Mumbai: The weak monsoon this year poses risks to India’s growth and inflation rates as any drop in agricultural production may result in higher burden on the exchequer to provide relief to affected states, Crisil said. After a dismal June there was some improvement in July rainfall, but a 64% shortage during the 30 July - 5 August week raised the total deficiency in this season to 25%.
Crisil measures the impact of rainfall using an index named Deficient Rainfall Impact Parameter (DRIP), which is based on the premise that both the availability of irrigation and the level of precipitation affect crop production.
“DRIP scores based on data till 5 August show that Uttar Pradesh, Madhya Pradesh, Maharashtra, Andhra Pradesh, Bihar and West Bengal have been hit the most by poor rainfall,” DK Joshi, principal economist at Crisil, said in a note on Monday.
These six states account for 47% of total summer food grain production and 46% of total summer rice production in India.
Crisil said food inflation, which is already under pressure, may accelerate further due to lack of buffer stock for rain-dependent coarse cereals and pulses.
However, sufficient stocks of rice, projected by DRIP scores as the most adversely impacted crop, will keep a lid on rice prices, it added.
While the overall national agriculture is not at same level of risk as it was in 2002, the “grave situation” faced by some states will definitely shave off part of the GDP and the extent of damage will be clear by end-August, Crisil said.