As COVID funeral pyres burn, India's rural economy goes up in smoke

ICRA

18/06/2021 08:16

By Rajendra Jadhav and Swati Bhat
    Satara, INDIA, June 18 (Reuters) - Having watched his
father's funeral pyre burn by a river bank close to their farm
last month, Indian sugarcane grower Dattatray Bagal and his
brothers had to set aside grief to count the financial cost of
the coronavirus's impact on their family.  
    They had hoped to buy a tractor for the small farm in
western Maharashtra state, but the brothers spent all their
savings on hospital treatment for their father and three other
family members who survived. 
    "The hospital bill was 820,000 rupees ($11,191). It not only
exhausted our savings but also forced us to borrow from
relatives," Bagal said as he irrigated the fields in the farm
below the mountains of the Western Ghats. 
    "We lost our father and incurred debt as well. We will repay
the debt in two to three years, but the personal loss can never
be compensated," said Bagal, who also caught the virus when it
ripped through his family. 
    Such accounts have become commonplace among rural
communities in the vast Indian hinterland in the wake of a
devastating second wave of infections that peaked in the past
two months.
    Lockdowns imposed by authorities trying to contain the surge
added to the pain, but at least the monsoon season, which began
this month, is forecast to deliver normal rainfall.
    Some farmers like Yogesh Patil from Sangli district of
Maharashtra were hit so badly that they don't have money to buy
seeds and fertilizers to plant summer-sown crops such as corn
and soybean.
    "I was expecting to earn more than 100,000 rupees from a
one-acre plot of tomatoes. But prices crashed because of the
lockdown and I couldn't recover the production cost," Patil told
Reuters.
    Almost two-thirds of India's 1.35 billion population live in
the small towns and villages in the countryside, and the rural
economy accounts for about a third of the country's gross
domestic product.
    So whatever bounce back India's economy makes from the
pandemic, the farm sector is unlikely to be a big help, with 
rural households saddled in debt, unable to make purchases
needed to drive their farm output, or keep money circulating in
their communities.
    Rural India was largely spared during the first wave of
infections, which peaked in September, as the farm sector grew
3.6% in the fiscal year that ended in March, even though latest
official estimates showed the broader economy contracted 7.3%.
But the second wave appears to have washed away that resilience.
    "This time sentiments in the hinterland are very weak and
even those with money are choosing to save rather than spending
it or paying off loans," said Ramesh Iyer, managing director,
Mahindra Finance, one of the biggest shadow lenders in the rural
sector.
    Iyer said even with farm incomes rising, fewer people are
taking on housing, car and personal loans, and nearly one in
three borrowers are delaying repayments. This is either because
lockdowns have restricted activity or people's earnings have
stopped or they prefer to save for emergencies. 
    Mahindra & Mahindra  MAHM.NS , India's biggest tractor
maker, sold 22,843 tractors in May, down 12.6% from April for
its worst month this year. 
    
    VACCINATION SLOWER IN RURAL AREAS
    The spread of coronavirus to the countryside exposed the
paucity of the medical infrastructure, and the impact of the
epidemic is still being assessed, with little trust in official
figures on infections and deaths as testing for the disease has
been woefully inadequate.
    India's vaccination drive is also far behind the curve, and
the fears of a potential third wave are damaging people's
confidence in the economic outlook.
    "There are serious concerns over rural demand and
businesses," said Rupa Rege Nitsure, chief economist with L&T
Financial Management, adding that a lot depended on how fast
India vaccinates its rural towns and villages.
    Rating agency ICRA continues to expect a prolonged negative
impact of the second wave on consumer sentiment and demand, with
healthcare and fuel expenses eating into disposable income, and
less pent-up demand in 2021/22 relative to last year.
    Rising input costs, notably for fuel, have eroded the
benefits reaped by farmers from improved prices for their
produce in the last six months.  urn:newsml:reuters.com:*:nL3N2NP0N1
    "We hire tractor for ploughing, sowing and to bring
fertilizers," said Gajanan Patil, a farmer from Maharashtra. "As
diesel prices have hit a record high, ploughing charges have
also gone up by 30%. Even to harvest crop and to carry it to
markets we will have to pay more."
 ($1 = 73.2725 Indian rupees)

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India tractor sales falling in 2021    https://tmsnrt.rs/3gG4oS8
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 (Additional reporting by Aditi Shah; Editing by Sanjeev Miglani
& Simon Cameron-Moore)
 ((swati.bhat@thomsonreuters.com; twitter.com/swatibhat22;
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