FE Editorial : Poor monsoon

Written by The Financial Express | Updated: Jun 27 2009, 02:01am hrs
As our columnist today argues, monsoon no longer has a vice grip on the economy but it retains enough clout for below normal rains-the governments official description now-to be a matter of worry, especially when the economy may be entering the turnaround phase. However, irrespective of whether July and August make up for Junes poor aggregate rainfallthe distribution will matter, toothe minister now responsible for Met, Prithviraj Chavan, must take a hard look at official rain forecasting. Mets record is not getting any better and its monopoly on weather prediction is plain silly in an age private forecasters in the West give out India predictions. The government must provide itself with the best forecasts and stop depending only on its own bureau. Chavan is supposed to be a doer with a reformist instinctlet him prove it by his actions on Met. Rains in Gujarat seem to have cheered up Met but the crucial questions are whether adequate rain will fall in areas that most need it. As of now, even assuming Gujarat gets enough rainfall, north, north-west and central India are not supposed to get enough rainfall even by Mets second prediction. So, while considerable impact on crops from foodgrains to sugarcane to oilseeds is not inevitable, neither is it severely unlikely.

Comfortable buffer stocks and imports, provided decisions are taken quickly, can meet any output concerns in the immediate term. How RBI will respond if theres pressure on food prices will be crucial for the non-farm economyhopefully the lesson has been learnt that sharp interest rate rises are an ineffective instrument when dealing with farm economys supply side problems. This is the most important link via which poor rains can affect non-farm economic activities. Theres a need not to panic, to use supply side strategies to deal with a supply side problem, not force aggregate demand down. For the longer term, much more public investment in irrigation is a must and a government that swears by poor Indians in villages should understand that. Groundwater recharging is another problem highlighted by prospects of poor rains. Reservoir levels are low now. But the long term problem is of bad pricing (wrong subsidies), water-intensity of many major crops and hugely increasing demands of potable water. The minister for water resources has a job thats far more crucial than is generally thought.