Low ground water levels have led to sluggish start to sowing of most kharif crops
Pay
Commission payouts may be a welcome shower of salary, but monsoon
showers matter most for the economy. Why so? The proportion of the
country’s working population dependent on agriculture was at 38 per cent
in 2011-12 — and this, even as the share of agriculture in the Indian
economy stood at a modest 15 per cent in 2014-15. With the assurance of
irrigation available for less than half of the net sown area, the volume
of rainfall, particularly during the monsoon period of June to
September, remains vital for irrigating crops.
Even though the
non-crop sectors have gained significance in driving the rural economy,
the volume of rainfall is key for various activities, including drinking
water for the populace and livestock. Moreover, storage levels in
reservoirs affect the generation of hydroelectricity.
As a result, the whims of monsoon rain retain a fair bit of influence on the purchasing power of rural India.
Unsteady start
After
the distressing deficits of 12 per cent and 14 per cent, respectively,
in 2014 and 2015, the India Meteorological Department’s (IMD) forecast
that monsoon rainfall will be 6 per cent higher than the long period
average (LPA) in 2016 brought cheer to the farm economy as well as the
producers of goods and services catering to the rural sector.
Monsoon has been unsteady in the first month of the season, as cautioned by the IMD.
Overall, the volume of rainfall in June 2016 was 11 per cent below the norm, with some regional variations.
Positive outlook
However,
the IMD has projected rainfall over the country to exceed the LPA by 7
per cent and 4 per cent, respectively, during July and August 2016,
thereby making up for the June deficit. Precipitation in September 2016
would still need to exceed the LPA by as much as 24 per cent to validate
the IMD’s forecast for the 2016 monsoon.
The dreaded “El Nino”
conditions over the equatorial Pacific Ocean have weakened and the
expectation of the more beneficial “La Nina” conditions being
established as the monsoon progresses augurs well for heavier rainfall
towards the end of the season.
However, the expected temporal
distribution in 2016, i.e. a deficit in June followed by excess rainfall
in the ensuing three months, particularly in September, is admittedly
less than ideal. This is particularly so in the prevailing scenario of
low groundwater and reservoir levels, which have led to a sluggish start
to the sowing of most kharif crops. Heavy rainfall in September, when
the crops are closer to maturity, may be somewhat counter-productive for
the standing kharif crop.
Contrasting trends
The
expected turnaround in the performance of agriculture is likely to
reinvigorate rural demand in the second half of this fiscal.
Nevertheless, some selective indicators are likely to see a contrasting
trend. For instance, lower demand for pumping ground water for
irrigation would dampen the pace of growth of diesel consumption.
Food
inflation is expected todip as the monsoon progresses, taking a cue
from improved kharif acreages, as well as lower prices of perishables
following a decline in temperatures, even if their output is not
correlated with the monsoon. A favourable monsoon may also benefit the
fiscal health of the Central and State Governments, particularly if
demand for work under the MGNREGA eases and less funds are required for
activities such as drought relief.
While the monsoon may turn out
to be favourable in 2016, a concerted effort is required to reduce the
vulnerability to variations in rainfall. Augmenting the storage of
rainwater and reducing run-off; switching to less water-intensive crops;
expediently completing pending irrigation projects and adopting more
efficient methods of irrigation — these would ease India’s dependence on
monsoon.
The writer is Senior Economist, ICRA