This is not an apocryphal tale. Weather forecasters in both the United States and Japan had warned the Indian Meteorological Department (IMD) that the summer monsoon, which plays a crucial role in the socio-economic fabric of south Asia, would be below normal.
Flying in the face of their evidence, the IMD, held a press briefing end-April insisting India would see an above average monsoon. The 137-year-old IMD has had a patchy record, underscoring the challenges weather watchers face. Seemingly unaware of these dynamics, Dr Ashwani Kumar, minister for science and technology, poker-faced, informed us that India would bear witness to a 102 per cent rainfall this year.
Alas, we are now six weeks into the monsoon and alarm bells are ringing across the country. The 2012 “straggler” monsoon is 23 per cent in the red with the north west states struggling to cope with a 40 per cent deficiency. The south has not fared all that well either. Rainfall has been patchy in Karnataka, Maharashtra and Gujarat are facing up to a 60 per cent deficiency in some districts, forcing Agriculture minister Sharad Pawar to admit he was worried about poor rains in these states.
“Half the sowing is already over, but it can continue up to the first week of August. There is time…With improvement in rains, the planting of paddy and soyabean will continue on course,’’ said Pawar. Poor rains in India’s key pulse-producing southern and western states has, however, affected sowing and could trim output. Lower output of pulses could force the government to import more lentils. India already imports over 20 million tonnes of assorted pulses from Australia, Canada and Burma. A staple in our diet, they contribute 0.72% to inflation, which at 7.55 per cent currently is extremely worrisome.
Food minister K.V. Thomas has admitted that production of coarse cereals — bajra, jowar and maize — would be hit. The IMD’s forecasts have been toned down, too, since the initial exhuberance. Making a clean breast, Dr L.S. Rathod, director-general, IMD, said, “So far, there has been a 23 per cent deficit in monsoon and this will continue through the next week. Rains should pick up in August, but in September there will be the El Nino factor, which will result in less rain. Overall the picture is not very encouraging”.
The farm sector accounts for about 15 per cent of India’s nearly $2 trillion economy and nearly 60 per cent of the nation’s population depend on it. Good harvests are crucial to maintain rural incomes and keep up consumer demand.
Given the rising worry over the monsoon, consumer goods companies are busy firming up contingency plans to deal with declining sales volumes. Chitaranjan Dar, divisional chief executive of ITC foods, warns that a weak monsoon will naturally reflect on costs and the industry will be bound to feel the impact around September-October. With the global recession persisting, India will depend on domestic demand, which was expected to come largely from rural India.
Economists warn, meanwhile, that food prices are set to rise sharply, especially if rainfall weakens again. The ministry for agriculture has switched to its contingency plan to encourage farmers to grow hardier crops. But it’s easier said than done.
The summer monsoon also remains a key source of water. What the government is not talking about is the fact that water levels in 84 major reservoirs have dropped to an all time low. The Central Water Commission had released figures that storage levels in the reservoirs are 154.421 billion cubic metres (bcm) but on June 28, they had dipped to 25.36 bcm, against 41.01 bcm on June 28 last year. This is the lowest they have reached in the last 10 years, and it is bound to affect power generation adversely, both for domestic and industrial consumption. Already, the country is being pushed to the brink in terms of severe power shortages and drinking water.
The lack of rains is being felt across the country in different ways. Scrap gold sales are gaining momentum as farmers, distressed at the poor monsoon, prefer to sell their gold at a time when gold prices are skyrocketing. In fact, this trend has picked up in urban areas, too, where a cash crunch is forcing people at large to take advantage of rising gold prices.
Will this weak monsoon end India’s hopes of an early economic revival? Poor monsoon will slow economic growth, presently at 5-6 per cent in the current fiscal, even further. It will also hit the banking sector as it is set to affect credit offtake in the farm sector. “If the monsoon remains weak, it will further fuel inflation. Except for wheat and rice, of which we have buffer stocks. But the pressure will be on coarse cereals and oil seeds”, said D.K. Joshi, chief economist with the credit rating agency Crisil.
The only section that could be smiling about the rain deficiency are companies selling air conditioners and cement. Less rainfall means construction activities can continue unabated while rising temperature means growth in sales of air conditioners.
The country’s economy is riding on the monsoon in the next ten days. If the monsoon recovers, so too, to some extent, will the Indian economy.