Farm sector growth may be over 4% in FY25, thanks to a good monsoon: Ramesh Chand

NITI Aayog member and agricultural economist Ramesh Chand

India’s farm sector growth, estimated to more than halve to 1.4 percent in FY24 versus the previous year, may bounce back in the ongoing fiscal, thanks to expectations of above-average rainfall, NITI Aayog member and agricultural economist Ramesh Chand told Moneycontrol.

Chand expects growth in agriculture to be more than 4 percent in FY25.

“From estimates that agriculture growth will be 0.7 percent in FY24 when the third quarter data for GDP was released in February, to it being seen at a higher 1.4 percent during the May release indicate that the trend growth rate is now better and along with that the forecast for an above-normal southwest monsoon, should further help in pushing up growth in the sector,” Chand told Moneycontrol.

Last year agricultural output slowed owing to the El Nino phenomenon impacting onion, potato and pulse production, he added.

The southwest monsoon entered Kerala and advanced into most parts of northeast India on May 30, two days ahead of its usual onset date of June 1.

India’s weather department forecasts above-average rainfall this year with monsoon rains likely to be 106 percent of the long-period average.

The country's farm sector growth is seen slowing down to slightly above 1 percent in FY24 against 4.7 percent in 2022-23, while for the last quarter of the previous fiscal the figure is marginally up at 0.6 percent from 0.4 percent in October-December.

Chand believes that given better rainfall prospects this year, food inflation may also ease.

Indian agriculture is overwhelmingly rain-fed, and a good monsoon as predicted, therefore, could lead to better farm output that would bridge demand-supply mismatches, which in turn would help keep food prices under control.

“There is no one reason or one state behind food inflation. Prices will be higher in some states versus others. If the growth rate in farm output turns out to be more than 4 percent, then food inflation will also begin to cool down. International prices are also coming down. Hence, I expect cooling after some time,” the agricultural economist said.

India's headline retail inflation has stayed below the 5 percent mark for two consecutive months now (March and April) but consistently higher food prices have been a cause for concern. Food inflation has remained above 7 percent for the past six months on a year-on-year basis.

In fact, even as the overall inflation rate came in at an 11-month low in April, the fall was limited by a rise in the prices of food and beverages that remained elevated at 7.87 percent, edging higher than the 7.69 percent posted a month earlier.