(Graphic by Paras Jain/Mint; Photograph by HT)
(Graphic by Paras Jain/Mint; Photograph by HT)

How a deficient monsoon impacts the economy

  • The delayed onset of the crucial southwest monsoon, followed by its slow progress, will likely aggravate the agrarian distress in India.
  • Rainfall during the June-September season accounts for about 70% of India’s annual rainfall and is key for the country’s $2.5 trillion economy

Mint looks into the impact of a deficient monsoon.

What is the latest update on monsoon?

The southwest monsoon has started advancing to more parts of eastern India. The advance is slow and the strong winds that typically accompany the monsoon current are missing. A low pressure area is likely to form in the Bay of Bengal in 4-5 days and this may accelerate the current, according to the India Meteorological Department (IMD). Private forecaster Skymet expects rainfall in June to be about 40% below normal. Rainfall is likely to be below normal for the third year in a row, with rains seen at 93% of the long-period average, according to Skymet. IMD has forecast a better monsoon with rainfall seen at 96% of the long-period average.

What is the state of summer crop sowing?

As of 14 June, farmers had planted kharif crops across 8.22 million hectares, down 9% from the year-ago figure, according to agriculture ministry data. The difference can be largely attributed to the slow progress of the southwest monsoon in key regions. Rainfall, so far this season, has been 43% below normal. Most kharif crops, largely grown in non-irrigated regions, depend heavily on the monsoon. Paddy, the key kharif crop, has been planted across 426,000 hectares, down from 547,000 hectares a year ago. It is early yet, but the trends are concerning because most crops have a limited sowing window.

Will foodgrain and vegetable prices rise?

A fall in crop output does not necessarily mean a rise in prices of essential commodities. Prices of farm commodities have declined over the past two years, largely because of successive bumper harvests. So much so that the food ministry has this year proposed an additional allocation of 2kg each of rice and wheat per month to beneficiaries of the National Food Security Plan for six months to trim central pool stocks. Till a few months back, open market prices of most farm commodities were hovering below their respective minimum support prices. The situation is only a little better now. There is concern over rising prices of vegetables, not so much over cereals. In May, retail inflation rose to a seven-month high of 3.05% on the back of rising vegetable prices.

How are the states responding?

The agriculture ministry has directed state governments to prepare for any eventuality. Also, there will be no help from reservoirs, which are holding only 18% of their live storage capacity as of June 13. While the Telangana government has asked farmers to defer kharif sowing, governments in Punjab and Haryana are giving financial aid to farmers for looking at alternatives to paddy sowing.

Will a weak monsoon hurt growth?

The share of agriculture in India’s GDP has been falling, but the rural economy’s buying power has never been more crucial. Automakers, already in a tight spot after regulatory and structural changes in the sector, could be the worst hit. FMCG firms such as Hindustan Unilever and Dabur, and tractor makers like M&M and Escorts rely heavily on rural areas for sales. Weak farm incomes will hurt them. This impact could also trickle down to cement and paint makers.

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