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Will rain gods aid farm-led recovery again?

Harish Damodaran

NEW DELHI, July 23

A FARM sector induced economic recovery appears a distinct possibility now, with the excellent spell of South-West monsoon rains so far resulting in a substantial increase in area sown under all the major kharif crops.

While a significant part of kharif sowing operations is still to be complete, latest available trends from States indicate a sizable expansion in acreages of rice, coarse cereals, pulses, oilseeds and cotton this year over last year's drought-constrained levels (see story on Agri-business page).

The higher acreage levels have been facilitated by good -- more importantly timely and well-spread -- monsoon precipitation. The country, as a whole, has received 379.8 millimeters of rainfall on an average area-weighted basis during the current monsoon season from June 1 to July 18, which is around 13 per cent higher than the historical long period average (LPA) precipitation of 336.7 mm for this period.

In terms of distribution, as many as 21 out of the country's 35 meteorological sub-divisions have received rainfall exceeding their individual LPA levels for this period. Of these, 16 have recorded `excess' rainfall, i.e. 20 per cent or more than the LPA for the particular sub-division.

Virtually the entire northern belt and the Indo-Gangetic plain stretching right up to Bihar and West Bengal, apart from Orissa and, most significantly, last year's drought-hit regions of Madhya Pradesh, Gujarat and Rajasthan have recorded excess rains th is year. Precipitation has been poor mainly in Karnataka, Tamil Nadu (which anyway does not receive much rain during the South-West monsoon season), Marathwada, Rayalaseema and the North-Eastern region.

In other words, the situation seems propitious for agriculture to stage a spectacular rebound from its dismal growth levels of 0.7 per cent in 1999-2000 and 0.2 per cent in 2000-01. But what the Government and corporates would be hoping for is a recovery that extends beyond agriculture to encompass other sectors of the economy as well.

There is, indeed, a precedent here. The year 1997-98 saw manufacturing growth slump to 1.5 per cent and the economy as a whole growing by just 4.8 per cent. But with agriculture registering a 7.1 per cent growth the following year, overall gross domestic product (GDP) rose by 6.6 per cent and by 1999-2000, manufacturing growth, too, had recovered to 6.8 per cent. Then too, the prime catalyst was the munificent monsoon of 1998 -- as many as 33 sub-divisions and 81 per cent of the country's districts rece ived normal-to-excess rainfall that year.

But for a repeat performance to happen, what is required is not just an increase in agricultural `production' but farm `incomes' as well. 1999-2000 and 2000-01 have been particularly bad for farmers not only because of low crop production levels, but als o the crash in prices of most commodities, leading to reduced growth, if not actual decline, of agricultural incomes. This, in turn, led to lower sales of not just tractors, fertilisers or agro-chemicals, but even cement, soaps and detergent, two-wheeler s and a host of consumer goods marketed in rural areas.

Fortunately, however, the situation seems to have improved somewhat even on this front: the price decline in agricultural commodities such as sugar and milk powder have been arrested since late last year. And with international prices of other commoditie s -- edible oils and wheat, especially -- too firming up, one can hope for higher crop output levels to translate into higher incomes for farmers as well. Only then, can one expect a genuine agriculture-led recovery to really take place.