Monsoon matters

After growing at an average rate of just 1.7 per cent in the last four years, farm GDP is expected to rise by 6 per cent in 2016-17, thanks to a bountiful and reasonably well distributed monsoon. This is expected to lift overall growth by one percentage point to at least 8 per cent — given that agriculture accounts for 16-17 per cent of the GDP. For a demand-constrained economy grappling with a capacity utilisation of just about 75 per cent, these are happy tidings. It will lift the fortunes of the consumer goods sector in particular, which has borne the brunt of the long-drawn-out crisis in the rural economy. Urban India, which fared better in recent years, going by the performance of certain consumer durables, is likely to get a boost anyway once the Seventh Pay Commission outgo begins to take effect. It is just as well that this should be matched by a fortuitous boost to the rural economy, or else a widening rural-urban divide could have serious socio-economic consequences. Assuming that the rabi season too goes off well, foodgrain output is expected to touch an all-time high of 270 million tonnes in 2016-17, against 252 in 2015-16. The most encouraging aspect of this kharif season is the increase in acreage under pulses (from 10 million hectares in 2015-16 to 13.6 million hectares) and coarse grains (from 16.7 million hectares to 18 million hectares). The generous hike in support prices (8-9 per cent across categories) of pulses has obviously worked; the issue now is to sustain this interest. Timely rain contributed to a 10-million hectare increase in paddy acreage; this could lift the fortunes of distress-prone, rainfed regions such as Telangana and Odisha.

However, a decent monsoon cannot fail to mask some sobering truths. A May 2015 RBI paper on whether the Indian economy is “conjoined” or “decoupled” from the monsoon observes that a ‘positive’ monsoon shock (above normal rainfall) does not impact output as much as a ‘negative’ shock does — a pointer to productivity constraints in agriculture. It also observes that farm output is more responsive to changes in acreage than rainfall, which points to the significance of the right policy environment. The spatial and temporal distribution of rain, rather than the actual quantum, is more important in assessing the impact of monsoon on agriculture. Owing to climate change, the dry days in the monsoon months has increased, accompanied by bouts of extraordinarily heavy rain destroying standing crop and livestock. The impact of the floods in central and western India can turn out to be serious.

Agriculture policy should be increasingly about managing water sensibly and being prepared for extreme weather events. The Economic Survey 2015-16 does well to recognise the centrality of water. Crop insurance should be promoted on a war-footing. The ICAR must work on preserving native, sturdy strains and evolving new ones resistant to droughts and floods. A good monsoon should not lead to a sense of complacency on these fronts.

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