A silver lining is the recent forecast for 2019 south-west monsoon. The MET has forecast a near-normal monsoon, and the Skymet has forecast south-west monsoon for 2019 at 93% of LPA. In case these forecasts fail to hold and the monsoon is deficient, certain states and regions can be in a difficult situation, coupled with adverse consequences for the rural economy.
In the past few weeks, the media was awash with weather-related news. Very recently, there were reports of thunderstorm warnings in north and north-eastern past of the country. There have been unseasonal rains and storms in central part of India as well. Prior to that, there was news with regards to south-west monsoon forecast for 2019 released by the India Meteorological Department and the private weather forecaster Skymet. The likelihood of the El Nino phenomenon has also been getting its fair share of press. The Drought Early Warning System (DEWS) has been showing that around 42% of the country is under drought conditions. All this limelight on weather is for a valid reason.
Rains are critical to India given the fact that we have a large rural population that depends on agriculture, and agriculture, in turn, depends on rains. A little of 50% of the cultivated land is covered by irrigation. That leaves much of Indian agriculture and agricultural households at the mercy of monsoons.
Let’s look at what 2018 has been like. The south-west monsoon season, which lasts from June to September, accounts for almost 73% of the rainfall India receives. Another 13% is accounted for by post-monsoon rains during October to December. These two spells of rain are very critical for the major cropping seasons in India—kharif and rabi. While the south-west monsoon is vital for the crops grown during kharif season, it is also critical for soil moisture content and water in the reservoirs that irrigates and supports the rabi crop. While the south-west monsoon in 2018 was 9.9% below LPA (long period average), the October to December rains were deficient by almost 44%. At a regional level, the north-eastern states, Gujarat, Andhra Pradesh, and parts of Telangana and Karnataka have had deficient rainfall throughout June 2018-March 2019. This has resulted in low reservoir levels, low ground water levels and low soil moisture content. A combination of all these factors has led to a drought-like situation in certain parts of these states.
Around 68% of India’s cropped area is prone to drought. The impact of these weather conditions is exacerbated by the state of the rural economy. A major chunk of rural households are agricultural households, for whom agriculture is the primary economic activity. According to the NABARD All India Rural Financial Inclusion Survey, the average agricultural household income was Rs 8,931 per month. A major share of this income is attributable to cultivation and wage labour. Both of these sources of income get adversely impacted by a poor monsoon. In fact, 52.5% of the agricultural households in the country are indebted and have an average debt of Rs 1,04,602.
Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Odisha and Rajasthan have declared droughts in many of their districts. All the above mentioned states have less than 60% of the cultivated area under irrigation. These states also have a significant share in India’s foodgrain production. Barring Andhra Pradesh, more than 50% of the rural households in these states are agricultural households. Moreover, a significant share of agricultural households in these states is indebted. Amidst all this, a drought-like situation and an extension of the same can have a severe adverse impact on the rural economy. The demand from these rural households can take a hit, and there could be fresh demand of farm loan waivers—adding to state’s fiscal stress.
At a macro level, a poor monsoon seems to impact agricultural output. Years following a poor monsoon have generally seen a contraction in foodgrain output. By broad logic, a poor south-west monsoon will adversely impact kharif crop, which is dependent on rains. Subsequently, soil moisture content as well as reservoir levels will be low for the subsequent rabi crop, which depends on winter rains and irrigation, thereby impacting rabi output adversely. A poor winter rain will further add to the woes of rabi crop. With poor realisations in successive kharif and rabi seasons, the farmer is off to a start in the next kharif season in a poor financial health, thereby reducing his investment in quality inputs for the next crop. Unless there is a good monsoon, this vicious cycle will continue.
While the impact on agricultural output is negative, the same is not really true for food inflation. There have been years when despite a good monsoon food inflation has remained high and vice-versa. Food inflation has behaved differently on account of different factors over the years. In the last few years, food inflation has remained low. Reports suggests various actions by the government (such as limited increases in MSP, anti-hoarding initiatives, management of food stocks, stabilising the markets via exports and imports) have really been instrumental in taming food inflation, apart from the strong seasonal swings in certain food categories. A poor monsoon can also adversely impact water-intensive manufacturing industries and hydro-power generation.
According to DEWS, last year too, almost 41% of the country was under drought-like conditions. Reservoir levels historically around this time of the year have been low. While there is no denying the fact that situation in certain parts of the country is grim, publicising this situation in the current election season could also be in the interest of some political parties. Declaration of drought enables the affected districts to seek assistance from the state disaster response fund and the national disaster response fund. While the DEWS takes into account a lot of objective data, a subjective assessment of many socio-economic aspects at the ground level has a significant weightage in declaring a particular district as drought hit. And there are significant variations in the quality and approach of assessment across states.
A silver lining is the recent forecast for the 2019 south-west monsoon. The MET has forecast a near-normal monsoon, and the Skymet has forecast south-west monsoon for 2019 at 93% of LPA. While the Australian Bureau of Meteorology has retained its outlook on El Nino as ‘alert’, there is no conclusive evidence of the impact of El Nino on rains and drought in India. In case these forecasts fail to hold and the monsoon is deficient, certain states and regions can be in a difficult situation, coupled with adverse consequences for the rural economy. An evenly distributed normal monsoon is what the country could really use right now.