Impact of 2nd wave of Covid-19 on Indian Agriculture — Part 2
In Part 1 of this analysis, we primarily considered tractor activity (acres farmed, distance traveled), and it indicated that the tractors worked as much in 2021 as in 2020. We ended Part 1 of this story on a phone call we had with a farmer, which opened our eyes to several other aspects that we needed to consider to gauge the impact of the second wave of Covid-19.
What are these aspects? Perhaps a summary of the phone call, given below, will shed some light:
- His tractor and harvester worked nearly as much in 2021 as in 2020 (something we also validated broadly in the first part of this post)
- Revenue was hit because of the cash crunch at the end of many farmers. There were many customers (people who rented his tractor/ harvester) who either delayed payments or did not pay altogether
- The scars left behind by 2020 affected the overall sentiment. Many people in his village were not growing the perishable 3rd crop between Kharif and Rabi in 2021, because their produce went unsold in 2020 (due to lack of demand), leading to losses.
Now, apart from the first point, there were two other major areas to be investigated — revenue, and sentiment. Before we looked at data to investigate along these lines, we decided to gather more on-ground reports (so as not to get biased by one viewpoint). So our field and support team reached out to several other customers across India and asked them about the impact of the second wave of Covid-19 on their business.
Most customers echoed the first two points. Tractors worked as much as in 2020, but revenue was hit. On the sentiment front though, the response was mixed.
Some farmers agreed that the sentiment took a hit, but the sentiment of most was unwavering. Most said that they were not making any changes to the crop cycles, and almost all of them were quite optimistic about the future.
Now it was time to put this on-ground information to some test.
Evaluating Revenue Impact
Somewhere in March 2020, we introduced an accounting feature (meant to digitize the traditional bahi-khata) in the Simha Kit app. The customers could enter their day-to-day transactions in this part of the app, and keep track of their revenue and costs.
This was the perfect data source for us for this analysis. We looked at all the CREDIT transactions entered by the users in Apr-May 2020 and Apr-May 2021. We evaluated 3 metrics:
- Average ticket size (size of an average CREDIT transaction)
- Average number of transactions per user
Now, in March 2020, we just had upwards of 500 Simha Kit users, and this number was over 3500 in May 2021. And, not all users use the accounting feature. Then how were we supposed to figure out the impact on the revenue?
One would say only consider the users who have entered at least one transaction on the platform in the timeframe of interest, for the purpose of averaging. This would indicate that the user is using the accounting feature. This is a fair point. The only word of caution here is that several users may not be entering CREDIT transactions here and may be using this feature like an expense manager. Therefore, the ‘average number of CREDIT transactions per user’ metric will not represent the actual truth. Luckily, it is only the trend that we are interested in. We will have to assume that the percentage users using this feature like an expense manager is constant between 2020 and 2021.
So, here are the results. Let’s first look at the average ticket size.
As you can see, the average transaction amount in 2021 is about 20% lower than in 2020. This itself is a big reduction. Now, let’s look at the average number of transactions per user.
As you can see, the average number of CREDIT transactions per user is about 24% lower in 2021 as compared to 2020. Thus, users received money lesser number of times, and each time, the amount was also lower than last year.
If you multiply the two metrics above, there is a close to 40% reduction in the avg. revenue per tractor owner this year, which matches well with what the on-ground interviews reported.
Hence, so far, the conclusion is that the tractor activity remained unaffected in 2021 as compared to 2020, but the cash flow took a hit. Several customers have either delayed payments or have declined to pay altogether. This could be because, in 2020, people were entering a lockdown. In 2021, they had already spent 1 year with Covid, and the second wave hit. So savings had presumably dried up, and a lot will depend on the sale of the agricultural produce going forward.
One can only hope that the wheels start churning faster now, and the delayed revenue soon finds its way.
Evaluating Sentiment Impact
As mentioned above, the first farmer we spoke to said that many farmers in his village were not growing the 3rd crop between Kharif and Rabi this year, because of the unsold wasted harvest in 2020. While many other farmers later refuted this sentiment, we still ventured out to analyze this claim.
We now turned to Krishi Diary data. Our Krishi Diary app can be used as a digital ledger by any farmer, irrespective of whether or not they have the Simha Kit installed on their tractors. We considered March to May as the period of interest (as most Kharif harvesting happens in March) and checked the transactions that were registered on the app.
Since we had a sufficiently large base of users, we restricted ourselves to only those users who had installed the app prior to March 2020, and were active on the app in the March to April period in both 2020 and 2021.
We compared the area under cultivation for some common Zaid season (March to June) crops, and also perishable fruits and vegetables, which might have been affected because of loss of sentiment. The results are shown below.
As you can see, the area under cultivation for most Zaid crops and perishable crops either remained constant or grew in 2021. There are some exceptions, like Soyabean, Maize, Lemon.
The general trend, however, largely indicates that the sentiment has NOT taken a hit.
We should add a disclaimer here that the Krishi Diary app users may be more tech-savvy, more enterprising, and more risk-taking, and therefore the general trend may indicate a lack of loss of sentiment. There may be truth to what we inferred from the first farmer we called. However, considering that most other farmers agreed that their sentiment hasn’t been affected much, if there is indeed any sentiment loss, it is most likely restricted to isolated pockets.
Digging Deeper
While the general trend was established, we wanted to dig further into the claims that some farmers were not going to grow the 3rd crop this year. Therefore, we looked at the SentinelSat data for the region around the first farmer we called. We specifically looked at the NDVI (Normalized Difference Vegetation Index) values for a small radius around this farmer. NDVI is a proxy for the vegetation in a region, and a comparison of NDVI can help predict whether the produce was higher or lower in different timeframes.
This is the overall look of the region this farmer resides in is shown below:
The NDVI values for the region the framer resides in are given below (all calculated from 1st to 15th May):
Thus, while there was a slight reduction in the 2021 NDVI as compared to 2020, the difference was not huge, and the value was still higher compared to 2019. Atmospheric conditions may as well be responsible for this difference. This leads us to conclude that even in the broader region surrounding this farmer, the loss in sentiment may not have been very significant.
Satellite data-based NDVI is a data-analysis approach we have just started with. With time, as we become more proficient with this approach, we may be able to produce more pointed and useful insights. Watch this space!
Closing Thoughts
Looking at the analysis done so far, I guess the following sums up what we learned about the impact of the 2nd wave of Covid-19 on Indian agriculture:
Agricultural work carried on as usual in 2021, just like in 2020. However, the cash flows, and therefore the revenue, took a hit. The effect of this disturbance on the revenue cycle may manifest itself in the times to come, and one can only hope that this is just a short-term de route from the steadily marching resilient growth story that Indian agriculture is. The overall sentiment, luckily, remains quite positive, as does the future outlook. One can only look forward to prosperous days ahead.
With that, I’ll conclude this article. If you’ve made it here, thank you. Have any thoughts on this analysis? Then feel free to drop us a line at datalabs@carnot.co.in. And don’t forget to follow Data Kisaan on Medium.
Special thanks to the field and support team of Carnot for interacting with the customers and getting the ground truth data for our reference.
