“Growth in agriculture and allied activities this fiscal hinges on a bumper food grains production. A normal monsoon will be critical, too.

Agriculture and allied activities are likely to see 2.5% growth in FY21 as the effects of the pandemic on the sector, thus far, have been varied because these activities are not a homogeneous group, each having its own set of dynamics, said rating agency Crisil.

Gross value added (GVA) in India’s agriculture and allied sectors grew 4% in FY20 while the sector’s average growth in the past six years was about 3.2%.

“Growth in agriculture and allied activities this fiscal hinges on a bumper food grains production. A normal monsoon will be critical, too. Horticulture might have to bear some burnt because of perishability. Livestock is an important fall-back in times crop output volatility,” Crisil said in a research report, authored by its chief economist Dharmakirti Joshi and senior economist Adhish Verma.

While the share of crops in the agriculture sector’s gross value added (GVA) is the largest (59.2%) — agriculture crops (30%) and horticulture (29.2%) — it is also the most volatile in terms of performance as it is the only sub-sector that showed negative performance during some years in the past decade, the report said.

Livestock, though only half the size of crops, plays a crucial role in driving the agricultural GVA growth, in which it has 26.6% share. Its role attains prominence particularly in years when crops take a hit, Crisil said. Milk, which comprises the biggest chunk of livestock (66.2% share), is expected to do well.

“Fortunately, milk consumption from the household segment has remained largely stable despite the lockdown. Demand from the hotels/restaurants/catering segment (which contributes 15-20% to total milk consumption) has certainly collapsed, but is expected to pick up gradually once the lockdown is lifted. Moreover, the current slowdown in consumption demand is being dealt with by converting liquid milk into skimmed milk powder (SMP),” it said.

But, meat, eggs, fisheries and aquaculture are likely to face a prolonged impact, as there is a tendency to reduce consumption of non-vegetarian food during the pandemic. A fall in exports in these commodities too is expected to hem in demand. “With the contribution of these items (meat, eggs, fisheries and aquaculture) in the agriculture and allied activities sector being relatively lower (33.8% share in livestock output), the overall agricultural growth may stay resilient,” Crisil said.

It has also identified any likely impact of locust attacks on crops as a risk factor. The impact of recent locust attack on agriculture output is not a worry for now, as rabi crops have been harvested and a full-fledged kharif sowing is yet to begin, it said and added that standing horticulture crops, which was not harvested because of problems in selling, have reportedly been attacked. “Measures to control the locust attack are needed on a war footing, as the kharif sowing season is approaching fast,” it said.

Agriculture and allied sectors could be the Indian economy’s only bright spot in a year when the Covid-19 pandemic has slammed the brakes on industry and services, Crisil said. It has recently predicted the economy to shrink by 5% in the current fiscal while previously it had projected a growth of 1.8%. The overall GDP grew 4.2% in FY20, according to the official data.