India faces risks from the agriculture sector’s vulnerability to climate change, which could affect food inflation, as extreme weather events lead to volatility in food prices, especially of fruits and vegetables, a Crisil report stated on Thursday. The report urged the RBI’s Monetary Policy Committee to take note of the increasing role of climate change-led weather disturbances in influencing consumer price inflation.
“As inflation faces upside risks and higher volatility due to climate change, there is a greater need to maintain credible monetary policy, to keep inflation expectations under control,” the Crisil report noted. Inflation is a significant issue for the country, as food occupies 39% of an average consumer’s basket. In the current fiscal, food has been the biggest factor contributing to the rise in retail inflation, the report said. Meanwhile, retail food inflation declined to 7.01% in October, from 8.6% in September, because of a decline in prices of edible oil, meat products, pulses and onions.
The report has suggested that the government’s climate action response should also focus on mitigating risks to the agriculture sector. “While the government cannot control the physical climate risks to the sector, it can speed up other efficiency improvements, such as reducing crop wastage, improving irrigation, setting up warehousing facilities and promoting higher yielding varieties of crops,” Crisil said.
Stating that aggregate monsoon rainfall activity appeared normal, the temporal and spatial distribution of the monsoon was patchy, the report said that due to tardy rains in the beginning of the monsoon season and patchy progress thereafter, the first kharif sowing was impacted.Crisil reported that preliminary estimates suggest a likely hit to rice production by 6-7%. India’s rice production in the current kharif season for the 2022-23 crop year (July-June) is expected to decline by around 6% to 104.99 million tonne (mt) against 111.76 mt in 2021-22, according to the first advance estimate of foodgrain production released by the agriculture ministry recently.
The report note that the month of March this year was India’s hottest in recorded history (1901-2022). Wheat output in the 2021-22 crop year (July-June), as per the agriculture ministry, had declined by around 3% on year to 106.8 mt, because of heat waves during the flowering stage of the crop in March.
On the prospects of rabi crops, the report said that healthy water reservoir levels will drive the acreage and cropping pattern of wheat and barley. “Wheat reserves this year have come down and greater acreage in the upcoming rabi season will help replenish the stocks,” it said.
The Food Corporation of India’s wheat stock had declined to 21 mt on November 1, a six-year low, because of a sharp fall in procurement.Average water levels in 143 major reservoirs in the country are up by 8% on year and 19% higher than the last 10 years’ average, the Central Water Commission (CWC) said in its latest report released last week.