According to a Care Ratings report, the record Kharif harvest, combined with a marginal increase in the minimum support price, is expected to boost rural demand by around ₹ 11,000 crore. In the first advance estimates for the Kharif season, the agriculture ministry predicts a good crop of more than 150 million tonnes.
In addition, the government previously raised the minimum support price (MSP) of all Kharif crops by 1-5 percent, with Tur, Urad, Groundnut, Jowar, and Bajra receiving the highest end of these new prices. Farmers will also benefit from normal monsoon rains.
According to preliminary estimates, while crop production will be higher overall this year, there will be shortfalls in some crops, such as oilseeds, cotton, and some coarse cereals whose area under cultivation has shrunk.
The agriculture ministry issued the first advance projections of major Kharif agricultural production for 2021-22 on Tuesday, with total food grain production expected to reach a new high of 150.50 million tonnes (mt).
Even so, oilseed production is expected to be 2.33 million tonnes, which is lower than the target of 26 million tonnes and the previous year’s figure of 24.03 million tonnes.
At 150.50 mt, this is 12.71 mt more than the previous five-year average foodgrain production. Despite this, total food grain production in the previous Kharif season was 149.56 million tonnes, and the government target for this year was 151.43 million tonnes.
Shri Madan Sabnavis, the Chief Economist at Care Ratings said in a note on Friday that the net disposable income for farmers this season is expected to be ₹ 10,700 crore higher, up 5.3%, due to bumper production as well as higher prices.
It may reach ₹ 2,10,099 crore, up from ₹ 1,99,357 crore in 2020, while net gross income will be ₹ 5.65 lakh crore, up from ₹ 5.36 lakh crore in 2020, with a net income-to-total income ratio of 37%, according to Sabnavis.
He predicted that net income from cereals would rise from ₹ 93,068 crore to ₹ 97,463 crore, that income from pulses would rise from ₹ 17,999 crore to ₹ 20,757 crore, that income from oilseeds would rise from ₹ 33,245 crore to ₹ 33,928 crore, and that income from cash crops would rise from ₹ 55,045 crore to ₹ 57,951 crore.
After adjusting for inflation, it rises from ₹ 1,99,357 crore in 2020 to ₹ 2,10,099 crore, indicating a net increase of ₹ 10,700 crore.
The weight values in the retail inflation or Consumer Price Index (CPI) could be used as proxies to gauge the pattern of spending of rural households. These weights are similar to those used in the National Sample Survey(NSS) for 2011-12, which is also the base year used by the Central Statistics Office (CSO) to calculate CPI, with rural households averaging 7.5% so far.
Likewise, food and beverages command the highest weight at 54.2 percent, followed by cereals (12.4%), milk (7.7%), textiles and apparel (7.4%), fuel and lighting (7.9%), miscellaneous items (27.3%), and health – care (6.8%).
As a result, the increase in net disposable income of farmers from Kharif output of around ₹ 10,700 crore may be affected by savings (up to 20% of incremental income) and non-food inflation of 5-10%, according to the note.
It also stated that the additional income of ₹ 10,700 crore can be distributed among savings and consumption, with healthcare being a priority.