Indian agriculture still remains inordinately dependent on monsoon. Less than 50% of the crop area under cultivation is irrigated and that which is irrigated is also dependent on rains. The south west monsoon often behaves in a very unpredictable manner both in terms of amount and distribution. This year has been particularly peculiar. The monsoon reached Kerala and spread to some parts of peninsular India more than a week before its scheduled date but then turned elusive. Its movement towards north turned slow and distribution remained sporadic. The latest bulletin of IMD informs that overall rain deficiency in the country till 15 July is 27 per cent but it is more than 40 percent in north west India which is crucial for country?s food security. Similarly, some other areas in East and North east are facing much higher deficiency in rainfall. Rainfall situation has improved considerably in July compared to June and provided some relief, but there is a serious concern about the likely impact of rainfall deficiency on agriculture and food production, food inflation, demand for industrial products and overall growth rate of economy.
Past experience shows that rainfall deficiency in a crop like paddy causes a more severe impact on productivity than area. As paddy has been planted only on 80 percent of normal area till 16th of July, there is going to be a significant reduction in area under paddy this year even if rainfall in subsequent weeks turns favourable for expanding planting of rice. The cumulative effect of decline in area and productivity could result in more than a 5 per cent decline in rice output this year. Some analysts feel that poor monsoon this year may not adversely affect coarse grain and pulses as farmers would put the area that could not be put under paddy or maize to other coarse grain and pulses.
Experience shows that this rarely happens and coarse grain are generally the worst sufferers due to rainfall deficiency. Among major crop groups, the monsoon effect is generally greatest in oilseeds since the kharif output accounts for around two thirds of our total oilseed production. Soybean and groundnut grown in Kharif season are the main oilseed crops and account for more than 50 per cent of total oilseed production in the country. Area under these two crops is only slightly lower than the corresponding figure last year. Based on the current status of area and monsoon it can be inferred that output of rice would witness serious setback, coarse grain would witness moderate decline and the impact on oilseeds would be small.
For the country as a whole any setback to food grain production this year can be met by drawing from the buffer stock as government has comfortable (48 mt) stock of wheat and rice in its kitty. Because of these stocks government is in a strong position to keep control on price of rice and wheat like in the years 2002-03 and 2004-05 when wholesale prices of foodgrain in the country did not rise despite sharp decline in production. However, strong divergence has been seen between retail and wholesale prices of food during last several months?retail prices of most of food commodities are likely to remain high in the wake of setback to food production due to low and erratic monsoon this year.
Poor monsoon affects demand for industrial goods in rural areas but this effect is going to be much less than what is being anticipated, for a couple of reasons. One, due to the development of non farm and non agricultural sector in rural areas. Further, schemes like NREG are also adding to income of rural population. Another important factor which influences rural demand is supply of institutional credit. It is a fact that a part of institutional credit for agriculture is diverted for consumption purposes.
With increased supply of institutional credit, rural spending on consumables also increases. This is, in fact, becoming an important factor for rural demand for industrial products. However, within rural areas, dependence of a large segment of population on agriculture income is very high and they are the worst sufferers of adverse effect of poor monsoon on agriculture production and income.
It needs to be kept in mind that large negative deviations in monsoon rainfall is a recurrent phenomenon in India. Since 1991, India has experienced more than 10 percent deficiency in the southwest monsoon for the country as a whole in three years, with 2002-03 being a severe drought year. Including 2009, this is the fourth time during a period of two decades that poor monsoons have caused serious concern. With such high frequency of occurence of poor monsoon, the country really needs to put in place a permanent mechanism to deal with the situation. Unfortunately, there is a lot of hue and cry all around when there is a poor rainfall, but all of it forgotten too soon.
The author is national professor, National Centre for Agricultural Economics and Policy Research