NEW DELHI: The past few years have seen non-farm income become a significant contributor to overall rural household incomes (40 per cent). But, the past few quarters have seen this segment face substantial disruption — due to cash limitations, GST roll-out and sand mining restrictions in several states. The second half of this financial year, however, is set to see a marginal recovery.
Industry forecasts for rural income growth estimate that the final output of Kharif crops could be higher than the government’s estimate. And, while farmers are battling sub-MSP market rates for many Kharif crops, analysts say vegetables and cereals alone should ensure high single-digit growth.
“Despite the backdrop of weak global agri-commodity pricing, the resilience in the prices of vegetables (25-30 per cent of agri income) and cereals (20 per cent) should ensure high-single-digit growth in farm income in FY18. The only areas to watch out for are the prices of pulses and oilseeds,” observed Arshad Parwez, JM Financial Institutional Securities, in a research note.
Even the effect of depressed crop prices might be mitigated by what analysts say is an impending recovery in non-farm income. Non-farm income comprises primarily of dairy and poultry, wage-based occupations, sand mining, tractor rental income, and small businesses.
“Real estate activity... has weakened further and prices have declined even in regions that were earlier resilient. Despite this apparent waning of the wealth effect and slower-than-expected growth in non-farm income in 1H, our hypothesis is for a gradual, albeit not accelerating, pick-up in rural consumption in 2H led by the modest farm income growth supported by higher government wages, higher credit availability and farm loan waivers,” the note observed.
However, not all non-crop income is expected to earn farmers more. The increase in input costs, especially in poultry, is putting significant pressure on net realizations from the segment for small, individual farmers.
“For integrated, large-scale farming operations, things have become cheaper. But, in case of small farmers input costs have soared. Prices of chicks have nearly doubled, for instance, and this wipes out the profit from poultry sales. The government should look into this,” said Vijay Sardana, agri-supply chain specialist.