Droughts inevitably inflict terrible pain on farmers and the poor, as farm output falls and food prices rise.
But an erratic monsoon has become less of a danger to the Indian economy as a whole in recent decades.
The first four significant droughts after Independence —in 1957, 1965, 1972 and 1979—led to at least a year of negative economic growth. Growth fell by 10 percentage points or more over the previous year after the 1965 and 1979 droughts.
The economy actually grew despite droughts in 1987 and 2002. India’s growth rate did drop in those years, but by a slim 0.8 and 2 percentage points, respectively. Thus, the record suggests that a collapse in the growth rate is unlikely if the monsoons do not revive soon this year.
The damage is unlikely to exceed 1 percentage point. Three possible reasons come to mind. One, farming contributes less to economic activity than before. Two, the rural economy has diversified beyond farming. Three, the rural jobs scheme will support rural incomes. So, let’s worry, but not panic.