April 15, 2024


Delighting finance buffs

Indian economy in corona time: Agriculture only bright spot

India is an agricultural country: Kids of 1980s, 1990s and early 2000s grew up reading this one sentence in school textbooks until LPG (liberalisation, privatisation and globalisation) changed the complexion of Indian economy. Services became the king of economy and industries started pulling out workers from the fields.

The outbreak of the novel coronavirus in India — as part of global pandemic — shut down offices of the gloating services sector and closed factories. But crops standing in fields kept growing, and farmers continued to tend them. Covid-19 has essentially and largely remained an urban outbreak in India till now.

Now, economy indicators show what is already known: production has contracted in factories and services have suffered losses. The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) fell to 27.4 in April. This is the lowest reading of PMI in 15 years, that is, since it started recording data.

A PMI of below 50 indicates contraction in manufacturing. It was 51.8 in March. Cases of the novel coronavirus started surging in India in the first week of March. States were going for lockdowns by the third week. The national lockdown was announced from March 25. India remained locked down through April.

Now, lockdown 3.0 is in place. The third phase of the coronavirus lockdown is actually an exit door. Over 14 days, India will restart the economic engine that was practically switched off on March 25. The manufacturing units have started opening in green and orange zones (areas either free from coronavirus or less impacted by Covid-19, the disease).

It is expected that PMI will rise in May. But how long the economy will remain in revival mode is a difficult question to answer. The Indian economy was already in an extended slowdown before the coronavirus outbreak applied brakes.

As the novel coronavirus shows ebbing signs in Asia, Europe and America, there is a fresh round of trade war between the US and China. This has dampened the mood of revival. Stock exchanges including those in India have reflected the soggy sentiments.

In a Confederation of Indian Industry (CII) survey, about 45 per cent of CEOs in India said they don’t see economic normalcy returning before a year. Another 36 per cent were more optimistic but said it would take 6-12 months for economy to function with normalcy.

Simply put, over 80 per cent of CEOs in India think normalcy is not going to return before six months. This is the beginning of May. So, before the end of October, the Indian economy of industry and services sectors (agriculture fields don’t have CEOs) is to reel under the impact of coronavirus.

The Indian economy is left with agriculture, only agriculture to depend upon. And, the good news is India is expecting record food-grain production at almost 300 million tonnes — 298.32 million tonnes to be precise (149.92 MT kharif + 148.4 MT rabi).

The government now has to ensure that all food-grains that farmers want to sell in the market is picked up. This is particularly necessary because with seemingly less significant contribution to the GDP at around 16 per cent, agriculture provides employment to about 55 per cent of workforce in India.

Add to this tally those migrants who are returning home in Shramik Special trains and are likely to return to their villages when lockdown is lifted and regular public transport resumes. A healthier and growing agriculture could not have happened at a better time.

A farmer jumps to avoid bruised straw (used to feed cattle) during threshing of wheat crop during ongoing coronavirus lockdown on May 2 in Muzaffarnagar, Uttar Pradesh. (Photo: PTI)

Niti Aayog member Ramesh Chand has pointed to this silver lining in the dark clouds hovering over Indian economy. In media reports, Chand has been quoted as saying, “The farm sector will grow by 3 per cent this year despite adverse conditions and it would add at least 0.5 per cent to India’s GDP growth in 2020-21.”

This 0.5 per cent additional contribution by agriculture may actually prevent Indian economy from contracting this fiscal. This includes production of non-food crops such as oilseeds.

To top it up, the Indian Meteorological Department (IMD) has predicted a normal monsoon in 2020. There is no concrete study yet but coronavirus outbreak has put pressure on ground water resources everywhere.

Sanitising body, hospitals, vehicles and public places requires a lot of water. Water consumption has increased in every household. With factories opening, water consumption will only increase as India eyes upscaling the fight against coronavirus. The IMD prediction, if it turns out accurate, will ensure that taps, wells and fields don’t dry up when summer hits its peak.

With more production and more workforces, agriculture requires proper management by the government. If 100 per cent procurement happens, it will revive private consumption demand, which was originally responsible for the economic slowdown in India in pre-corona time.

This brings us back to the opening sentence that India is still an agricultural country. The coronavirus outbreak has reinforced this often ignored reality of 130-plus nation.

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