WWRR Vol.2.015

India
Agri-inputs / Automobiles
SPEAKER SESSIONS: DECEMBER 4, 2018, 27BKC, MUMBAI
BALRAM YADAV: ROUND-UP OF RURAL INDIA
Managing Director,
Godrej Agrovet
Key takeaways
Expect bumper Kharif despite patchy rainfall. Patchy distribution of monsoon and
low rainfall in September has dampened overall normal rainfall. Nevertheless, Kharif crop
production is expected to good in the current year, being adequately supported by
development in the irrigation sector over the past few years. A subsequent reduction in
reservoir levels and deficient soil moisture may have a bearing on the Rabi crop.
Surplus of food produce creating current distress in agriculture. Surplus across
various food produce such as milk, sugar, food-grains is creating distress in the
agriculture sector. Rising milk production has led to a sharp correction in prices of SMP.
Sugar supply has outstripped demand by a good margin in the current year and may
increase further next year, putting India ahead of Brazil as the largest producer of sugar
globally. Food-grain stocks continue to rise. Agriculture stress is not synonymous with
rural stress though, as the rural economy depends on several other sources of income,
including construction, labor and several other services, which have grown robustly in
recent years.
Rural economy showing signs of strength. The rural economy has benefited
significantly under the current government from (1) increasing traction in road
construction activities, (2) pick-up in housing demand, (3) steady increase in rural wages,
(4) increase in MNREGA wage rate, (5) electrification of villages and (6) rising access to
mobile internet connectivity. The strength of the rural economy is reflected in (1) strong
growth in sales of tractors over the past three years, (2) increasing pace of farm
mechanization and (3) sustained higher growth in FMCG products as well as passenger
cars as compared to urban India.
Policy focus rightfully shifted toward income security from food security. The
government has shifted its focus from food security to income security and has adopted
various measures to enforce the same. Measures undertaken to steer the rural economy
in the right direction include: (1) Draft agricultural exports policy, (2) index to assess
states on the ease of doing agri-business, (3) Pradhan Mantri Annadata Aay Sanrakshan
Abhiyaan (PM-AASHA) scheme to ensure earnings at MSP, (4) MSP formula linked to
1.5X the cost of cultivation (A2+FL), (5) Prandhan Mantri Fasal Bima Yojana to safeguard
farm income in times of adversity, (6) E-National Marketing scheme, (7) soil health card,
(8) MNREGA expenditure directed towards water-related works and
(9) investment in drought proofing and micro irrigation.
2 KOTAK INSTITUTIONAL EQUITIES RESEARCH