We have suggested earlier that the agricultural output data for the current agricultural year (July 2002 to June 2003) is suspect. That the failure of the 2002 South West (SW) monsoon has been spun quite out of proportion. Our argument rested first, on the fact that the combined impact of two successive drought years of 1986 and 1987 was a reduction by 12.5 per cent in kharif grain output in 1987 compared to kharif 1985. So, how could 2002, the very first year, generate an output shortfall of as much as 19.7 per cent? Second, if such a large decline in output had indeed taken place, we should have seen a big increase in prices. Which did not happen with the exception of bajra, cotton, groundnut and edible oil. And in the latter three, developments in the world market had as much, or more, to do with the price increases than domestic growing conditions had.
But to mix a metaphor, cold logic does not always cut ice in India, that is, Bharat, where the normal principles of economics often remain suspended like our levitating yogis. If prices have not gone up for rice and pulses, so what, as long as they have risen for cotton, groundnut (but not for soya) and barley (which is a winter crop, but so what?).
But we have a third arrow in our bow, that of the data on procurement. Official figures tell us that for the marketing season October 2002 to September 2003, procurement of rice up to 21 April 2003 (basically kharif rice), was 14.6 million tonnes (mt), which was 13.4 per cent lower than the 16.9 mt of rice procured same time last year. Some mandarins might be tempted to utter QED, here be the proof of the official estimates. But not at all so.
In the kharif season of 2001-02, India produced 80.6 mt of rice. Some of it was retained for seed and some for the consumption of the farmer?s family. The balance was available for sale, out of which the official agencies bought the bulk. Common sense informs us that the quantum retained for seed and own consumption would be more or less fixed. Under what circumstances would this not be? For one, the farmer could starve his family, an eventuality we choose to rule out as a general mechanism. For another, if the farmer (collectively speaking) fails to keep back grain for seed; we rule this out too, for Indian farmers, unlike some of the experts, are never stupid.
How about the farmer selling more of his rice production and consuming some other cereal? Plausible, but improbable. More than half of the rice is grown in states where it is the sole staple of growing communities. Another quarter is grown in regions where rice is an important staple. But tastes apart, economics would not support such substitution. In the traditional candidates, namely coarse cereals like bajra, jowar and millets, prices have risen much more than for rice this year.
Over the years, we know (Economic Survey 2002-03, para 5.33) that private trade in foodgrain has been squeezed out by official agencies. Now, making the very conservative assumption that farmers? own consumption accounted for 25 per cent of output after seed in 2001-02, which quantum was at most reduced by 10 per cent in absolute terms this year, how much ought the marketable surplus have been affected by changes in output? For the official estimates on output to be true, procurement should have fallen by 22 per cent, not 13 per cent. For the procurement story to be understandable, output should have fallen by 7 per cent, not 19 per cent. Ergo, if the official procurement story is true, the official output story is wrong.
But why is the ministry overseeing agriculture so keen on understating output? This is a matter that needs to be understood quickly, for otherwise the peregrinations of this ministry will continue to put at jeopardy, all analysis of the Indian economy.
Finally, for those who might want to keep tabs on the progress of the SW monsoon log on to http://www.monsoondata.org/wx/, a special section added this year by the Institute of Global Environmental Society.
The author is economic advisor to ICRA (Investment Information and Credit Rating Agency)