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Business News/ Opinion / Online-views/  The threat of a bad monsoon
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The threat of a bad monsoon

With another six weeks to go, the uncertainty is gradually giving way to fear of the worst

A drought is declared when rainfall for the entire monsoon season is deficient by 10% and the area affected covers 20-40% of the area of the country. At this stage, it is evident that parts of India will experience drought-like conditions. Photo: Hindustan TimesPremium
A drought is declared when rainfall for the entire monsoon season is deficient by 10% and the area affected covers 20-40% of the area of the country. At this stage, it is evident that parts of India will experience drought-like conditions. Photo: Hindustan Times

The progress of the monsoon this year has been anything but reassuring. With another six weeks to go, the uncertainty is gradually giving way to fear of the worst. With the benefit of hindsight, some would claim, and rightly so, the India Meteorological Department (IMD) seems to have got the scale of its sub-par monsoon forecast. But has it?

At present, the pattern of the monsoon is similar to that exhibited in 2009 and 2012. The big difference between the two years being that the former was a drought, while the latter eventually ended well with the monsoon exhibiting a spectacular pick-up in the remaining weeks. The question then is whether we are looking at a drought or a sub-par monsoon. There is no easy answer. We are at a cusp and the outcome can go either way.

According to the data put out by the Met department on 26 July, nearly two-thirds of the country had cumulatively received deficient rainfall (classified as minus 20% to minus 59% below normal). About 1% of the country was classified as having received scanty rainfall (minus 60% to minus 90%). Overall, the cumulative deficit of rainfall for the entire country is 25% at the end of this period. It was almost 40% a few weeks back, suggesting that there has been a pickup in the monsoon in this period.

The situation in 2012 was somewhat similar at the same point of time. On 28 July 2012, about 46% of India was classified as having received deficient rainfall, slightly better than today, and 12% was classified as scanty, substantially worse than today.

Like in 2012, the regional story is similar in starkness in the current year. On 28 July 2012, the rain deficit was 10% in east and northeast India, 21% in the south peninsula, 20% in central India, and 39% in northwest India. In 2014, on 26 July, the deficit was 23% in east and northeast India, 24% in the south peninsula, 20% in central India and 38% in northwest India.

If the monsoon mimics the pattern it established in 2012, everyone should breathe easy. This is because, beginning August, the monsoon picked up sharply and the country ended up with a cumulative rainfall that was 7% below normal. However, if follows the trend of 2009, then India is headed for a drought.

To be sure, a drought is declared when rainfall for the entire monsoon season is deficient by 10% and the area affected covers 20-40% of the area of the country. At this stage, it is evident that parts of India will experience drought-like conditions.

What will be of particular worry is that sowing of the summer, or kharif, crop has been slowed due to the delay in the monsoon. Overall sowing is nearly 30% behind the normal trend at this point of time. On 24 July, an area of 53.3 million hectare was sown under different crops. It was however up 34.5 million hectare in the previous week. If the monsoon does continue to play catch up, then the kharif crop may still escape a serious setback.

Clearly, the Bharatiya Janata Party-led National Democratic Alliance (NDA) is not taking chances. Last week it followed up on its earlier decision and decided to offload a fresh stock of food grains in the open market to dampen inflationary expectations.

At the moment, the latest inflation data indicates it has begun to decelerate. Retail inflation slowed to 7.31% in June, the lowest in over two years, and wholesale price inflation decelerated to a four-month low of 5.43% in June. But, given that this is partly due to the base effect—last year seeing a spike in inflation—and that vegetable prices have seen a dramatic spurt (I paid Rs100 for a kg of tomatoes on Sunday; in most kitchens, tomato puree is rapidly replacing the vegetable), there is a good chance that inflation would rebound.

The Reserve Bank of India (RBI) will of course be viewing this closely. By the time it comes around to its bimonthly policy statement due on 5 August, it would have at least 10 days more data on the monsoon. Its stance should reveal a lot on the direction of macroeconomic thinking in policy circles in a bad monsoon year and for an economy recovering from years of neglect.

It is not just the RBI, but even consumer companies which have come to rely on rural demand, will be watching the progress of the monsoon closely. Since the setback is unlikely to be uniform across the country, rural demand would not necessarily see an across the board squeeze. The bigger threat will be from resurgence in inflationary pressures.

For the NDA, which has hardly had time to savour its dramatic victory, priorities will shift from firefighting to managing the politics of a bad monsoon, especially given that elections to five state assemblies are due in the next few months and the fact that NDA came to power on the promise of fixing, among other challenges, inflation.

Anil Padmanabhan is deputy managing editor of Mint and writes every week on the intersection of politics and economics. Comments are welcome at capitalcalculus@livemint.com

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Published: 28 Jul 2014, 12:17 AM IST
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