Agri Sector Remains Resilient; Rabi Sowing Got Off to a Good Start: RBI

On Wednesday, Reserve Bank Governor Shaktikanta Das stated that the agriculture sector is resilient and that rabi sowing is off to a good start. However, due to uneven rainfall, India expects some moderation in Kharif production.

According to the first advance estimate, India's total Kharif crop production will fall to 149.92 metric million tonnes (MMT) from 156.04 MMT the previous Kharif crop year. Das stated on the supply side, "The agricultural sector is still strong. Rabi sowing is off to a good start. So far, the area sown is 6.8 percent greater than the normal sown area (as of December 2, 2022)."

According to agricultural ministry data released on Friday, wheat area sown increased by 5.36 percent year on year to 211.62 lakh hectares in the first two months of the ongoing rabi (winter) season, with higher coverage reported in Rajasthan, Bihar, and Uttar Pradesh. Wheat, the main rabi crop, is sown in October and harvested in March-April. This season also sees the cultivation of wheat, rice, and pulses such as gramme and urad, as well as oilseeds such as groundnut and mustard.

Das stated that the Indian economy's outlook is supported by good rabi sowing progress, sustained urban demand, improving rural demand, a pick-up in manufacturing, a rebound in services, and robust credit expansion. As expected, consumer price inflation moderated to 6.8 percent year on year in October, but it remains above the target's upper tolerance band, he said, adding that core inflation is sticky.

"While headline inflation is expected to remain above the target throughout the rest of the year and in Q1:2023-24, it is expected to ease. The medium-term inflation outlook is subject to increased uncertainty due to geopolitical tensions, financial market volatility, and the increasing frequency of weather-related disruptions," he said.

He stated that future investment activity will be aided by government capex. "In H1, there was a noticeable increase in the share of fixed assets in total assets of manufacturing companies." Consumer confidence has increased further, according to our surveys. Firms in the manufacturing and infrastructure sectors are upbeat about the business outlook. Firms in the services sector also anticipate increased activity," Das elaborated.

"We cannot remain entirely decoupled from adverse spillovers from the global slowdown and its negative impact on our net exports and overall economic activity," he said in an interconnected world. According to him, the biggest risks to the outlook continue to be headwinds from protracted geopolitical tensions, a global slowdown, and tightening global financial conditions.

"Taking all of these factors into account, real GDP growth is projected to be 6.8 percent in 2022-23, with Q3 at 4.4 percent and Q4 at 4.2 percent. The risks are evenly distributed. Real GDP growth is forecasted to be 7.1% in Q1:2023-24 and 5.9% in Q2. "Even with this revision to our growth projection for 2022-23, India will remain one of the world's fastest-growing major economies," the governor said.