Indian economy
hit by vagaries of weather DEVAJIT
MAHANTA
Vagaries of weather in place of regular monsoon
rains, which otherwise sustains India’s economy, has pushed India to the
brink of drought, putting pressure on food prices, energy supplies and
finally affecting economic
growth.
Rainfed agriculture
is risky and vulnerable, but it plays an important role in our national economy
because it contributes 60 percent
of the cropped areas and 45 percent
of the total agricultural
output. Though the rains have picked up since July, still it is 19 percent
below normal for the
nation as a whole. Deficit rainfall
is an increasing threat because more than 50 percent
of India's
population rely on farming for their livelihood and only 40 percent
of farmlands are irrigated.
Bad monsoon
impact consumers in a big way because it exacerbates food
prices coupled with rising global oil prices. India is
one of the world’s largest exporters of rice and sugar. The notable fall in
output due to below average rains is putting upward pressures on both
domestic and global prices. Insufficient crops could add to inflation
pressure.
RBI sources claim that food price inflation has been persistently high at
8.9 percent
as on July-’09. Falling water reservoir levels coupled with poor monsoon
not only for GDP and inflation, also affects the UPA government’s proposed
Food Securities Act for providing guarantee food securities to poor
families, i.e., providing 25 kg of wheat or rice per month at Rs 3 to every
family below the poverty line.
Deficit rainfall
has slowed the refilling of India’s
main water reservoirs, and threatened supply of hydropower. Central
Electricity Authority Chairman Rakesh Nath said that hydropower generation
in India
has fallen 20 percent.
In India,
monsoons directly impact agriculture
and hence the economy,
since the agricultural
sector contributes approximately 24 percent
of the GDP. India’s
four month rainy season starts in early June and runs through September
which is known as South-West monsoon.
It affects production of rice, millet, sugarcane, oilseeds and cotton. As
per the Met report, the June-09 rainfall
was 46 percent
below normal, it’s lowest since 1926.
The recent drought condition has created a question in the financial
market. “Is there a monsoon
effect in the stock
market?” For the Sensex, it has six times out of ten lost
value during this period. Most of the analysts say that stock markets have
a tendency to rule weak between June and September. Several companies,
especially in the FMCG, automobiles, fertilizer and construction segment
keep their fingers crossed because of demand close to saturation point in
urban areas.
However, if the
government increases rural spending and supports programmes, then
this problem will be negated. The government
can take some important
measures to mitigate the economic, agricultural
and social affects of a poor monsoon.
It can implement a scheme to allow duty free import of raw sugar, rice and
essential commodities as India
did when the inflation rate reached double digit.
The Central and state governments should activate the public distribution
system to keep down prices of essential commodities.
The Government
should increase grain stocks for distribution in drought-affected regions.The
Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia has
claimed that India
has enough food stocks to counter inflationary pressures.
The
Government should distribute seeds among farmers for a second
attempt at planting, besides subsidized diesel to farmers to operate
irrigation pumps in drought-hit areas.
Modernized Met department is the need of the hour to stave off
uncertainties of weather. For more accurate prediction, the
government should provide state-of-the-art equipment to the Met
department.
However, the Indian monsoon
remains an elusive phenomena despite all the advances in modern technology.
(Readers can send their feedback at devajitmahanta@gmail.com)
<>ASSAM TRIBUNE
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