M A I N   N E W S

Poor monsoon will add to economic woes, says industry
Sanjeev Sharma/TNS

New Delhi, July 29
The poor monsoon is adding to the woes of the already ailing Indian economy.

Industrial body CII has expressed concern over the impact of the deficient rainfall on the broader economy, at a time when there is already a sharp slowdown on account of various domestic and global factors.

“Not only will there be an impact on the performance of the agricultural sector, but also on other sectors through effect on rural incomes,” said Chandrajit Banerjee, director general, CII. The government should take urgent measures to ensure that rural livelihoods were protected, he added.

The CII said the Indian economy was currently grappling with high inflation rates, emanating largely from surging food prices. A normal monsoon would have provided the much needed relief by easing the domestic supply-side pressures.

As per the India Meteorological Department, the average monsoon rainfall has been deficient by 22 per cent in the country for the period from June 1 to July 16. As evident from the data, years in which there was a higher deviation of the monsoon from the LPA, higher food inflation was recorded. However, food inflation was low during the drought in 2002-03 as there were huge buffer stocks of foodgrains. Although the situation is similar today in terms of grain stocks, inflationary concerns have now moved to crops such as pulses, oilseeds and perishables.

Concomitant with the poor monsoon progress, the sowing of major kharif crops, as on July 13, 2012, was down 18 per cent as compared with last year’s figures - almost similar to the pattern observed in 2009, which saw the worst drought in four decades. Major declines have been reported in area under rice, coarse cereals, pulses and oil seeds cultivation.

Scanty rain in Karnataka, Maharashtra and Andhra Pradesh this year is expected to affect sowing of coarse cereals and pulses. This is certainly worrisome as both coarse cereals and pulses are already grappling with double-digit inflation since the second-half of last fiscal. Any adverse impact on rural livelihood would also increase the demand for government welfare schemes, thereby putting more pressure on the fiscal deficit, the CII said.

The Crisil Research says the agricultural production in Gujarat, Rajasthan, Maharashtra, Karnataka, and Madhya Pradesh is likely to be hit the most due to the poor rainfall. Crop-wise scores show that coarse cereals (jowar, bajra) oilseeds (groundnut, soyabean) and pulses (tur) have been impacted the most due to deficient rains.

Rajasthan and Madhya Pradesh not only have high incidence of rural poverty, but also high dependence on agriculture. Providing relief to these states will translate into a higher burden on the exchequer.

Kharif production will be hit as sowing of quite a few crops has been negatively impacted due to deficient rainfall. At the all-India level, area sown till July 13 was around 19 per cent lower than the area sown during the corresponding period last year. The yield of planted crops will also suffer. This will shave off some part of the GDP. If the monsoon continues to remain below normal in August, the GDP growth could fall below 6 per cent from Crisil’s current expectation of 6.5 per cent.

Food inflation, which is already high, will face further pressure due to poor rainfall.