Latest News | Rising Farming Cost Has Rural Demand Bottoming Out: Report
Get latest articles and stories on Latest News at LatestLY. Though expectation of a normal monsoon and elevated food prices have brightened the outlook for rural incomes in FY23, steeply rising rural wages/farming cost may spoil the party for farmers that will eventually lead to a bottoming out of rural demand, warns a foreign brokerage report.
Mumbai, May 18 (PTI) Though expectation of a normal monsoon and elevated food prices have brightened the outlook for rural incomes in FY23, steeply rising rural wages/farming cost may spoil the party for farmers that will eventually lead to a bottoming out of rural demand, warns a foreign brokerage report.
Net of farm costs, kharif crop income is likely to grow by 10.1 per cent in FY23, atop a 9.5 per cent in FY22, while net rabi income is expected to grow 12 per cent as against a low 3 per cent last year.
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However, the cost of farming is soaring and has touched 20 per cent in FY22 over FY21 and so is non-farm wages. Adjusted for fertilizers, electricity and diesel, the farming cost is up 8.9 per cent, Bank of America Securities said in a report on Wednesday.
The meteorological department has forecast that the 2022 Southwest monsoon will be normal at 99 per cent of long-term average.
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Normal to good monsoons in the last three years have aided kharif food grain production, up 2.8 per cent on an average and this may result in kharif production going up by 2.5 per cent, atop a 1.5 per cent increase in rabi output.
Over the years, the share of crops in agriculture GVA has come off, from 67 percent in FY11 to 55 percent in FY21, accordingly non-crops (forestry, logging, livestock, fishing etc) have risen in importance, thus making farm incomes more diverse and less vulnerable to rain shock, notes the report.
While elevated prices will aid income, rising farming costs will scupper rural demand, warned the report, which pegs in FY23 kharif season, nominal farm income will rise by 17.1 per cent, on top of a 15.4 per cent increase in FY22.
The report further said while kharif farm income is expected to show robust growth for a second successive year, kharif farm costs are expected to rise further as global fertilizer and feed prices soar.
Imputing composite input price index from whole sale inflation, the report sees farming costs rising 7 per cent kharif season in FY23, up from 5.9 per cent in FY22. We thus, see net kharif income grow only by 10.1 per cent in FY23 from 9.5 per cent in FY22.
Similar exercise for the rabi crop indicates that nominal rabi income rose from 9.6 per cent in FY21 to 18.9 per cent in FY22, but as rabi farm costs rose from 6.6 per cent in FY21 to 6.9 per cent in FY22, taking net rabi income growth to 12 per cent in FY22, much higher than the 3 per cent in FY21.
The report also said rising farming cost makes a valid case for increasing MSPs.
After declining by 0.5 per cent in early FY22, non-agri wage growth started to improve and rose 4.2 per cent in H2 of FY22. Within non-agri segments, contraction is limited to two sectors, while the remaining 11 sectors are seeing above average wage growth.
(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)