Normal monsoon key to controlling inflation

The India Meteorological Department’s prediction of a normal south-west monsoon should give some cheer at a time when the prospect of economic recovery after the pandemic is beset with uncertainties. The weather agency has predicted that the rainfall is likely to be 99% of the historical average for the country during June-September. This was after modification of the long-term average (LTA) from 88 cm in 2018 to 87 cm in the 2022 annual review. The LTA is revised periodically to capture the rainfall variations over time. Though the total quantum of rainfall might change slightly this year, it would still be normal, according to the IMD. If it comes true, it will be the fourth consecutive year when there will be a normal monsoon. The IMD’s prediction is based on its estimate that the various factors and conditions that influence the Indian monsoon, like the La Nina phenomenon in the Pacific Ocean, will remain benign this year.

A normal monsoon will help the economy, especially the agricultural sector, which did well in the last two years. If the food grain and vegetable crops do well, that might help to rein in inflation. Rise in food prices is a major driver of inflation now. A good kharif crop, easing of vegetable prices and a fall in edible oil prices will have an impact on inflation. But agriculture cannot thrive only on a good monsoon. The distribution of the rainfall, both temporal and spatial, is crucial. Every year, there are wide variations in precipitation across the country. Last year, farmers could not sow their crops in many parts of the country in June which was dry. Later, standing crops were damaged in many places at the time of harvest because of unseasonal rains. Another serious problem to be encountered this year will be the shortage of fertilisers. There was already a shortage, which has been aggravated by the war in Ukraine. Russia is the world’s largest exporter of fertilisers and much of India’s requirement is met by imports. The war has disrupted the supplies, and fertiliser prices have trebled in the past few weeks. The government will have to subsidise the prices or farmers will find it difficult to buy fertilisers. The high fertiliser prices will also push up the prices of crops.

Agriculture had absorbed the migrant labour returning from cities and this had brought down the wage levels in rural areas. With the ongoing return of labourers to the cities, the farm workers’ wages may see an increase due to reduced supply. Increase in rural incomes is a key factor in economic recovery, and hopefully a good monsoon will lead to that.