Four states — Bihar, Karnataka, Maharashtra and Uttar Pradesh — and five crops are likely to be hit the hardest in case the country receives deficient monsoon rains for a second straight year in 2015, according to a report by Crisil Research.
The likely worst-hit crops are jowar, soyabean, tur, maize and cotton, Crisil said, using its Deficient Rainfall Impact Parameter (DRIP) which also tracked state-level vulnerabilities on four parameters: dependence on agriculture income, indebtedness of households, extent of irrigation, and crop insurance cover.
The four states that are feared to suffer the most this season make up for 34% of the country’s grain output, while jowar, soyabean, tur and maize account for 26% of the total grain and oilseed production.
The IMD expects monsoon to be 12% lower than the benchmark LPA for the June-September season, the same as last year.
The report said since the non-farm part of the economy has been struggling, as underscored by poor investment and manufacturing activity and, therefore, agriculture assumes greater significance.
“India has suffered weather-related turbulence for years but what is worrying is that with rising frequency of such events, the impact is getting increasingly amplified because holistic efforts to reduce structural vulnerabilities are lacking. We believe investing in Indian agriculture’s future has become economically and politically critical,” said Dharmakirti Joshi, chief economist at Crisil, in the report titled Angsty Farms.
It added that the last few years have seen a sharp rise in wages and other input costs, while the increase in output prices was restrained, which reduced cultivation income and hit profit.
“The recent fall in rural wage growth has hurt those on the fringes. For the record, small and marginal farmers constitute about 70% of India’s agricultural households and they depend more on wage income compared with large farmers who enjoy cultivation income,” Joshi said.
The rating agency has maintained its overall GDP growth forecast of 7.4% for the fiscal with agriculture growing at 1.5% on a favourable base.
“Any positive surprise on rainfall over the next 45 days can create some upside to our growth outlook,” Crisil said.
Just like last year, the country may succeed in putting a lid on food inflation this time around and that, too, even if monsoon is not supportive. But repeating the feat every year is impossible without structural, holistic improvements in agriculture to address the vulnerabilities, the report said.