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Agriculture sector showed positive growth though India's GDP contracted by 23.9% in first quarter of FY 2020-21qrcode

Sep. 15, 2020

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Sep. 15, 2020

Agriculture sector showed positive growth though India's GDP contracted by 23.9% in first quarter of FY 2020-21

India, the world's fifth-largest economy and is the second-worst performer in the COVID-19 hit the quarter of the financial year 2020-21. India's GDP has contracted by 23.9 per cent in the first quarter of the FY 2020-21 as the coronavirus-related lockdowns weighed on the already-declining consumer demand and investment. However, agriculture showed a positive outlook. 


Prasanna Rao, Managing Director, Arya Collateral said, “As far as we can see this is a parabolic downturn of the economy because as soon as India went into lockdown, people suddenly stopped spending thus resulting in a halt on goods and services produced within the country and there will be a sharp uptick as soon as we drive towards the solution of the virus.” 


Agriculture alone has shown positive growth with a share of 18 per cent in GDP. The only bright spot was the rural economy, where the farm sector grew at 3.4 per cent year-on-year in the quarter. 


The agriculture, the farm sector is still growing, but it might not be enough to pull out the economy from this stagnation. There is no alternative to public spending in these trying times; people are locked inside their houses and only spending on essentials.  


“The only way possible from here is stimulus announcement and public expenditure outlay in infrastructure, which may bring in the channelization of economic fundamentals required for the country’s growth,” Rao said.  


The recent GDP data released shows that the farm sector is the only sector that has shown growth and it has outpaced GDP growth for the third straight quarter. Gross Value Added (GVA) from agriculture, forestry & fishing grew by 3.4 per cent at constant prices in April-June 2020 over April-June 2019. The Atma Nirbhar Bharat initiative launched by Prime Minister Narendra Modi has helped in boosting the confidence of the people of India in the local products, especially in the processing sector. Thus, in turn, resulted in much-needed confidence in the agricultural sector. 


“If we look at the basic principles of GDP, it is the demand for products in the country and how much people are spending. Even the farm sector has grown but the overall demand has slowed down, production is happening  in the agricultural space but the shrinking demand can impact the agriculture sector also in coming months if situations do not improve,” Rao added. 


The study about the impact of COVID 19 for producer organisations during the lockdown period. We found that farmers had challenges in managing logistics and securing finance. From the lockdown period onwards have endeavoured and has been to bridge this gap as much as possible.  


Effective communication is really important in times of crisis, and we have worked on the same.  


Further, Rao said, “We are greatly leveraging virtual media to ensure our training and capacity building programs are not stalled due to the epidemic. Our plan is in execution to train 1,25,000 farmers through various farmer training programs that we undertake.” 


Arya was incorporated in 1982. In 2002 it forayed into agribusiness with a core business of warehousing and collateral management and is now present across 20 states of India. The company is a significant player in the post-harvest agriculture ecosystem. It is a prominent service provider to agriculture corporations and the FPO ecosystem in catering to their warehousing and post-harvest needs. Arya manages 2.7 Million Tonnes of commodities through its network of 1,500 warehouses with an AUM of INR 55 Bn. It also has a 100 per cent owned NBFC, Aryadhan, with a strong client base covering farmers, FPOs, processors and corporates and completed loan disbursements over Rs 220 Crores and has already turned profitable. Arya has risen $9M funding by strong investors in the Agri-tech space including LGT Lightstone Aspada and Omnivore till now. 


India has about 110 million tonnes of constructed warehousing capacity. Studies suggest that as a country, India has a storage gap of over 35 per cent This is further acute if we consider requirements versus availability in primary agriculture centres which are closer to the farm gate. On the other hand, it is also ironic that despite the aforementioned shortage of space large warehousing spaces remain unutilised. The platform is an online aggregation solution for warehouses and other post-harvest needs of farmers, farmer producer organisations, small aggregators, and other stakeholders in the commodity value chain. The platform aims to organize the traditionally unorganized warehousing sector. 


A2Z is a digital extension of Arya’s current business model and has been tested across a wide range of customers. Over the next 5 years, the platform will provide discovery of 20,000 agriculture warehouses in the country and would have multiple transporters, financiers and service providers seamlessly serving agricultural stakeholders across the country. 


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