Agri GVA stands out on strong monsoon

Amid low growth elsewhere, gross value added (GVA) growth in agriculture and allied activities recovered during the second quarter of the current financial year (Q2FY25) to 3.5 per cent year-on-year (Y-o-Y) due to strong monsoon.

Experts feel that the rains have laid the foundation of an even better GVA performance in subsequent quarters.

GVA growth in the first quarter of FY25 was 2.0 per cent.

In the previous four quarters, the sector recorded sub-optimal growth ranging between 0.4 per cent and 2.0 per cent.

A good performance of agriculture and allied activities in excess of 4 per cent in FY25 should go a long way in pushing up rural demand that could be critical in the final analysis of domestic consumption demand for FY25.

This is all the more crucial as urban consumption demand remains slack.

“In Q3, our expectation is GVA growth would be even better as by then the full impact of a bumper kharif harvest would come into the picture, and the trend in rabi sowing start trickling in,” Madan Sabnavis, chief economist at Bank of Baroda, said.

He said if the rural sector grows in FY25, then it might support the overall consumption story as urban areas are not picking up at the same pace.

Dharmakirti Joshi, chief economist, CRISIL, also said that rural demand is expected to drive improvement in consumption.

The impact of healthy kharif production, coupled with gains from the festive season, is expected to increase demand in the second half (H2FY25), he said.

Devendra Kumar Pant, chief economist at India Ratings and Research, said in a note that agriculture and public administration have provided support to GVA growth in Q2FY25.

He said rising real wages has the ability to increase consumption demand, the ripple effects of which would also provide succour to economic growth.

Meanwhile, on the monsoon front, data from the India Meteorological Department (IMD) showed that rains in the June-September months were almost 8 per cent in surplus, which was among the best in recent times, due to back-to-back low-pressure systems and a higher than normal number of deep depressions.

The good rains pushed up kharif acreage in 2024 to almost 111 million hectares as against a normal acreage of 109.6 million hectares.

As per the first advanced estimate of kharif production for 2024, rice output is expected to be around 120 million tonnes, which is 5.9 per cent more than the same season last year.

Production of maize, a prominent kharif cereal, is also expected to jump to around 24.54 million tonnes, up almost 10.3 per cent from last season.

However, production of pulses is expected to be down at around 6.95 million tonnes, largely due to drop in urad output.

Among other crops, production of oilseeds is projected to jump by almost 6.5 per cent at 25.74 million tonnes on the back of strong output of groundnut and soybean, while production of cotton is estimated to be almost 8 per cent lower at 29.92 million bales (1 bale=170 kg).