Barclays Research expects a better Rabi (winter) crop, thanks to the recent pick up in monsoon. This will limit the pressure on banks’ agri loan book, it says.
Barclays Research is a part of the Corporate and Investment Banking division of Barclays Bank Plc.
Soil moisture and reservoir levels have picked up and should increase possibilities of a normal rabi crop. Water levels in major reservoirs are up sharply (from 46.3 billion cubic metres in July to 79.4 BCM) and are now broadly normal.
The cumulative deficiency in rainfall has moderated considerably to 10 per cent (early September), down from 19 per cent in July and 23 per cent in June. The Indian Meteorological Department (IMD) has recently indicated that – in contrast to their late July guidance – India could receive above average rainfall in September as well.
Sowing trends also suggest that kharif output would be moderately impacted. The drop in acreage relative to the previous year is now 6 per cent. This is smaller than the drop in FY10 (8 per cent) – a weak monsoon year in which total agriculture output grew 1 per cent.
“Our rain shortage-irrigation matrix indicates that states under the higher risk zone typically contribute 15 per cent of overall agro-output,” says Barclays Research.
Most of the states that have large deficits have good irrigation infrastructure and are less rain dependent. The sub-optimal timing of rains will leave some impact on the kharif crop. But, the recent pickup in rains should limit it even for the kharif season, barring any fresh weather disruptions.
“Specifically, Punjab, Haryana and Uttar Pradesh, which constitute nearly one-fourth of the country’s agro output, have suffered rain shortfalls of 23-54 per cent,” said the research report.