The India Meteorological Department and private weather forecaster Skymet predictions of a normal monsoon this year should offer some succour to the rural economy, which has seen wage growth flatline even as price pressures have been rising. The rise in wages, in nominal terms, for non-agricultural labourers stood at 5.9% in February 2022 over February 2021 while that for agricultural labourers, it was 4.8%. Against this, the rural inflation print for March 2022 was 7.7% on the back of rising food inflation, up from 6.4% in February.
Little wonder the demand for consumer staples in rural India as well, as two-wheeler sales, has been weak the past few months. Add in the gathering cloud of persistently high fuel costs and rising fertiliser costs in the run up to the kharif season—thanks in no small measure to Russia’s war against Ukraine—and there is a fair amount of uncertainty surrounding rural growth. Some experts even believe that costlier fertiliser could push up food inflation—this has more than doubled in rural areas since March 2021—despite a normal monsoon. Against such headwinds, a less than normal monsoon would have worsened the pain.
Agriculture’s share in the nation’s gross value added may have declined to 18.5%, but 55-60 % of its contribution to the economy emanates from rain-fed crop lands. Over half of the country’s net cultivable area of 141.4 million hectares is un-irrigated and rain-dependent. More than three-fifths of India’s farmers cultivate crops without irrigation. It is this segment that seeks deliverance through normal rains. Normal rainfall is a good augury for higher grains production during the kharif or summer season when crops are sown in June and July. A high enough grain output could, of course, lower the chances of agri-commodity prices reigning high. During the last decade, there have been five years of normal (2016 and 2021) and above normal rains (2013, 2019 and 2020) during which agriculture and allied activities grew at an annual average of 4.9% after adjusting for inflation. This is much higher than when rains were below normal (2012, 2017 and 2018) and deficient (2014 and 2015) when average agricultural growth was 2%.
While an increase in production may not always mean more income for farmers—and farm and non-farm labour—this year could be different, especially from the perspective of oilseed producers. Given how vegetable oil prices have risen sharply because of supply disruptions—India imports more than half of its requirements and Ukraine is a leading producer of sunflower oil—a bumper crop may not just ease domestic oil prices but also translate into meaningful income gains for their producers. Higher farm income could boost demand for FMCG products, two-wheelers, tractors etc. Good rains thus reinforce the overall growth momentum of the Indian economy. Besides, a good monsoon would also mean healthy soil moisture for the rabi sowing season late in the year.
However, there is a need to temper the predictions of a normal monsoon with the changes in pattern brought about by warming of the planet. Some years ago, scientists from the Centre for Mathematical Modeling and Computer Simulation observed decreasing trends in the quantum of both pre and post-monsoon rainfall and the number of rainy days—implying a shorter monsoon. While the number of rainy days is declining, the incidence of very heavy and extremely heavy rainfall events has been rising, which could have its own deleterious effects. To reckon with monsoon-related uncertainties—even when the overall quantum is ‘normal’—the government has to focus on building irrigation and storage capacity. There is a long way to go as the share of irrigated land has reached just 45% from less than 20% per cent in the 1960s. Until this is stepped up manifold, especially in peninsular India, the economy’s fortunes will remain hostage to the vagaries of the falling rains.