New Delhi: India’s below-normal monsoon has caused a significant decline in the area under foodgrain cultivation, a trend that, if it lasts, could trigger a rise in food prices.
Agriculture minister Sharad Pawar had told the Rajya Sabha on Friday that the area sown under rice in the year to 17 July fell to 11.46 million ha, from 14.52 million ha in 2008, a fall of 21%.
Farmers have begun substituting foodgrain with cash crops, which require less water. Overall, the volume of land under kharif (summer crop) has fallen only 8%.
Experts warn that this is among the first signs of the negative impact of the monsoon’s failure on the country’s agricultural gross domestic product (GDP), but say a conclusive picture will emerge only by January.
While the shift to cash crops is unlikely to trigger a food security problem, especially with sufficient food stocks on hand, it is likely to cause an increase in food prices. As of July, food price inflation was 8.24% as measured by the Wholesale Price Index, while retail inflation, which accords greater weightage to food prices, was averaging nearly 9% at the end of May. Food prices also move on account of market estimates of supply. Less land for foodgrain cultivation means lower production.
India’s monsoon rains have been short by 19% of their seasonal normal, between June and July. Sandeep Bhatnagar / Mint
“We’ve had record procurement on the back of two good monsoons,” said Mahendra Dev, chairman of the Commission for Agricultural Costs and Prices, the government body that recommends price support for agricultural crops. “But the bad monsoon’s impact may well begin to affect our food security from next year. However, a clear picture should emerge from mid-August.”
India’s monsoon rains have been short by 19% of their seasonal normal, between June and July. The monsoon accounts for nearly 80% of the annual rainfall and is vital for the economy, being the main source of water for agriculture, which accounts for around 17% of GDP.
Other than the 60% of the country’s workforce that depends on agriculture, the rains are also important for traders dealing in food and cash crops.
The current year’s monsoon is considered to be crucial for the economy as buoyant rural consumption has been a key driver of growth amid an economic downturn. While the country has sufficient food stocks to tide over any crisis this year, the rise in food prices that will follow a poor monsoon and, consequently, a poor harvest could wreak havoc on the economy.
“Agriculture GDP will definitely be impacted, it’s only a matter of how much,” said Himanshu, agriculture economist at the Jawaharlal Nehru University and a columnist for Mint. Though farmers typically grow oilseeds as a second or third crop during the kharif season, these are being sown this year on the back of a poor monsoon, say experts. That’s because these crops are less water-intensive and are easier to grow, Himanshu added.
Around 85% of India’s kharif crop are cereals, largely rice, pulses and oilseeds. While a poor monsoon has seen land under cultivation contract across all categories, oilseed cultivation has been the least affected, with a fall of only 3% (in terms of land under cultivation) compared with last year.
Rice, India’s most important and widely grown food crop, accounts for nearly 35% of the nation’s farmland in the kharif season. Farmers prefer cultivating rice to any other crop during the kharif season as they find a guaranteed, well-paying buyer in the government. A decline in acreage will, thus, hurt next year’s procurement and affect the country’s growth.
Meanwhile, the areas earmarked for sunflower and castor have zoomed 145% and 54%, respectively, compared with last year. Though the returns on these cash crops aren’t as good as those on rice, farmers prefer it to leaving their farms fallow. “India imports most of its oilseeds, and our production is very small. The returns on these crops are minimal for farmers and, therefore, if they are planting these early on, it’s a sign that they are worried and diverting land (meant) for rice to oilseed,” Dev added.
That isn’t always a better move, said an expert. “Some farmers have seeds and required inputs such as fertilizers, etc., for oilseeds, but it does not prove remunerative for them to grow oilseeds. For they (are) assured of a decent minimum support price in rice, which does not work in oilseeds. A lot of times farmers have to sell oilseeds much below the minimum support prices,” said S. Raghuraman, head of trade research at Agriwatch, a New Delhi-based research firm.
Sangeeta Singh contributed to this story.