India is headed for its second drought in four years, a worrisome eventuality that policymakers fret could drive food prices sharply higher and drag down economic growth into an even lower orbit.
According to an assessment of deficit rainfall by CRISIL research, a risk and policy advisory service, fears of a full-blown drought this year appear to be well-founded. In a report by the company, which measured the impact of deficient rain on agriculture output through a method called Deficient Rainfall Impact Parameter (DRIP), this year’s monsoon has until 18 July been 21.9 percent below the Long Period Average (LPA). That’s nearly as bad as the deficiency seen in 2009, an all-India drought year .
These estimates fall well short of the Indian Meteorological Department’s prediction in April, when it called a “normal” monsoon. Subsequently, in June, the IMD revised it downwards to 96 percent, a 4 percent dip. But since then, the monsoon has played truant and increasingly its progress has raised the red flag of a drought.
Indicatively, in June, the first month of the monsoon season, the overall rainfall was around 25 percent below normal. In July, the situation was equally grim, with a deficit of 22 percent until 18 July.
On 23 July, the Prime Minister’s Office (PMO) acknowledged that the progress of the monsoon had been less than satisfactory.
A press release from the PMO noted that the Central government had prepared “extensive plans” to deal with the deficiency in the monsoon rainfall in parts of the country. The government, it added, was in “full readiness” to address “any situation that may arise due to any rainfall anomalies.” The Prime Minister, it claimed, had been apprised of the situation and had directed all departments and ministries to co-ordinate efforts with State Governments “to meet any eventuality” and to monitor the situation on a weekly basis.”
CRISIL research agency’s assessment, based on data recorded until 18 July, shows that agricultural production in Gujarat, Rajasthan, Maharashtra, Karnataka, and Madhya Pradesh will likely be hit the most by poor rainfall. In particular, coarse cereals (jowar, bajra), oilseeds (groundnut, soyabean) and pulses (tur) have been hit the most by deficient rains.
For most of these crops, the DRIP scores are higher this year than they were in 2009.
Rajasthan has seen a rainfall deficit of 34 percent, Madhya Pradesh experienced a dip of 23 percent in its LPA rains and Punjab – India’s grain basket – has seen a whopping 69 percent deficit in rainfall. These are all predominantly agricultural States, and at least in the case of the first two named States, the incidence of rural poverty is high. Drought relief measures are already being unveiled.
In 2009, the average rainfall during the monsoon season, which lasts from June to September, was 23 percent below normal, according to the Indian Meteorological Department. One of the worst years of deficient rainfall was 1972, when the overall deficit was of the order of 24 percent.
CRISIL research has predicted that kharif crop production will be hit because sowing of quite a few crops has been negatively impacted by deficient rainfall. Across India, the area sown until 13 July was about 19 percent lower than the area sown during the corresponding period last year. In addition, the yields of crops that have been planted will suffer.
If the monsoon continues to remain below normal in August too, GDP growth could fall – from the current estimate of 6.5 percent to below 6 per cent.
Poor rainfall will also have an adverse impact on food inflation, which continues to be a nagging worry for India.
The prices of rain-fed crops like pulses and coarse cereals could flare up. In addition, prices of oil seeds are expected to rise further because of lack of adequate sowing due to lower acreage, which will in turn push up WPI-based inflation above 7 percent. Reserve Bank of India Governor Duvvuri Subbarao on Tuesday increased RBI’s inflation projection from 6.5 percent to 7 percent for FY13, and lowered the country’s growth projections from 7.3 percent to 6.5 percent for the same period.
A weak monsoon will deal a blow to hundreds of millions of desperately poor agricultural labourers, small farmers and their families. The risk of malnourishment in much of rural India also rises up sharply.
Fearing lower output from agriculture and higher food inflation, the government on Tuesday took steps to cut irrigation costs and increase fodder supplies for livestock farmers.
A drought will put more pressure on the already high demand for diesel, which accounts for about 40 percent of consumption in Asia’s third-largest oil importer. Farm irrigation pumps use only 6 percent of overall diesel use but it would still be politically hard for the Manmohan Singh government to raise fuel prices and cut subsidies as part of a long-delayed efforts to rein in the fiscal deficit.
Planning Commission Deputy Chairman Montek Singh Ahluwalia told Reuters that while in his view “there is a good economic case” for adjusting oil prices, “it’s also no secret that these things become politically difficult, and maybe a little more difficult in a drought year.”
Elections are not due until 2014, but given the lack of unity of purpose among partners in the Congress-led United Progressive Alliance government, the risk of a mid-term election runs high. Cutting subsidies during a drought year will be seen as “anti-poor”. Two of the most severely affected States – Gujarat and Karnataka, both ruled by the BJP – also face Assembly elections later this year. It’s not just the Congress that will be fearful of the political impact of the drought.