Weak monsoons have once again emerged as a macroeconomic risk from growth as well as inflation angle. Crisil?s analysis shows that July and August rainfall is the most critical determinant of agricultural production.
A 64% shortage in rainfall during July 30-August 5 raised the cumulative deficiency in this monsoon season to 25 per cent. The recent weakening of monsoons has elevated the concerns on the impact of deficient rains. Performance of monsoons in the next few weeks will be very critical.
The Crisil report says that after a dismal June there was some improvement in July, but the cheer that this brought was short lived as towards the end of July and the first week of August many parts of the country witnessed deficient to scanty rainfall.
Crisil measures the impact of rainfall using an index named Deficient Rainfall Impact Parameter (DRIP) which was developed in 2002. DRIP is based on the premise that both the availability of irrigation and the level of precipitation affect crop production.
Dharmakirti Joshi, Principal Economist, Crisil says ?DRIP scores based on data till August 5 show that Uttar Pradesh, Madhya Pradesh, Maharashtra, Andhra Pradesh, Bihar and West Bengal have been hit the most by poor rainfall. These six states account for 47 % of total Kharif foodgrain production and 46 per cent of total kharif rice production in India. Most of these states not only have high incidence of rural poverty but also high dependence on agriculture. This translates into higher burden on the exchequer to provide relief to these states?.
Punjab and Haryana too have suffered from rainfall deficiency but have low DRIP scores due to the irrigation buffer. Here the crop loss may not be significant but cost of irrigation is set to go up and will definitely result into increased input subsidy.
Joshi further adds ?Crop level DRIP scores show that rice is the most adversely impacted crop. Due to higher water requirement of rice, deficient rainfall has led to a sharp reduction in area under rice cultivation?.