The south-west monsoon has been a disaster this year. As of August 5, the precipitation this season was 25% lower than the long period average. As a result, kharif sowing was down 6% as of end-July. If the situation does not get any worse, CMIE expects crop production to fall by 4.7% this year. Rice production is projected to fall by 9.6%, sugarcane by 6.7%, cotton 5%, groundnut 12.8% and coarse cereals 8.8%. Production of most other crops is also expected to fall this year.
This can lead to a rise in inflation. The combined effect of lower output and higher inflation could make 2009-10 the worst economic year since 2002-03. Lower farm incomes will depress demand from rural regions and high inflation will depress demand in urban regions.
The crisis merits a response that matches the quick and smart moves made by RBI after the global liquidity crisis. An immediate response should be to augment domestic supplies of those commodities that are expected to see a decline in output. This can be done through a strategy of sustained release of government stocks and quick imports to supplement the
It is important that these supply-enhancing moves be made quickly and effectively to prevent high inflation. A delayed response fails to control inflation and bestows an opportunity on traders to make a quick buck. Speed and clarity of intention is imperative.Immediate imports are only a short-term and partial solution to the larger problem of the economy’s vulnerability to an unpredictably errant monsoon. We require a two-pronged solution to this uncertainty. First, we need to reduce the unpredictability. And, secondly, we need to build an agricultural sector that is resilient to the vagaries of the monsoon.
Our science & technology programme needs to set its priorities to solve the country’s most vexing problems. Predicting the monsoon and the climate in general is a critically important task that needs greater attention and resources today than it gets. The India Meteorological Department needs to meet the decision-making needs of the potential users of the information it gathers. There is a need for better timeliness and greater geographical granularity of the forecasts.
The business of forecasting the weather needs a larger body of researchers and consultants. Multiple forecasters and application-specific consultants can bring in the depth and the competition necessary to make this business exciting and useful. The IMD can facilitate this metamorphosis and redefine its role in the growth of the weather forecasting industry in India.
Most FMCG companies in India use the weather forecasting services of international institutes. I will not be surprised if those institutes use Indian skills to make the forecasts. It will be fruitful if we also develop a thriving body of professionals—an entire industry that forecasts the weather to provide useful services to clients.
Accurate weather forecasts themselves do not yield a good crop. Farmers should be capable of using them. Most of our farmers are too poor and ill-equipped to use a good forecast. We need corporates to enter the sector to be able to use modern inputs such as weather forecasts and to exploit the advantages that India naturally has to be a global leader in agriculture.
Our natural advantages are many. India has the second largest arable land in the world. The climate is conducive to multiple cropping. We have plenty of labour to till the lands and we have a large domestic market to consume the farm produce. What is missing is enterprise to harness these advantages into growth and prosperity. The modern corporate structure is the best known form of enterprise today. We need corporates to be engaged in agricultural production activities in a big way to ensure that we do not remain vulnerable to the monsoon.
Only big corporates can invest in land development and modern irrigation systems that would use finite resources such as land and scarce resources such as water and electricity efficiently; in storage and distribution systems that would reduce wastage; in branding and marketing that would ensure competition and quality.
We need reforms that can enable the consolidation of land holdings and stop these from further fragmentation. The hands that till the land need to be employed in better conditions than they are today. Growth through corporatisation of agriculture can be inclusive. Farmers with land can find a better value for their land and landless farm workers can get better working conditions. Surely, large corporates would make profits on the way. But, these can be taxed and agriculture then need not remain a tax-free sector.
Agriculture needs strategic long-term investments. Arable land is the source of food and alternate fuels. Let corporates invest into these and reduce our vulnerability to food shortages today and fuel shortages tomorrow. Agriculture need not remain the preserve of poor vulnerable farmers and the country need not remain captive to the monsoon any more.
The author heads the Centre for Monitoring Indian Economy