DC debate: Will poor monsoon wreak havoc on the economy?

Bad rains to hit poor farmers, middle class: A weak monsoon will not trigger a foodgrain crisis, given the fact that there are sufficient food stocks in the godowns of the Food Corporation of India. The PDS supplies have quantity restrictions and to the extent that consumption requirements need to be met from the market, the cost of living is likely to go up.

But certainly other food stocks, like vegetables and other perishable food items, will be affected because there is a limitation on the quantity of their production at one time. When one seriously falls short of these commodities, the households in the country will be affected and inflation will rise.

Though agriculture forms only 18 per cent of the economy, more than half of the population is dependent on it. In 2009, when shortfall in rainfall was about 22 per cent, peak consumer inflation rose to nearly 15 per cent and the wholesale price index inflation rose to about 10 per cent.

In 2002, when rainfall was less by 19 per cent, GDP growth was 4 per cent. The fiscal deficit is also affected, since the government expenditure increases as it has to spend additional money for mitigation of the weak Monsoon.

As such, there is a severe agrarian crisis with a high number of farmer suicides. A weak monsoon would mean no access to water in rain-fed areas. This would aggravate the situation. Some people may not invest in agriculture in view of a poor Monsoon forecast, but those who do have no choice but to take the risk will probably lose out. There is also this problem of small marginal farmers who come to urban areas in the agricultural off-season. A weak monsoon will be a feast for the industries that employ the marginalised labourers.

The industries that employ them will likely see an increased influx of labour and wages are likely to go down. At the same time, the middle class households and the non-food manufacturing industries will also be affected.

Because the middle class will use a higher proportion of their income towards purchase of food commodities and consequently their non-food spending will come down. A weak monsoon will mean higher inflation in food prices, but there is no translation into higher salaries. In this backdrop, the political consideration of a weak economy is one of the important aspects that remains to be seen.

It is to be seen if the NDA government intervenes in the event of a weak monsoon to provide support to the agrarian economy in terms of support prices of waiver of loans or something like the NREGS, which address distress. The entire corporate sector and the corporate media look a little worried. Their worry is not about how the society will be hit.
The worry is about how this will slow down the pace at which the government is executing neo-liberal policies.

If the Narendra Modi-led NDA government brings some cover for the bottom section of the people, criticism from the corporate sector will be inevitable.  So it will be interesting to see how the government will handle a weak economy.

Dr G. Vijay, School of Economics, University of Hyderabad

Weak monsoon not to affect food security: Oscar Wilde had accurately described the relationship between the UK and the USA: “Separated by the same language”. Similarly, the interpretation of a “Good Monsoon” divides the India Metrological Department and the national and state departments of agriculture, a difference in perception fraught with potential for needless panic and confusion.

The Southwest Monsoon ushers in the Kharif cropping season (June-September), which, until recently, contributed to the bulk of the country’s foodgrain production. The monsoon rains recharge ground and surface water resources and sustain the Kharif crop. However, today, Rabi (November-April) and Kharif contribute almost equally to the country’s food production. In fact, wheat is mainly a Rabi crop and it is practically immune to the behaviour of the Southwest Monsoon. This year’s IMD forecast, influenced by the strengthening of the El Niño system, predicts only 85 per cent of the normal Kharif rainfall.

However, another agency, Skymet, foresees “a normal season” based on a study of the Indian Ocean Dipole. These outputs need to be read in the context of the agricultural requirements. The IMD’s warning has already sparked off fears of a drought and has lead to dips in the stock markets. However, despite a strong correlation between the El Niño system and below-average rainfall over two decades, only three out of seven El Niño years actually saw droughts.

To put things in perspective some facts need to be noted. Distribution of rainfall over time and space, more than quantity of rainfall, is of the essence. Late-September rains may induce a fresh flush in cotton, but are bad for paddy. Similarly, end-of-June rains, that are welcome for cotton, may not help groundnut.

The year 1987-88, termed the worst drought year of the century, saw agricultural production drop by only 0.8 per cent over the previous year. The El Niño-hit 1997 received normal rains (102 per cent of the Long Period Average); 2009, the third worst drought since 1901, with 23 per cent rainfall deficit, recorded a foodgrain loss of just 10-15 MT, less than the production shortfall in 2002. So given acceptable distribution over time and space, agriculture production can remain at satisfactory levels.

Besides, conjunctive use of groundwater resources and sound water management techniques can mitigate against rainfall shortages. And while a localised crop failure may cause concern with regard to farm income and livelihood, it is not a cause for anxiety as far as national food security is concerned. With employment and wage protection through NREGA, improved management of the PDS and efficient implementation of crop insurance schemes, hardships caused to farmers and agricultural labour can be addressed.

While it is premature to let despondency set in, any possible natural calamity must be prepared for. Regardless of which forecast is right, the systems supporting the forward and backward linkages of the agriculture value-chain including research, extension, credit, insurance etc., need to remain in a proactive mode.

Mohan Kanda, Former secretary (Agriculture), Union of India