestry and fishing to print at 3 per cent in the second quarter of current financial year, investment information firm ICRA has said.

The rainfall contributed to a healthy 4.8 per cent rise in kharif acreage. "Despite episodes of heavy rainfall, and deficient precipitation in some areas, the harvest of most crops is expected to be bountiful," said ICRA.

Pan-India rainfall stood at 109 per cent of long period average (LPA) in the monsoon months (June to September), well above the 102 per cent level projected by the India Meteorological Department (IMD).

However, the rainfall was geographically uneven with below average rains in the northwest region. Moreover, the level of monthly monsoon rainfall was highly varied in 2020, and in contrast to the trend in 2019, even as the total volume of precipitation was similar to the last year.

ICRA said the healthy storage in most reservoirs compared to the levels witnessed between FY2015 and FY2019 should support timely sowing of upcoming rabi crops. "Overall, we expect agricultural GVA growth to print at 3 to 3.5 per cent in FY21."

In addition to the favourable precipitation trends, rural sentiment has been supported by the improvement to farm cash flows through the robust rabi harvest and government procurement which has been at historic highs.

Additionally, policy interventions in the form of increased disbursals through support schemes such as MNREGA and PM-Kisan Samman Nidhi Scheme and increase in average daily wages have all contributed to improving liquidity in the hands of farmers, which in turn has kept the sentiment positive in the rural and semi-urban areas.

Supported by the interplay of several positive factors (healthy crop output, increased procurement, policy support, increase in food prices), farm GVA growth has outpaced overall GVA growth over the past three quarters.

Even when the country remained under extended lockdown in Q1 FY21, said ICRA, farm GVA expanded by 3.4 per cent as compared to the sharp contraction in rest of the economy.

Buoyed by rural optimism and expectation of a favourable kharif harvest, sectors which are largely rural demand-driven are expected to maintain the healthy demand momentum going forward as well.

Accordingly, sectors like motorcycles and tractors are expected to lead the growth in the automotive segment, although they may still be unable to recoup the lost sales of the initial few months of the fiscal.

The fertiliser sector has also witnessed stellar growth in the current fiscal and is expected to remain buoyant, said ICRA.

( With inputs from ANI )