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India GDP Q1 data: Farm activity shows promise. Can it engineer a rebound?

Experts say the government needs to have a strategy in place to monitor the progress of the kharif crop and prevent its distress sale.

August 31, 2020 / 06:02 PM IST

The farm sector, which contributes around 17 percent to India's GDP, has helped in arresting a much deeper fall in economic growth.

According to the data released by the Central Statistics Office on August 31, the agriculture sector, aided by good rains, grew 3.4 percent in the first quarter of 2020-21 against 3 percent during the same period last year.

The first quarter agricultural GDP includes production from the rabi season, which ends with harvesting in April-June. The Agriculture Ministry has pegged the output of wheat, chana and other rabi food grains 5.6 percent higher than last year.

During the lockdown period, the Food Corporation of India launched a massive operation to complete procurement and make payments to farmers.

For farmers, agricultural growth in nominal terms, after adding inflation, assumes importance.

According to Sreejith Balasubramanian, Economist — Fund Management, IDFC AMC, the government's spending on the rural economy, sale of tractors and support through MGNREGA have all been positive but it is probably still a case of over-optimism.

A report by India Ratings said the government needs to have a well-crafted strategy in place, both to continuously monitor the progress of the kharif crop and prevent its distress sale, with harvesting expecting to begin in a month's time.

The government is confident that the 2020-21 crop year would report an all-time record output of food grains and cross the target of 298 million tonnes.

While the industrial and services sectors are still struggling from disruptions caused by the coronavirus, the agriculture sector can become an engine for recovery.

Besides agricultural output, it is believed that many factory workers who returned to their native places in the aftermath of the nationwide lockdown will add to the rural demand.

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first published: Aug 31, 2020 05:55 pm