Rural demand can contribute towards economic recovery but can't substitute for urban demand: Ind-Ra

31 Aug 2020 Evaluate

India Ratings And Research (Ind-Ra) in its latest report has said that since the share of agriculture in India’s gross value added is about 17 percent, rural demand at best can extend support to consumption demand, but cannot be a substitute for urban demand. It said while the industrial and services sectors are still struggling to recover from the adverse impact of Coronavirus disease (COVID-19), the agriculture sector could become an engine for economic recovery. However, it said a large part of the rural demand, notwithstanding the encouraging sales number of motorcycles/tractors in June 2020, comes from consumer non-durables.

Ind-Ra expects the first quarter 2020-21 GDP growth to come in at negative 17.03 percent. It said the current account in the June quarter is expected to record a surplus of around $18 billion. It also said one sector that has largely not been impacted either during the lockdown or even thereafter is agriculture. Besides, it expects the agriculture sector to grow at 3.5 percent year-on-year in 2020-21. It pointed out that after several years, the agricultural sector has witnessed three consecutive good harvests - rabi 2019, kharif 2019 and rabi 2020. Moreover, it noted that the adequate pre-monsoon rainfall followed by the timely arrival of monsoons in most parts of the country has led to an increase in the total kharif sowing area in 2020 in comparison to the last year.

The report further stated that the rainfall and area sown so far indicate that the country is headed towards a good 2020 kharif harvest, notwithstanding the floods in several areas. However, it said the flip side of high agricultural production levels could be lower prices of agricultural commodities impacting agricultural income itself. Therefore, it said the government needs to have a well-crafted strategy in place, both to continuously monitor the progress of the kharif crop and prevent the distressed sale of kharif harvest.

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