Monsoon Impact on Economy

Lok Sabha TV Insights – Monsoon Impact

 on Economy

1 July 2015

Proving apprehensions of deficit rainfall false, monsoon in June showered 16% surplus rainfalls in well distributed manner. Only few areas (north east, Bihar, Kerala and T.N.) received deficit rainfalls. About 20% of total showers expected during the season, are received in June. However, IMD forecast for the months of July and August is pessimistic at 88% of normal rainfall. Overall performance of sector will emerge clearly only after a few months. Given that El Nino is prevalent this year, government already framed a ‘crisis management plan for drought’ for 2015.

Last year we witnessed drought in many places, which pushed agriculture growth down to meagre .2%. Previous few years registered robust growth of 4% plus on the back of good monsoons. Erratic rainfalls earlier this year devastated vast quantities of rabi crops bringing millions of farmers under distress. So, good monsoon is very crucial to prevent further deterioration. Good monsoon contributes to healthy growth in national GDP and this growth is much more inclusive than growth in Industry and services.

Crop sowing so far this year has dropped for rice, maize and millets in comparison to last year. In case of cash crops, Jute, sugarcane and cotton has witnessed the decline. For pulses and oil seeds, sowing is marginally up.

In anticipation of bad monsoon and spiraling prices of few commodities government has imported pulses and other essential goods to maintain the buffer stocks. We have sufficient stocks of Rice (20 Million tons) and wheat (40 MT), and these are expected to increase by current year’s surplus. That said, India doesn’t produce sufficient pulses and edible oils. We import about 20% of requirement. Recent crunch in supply of pulses resulted in 30% increase in prices. Main reason behind this is lower MSPs in comparison to food grains, Low productivity and technology resistance nature of pulses. Recently government increase MSP of pulses significantly, but this is only a partial solution. Pulses yield merely 700-1000 kgs per hectare and this is almost stable from pre green revolution period. In contrast, food grains despite being in similar state few decades ago now yield 2500-3000 kg. Per hectare. Accelerated Pulsed Production Program (A3P) is in place to promote better farming, but so far there is limited success. In Canada, Australia and USA productivity is almost 2-3 times that of India. Similarly, edible oils are being imported from South East Asia even when we have ample potential.

India is net exporter of agriculture and monsoon in India is observed closely by whole world. Even some developing countries such as Brazil and ASEAN have as low as 3-4% population engaged in agriculture, so unlike India (which stocks physical grains) these countries are dependent on imports for food security in times of distress. Further, in case of natural calamities like recent Nepal EQ and floods in Pakistan last year, India is main provider of food grains. This is an opportunity given that every 1% increase in agri exports, brings Rs 8500 crore of revenues to India. But for this agriculture sector needs to be infused with new technologies and practices.

Financing and Technology are key determinants in future of this sector. Farmer needs money for all the Inputs viz, seeds, fertilizer, electricity, technology and also for post harvesting period so that he can hold the crop till it fetches good price. Despite numerous steps taken under aegis of NABARD small farmer is as vulnerable as ever.

Recent decline in value of Rupee against dollar is worrying trend especially in case of deficit monsoon. In that case first recourse of government will be to import to the extent of the shortfall of food stuff. Expensive dollar will pull up prices of imports and in turn food inflation in the country. Decline in Rupee, though is more attributable to international worries about possible Greek’s from European Union. But thankfully, India currently holds highest ever Forex reserves at more than 350 billion $s.

In past we have seen Government in spite of putting adequate contingency plan in place generally failed at delivery. This time it should work proactively and deliver good quality seeds in vulnerable villages. It should also chart out an Income Insurance scheme for farmers. This along with long term commitment of making agriculture monsoon proof will bring prosperity in our countryside.