Why the late monsoon could dry out the economy

Due to the slow progress of the southwest monsoon, planting of the Kharif crop has been delayed this year. India’s overall dependence on rain-fed irrigation means that a bad monsoon can affect the economy and GDP growth. Mint explains the problem:

What is the monsoon season in India?

Southwesterly monsoon winds blow from the Arabian Sea and the Bay of Bengal in northern India from June to September, while the northeast rains blow from northeast India to the south -west in October-November. The southwest monsoon typically hits Kerala on June 2, Mumbai on June 9, and Delhi on June 29. Precipitation is normal when it is between 96% and 104% of the long-term average or LPA (average precipitation received over a 50-year period between 1951 and 2001), deficient when it is less than 90% and “Above normal” when it is between 104% and 110% of the long-term average.

How crucial is the monsoon for India?

Monsoons are the lifeblood of Indian agriculture. Up to 51.2% of the country’s farms are rainfed, while the irrigated area represents 48.8%. The southwest monsoon is crucial for the cultivation of Kharif crops and the early rainfall is essential for planting cotton, pulses, rice and oilseeds like soybeans. Monsoons are closely linked to agricultural production in India. With around 50% of our total food production being summer crops, a delayed monsoon can affect the supply of food grains and other agricultural products such as vegetables and fruits and even impact food inflation.

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Disturbing signs

What is the monsoon trend for the current year?

Overall precipitation for June was above normal (9.6% above LPA); however, it became deficient as of June 21 (30.2% below the LPA). As of June 25, only 20.3 million hectares had been seeded with Kharif crops, compared to 25.9 million hectares in June 2020. As of July 16, with 57% of the total area of ​​Kharif sown, it was still 11.56% lower than July 2020..

What does this mean for the Indian economy?

The share of agriculture in India’s GDP was 19.9% ​​in FY 21. The export market for agriculture and related products was $ 41.25 billion. . The share of agriculture in the wholesale and consumer price indices is 13.98% and 32.96% respectively. Thus, supply shortages of agricultural products could lead to higher inflation. Food industries like sugar and cotton are affected by the monsoons. With the rural economy isolating the global economy during many crisis situations, consumer goods, fertilizers, seeds and tractors depend on agricultural performance for demand.

Why are policy makers interested in rainfall data?

With monsoons contributing 89 cm by 116 cm of rain each year, changes in arrival and intensity are monitored by decision makers. The Center develops policy measures for food security, including imports, price stability and buffer stock, and financial assistance, i.e. agricultural credit, insurance coverage, etc. The RBI formulates monetary policy taking into account expected inflationary pressures and credit policy. India Inc’s marketing plans are based on the impact of the rains on rural incomes.

Jagadish Shettigar and Pooja Misra are faculty members of BIMTECH.

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