It is that time of the year when heavy dark clouds are particularly welcome as they spell the onset of the monsoon across India. This country’s $1.2-trillion economy remains substantially dependent on a good monsoon, with barely 14 per cent of arable land under irrigation on an average. While the rains in June are important, those in July are even more vital as several major crops depend on these, and will otherwise fail.
The good news so far this year is that the rains have arrived a couple of days ahead of schedule in Kerala, Lakshadweep, South Tamil Nadu and the Andaman and Nicobar Islands, heralding the onset of the southwest monsoon. This is the so-called Arabian Sea branch of the southwest monsoon; the other one — the Bay of Bengal branch — provides rainfall to areas east of the western ghats. The southwest monsoon determines the fate of the nation’s kharif crop — foodgrain, cotton, oilseeds, etc. — in the main cropping season.
If, as forecast by the India Metereological Department, this year’s rains are normal and the sowing can be done on time, the prospects for a good crop are bright. But it is also not that simple. A lot of groundwork needs to be done — loans have to be disbursed in time so that farmers can buy agricultural inputs, such as seeds and fertiliser, before it is too late. Complaints are already coming in from Maharashtra’s Vidarbha region, from where the maximum number of farmer suicide deaths are reported, that the banks are going very slow on loan disbursements, and since the government delayed fixing the price of seeds, there is a delay in distribution of seeds as well, and these are openly being sold in the black market. It is learnt that just 10 per cent of farmers have received Kisan Credit Cards, which makes them eligible for loans automatically when they pay off their earlier loans. But even in such cases, the banks work less efficiently than they should. If these hurdles can be overcome, the agriculture scenario should be positive, and the economy in general will benefit.
Agriculture accounts for just 28 per cent of India’s GDP and has grown by 2-4 per cent in recent years. But 70 per cent of India still depends on agriculture, and therefore if the monsoon is not good the results can be devastating. Millions of poor people are driven into further impoverishment. From industry’s perspective, a good monsoon is an instant bonanza for certain sectors, such as fast-moving consumer goods (FMCG) and two-wheeler and tractor manufacturers as rural India has more purchasing power in its hands. It could also help tame food inflation, though last year, even though there was a good monsoon, food prices actually soared. One reason behind that was Russia stopping grain exports after it had a bad season. India is heavily dependent on the import of pulses, so if countries like Burma have a bad crop the prices soar in the international markets. Also, the domestic onion crop was destroyed due to unseasonal rains and floods. If food inflation falls, the overall inflation rate could come down too and lead to a softening of interest rates. The Reserve Bank will at least not be under pressure to raise interest rates. Ironically, a good monsoon will have little positive impact on the stock markets (as just a few fertiliser stocks and an irrigation company are listed); unlike the huge negative impact that a bad monsoon has on market sentiment. The country will, of course, pray as usual to the rain god Indra that he shower his blessings on India and its people.