New Delhi: Meagre monsoon rains have pushed India to the brink of drought, putting pressure on food prices and energy supplies and imperiling growth, but wheat and rice stocks will provide a buffer, officials said on Tuesday.
India’s monsoon rains have been 29% below normal since the beginning of the June-September season, hurting crops such as rice and cane and triggering a sharp rise in food prices in India and sugar futures abroad.
The monsoon is vital for India’s summer-sown crops because most farmers do not have access to irrigation facilities.
“We are staring at the prospect of an impending drought,” Prime Minister Manmohan Singh told a meeting of state environment ministers.
Rains have returned in the past few days, particularly in cane-producing Uttar Pradesh, where the local government has declared a drought in most districts. But this has not eased the concerns of top national officials, who only in recent days began to characterize the countrywide situation as a drought.
Gujarat imposed limits on the quantity of pulses and sugar that traders can hold, a state government official said on Tuesday, part of a nationwide crackdown on hoarding in the hope of checking price rises.
Reserve Bank of India deputy governor K.C. Chakrabarty said erratic monsoon rains may put pressure on prices, but deputy chairman of the Planning Commission Montek Singh Ahluwalia said India had enough food stocks to counter inflationary pressures.
Commerce secretary Rahul Khullar said the government was not considering a ban on exports of corn and soya meal.
Finance minister Pranab Mukherjee said he expected growth in 2009-10 to be at least 6%, as forecast earlier and in line with a central bank estimate, despite the monsoon shortfall.
Still, the Sensex, India’s benchmark share index, gained 1.7% on Tuesday.
Some economists have said poor rains could trim economic growth by as much as 2 percentage points in the fiscal year ending March. Some investors are growing nervous that a poor harvest could crimp rural spending and erode profit growth for consumer goods sellers.
Citigroup on Tuesday scaled back its estimate for Indian growth in 2009-10 to 5.8%, down from 6.8%, because of a downturn in the farm sector.
Higher food prices were likely to raise India’s inflation rate to 6% at the end of the fiscal year, above an earlier 4% forecast, Citigroup analysts Rohini Malkani and Anushka Shah said in a report.
Farming accounts for 17% of the Indian economy, but rural consumption makes up more than half of domestic demand.
India’s growth slowed to 6.7% in 2008-09 after three straight years of growth of at least 9%.
Nidhi Verma, Rajesh Kumar Singh, and Rajkumar Ray contributed to this story.