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October 31, 2019

Indian Economy: The monsoon trail

The southwest monsoon confounded weather forecasters this year. First, the onset of rains, due by June 1 each year, was delayed by a week. Upon arrival, rainfall was scanty and deficient. As of June-end, all-India rains were 36% below normal. Thereafter, it had a change of heart, and swiftly moved from being deficient to surplus, in a matter of 2-3 weeks. Finally, it ended with 10% surplus.


Up to 4% surplus is considered normal. However, the spread suggests a skewed distribution. Uneven distribution of rains – both spatial and temporal – meant that sowing was initially slow, but gained pace later. However, excess rains damaged crops, in addition to life and property, in some regions. The extent of crop loss, in particular, proves difficult to ascertain.


Where rains were weak, presence of healthy irrigation cover helped (like in Uttar Pradesh and Bihar), but in parts of West Bengal, where irrigation coverage is low, poor rains spoilt crop production, especially paddy. Then again, in regions with excess rainfall, where damage was extensive, cost of production for farmers is likely to have risen due to re-sowing and increased use of fertilisers to improve crop yields.


Spatial and temporal distribution was skewed, though presence of healthy irrigation cover in a few states came to rescue in areas where rains were scanty


Overall, kharif production is expected to end slightly lower than last year, but rabi output could be healthy given good irrigation and groundwater levels. Given the squeeze in kharif output, food prices have started seeing a mild uptick. For the current fiscal so far, food inflation is at 2.6%, compared with 1.8% in the corresponding period of last fiscal. That, coupled with an increase in minimum support prices, could result in slightly higher food prices this fiscal. However, given that farmer incomes have been under duress for the last few years, this minor lift to their incomes is welcome.