An increase in rural demand will not be enough to keep the economy afloat

Mumbai, Ta. 30 October 2020, Friday

The share of Gross Value Added (GVA) in agriculture in the country's economy is expected to increase by 20 basis points to 12.50 per cent in the current financial year and subsequently increase rural demand, but the decline in urban demand cannot be offset by increased rural demand.

According to a report by India Ratings, the eight states in the country, which account for 5 per cent of the total agricultural GVA, will see an increase in aggregate demand. Despite the epidemic and related lockdowns, agricultural activities have not been seriously affected. Good agricultural activity is expected to keep rural demand high and support the recovery in the economy, the report said. However, due to the epidemic, the industrial and service sectors have declined.

Rural demand will increase but it will not be able to offset the decline in urban demand as the share of agriculture sector in GVA is expected to be 12.50 per cent in FY 2021 while the share of agriculture sector in GVA between FY 2012 and FY 2030 will be 15.50 per cent. Was seen in between. In the financial year 2020, this figure was 18.50 per cent.

Andhra Pradesh, Madhya Pradesh, West Bengal, Punjab, Uttar Pradesh and Rajasthan are expected to see higher rural expenditure as their share in agricultural GVA stood at 7.50 per cent in the last financial year.

In the current year, the country's kharif agricultural production is expected to be 124 million tonnes as against 127 million tonnes last year.