The govt needs to step in to revive rural demand
Agriculture is not only crucial for what happens to growth, inflation and rural distress, it is also politically important given the simmering discontent among farmers in the last two years
Last week, the India Meteorological Department (IMD) declared that the south-west monsoon has covered the entire country, 15 days earlier than normal. This may be a cause for celebration considering the distress in agriculture in the last four years. Agriculture is not only crucial for what happens to growth, inflation and rural distress, it is also politically important given the large-scale protests and simmering discontent among farmers in the last two years. While the reasons for discontent are many, with the government also contributing to it, one factor that will play a role is the monsoon.
Unfortunately, the good news shared by IMD is not that good, looking at the regional scenario. Even at the all-India level, after the first month with data up to 1 July, monsoon rainfall is cumulatively 7% less than normal, putting it in the deficient category, as against the prediction of normal monsoon. Disaggregated data shows that only 24% of land area in the country has received normal or excess monsoon rainfall, while 38% falls in the deficient category and another 38% in the large-deficient category. It is this 76% deficient category, which is worrying because in some of these regions, deficient rainfall is far too serious to be ignored.
Areas that have received normal to excess rainfall are the southern peninsular states of Karnataka, Andhra Pradesh, Maharashtra, Telangana, Tamil Nadu and Kerala, along with the north-western states of Punjab, Haryana, Himachal Pradesh and parts of Rajasthan. The north-western states are anyway among regions with better irrigation coverage and monsoon does not make much of a difference. But it is the deficient states and regions that should cause worry to the government.
Gujarat is among the states with the largest deficiency, with the Saurashtra region receiving 86% less rainfall and remaining parts of the state receiving 34% less rainfall. Others include the eastern states of Odisha (28% deficient), eastern Uttar Pradesh (59% deficient), western Uttar Pradesh (48% deficient), Bihar (39% deficient), Jharkhand (37% deficient) and Gangetic West Bengal (19% deficient). These states are among the poorest, with agrarian crisis hitting them hard in the last four years.
While there is still time for monsoon to cover the deficiency, it has already affected sowing of major kharif crops. As on 29 June, total kharif sowing was 21.6% less than the area sown until this week last year. Total foodgrain sowing was lower by 25%, with paddy sowing lower by 10% and coarse cereals by 30%. On the other hand, area sown under pulses and oilseeds has declined by 41% and 44%, respectively, compared to that of last year. The situation is the same for non-food crops such as cotton, which has reported lower sowing by 30% compared to that of last year.
But the real worry is rural distress and collapse in demand, which has led to a sharp drop in commodity prices. It is unlikely that this will be resolved easily, with economic growth still limping back to normal. Although the government has promised a generous increase in minimum support prices (MSP), this has not yet been announced even though the sowing season started a month ago. But even with the proposed MSP increase, it is unlikely to revive demand in rural areas unless the government proactively enters the market and procures at the announced MSP. The MSP increase may have an inflationary impact, which might pull back the government from incurring expenditure on procurement. Nor is there likely to be other large-ticket expenditure on rural spending, which could have revived demand in rural areas. But the least the government is expected to do is to announce the MSP at the earliest.
Even though there is still some hope of a revival in the monsoon, it may not be enough to revive agriculture unless the government proactively intervenes in pulling up commodity prices. This may require loosening the fiscal purse, which appears unlikely given the worries of a weakening rupee and the rise in current account deficit. But there are hardly any options left for the government. The revival of agriculture at this juncture is not just crucial to revive domestic demand given the worries on the external front, it is also important if the government has any hopes of coming back to power in the 2019 general elections. More so, given that most states that have received deficient rainfall are those where the ruling dispensation has high hopes of retaining or increasing its seats. Gujarat, Jharkhand, Chhattisgarh, Bihar and Uttar Pradesh are also states that account for almost one-third of the total seats of Parliament. While the government has no control over the monsoon, the least it can do is to insulate the farming community from the vagaries of rural distress, most of which has been created by this government.
Himanshu is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi