Waiting for the Monsoon
Everything grows, except the rural economy
Abeer Kapoor Delhi
In 2014, it was estimated that a 5 per cent deficit monsoon over the Long Period Average (LPA) would lead to a loss of 1.75 per cent in the GDP. The loss due to this decrease in rain would amount to nearly Rs 1,800 crore. Little did the country realise that it would be the beginning of the worst drought in the past 30 years. The Asian drought of 1987 was the last time such a serious deficit of rain was witnessed.
What was estimated to be 5 per cent turned out to be a 12-15 per cent shortfall in the LPA, which is an estimation of the average rain measured in a 50 year period, incurring greater losses to the Indian economy than previously calculated. In the last two years, regions all over the country have been dealing with a weak and negligible monsoon impacting the farming sector adversely since nearly 55 per cent of agricultural land relies on the monsoon for water. The deviance from normal rainfall has run upwards of 20-40 per cent, effectively crippling the agriculture sector. In a report by the Reserve Bank of India (RBI) in May 2015, on the question of whether the agriculture sector had managed to decouple itself from the monsoon -- the answer was no.
The effects of near-total reliance on the monsoon, and the inability to diversify the rural economy, continued till 2015. Rainfall deficit continued in double digits, estimated between 12 and 14 per cent below the LPA. This shortage resulted in nearly 42 per cent of the country facing acute water scarcity and drought. In Haryana, there was 38 per cent shortage in rainfall. The amount of land or acreage of pulses, grains and other kharif crops have barely increased; instead, in many cases, it has decreased. There was a decrease in the amount of acreage in the case of rice, which marginally fell from 37.967 to 37.824.
Amidst the severe drought, mass scarcity of water and farmer suicides, 2016 might bring a sense of respite. The monsoon, delayed by a week, might be above average. The announcement by the Australian Meteorological Department, which has forecast the end of El Nino and the beginning of La Nina, has beneficial implications for India. The period of El Nino has had debilitating effects on global food security leaving a majority of the world’s population hungry.
The above normal prediction has buoyed economic predictions, signalling a revitalisation of agriculture and allied sectors, and this will see a recovery in the industrial sector as well. As the South West Monsoon approaches, it is awaited with bated breath. June to September in India accounts for nearly 75 per cent of the water because of the onset of these winds. This represents a dense concentration of rainfall in a period of two months. Farmers start sowing the kharif crops such as rice, bajra, tur, groundnut and arhar in early June.
The economic prediction has started influencing the fate of many companies, especially those in the seed and agricultural inputs market. This has given the beleaguered government some wind, but the veracity of registering a 7.9 per cent growth is still a bit unbelievable.
Amidst the severe drought, mass scarcity of water and farmer suicides, 2016 might bring respite. The monsoon, delayed by a week, might be above average. The announcement by the Australian Meteorological Department, which has forecast the end of El Nino and the beginning of La Nina, will mean to be beneficial to India. The period of El Nino has had debilitating effects on global food security leaving a majority of the world’s population hungry
Insufficient rain in the last two years has seriously hampered the rural economy. There has been rising inflation in the rural consumer price index, the marker for inflation. The agricultural economy that employs nearly 55 per cent of the workforce, sustains nearly 60 per cent of the population and contributes to 17 per cent of the economy, is in severe distress. Water scarcity has led to drying up of the rural economy. The sectorial change as estimated by the RBI is the lowest in the agricultural sector, with it hitting negative in the third quarter of 2015-16, and registering a growth of a microscopic 1.1 per cent.
Agriculture and its well-being are linked to several allied sectors; industry too seeks to benefit. There has been a decrease in manufacturing. Rural areas account for the bulk of the sales of goods such as TV sets and motorcycles. With the absence of growth and large-scale stagnation, purchasing power has come down. The lowering of income has led to a fall in overall income. The unreliable prices of agricultural produce have led to declining fortunes for the farmers. The betrayal by the Narendra Modi government regarding compensation and on minimum support price has also hit farmers very hard.
While a good monsoon will definitely improve the harvest, this might not necessarily result in an increase in the income of farmers. The recent bumper crop of onions stands as testimony, with the market flooded with onions while farmers are facing losses. In the absence of a minimum support price, the farmers are left to the vagaries of unethical market forces. Ironically, in a drought, or during a bumper harvest, the farmer is left with very little. The lack of money reduces reinvestment, reproduces social and economic crisis.
The agricultural economy that employs 55 per cent of the workforce sustains 60 per cent of the population and contributes 17 per cent of the economy, is in severe distress. Water scarcity has led to drying up of the rural economy. The sectorial change as estimated by the RBI is the lowest in the agricultural sector, with it hitting negative in the third quarter of 2015-16, and registering a growth of a microscopic 1.1 per cent
Due to the drought, major inflationary trends face the rural economy. The consumer price index is far higher on all counts than urban areas. Food prices have sky-rocketed and the money spent on essential goods such as pulses have increased manifold.
The last two years have also seen a steady decline in the output of kharif crops. There has been decline in the amount of rice -- its production decreasing to 90.59 million tonnes in the third estimate of 2015-16. Unseasonal rains in March and February have led to major losses in wheat production. The pulse, tur, has seen a shortfall of nearly a million tonnes (MT) in 2015-16. Groundnut, a major kharif crop, has decreased in output. In 2013-14, groundnut production was 80.58 MT; this has alarmingly reduced to 54.8 MT. Oilseeds have also seen a dramatic decrease from 226 to 172.14 MT.
The decline in output has increased pressure on the government to import. While the government has denied the need to import, all hopes are pegged on the success of the monsoon which may come to the rescue of the farmers. Indeed, it is quite possible that in as fragmented and diverse a land as India, the rains that arrive as a boon might soon end up becoming unpredictable and a cause of worry.