With the monsoon showering 13 per cent excess rainfall and higher kharif crops planting raising hopes of a record harvest, the economy is likely to see some green shoots emerging.
A good monsoon and harvest will have positive linkages with the industry, according to ratings agency CARE.
Agricultural output is likely to increase by three per cent this fiscal against 1.9 per cent last year. In turn, it could moderate inflation too.
Early indications of kharif crops will be available in mid-September when arrivals begin.
Good production prospects, historical data suggest, improve domestic demand for tractors, seeds, fertilisers, pesticides and irrigation systems (even when using water from natural sources), the agency said.
Based on crop prospects, the milling, dairy, edible oils, sugar (area is still above normal) and textiles industries will benefit on the supply side, CARE said.
Abneesh Roy, Associate Director – Institutional Equities – Edelweiss Research, told Business Line that since the monsoon this year so far has been better than last year, FMCG companies, which derive 30 to 50 per cent of their sales from the rural market, should benefit from higher turnover.
“The prospect of a good monsoon-driven greater disposable income for the rural consumers is likely to augur well for all FMCG companies this fiscal,” he said.
According to the India Meteorological Department, the monsoon has been bountiful this year with 14 per cent excess rainfall.
According to CARE, regions that contribute 89 per cent to the agriculture sector production have been recipients of normal-to-excess rainfall this year.
This has resulted in a significant rise in plantings of rice, oilseeds, pulses and coarse cereals.
Rainfall has been deficient in Bihar, West Bengal, Jharkhand and the North-East.
“The deficient rainfall has, however, reportedly not had much impact as yet on the sowing of paddy, cotton and other kharif crops here, as there was an early onset of monsoon. Moreover, the meteorological department expects normal rainfall for these regions for the season ahead,” the rating agency said.
In fact, prospects for the rabi crops are also good given the favourable soil moisture and the storage level in the 85 major reservoirs in the country.
As of August 22, the storage was 79 per cent or 122.236 billion cubic metres (BCM) against the live storage capacity of 154.877 BCM.
The higher planting of oilseeds and pulses will also help in cutting down imports of vegetable oils and pulses. India is likely to import nearly 10 million tonnes of vegetable oils this oil year ending October, while it is also world’s largest buyer of pulses.
With the recent plunge in the rupee making imports dearer, hopes of higher agricultural production hold promise.