Chasing The Monsoon

Even a small change in monsoon patterns can result in a lasting effect on the economy since an overwhelming 30 per cent plus of India's gross national product (GNP) comes from agriculture. And, points out Shashanka Bhide, economist with the National Council for Applied Economic Research (NCAER), the monsoons impact the economy in larger ways than the straight GNP factor. Agricultural commodities, especially sensitive ones like edible oil and oilseeds, also affect the overall inflation rate.

Experts note that the IMD's figures have an error limit of 10 per cent either way and, with an elasticity of only between 0.3 and 0.5 per cent of agricultural production to monsoon variations, a 10 per cent change in monsoons could have an enormous repercussion on the economy. Says economist D.H. Pai Panandikar: "The definition of a normal monsoon is absolutely cockeyed. A 10 per cent variation in monsoons can cause havoc with agricultural output (and thus, the economy)." The overall figure or the quantum of monsoons—in simple terms, how much it rains all over India—means nothing. It is the timing, spacing and geographical distribution of the rains which provide the true picture. And when the IMD itself contends that an abnormally low rainfall is anything below 90 per cent of the long-term average, a prediction of 1 per cent less rainfall than the previous year could mean a lot.

Panandikar says that with a fall in agricultural production, there is a decline in the purchasing power of the rural populace. And if there is an increase in prices due to low agro-output, there is an erosion in the purchasing power of urban people too, leading to a subsequent fall in demand for industrial produce. For instance, in 1992, a relatively good monsoon year, the recession in industry was primarily due to a 1-2 per cent fall in agricultural production leading to a 22 per cent increase in price levels.

Experts say that any delay—or abnormal time distribution—in the rains could have a strong negative impact on main and cash crops like rice and some commercial crops like cotton, edible oil and jute. Rains are crucial during the sowing season and later during the sprouting season but any rain during the mature crop stage is harmful.

Bhide says that while this year the direct impact may not be that bad due to the record foodstocks, in relative terms, these foodstocks could fall. And all this might result in a decline in the overall growth rate by about 3 per cent, he says. Even last year, which saw normal (100 per cent) monsoons, there was an actual fall in foodgrain production from 105 million tonnes to about 95 million tonnes due to somewhat delayed and unevenly distributed monsoons.

Experts point to other ills due to a failure or delay in monsoons, especially in rainfed areas and states like Tamil Nadu, Karnataka and Kerala, which are dependent on the monsoons for their overall water requirement, hydro projects and crop-specific agro-industries. It is natural that any variation in the monsoons affects the immediate future of these areas whose basic livelihood is based on the nature of rainfall.