'Weak monsoons to impact economy'

Crisil study says rice and pulses production likely to be hit, raising prices further

An analysis by Crisil shows that July and August rainfall is the most critical determinant of agricultural production and after a dismal June there was some improvement in July, but the cheer that this brought was short lived as towards the end of July and the first week of August many parts of the country witnessed deficient to scanty rainfall.  A 64 per cent shortage in rainfall during July 30-August 5 raised the cumulative deficiency in this monsoon season to 25 per cent. The recent weakening of monsoons has elevated the concerns on the impact of deficient rains, said Crisil report. It measures the impact of rainfall using an index named Deficient Rainfall Impact Parameter (DRIP) which was developed in 2002.  DRIP is based on the premise that both the availability of irrigation and the level of precipitation affect crop production.

 Crisil Principal Economist Dharmakirti Joshi  said, “DRIP scores based on data till August 5 show that Uttar Pradesh, Madhya Pradesh, Maharashtra, Andhra Pradesh, Bihar and West Bengal have been hit the most by poor rainfall. These six states account for 47 per cent of total Kharif foodgrain production and 46 per cent of total kharif rice production in India.”  Most of these states not only have high incidence of rural poverty but also high dependence on agriculture and on subsidy burden. Punjab and Haryana too have suffered from rainfall deficiency but have low DRIP scores due to the irrigation buffer. Here the crop loss may not be significant but cost of irrigation is set to go up and will definitely result into increased input subsidy. At the crop level, Joshi added, that  DRIP scores show that rice is the most adversely impacted crop. Due to higher water requirement of rice, deficient rainfall has led to a sharp reduction in area under rice cultivation.  Lower area under cultivation together with a high DRIP score will result in significant shortfall in rice production. Other vulnerable crops are coarse cereals and pulses.

Area under some of the coarse cereals and pulses has expanded this year due to attractive prices as well substitution of rice area by these relatively hardy crops, it added. Whether increased area under these crops will lead to higher production critically depends on the performance of monsoons in the coming weeks but the signs so far are not encouraging. 

While the overall national agriculture is not at same level of risk as it was in 2002, some states definitely face a grave situation. This will definitely shave off some part of the GDP. Extent of damage will become clear once we have the rainfall picture by the end of August. Sufficient rice stocks will help in keeping a lid on rice prices. But the prices of pulses and coarse cereals which are rain-fed crops and for which no buffer stock exists could remain firm.