Blaming it on rain

A feeble monsoon is a problem only when the policy response is weak

Written by The Indian Express | Published: July 30, 2012 3:39:18 am

A shortfall in the monsoon rains directly translates into some shortage of agricultural produce in the kharif season,but most spectres that build on this obvious point are based on assumptions that confuse incorrect policies with the vagaries of the weather. Assumptions about the weakening purchasing powers of farmers,the resultant impact on companies that depend significantly on sales in rural India,the effect on government finances,banks’ non-performing assets and on the growth rate of the economy,are predicated on this error. In the six years when India declared drought in parts of the country since 1970, just after the Green Revolution,the impact has depended on how these policy errors have played out. Monsoon 2012 will also impact India’s economy to the extent these errors are magnified or minimised.

The Indian economy today has a foodgrain stock that can,with the expected addition from the winter rabi crop,shore up the country’s basic food security for about two years. This means that any rise in prices of these grains — principally wheat,rice and sugar — is more the result of inadequate or distorted distribution mechanisms than of a shortage. The missing links could be pulses and coarse grains. The top exporters of pulses to India — Canada and Myanmar — are not hit by a drought this year. So,imports should not be a problem. Of the coarse grains,more than 50 per cent are used as feedstock for poultry and cattle; a shortage in production,therefore,will not hit food security. There has been,however,a rise in prices of food products,especially in urban markets. Of these,vegetable production does not depend on rainfall. The issue seems to be,once again,of food supply management,which ruling parties in several states refuse to reform,despite the evidence of a breakdown at the first sign of pressure. Since the futures market is banned in the rest,any way of knowing if a potential shortage is developing has been precluded,except through government statistics.

A rise in food prices increases the farmer’s income,which is a good thing. A bad monsoon provides an opportunity to transfer resources to farmers from the rest of the economy. Landless labourers could see a decline in income but since the government has a committed NREGA programme,it is time to measure its efficacy now. A weak monsoon is a problem only when the government response is weak.

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