New Delhi: Is India looking at another drought, the fourth in the past decade?
Some key parameters, such as crop-sowing patterns and the deficit in monsoon rainfall, suggest that this could be a possibility.
According to the India Meteorological Department (IMD), the cumulative deficit in rainfall on 9 July was 25%; as opposed to the normal rainfall of 240.3mm at the end of this period, the cumulative rainfall was 180.9mm.
A drought is declared when monsoon rainfall, for the entire season, is deficient by 10% and the area affected covers 20-40% of the area of the country. Since it has been forecast that El Nino, a shift in ocean temperatures that disrupts usual weather patterns, may set in by the end of August, the country will have to receive record rains in the next few weeks if the deficit is to be made up.
July is a busy sowing month, and, according to the agriculture ministry, as of 6 July, the sowing of rice—the main kharif crop—at 5.54 million hectares, was down 16.3% from the previous year, while the area under coarse cereals stood at 2.195 million hectares, down 34.6% from a year ago. Over the same period, sowing of pulses was down by 13.9% and of oilseeds by 7.7%.
The only increase in sowing has been in the area under sugar cane and cotton, which need less water; the increase is a little less than 5% in each case.
Abhijit Sen, Planning Commission member in charge of agriculture, maintained that he was worried because average precipitation was not increasing though rainfall coverage had increased. “If rainfall does not increase drastically by 15 July, then we will have a deficit year with rainfall 10% less than normal,” he said.
As a result, he said, it is certain now that the chance of 4% agricultural growth as targeted by the government earlier is remote. “The hope that agriculture will give huge impetus to domestic growth directly or through rural demand can be written off,” Sen added.
In case there is a drought, the government will have to spend more on agriculture-related areas, he said. “I hope the so-called policy paralysis does not extend to agriculture,” he added.
And the government has to find the fiscal space to spend more, Sen said. “When it is a drought year, the choices are between fiscal space and the people of India. A sensitive government has to make a choice between the two,” he said.
Overflowing food stocks, estimated at 82.3 million tonnes, should provide some cushion to the economy.
IMD forecasts a further let-up in the monsoon. “There’s likely to be some decline next week,” said L.S. Rathore, IMD’s director general, who sought to play down the impact of deficient rainfall. “The only problem is that late sowing could eat into the rabi, or winter, crop. Otherwise, even a further two-week delay in rainfall will not really harm rice and pulses,” said Rathore, who earlier headed the agro-met division of IMD.
The immediate fallout of the poor monsoon would be lower rural demand and higher retail inflation (it is already in double digits). It would also increase demand for the government’s rural employment guarantee scheme, which has an annual budget of Rs 33,000 crore, and thereby put more pressure on the fiscal deficit.
A spokesperson for Dabur India Ltd, the consumer products firm that owns brands such as Dabur Chyawanprash, Hajmola (healthcare), Real (packaged juice) and Vatika (personal care), among others, said the company is watching the monsoon closely as 50% of its revenue come from rural markets.
The true picture will emerge at the end of the second quarter in September, after a good first quarter, the spokesperson added.
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A. Mahendran, managing director of Godrej Consumer Products Ltd, said, “The 30% deficit in rainfall has impacted July sales. We will have more clarity on numbers by the end of this month. In categories like insecticides and hair colour, which are not necessities in the rural market, we might be expecting a dip.”
Still, the government’s continuing support for rural employment schemes may soften the blow on rural spending, said Kannan Sitaram, a consumer products expert at India Equity Partners. “To be fair, when the monsoons failed in 2009, there was no major impact on rural demand. The government had been supporting prices. Even the landless labourers were supported by (the rural jobs scheme), which put some money in their hands.”
Firms cannot entirely escape unscathed, though, added Sitaram, previously a senior executive at Dabur. But “if the monsoons fail this year, there will be some compression of margins for the companies”, he said.
Shifts in spending will definitely be seen, another analyst said. “A deficit of 20-30% in rainfall will definitely impact rural demand going forward. All non-essential categories will get affected, and there will be a level of down-trading from the consumer’s side. For instance, if the rural consumer earlier bought a premium brand of toothpaste, he would shift to a cheaper brand,” said Pinaki Ranjan Mishra, a partner and national leader at Ernst and Young India Pvt. Ltd.
As early as February, a report by Japan Agency for Marine-Earth Science and Technology warned that India could face a deficit monsoon this year, while US-based World Weather Inc. indicated a relatively dry spell in August and September, according to a report in The Economic Times newspaper.
“It is considerably late now. Politicians are lingering on hope and divine intervention when they should have started preparing farmers for contingency measures weeks ago,” said P.C. Kesavan, a distinguished fellow at the MS Swaminathan Research Foundation in Chennai. “When sowing is down, will the final production be otherwise?”
Exacerbating the situation is the fear of the onset of a moderate El Nino; it may widen a monsoon deficit in India, while bringing excessive rain to the driest parts of the US, threatening floods in a region that’s been hit by a heat wave, Bloomberg reported, attributing it to a United Nations adviser.
El Nino, caused by a warming of the Pacific Ocean, can parch parts of Asia.
Asit Ranjan Mishra and Neha Sethi contributed to this story.