Year 2020 has so far been a
painful year for entire world in terms of loss to human life and economic loss
to the countries due to Pandemic COVID-19. Every human is scared of the Coronavirus
these days.
On the one hand, science is
struggling to find a solution to contain the Pandemic Covid-19, on the other a
large number of Economies are incurring huge losses due to lockdown as movement
is restricted and only essential services are allowed to operate.
Financial Markets across the
globe have seen a sharp correction due to increased risk under prevailing
uncertain environment.
There are a lot of pessimism
with regard to the Economic growth at the global level as there is fear of recession. We believe that the recovery in global
markets would vary from country to country depending upon the severity effect
of the COVID-19. The policy measure taken by the various government will decide
the growth trajectory of their countries.
India:
Way Forward for Agricultural Commodities Sector
Fortunately, Indian is largely a
consumer economy. How demand will improve and what steps Indian government
takes to create and sustain demand in near future will guide the market
sentiments and country’s growth story.
As on March 07, 2020, so far
the loss to human life and number of case of Corona virus patients is not too
much alarming India is successfully managing the situation.
India fortunately is having
abundant food grains in its stock. Thus, it is not worried about the food
inflation as of now. New Rabi season crop is ready to be harvested however due
to lock down, the harvesting process is delayed.
Government is making every
effort that Agri Markets (Mandis) are to be allowed to operate smoothly so that
farmers produce starts available for sale to the bulk buyers keeping all the
precautionary steps of maintain social distancing. Currently harvesting of big
crops like Wheat, Chickpea (Gram/Chana) and Mustard seed is underway apart from
other crops.
Unavailability of
Agricultural Labour for harvesting and market operations due to its migration
to their native places during Lockdown period remains a big challenge for the
government.
Logistics and Transport
related problems are also there as the Machineries required for the harvesting
are stuck at places and it will take them time to reach at the required places.
Each day crores of rupees
are required to purchase bulk agri commodities which arrives in the agri
markets i.e. Mandis. It is to be seen how bulk buyers manage to arrange this
huge amount of money to purchase the crop produce under uncertain economic
environment. At the same time, how lending institutions are willing to provide
them credit facility.
Thus, maintaining flow of
money would remain a challenge under current situation. If adequate credit
facility is not provided, the impact may be seen on the farm prices as
Government procurement quantity remains limited.
Demand
Prospects:
Early trend in the export of the Indian agricultural commodities
like Pulses, Spices, dairy products, oil meals, poultry products and Rice have
shown declining trend (Jan 20 over Dec 19). Under current scenario, it seems
that Feb and March data might also be discouraging on export front. The short term domestic demand has also
curtailed.
However, we believe that while expenditure on non-essential
items might remain restricted in short to medium term by the consumers, the
food demand would continue to remain there. Rather, it will increase in time to
come.
Thus, increased food item demand will continue to support the
agricultural and allied sector even in the pessimistic scenario of the other
sector in India.
Internet based
services and sectors are the sectors which are comparatively less affected due
to Lockdown. Paralysis in the economic activities due to Lockdown clearly
reflect that this is high time to make sea changes in the Indian Agricultural
sector and make most of the services available through e-based platform be it
procurement/warehousing/selling/buying etc.
However, India started e-NAM (electronic- National Agricultural
Market) few years for making procurement based activities through online platform.
Although, it is yet to become more popular among the farmers and traders.
Similarly warehouse based sales and other operations are yet to gather
attention by the market participants.
It is suggested that whole agricultural value chain operations should
be made ON-LINE to make it more effective to address the unprecedented and
unpredictable challenges like Pandemic Covid-19.
