Via RT Business

The Indian government is pinning its hopes on the agricultural sector to boost the country’s economy that has been hurt by the Covid-19 crisis. Bountiful rains have set the stage for another year of record crops, officials say.

Statistics show rural incomes in India have stayed strong and the production of monsoon-sown food grains is estimated to hit a record 144.5 million tons. The government’s decision to raise support prices for some crops and boost spending on rural employment programs has also supported incomes of farmers and laborers.

Some companies reported a high demand for their services and products in rural areas, including automobiles, cement, steel, tires and jewelry.

“Despite Covid-19 and the related lockdown, the agricultural activities across the country have almost remained unaffected. This has raised the hope that rural demand could drive the economic recovery,” said India Ratings and Research, a unit of Fitch Ratings.

Meanwhile, in urban areas, companies are still struggling to boost their sales as the pandemic has ravaged business activities, affected demand and caused labor shortages. “We are seeing rural markets as well as smaller towns perform relatively better,” Sanjiv Mehta, chairman and managing director of Hindustan Unilever, was quoted as saying by Bloomberg. The company sells its products through 8 million outlets in the country and is Asia’s biggest maker of personal care products by market value. It has seen its biggest jump in sales since 2011.




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Tractors, passenger cars and light commercial vehicles are seeing a healthy demand as rural buying continues to be strong. Construction activities have also gathered pace. “We continue to witness unprecedented retail demand,” said Hemant Sikka, president at Mahindra & Mahindra, which makes tractors.

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Some analysts, however, say that rural demand may not be able to offset the shortfall in urban demand because the share of agriculture in gross value added of the Indian economy ranged between 14.6 percent and 17.8 percent from 2012 to 2020, according to India Ratings and Research. India is the second-worst-hit by the coronavirus pandemic nation after the US, with more than eight million reported infections.

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