COVID pandemic has resulted in one of the worst economic crisis. Manufacturing units have been shut down, demand has plummeted, job losses can be seen across the sectors. The Union Finance Ministry has estimated that GDP will shrink 4.5 percent in the current fiscal year.
However hope has arisen from rural India as agriculture sector seems to have been relatively less affected by the pandemic and consequent lockdown. Rural India never really went into a severe lockdown and thus harvest, procurement and consumer activity has remained more or less the same. Thus while GDP will decline, growth rate of 2.5 percent is projected for agriculture this financial year. In 2019-20 agriculture grew by 4% thanks to record production of food grains supported by good rains and a recovery in prices of non-perishables.
Rural economic revival would not have been possible without some key factors that contributed to this. While the urban activities were shut, farming continued during the lockdown, especially for wheat and rice cultivation lockdown had little impact. Large number of migrants returned home causing surplus of agriculture labour and this may have contributed to the fact that more land was brought under cultivation than ever before according to some preliminary assessment by government agencies this year. Moreover, rabi harvest was good, despite lockdown limitations.
An unfortunate consequence of lockdown was loss of jobs in urban areas, forcing thousands of migrants, mostly factory workers and construction sector informal workers, returning home in extremely difficult circumstances. They were willing to work for lower wages in rural India providing cheaper labour in April for harvesting wheat. Thus revival in agriculture is somewhat based on loss of incomes of labour in urban sector. Hopefully the resurgence in agriculture sector will offset the loss of this income to some extent.
External factors have also been favorable. India has just experienced the wettest June since 2013, according to the Meteorological Department data recording rainfall 15% above normal. Since this is the second good season of rains, it will put agriculture back on track, after many seasons of below normal showers. According to Bera, writing for Livemint, June has seen rainfall at 24% above normal and planting of rain-fed Kharif crops are 21% more than five-year averages, driven by higher sowing of oilseeds, cotton and coarse grains.
Government intervention has also helped. For MGNREGA 42 per cent of the total allocation of Rs 1.01 lakh crore for the employment scheme has already been distributed among states (to help the labourers stay on). In fact the demand for work under MGNREGA has more than doubled this fiscal. The ambit of work has also increased. It not includes construction of toilets and dragon fruit plantation.
This has been accompanied by direct benefit transfers and food security programmes. Union government has also announced measures to improve agriculture marketing by removing restrictions on APMC procurement and setting up cold storage for agro-processing units. Moreover government procurement of food grains has happened at a high minimum support price (federal procurement of wheat at minimum support prices (MSP) is at an all-time high of 38 million tonnes.)
These measures have resulted in surge in rural demand. While the automobile sector in the slump in the urban sector, tractor sales in the domestic market registered 4% growth year-on-year. Apart from this the sales of fertilisers and pesticides also went up indicating the robustness of the rural demand. Due to spillover income other goods (like motorcycle sales) have also gone up. Even health, wellness, hygiene and immunity boosting products have witnessed a great demand in rural India. States like Punjab, Chhattisgarh, Madhya Pradesh, Bihar, Assam, Andhra Pradesh, Telangana and Karnataka witnessed growth in GST collection in June over last year. North-Eastern states like Sikkim, Manipur, Mizoram, Tripura, Nagaland, Arunachal Pradesh too witnessed increase in revenue during the month.
Yet there are some challenges that rural India will have to contend with if it is to witness resurgence. With bountiful harvests and only a moderate increase in support prices, prices of agricultural products may fall sharply and even prices of farm products may remain subdued. With lockdown affecting supply chains for a while, those who were cultivating perishable items such a vegetables faced serious losses and even floriculturists suffered as demand dried up (lack of weddings or other ceremonies and celebrations). Locusts moving towards farmlands in rural areas will also be a serious threat to standing crops. Food and Agriculture Organisation (FAO) has asked India to be on high alert for next four weeks for the works locust attack in 26 years. All these factors will have to be kept in mind and some compensation or remedy must be found if rural economy is to herald the economic revival.
The views are author’s own.