Millennium Post

Normal monsoons can boost farm income by 20% in FY17: Report

"A good monsoon can provide better yields, and boost farm income by 20 per cent while the total rural income may grow at 12 per cent in FY2017 while higher rural spending by government should support non-farm income," JM Financial said in its third annual rural survey titled Rural Safari.

On an average, farmers' income has come down by 3 per cent in 2014-15 and by 4 per cent in 2015-16. During 2014 and 2015, monsoons were lower by 12 per cent and 14 per cent from the long period averages. The Met department had projected a 106 per cent rainfalls this year.

The survey warns however that given the massive spike in indebtedness of farmers, which rose to 22 per cent in 2014-15 from 18 per cent in the previous year, coupled with lower prices of farm produce, a full-blown recovery looks bleak this year. "Given the rise in their leverage, which jumped 4 percentage points in FY2016 to 22 per cent and still very weak real estate markets, we expect the initial savings to go into deleveraging and small ticket purchases, thereby by whittling a full recovery of the overall economy," it said. The share of the rural credit rose 20.3 per cent by end 2015 from 16.8 per cent in December 2010, growing at 24 per cent CAGR, against urban credit CAGR of 12 per cent during 2011-15, it added.

"The high growth of rural credit signifies the increasing leverage taken by rural India along with the event of declining income levels in agri households. As of December 2015 total credit outstanding stood at Rs 70 trillion (Rs 70 lakh crore) a growth of 10.9 per cent with rural credit standing at Rs 14 trillion a growth of 12.8 per cent and urban at Rs 54 trillion, up 8.6 per cent. Farm credit grew 13.2 per cent in FY2015". An average farmer's debt requirement has increased from 7.5 per cent in 2013-14 to 9.8 per cent in 2015-16 due to falling income levels leading to for borrowing more for consumption and income mismatch. The report is based on the brokerage's analysis of 14 districts across eight states -- Andhra, Bihar, Karnataka, Maharashtra, MP, Punjab, Rajasthan, Tamil Nadu and UP -- which account for 52 per cent of the nation's farm GDP. 

The survey finds that two years of successive droughts have yanked down farm incomes fallen further, apart from bringing down the real estate values, while debt/assets of farmers have risen massively. Noting that farm income profitability has struggled in the past three years due to low MSP hikes, low productivity and high production costs, the report said this may reverse in the upcoming monsoon season with per acre profitability increasing sharply by 10-12 per cent. "Even though the past four crops (including Rabi 2016) have been weak, a good monsoon would increase farm income on the back of improved productivity and probable higher net sown area. Even though MSP growth in the past three years have been weak, due to inflationary reasons MSP hike for upcoming Kharif season would be supportive rather than sharp," it said. 

Investment in farm infra must for 100% FDI in food processing: Minister
New Delhi: Foreign players looking to invest in the food processing sector will have to mandatorily invest a portion of the funds in building infrastructure at the farm gate level for the benefit of farmers, Food Processing Minister Harsimrat Kaur Badal has said. Badal said she is pushing for 100 per cent FDI in the food processing sector with a purpose to raise farmers’ income. “My intention behind proposing this policy was to create ‘swadeshi’ (local) infrastructure at the farm gate level with ‘videshi’ money (foreign investment),” Badal said. 

The policy was announced to address the requirements of farmers and food processing industry as lots of fruits and vegetables grown by farmers either do not fetch the right prices or fail to reach the market, she said. “...I feel there should be a rider in the policy to ensure that a certain percentage of FDI inflows is invested on infrastructure at the farm level, directly benefiting the farmers,” she said. 

The investment could be on mechanised farming, latest irrigation technologies, seeds, among others, Badal said adding better quality of farm produce is good for processing. Badal also said the FDI inflow in food processing sector is expected to cross $1 billion in the next two years, helped by reforms in FDI space and streamlining other regulations.
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