Tidings of a bountiful monsoon could lessen economic woes in India, South Asia

The southwest monsoon’s impact is felt throughout South Asia. Above-normal rainfall is likely over Pakistan, the Maldives, and Sri Lanka, while it could be less than normal in Bangladesh, writes N Chandra Mohan for South Asia Monitor

N Chandra Mohan Jul 21, 2020
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The fortunes of India’s agricultural sector, if not the economy, depends on the rhythms of the southwest monsoon. Over half of the country’s net cultivable area is un-irrigated and rain-dependent.  Between 55 to 60 percent of agriculture, forestry, and fishing’s contribution to the economy in terms of gross value added emanates from croplands that are rain-fed. More than three-fifths of India’s farmers cultivate crop without irrigation. It is this segment that seeks deliverance from the dark clouds that cross Kerala’s coast every June, sweep over the peninsula and shower the rest of the country with rain till September.

The southwest monsoon is expected to be normal this year, meaning that total rainfall is expected to be 96 to 104 percent of the long period average of 887.5 mms over the season. The southwest monsoon’s impact is felt throughout South Asia. The rains are also expected to be normal in this region, according to the South Asian Climate Outlook Forum. Normal rains are an average of differences across countries: Above-normal rainfall is likely over Pakistan, the Maldives, and Sri Lanka, while it could be less than normal in Bangladesh.

COVID-19 impact on economy

In India, normal rainfall is a good augury for higher grains production during the Kharif or summer season when crops like rice, millets (jowar, bajra, ragi, and others), pulses, oilseeds, cotton are sown in June and July. In theory, higher output boosts the income of farmers. In turn, this triggers demand for consumer goods, two-wheelers, and tractors, which help industrial growth. Good rains thus support economic growth. At a time the economy has been impacted by COVID-19 and might register negative growth this year, a buoyant agriculture is the exception and could be the basis for a revival in the near- future.

Although farmers reap record harvests with bountiful rains, their incomes do not necessarily improve under all circumstances. Consider the recent experience when farm prices were depressed after the nationwide lockdown kicked in from March 25 to fight COVID-19. Demand from institutional buyers like hotels and restaurants evaporated, resulting in a crash in prices of milk, potatoes, and tomatoes. This extended also to horticultural produce like grapes and bananas. The poultry industry, too, was adversely affected as people started consuming less chicken and eggs. Farmer incomes took a hit.

Nevertheless, the agricultural sector’s fortunes contrast sharply with those of manufacturing and services that are still struggling in coping with COVID-19. As the lockdown coincided with the peak rabi or winter/spring season, the government exempted harvesting operations, sale of produce in markets, and intra and inter-state movement of grain from any restrictions. The upshot is that farmers in the vanguard agrarian states like Punjab, Haryana and western Uttar Pradesh successfully harvested their wheat crop, while economic activities in the major metropolises shut down completely.

At this time, the government also pumped in much-needed liquidity into the agricultural sector with its procurement operations of wheat and other crops at high minimum support prices. To improve farmer incomes, it also frontloaded payments into the bank accounts of 84 million farmers under the PM Kisan Samman Nidhi. Outlays on the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA) was stepped up to provide additional job opportunities in rural India. All of this added up to a significant infusion of resources amounting to 0.7 percent of the nation’s output of goods and services.

As the southwest monsoon this year covered the entire country ahead of time, farmers were able to sow 55 percent of the normal area sown of 106 million hectares as of July 10. In contrast, they covered only 38 percent of the normal area sown during the same period last year. Sowing operations have also been aided by excellent soil moisture conditions, thanks to plentiful pre-monsoon rains.

Water levels in major reservoirs are also higher than comparable 10-year averages. Higher MGNREGS spending and brisk sowing in kharif season is keeping rural India better employed than elsewhere. Joblessness has come down in agriculture, according to the Centre for Monitoring the Indian Economy.

Bumper crop

The agricultural sector thus will register robust growth due to a bumper kharif season in prospect. The government expects Kharif production to be 149.9 million tonnes. With a similar contribution from the rabi season, overall output is pegged at 298.3 million tonnes in 2020-21. The big challenge for policy is to build more irrigation facilities to reduce monsoon-dependence.

The rains maybe normal this year but the monsoon has been wayward in recent years. Six of them saw below normal (2012, 2017 and 2018) and deficient rainfall (2009, 2014 and 2015). Investments in irrigation must be stepped up as Kharif crops like millets, pulses and rice are grown on un-irrigated fields. Unless this happens, the Indian economy will remain hostage to the vagaries of the falling rains.

(The writer is an economics and business commentator based in New Delhi. The views expressed are personal)

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